Variation Order / Change Order

A Variation Order (commonly called a Change Order in North American practice) is a formal contractual instruction that directs the contractor to execute work that differs from the original contract scope, whether by addition, omission, substitution, or change in quality or sequence, with the contract's valuation provisions governing how the associated cost and time adjustment is determined.

What is a Variation Order / Change Order?

Under standard construction and works contracts, including those using fidic-red-book-works and fidic-yellow-book-plant-and-design-build conditions, the employer or the engineer has the right to instruct variations during execution without terminating and retendering the contract. A variation may add new scope, delete scope originally included, change the specification or quality of work, alter the sequence or timing of execution, or modify the conditions under which work is carried out. The instruction must be issued in writing within the formal contract procedure; oral instructions to vary scope are not binding under most standard forms without subsequent written confirmation.

The valuation of a variation order uses the contract's pricing mechanism: agreed rates from the bill of quantities are applied where the work is similar in character and circumstance to original scope; new rates are negotiated or determined by the engineer where the work is different. The engineer then certifies the variation value in the interim payment certificate. Where a variation also causes delay to the completion date, the contractor is entitled to apply for an extension of time through the contract's claims procedure. Variation orders are a key lever for scope control and can, if numerous or large, substantially change the final contract value relative to the tender price. Tracking variation order trends on comparable projects is useful market intelligence when estimating contingency allowances at bid stage.

Why Variation Orders matter for bidders

Variation orders affect both the revenue and programme of a contract during execution. Contractors must price all variations promptly and in writing, using the contract's rates where applicable and flagging new-rate situations quickly. Delays in formalising variation valuations lead to disputes over entitlement and quantum. Under the FIDIC Red Book, a contractor who executes varied work without an instruction or without reserving their rights may lose the entitlement to additional payment. Conversely, suppliers who understand how the variation mechanism interacts with the engineer's determination process and the claims timeline are better positioned to recover their full entitlement. At bid stage, an unusually low provisional sum or contingency allowance for variations in the tender documents is a signal to scrutinise the employer's scope definition quality.

FAQ

What is the difference between a variation order and a contractor's claim?

A variation order is initiated by the employer or engineer and instructs the contractor to do something different. A claim is initiated by the contractor and asserts an entitlement to additional cost or time arising from an event that was not a formal variation instruction. Both must be administered through the contract's formal written procedures.

Can a contractor refuse a variation order?

Under most standard forms including FIDIC, the contractor is obligated to comply with a variation instruction from the engineer, subject to notifying any objection or requesting a determination if the varied work cannot be executed at the scheduled rates. A contractor cannot simply refuse to execute a variation on the grounds of inconvenience.

How is variation order value agreed?

The engineer values variations using the contract's bill of quantities rates where the work is comparable, negotiates new rates with the contractor where it is not, or applies a day-works schedule for small, indeterminate quantities. If agreement cannot be reached, the engineer makes a determination, which the contractor may challenge through the contract's dispute resolution procedure.