Variations

Variation PPA CLAUSE 54 & PPR RULE 118

with Variation literally means change,
Cases alteration, modification

• As per ICE “variation are required for

the satisfactory completion and
functioning of works”
• Greater the elements of unknown more
chances of variations
• Strictly speaking ,contractor is not bound
to execute more than contracted unless
Dinker Sharma contractual provisions bind him
30 Fagun, 2076
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Civil Works Contract Variations Statistics

Averages from an analysis of 32 UK Contracts

TENDER SUM (100%)

30% 26% 23% 21%
Causes of Variations
Unchanged items Increased Decreased Unused
Items Items Items

Extras
(Variations) (Variations)

30% 38% 13% 30%

FINAL13%
ACCOUNT (111%) 3 4

Causes of Variations Causes of Variations

Technical reasons
• Increase or decrease in quantity • Change of design and specification
indicated in the BOQ (without change in
scope /design)
• Omission of any such work in the • Change in level, lines, position and any
BOQ dimension of any part of the work (design
• Compromise on design improvement parameters)
• Due to shortage/ availability of
• Time Extension
additional fund
• Change in sequence or timing of
5 Construction
6

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 Types & Effects of Variations

Approval Process in Rules, Regulations

And
Contract Documents

Time 7 8

Special clauses – May Contain

• Significance of Regulations and Acts – “If the final quantity of the work done
Approval process within Employer differs from the quantity in the Bill of
Quantities for the particular item
• Significance of Special Clause on by more than 25%, provided the
Engineer’s Authority - [As per specified Contract change exceeds 2% of the Initial
Sub Clauses – Approval between Engineer and Contract price, the Project Manager
Employer shall adjust the rate to allow for the
Change”
- (Clause 37 of Bridge Project/ Ramghat
– Bheri River Steel Bridge)
9 10

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 Valuation of Variations
 Bill of Quantities Rates

Price Revision/ Rate Revision/ New Rates

Rate Negotiation  New Rates

 Revised Rates
 As Fixed

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Bill of Quantities Rates Revised Rates

Minor and major item

• Basis for negotiation of existing BOQ - approved norms
rate. - breakdown of contractor’s existing rates
• All quantities within 125% of each - contractor’s overhead scenario e.g.
item to be as per BOQ rates. mobilization situation.
• High rate item beyond 1 or 2% of - change of situation e.g. work nature,
Contract Price and exceeding 25% the market rate, quarry site, taxes etc.
BOQ quantity can be asked to be - effect of escalation clause if any
revised. - effect of currency exchange rate.

15 16

New Rate Negotiation New Rate/Rate Revision

Factors considered
Basis for negotiation for New Item Rate
- approved norms for required inputs
• Contract Clause
- breakdown of contractor’s existing rates • Labor
of similar item for input pricing and • Equipment
overhead.
- Pricing of inputs on the basis of market • Materials
rates, transportation etc. • Overhead (field and home office)
- use of price escalation clause if any • Profit
- foreign currency exchange rate if
applicable • Contractor’s Bid Rate
• Contractor’s Rate Analysis
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 Rate As Fixed

• Rates as appropriate as determined by the

Engineer, such rates shall be
• Proxy or temporary (to be fixed later or Risks associated with Variations
subjected to dispute.
• This rate shall prevail if agreed by both
parties to the Contract

Payment on Variations to be as per agreed terms

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Risks associated with variation

 Probable high item rate pricing for varied
 Increase in project cost works due to uncompetitive rate arrived
 Additional works through negotiation
 Extension of contract period  Rate negotiation generally an advantage to the
 Additional escalation cost due to time extension contractor.
 Additional supervision cost  Contract could result to be more costly due to
increase in quantity with escalated rates.
 Delay in project completion
 Opportunity for non performing contractor for
 Absence of additional fund may lead to scope excuse for time extension.
curtailment.
 Possibility of Contract litigation
 May result in Claims and Disputes

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Case I
A Water Supply Contract late at its end
was terminated because the works did not
require some item that existed in the Bill
Cases of Quantities to be done?
The Engineer on recommendation from
the Employer terminated the Contract
pointing out that it was default of the
Contractor.
The Contractor objected saying that he
was not responsible for the outcome.
Discuss the situation.

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 Case II Case III – Variation
In a certain case, there was a necessity to make variations to
An item in the Bill of Quantities (supply incorporate additional activities required by politicians. An
and installation of Household wiring) estimation to this effect was made which resulted in 37% of the
contract amount according to prevailing rates in the BOQ.
increased by 1000%. The item Approval to carry out works on variations was obtained from the
amounted to 0.5% of the contract Cabinet. A variation order was forwarded to the Contractor for
the Contractor’s signature.
price. After increase it amounted to
The Contractor signed it but commented that he is not satisfied
5% of the contract price. The with the rates proposed for variation and demanded that his
contractor asked for a new rate. earlier proposed rates be based for payment.
The Employer was hesitant to sign it because of the Contractor’s
comment in the VO form and requested the contractor to delete
What is your opinion? it. The Contractor refused.
Discuss about the variation process and its
25 considerations?
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Case IV – Case of Variation/ KUKL The Contractor requested for a Variation saying:
An item in the BOQ under “Excavation and Backfilling That he was responsible for laying of the supplied
of Pipeline Trench” read: Warning Tapes and that he was not responsible for
supplying. The supply is the responsibility of the
Pipe line trench excavation in all types of soil including
Employer or if he has to supply it should construe a
soil testing, shoring, forming of embankment, supporting
Variation under the Contract.
excavation, protecting structures, dewatering, bedding,
laying of warning tape and backfilling with compaction The Engineer argued that the Specification gives the
by layers including temporary facilities and safe disposal detail of type of Warning Tapes and the Drawing
of extra material from trench excavation all complete shows the position and gives the location of the
works as per specification and as shown on the Drawing warning tape to be placed. The BoQ requires the
No: XXX.
Contractor to compete all works as per the
The Specification provided: “ the underground Specification and Drawings. The Engineer rejected
warning tape shall be blue color, 10 cm wide, 4 mm the Contractor’s claim.
thick, made to PVC or polythene. Does Warning Tape item construe a Variation under the
The Drawing clearly provided the position and location Contract?
of Warning Tapes 27 28

Case V – Proposal for modification of Variation Clause

Note:
In a Melamchi Water Treatment Plant Contract worth US$ 80 FIDIC 1987 was distributed to all the bidders
million, the lowest read out priced Contractor Vinci/ Hindustan
JV proposed following addition from FIDIC 1999 which read
that read Variations may be initiated by the
as: Engineer at any time prior to issuing the ToC
• Variations may be initiated by the Engineer at any time prior for the works, either by instruction or by a
to issuing the ToC for the works, either by instruction or by a request for the Contractor to submit a proposal.
request for the Contractor to submit a proposal
The Contractor shall execute and be bound by
• The Contractor shall execute and be bound by each
variation, unless the Contractor promptly gives notice to the
each variation instructions.
Engineer stating (with supporting particulars) that the . The second read out bidder differed by about
Contractor cannot readily obtain the Goods required for US$ 9 m.
Variation. Upon receiving such notice, the Engineer shall
cancel, confirm or vary the instruction. Discuss this situation?

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 Case VI–
VI– Variation
A Bridge Contract, to be completed in two years time, was
awarded to Contractor A in Janakpur under the Division
Roads Office.
The Contract was successfully completed within the
assigned time period. On completion, the Division submitted
a variation for approval to the DOR stating that the The End
allocated amount towards Insurance was not necessary. The
Insurance amount bid by the Contractor was NRs.
1,00,000/-. The Bid value of the Contract happened to be Thank You
NRs. 20,00,00,000/-

Is this variation acceptable?

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