Chapter 4 What are variations?
There are two main types of variations:
- variations to the scope of works and services; and
- variations to the terms of the contract itself.
This chapter deals with variations to the scope of works and services of contractors or consultants.
Generally, a variation is a change to the scope of works under a contract.
Most standard form contracts define variations broadly. For example, clause 36.1 of AS4000-1997 Construct Only Contract describes variations as being directions given by the superintendent to:
- increase, decrease or omit any part of the work under the contract;
- change the character or quality of any material or work;
- change the levels, lines, positions or dimensions of any part of the work under the contract;
- carry out additional work; or
- demolish or remove material or work no longer required by the principal.
The first step in identifying a variation to the scope of works and services is the identification of the scope itself. The scope of works and services is defined by the contract, commonly by reference to documents such as plans and specifications or a project brief. If works or services are part of the scope then they cannot be considered a variation.
A variation can arise at the initiative of either party (subject to an express right to instruct or request the variation as is discussed below), or from circumstances beyond the control of both parties such as latent conditions and changes in legislative requirements.
The courts have established a number of general principles in relation to variations:
- an item specifically provided for in the contract is not a variation;
- when the contractor supplies material of a better quality than the quality required by the contract, without any instruction from the
- principal, it is not entitled to charge the extra cost as a variation;
- when the contractor does work not called for by the contract and without instruction, it is not entitled to charge this additional work as a variation;
- indispensably necessary works are not a variation; and
- design development may be a variation.
Indispensably necessary works
The courts are likely to require a contractor to perform all work which is indispensably necessary for completion of the work, even if each and every minor item of work involved is not specifically referred to in the contract (Walker v Council of the Municipality of Randwick (1929) 30 SR (NSW) 84).
For example, a plan shows that the contractor must construct two doors in a room, and the specifications do not specifically refer to any hinges on those doors, supplying the hinges will be found to be part of the scope, as it is work which is indispensably necessary for the completion of that work. Contracts often also provide that such work is not a variation or is work which the contractor is required to perform under the contract.
Often a dispute can occur over whether works arising out of design development are a variation. The question which arises is the point at which design development becomes a change in the scope of the work.
The following case involved a construct only contract and looked at situations where changes were part of design development and where they were a variation.
Multiplex Constructions v Epworth Hospital (unreported) (28/06/1996) Vic CA
- Multiplex (the contractor) was engaged by Epworth Hospital (Epworth) under a fixed price contract for the redevelopment of the Epworth Hospital.
- Epworth was responsible for providing the design to Multiplex. However, the design was incomplete at the date of tender.
- The contract stated that variations excluded:
- ‘any change/s or additional work/s caused by or resulting from the development of the design of the works (including…the development of the design for that part of the Works not documented or not fully documented as at the date of the Builder’s tender and/or in the [contract documents])’.
- Although Multiplex had accepted the risk of Epworth’s development of ‘the design’ that did not make the contract open-ended.
- Once a design component had been ‘fully exposed’, its design development was at an end. Once ‘fully exposed’, Epworth could still refine the exposed design at Multiplex’s expense. Anything beyond refinement would be a variation except where some other design development had a consequential impact.
- The court gave an example of consequential impact. If Floor 5 of the works was fully documented in the contract drawings but Floor 6 was not, and in developing the design of Floor 6 the hot water pipes are shifted significantly leading to consequential changes to Floor 5 (where the design was otherwise complete), these changes can be said to be ’caused by or resulting from the development of the design of the Works’ and are not variations.
- In another example, if toilets were added to the drawings where there were previously none, this alteration would be a variation, not design development.