Variations — changes to the scope, sequence, quality or timing of the works instructed by the employer — are among the most common sources of additional cost on construction projects. Core Principle 19 of the SCL Delay and Disruption Protocol summarises the principles applicable to the valuation of variations, building on the contractual provisions in standard forms such as FIDIC.
FIDIC Sub-Clause 13 (in both the 1999 and 2017 editions) sets out the variation procedure and the valuation methodology. The general approach is hierarchical: first, the rates and prices in the contract bill of quantities apply to like work; second, where rates do not directly apply, they are adjusted to reflect the changed circumstances; third, where no rates are applicable, fair valuation is undertaken by reference to the actual cost incurred plus reasonable overhead and profit.
The SCL Protocol stresses that the valuation of a variation should include not only the direct cost of the changed work but also any time-related and disruption-related consequences. A variation that increases the duration of an activity on the critical path, for example, may give rise to both direct cost (the changed work) and prolongation cost (the time-related impact). These consequences must be analysed and valued separately, with the support of a delay expert witness and a quantum expert as appropriate.
A frequent source of dispute in Middle Eastern projects is the use of bill rates for variations that depart materially from the original scope. Where the variation introduces new constraints, new sequences or new resource demands, the bill rate may no longer be 'fair' and an adjusted or fair valuation approach is needed. Engineers and quantity surveyors should engage with this analysis transparently rather than defaulting to bill rates that do not reflect the changed circumstances.
The Protocol also addresses the procedural requirements that frequently apply to variations — including written instructions, pricing submissions, and engineer's determinations. Failure to follow these procedures can create disputes about the validity of the variation itself, separate from the question of valuation.
Properly managed, variations are a routine part of construction project administration. Mismanaged, they become a major source of dispute and one of the largest categories of claim in arbitration. Adopting the SCL Protocol's structured approach to valuation, and engaging the right expert input where complexity demands it, significantly reduces the risk of dispute.