Management Of Variations In Construction Management Construction Essay

Management of Variations could be counted as one of the most significant challenges in construction management. The nature and amount of Variations occurrence varies from one project to another depending on various factor (CII, 1986; Kaming, Olomloaiye, Holt & Harris, 1997). Arain and Low (2005a) identified the design phase as the most likely area on to focus to reduce the number of Variations. The newsletter Law Talk by McKays Solicitors discussed that Contractor’s inability to successfully pursue variations claims, is one of the main factors contributing to business bankruptcy in the industry.

One way to reduce Variations on site is to begin with is to focusing on what and how does the project team can help in minimizing the problems during the design phase (Arain, 2005). Variations changing the design or the specifications usually have a time impact and a cost impact. It is for this reason that the construction drawings and specification should be prepared with great care and precision. The less ambiguity in terms of design documentation, then lower the potential for Variations (Stuart Miller, 2009).

This chapter focuses on the definition and nature of Variations. The causes and impacts which the Variations influence from the pre-construction stage until the construction stage will be identified.

Definition

A construction contract is an agreement to build and can be subjected to variability.

Contractual provisions relating to changes allow certain parties involved in the Contract to initiate variation orders within the ambit of and without vitiating the Contract.

There is no single explanation for the word variation. Variation in layman terms means changes, alteration or modifications. Each standard form of building contract has its own definition for “Variation”. In PAM 2006 (Clause 11.1) Variation means the alteration of modification of the design, quality or quantity of the Works.

A Variation can be any, a combination of any of the following:

Variation in building projects may mean the “alteration of modification of the design quality or quality of the Works in the Contract drawings and described by the Contract Bill of Quantities and includes the addition, omission or substitution of any work (Clause 11.1 (a) ), the alteration of the kind of standard of any of the material as goods to be used in the Works (Clause 11.1 (b) ), and the removal from site of any work executed or material and good brought thereon by the Contractor for the purpose of the Works other than work, material and goods which are not in accordance with the contract (Clause 11.1 (d) ).

Variation in building projects together related with instruction of expenditure of provisional sums, prime cost sums and instruction related the nature of Works are a Variation in the contract documents.

Variation of contract in law, are variation of the contract terms & condition. Example: both parties alter the original contract document by agreement after execution of the original contract.

Variation of price clause which enables the sum to be adjusted for increase or reduction in the cost of labour or materials.

Variations are directly attributed to matter not being stated or as required in the contract documents. This occurs either because circumstances actually changes or because circumstances upon which the contract documents based were misinterpreted.

The former is matters which can easily appreciated and comprehend. Nevertheless, it still has two distinct aspects. Firstly, circumstances may change in such a way, which can have no control, that the documentation can now be seen to be defective. Alternatively, circumstances may require that the client determines a choice of action, with the resulting choice of creating a Variation.

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Most standard forms of contract include a clause under which the employer or his representative is able to issue an instruction to the contractor to vary the works which are described in the contract. A change in shape of the scheme, the introduction of different materials, revised timing and sequence are all usually provided for by the variations clause. It will also usually include a mechanism for evaluating the financial effect of the variation and there is normally provision for adjusting the completion date. In the absence of such a clause the employer could be in a difficulty should a variation to the works be required. The contractor could both refuse to carry out the work or undertake the work and insist upon payment on a quantum meruit or fair valuation basis. Calculation of the price for the extra work applying this method could involve payment well in excess of the contract rates.

Potential Causes of Variation

Literature reviews that of Variations and Variation Orders requires a comprehensive understanding of the root causes of Variations (Hester et al., 1991).Variations some of which are financial, design aesthetics, changes in drawings, weather, geological and geotechnical reasons. From the literature review, there were 53 causes of Variations identified and these Variations are mainly caused by the Employer, Consultants and Contractors.

As shown in Figure 1, these causes of Variations were grouped under four categories: Employer related Variations, Consultants related Variations, Contractor related Variations and other Variations. These Causes of Variations have been identified by many researchers (CII, 1990a; Thomas and Napolitan, 1994; Clough and Sears, 1994; Fisk, 1997; Ibbs et al., 1998; O’Brien, 1998; Mokhtar et al., 2000; Gray and Hughes, 2001; Arain et al., 2004). The causes of Variations can be categorized according to the originators (CII, 1990a; Thomas and Napolitan, 1994). The 53 causes identified from the literature review are also discussed below.

Causes of Variations

Employer

related Variations

Consultants

related Variations

Contractors

related Variations

Change of plans or scope by Employer

Change in design by Consultants

Lack of Contractor’s involvement in design

Change of schedule by Employer

Errors and omissions in design

Unavailability of equipment

Employer’s financial problem

Conflict between contract documents

Unavailability of skills

Inadequate project objective

Inadequate scope of work for contractor

Contractor’s financial difficulties

Replacement of materials/procedure

Technology change

Contractor’s desired profitability

Impediment in prompt decision making process

Value engineering

Differing site conditions

Obstinate nature of Employer

Lack of coordination

Defective workmanship

Change in specifications by Employer

Design complexity

Unfamiliarity with local conditions

Inadequate working drawing details

Lack of specialized construction manager

Inadequate shop drawing details

Fast track construction

Consultant lack of judgment and experience

Poor procurement process

Lack of consultant’s knowledge of available materials and equipment

Lack of communication

Honest wrong belief of consultant

Contractor’s lack of judgement &experience

Consultant’s lack of required data

Long lead procurement

Obstinate nature of consultant

Honest wrong belief of contractor

Ambiguous design details

Complex design and technology

Design discrepancies (inadequate design)

Lack of strategic planning

Non-compliance design with govt. regulation

Contractor’s lack of required data

Non-compliance design with owner’s requirement

Contractor’s obstinate nature

Change in specifications by Consultant

Figure 1: Causes of Variation grouped under four categories

A. Employer Related Changes

This section discusses the causes of Variations that were initiated by the Employer. In some cases, the Employer directly initiates Variations or the Variations are required because the Employer fails to fulfil certain requirements for carrying out the project.

Change of plans or scope by Employer: Change of plan or scope of project is one of the most significant causes of Variations in construction projects (CII, 1990b) and is usually the result of insufficient planning at the project planning stage, or also i can because of lack of involvement of the Employer in the design phase (Arain et al., 2004). This cause the Variations affects the project severely during the later phases.

Change of schedule by Employer: A change of schedule or master programme during the project construction phase may result in major resource reallocation (Fisk, 1997; O’Brien, 1998). This is because time has an equivalent money value. A change in schedule means that the Contractor will either provide additional resources, or keep some resources idle in the construction site. In both cases additional cost is incurred.

Employer’s financial problems: The Employer of the project may run into difficult financial situations that force him to make changes in an attempt to reduce cost of the project. Employer’s financial problems affect project progress and quality (Clough and Sears, 1994; O’Brien, 1998). Proper financial planning and review of project cash flow would be effective in avoid this problem to from happening.

Inadequate project objectives: Inadequate project objectives are one of the causes of Variations in construction projects (Ibbs and Allen, 1995). Due to inadequate project objectives, the designers would not be able to develop a comprehensive design which leads to many of Variations during the project construction phase.

Replacement of materials or procedures: Replacement of materials or procedures may cause major Variations during the construction phase. The substitution of procedures includes Variations in application methods (Chappell and Willis, 1996). Therefore, an adjustment to the original contract value is required if there is a change in procedures.

Impediment in prompt decision making process: Prompt decision making is an important factor for project success (Sanvido et al., 1992; Gray and Hughes, 2001). A delay in decision making may obstruct the progress of subsequent construction activities and that may eventually delay the entire project progress.

Obstinate nature of Employer: A building project is the result of the combined efforts of the professionals. They have to work at the various interfaces of a project (Wang, 2000; Arain et al., 2004). If the Employer is obstinate, he may not accommodate other creative and beneficial ideas. Eventually, this may cause major Variations in the later stages and affect the project negatively.

Change in specifications by owner: Changes in specifications are frequent in construction projects with inadequate project objectives (O’Brien, 1998). In a multi-player environment like any construction project, change in specifications by the Employer during the construction phase may require major Variations and adjustments in project planning and procurement activities.

B. Consultant Related Variations

This section discusses the causes of Variations that were initiated by the consultant. In some cases, the consultant directly initiates Variations or the Variations are required because the consultant fails to fulfil certain requirements for carrying out the project.

Change in design by Consultants: Change in design for improvement by the Consultant is a norm in contemporary professional practice (Arain et al., 2004). The changes in design are frequent in projects where construction starts before the design is finalized (Fisk, 1997). Design changes can affect a project adversely depending on the timing of the occurrence of the changes.

Errors and omissions in design: Errors and omissions in design are an important cause of project to delays (Arain et al., 2004). Design errors and omissions may lead to loss of productivity and delay in project schedule (Assaf et al., 1995). Hence, errors and omissions in design can affect a project adversely depending on the timing of the occurrence of the errors.

Conflicts between contract documents: Conflict between contract documents can result in misinterpretation of the actual requirement of a project (CII, 1986a). To convey complete project scope for participants, the contract documents must be clear and straight to the point. Insufficient details in contract documents may adversely affect the project, leading to delay in project completion.

Inadequate scope of work for contractor: In a multi-player environment like construction, the scope of work for all the players must be clear and without uncertainty for successful project completion (Fisk, 1997; Arain et al., 2004). Inadequate scope of work for the contractor can cause major Variations that may negatively affect the project, and leads to changes in construction planning.

Technology change: Technology change is a potential cause of Variations in a project. Project planning should be flexible for accommodating new beneficial Variations (CII, 1994b). This is because the new technology can be beneficial in the project life cycle, for instance, reducing maintenance cost of the project. Or new methods of constructions that reduce construction cost.

Value engineering: Value engineering should ideally be carried out during the design phase (Dell’Isola, 1982). During the construction phase, value engineering can be a costly exercise, as Variation in any design element would initiate and leads to Variations to other relevant design components (Mokhtar et al., 2000).

Lack of coordination: A lack of coordination between parties may cause major variations that could eventually impact the project adversely (Arain et al., 2004). Unfavourable Variations, which affect the projects negatively, can usually be managed at an early stage by paying extra focus in coordination.

Design complexity: Complex designs require unique skills and construction methods (Arain et al., 2004). Complexity affects the flow of construction activities, whereas simple and linear construction works are relatively easy to handle (Fisk, 1997). Hence, complexity may cause major Variations in construction projects.

Inadequate working drawing details: To convey a complete concept of the project design, the working drawings must be clear and concise (Geok, 2002). Insufficient working drawing details can result in misinterpretation of the actual requirement of a project (Arain et al., 2004). Thorough reviewing of design details would assist in minimizing Variations.

Inadequate shop drawing details: Shop drawings are usually developed for construction work details for site professionals (Cox and Hamilton, 1995). As mentioned earlier with regard to working drawing details, likewise, inadequacy of shop drawing details can be a potential cause of Variations in the construction projects.

Consultant’s lack of judgment and experience: Professional experience and judgment is an important factor for a successful completion of a building project (Clough and Sears, 1994; O’Brien, 1998). The lack of professional experience increases the risk of errors in design as well as during construction. Eventually, this may affect the project quality and delay the project completion.

Lack of consultant’s knowledge of available materials and equipment: Knowledge of available materials and equipment is an important factor for developing a comprehensive design (Geok, 2002). In the construction industry where material standardization is not common, the consultant’s lack of knowledge of available materials and equipment can cause numerous major Variations during various project phases.

Honest wrong beliefs of consultant: Honest wrong beliefs may cause construction professionals to contribute poor value add in projects (Arain, 2002; Arain et al., 2004). Consultants, without having firsthand knowledge, may make decisions based on their wrong beliefs which would adversely affect the pace of the project.

Consultant’s lack of required data: A lack of data can result in misinterpretation of the actual requirements of a project (Assaf et al., 1995; Arain, 2002). When there is insufficient data, consultants are prone to develop designs based on their own perceptions, which may not be what the Employer wants. Eventually, this may cause major Variations and affect the project negatively.

Obstinate nature of consultant: In a multi-player environment like construction, the professionals have to work as team at the various interfaces of a project (Wang, 2000; Arain et al., 2004). If the consultant is obstinate, he may not accommodate other creative and beneficial ideas. Eventually, this may cause major Variations in the later stages and affect the project negatively.

Ambiguous design details: A clearer design tends to be comprehended more readily (O’Brien, 1998). Ambiguity or Doubtfulness or uncertainty in design is a potential cause of Variations in a project. This is because ambiguity in design can be misinterpreted by project participants, leading to rework and delay in the project completion. Eventually, this may affect the project progress negatively.

Design discrepancies (inadequate design): Inadequate design can be a frequent cause of Variations in construction projects (CII, 1990a; Fisk, 1997). Design discrepancies affect the project functionality and quality. Eventually, this can affect a project adversely depending on the timing of the occurrence of the Variations.

Noncompliance of design with government regulations: Noncompliance of design with government regulations or policies would cost the project difficult to execute (Clough and Sears, 1994). Noncompliance with government regulations may affect the project safety and progress negatively, leading to serious accidents and delays in the project completion.

Noncompliance of design with owner’s requirements: A comprehensive design is one that accommodates the owner’s requirements (Cox and Hamilton, 1995). A noncompliance design with the owner’s requirements is considered an inadequate design (Fisk, 1997). Eventually, this may cause Variations for accommodating the Employer’s requirements. This may affect the project adversely during the construction phase.

Change in specifications by consultant: Changes in specifications are frequent in construction projects with inadequate project objectives (O’Brien, 1998). As mentioned earlier with respect to changes in specifications by the Employer, this is also a potential cause of Variations in a project, leading to reworks and delays in the project completion.

C. Contractor Related Variations

This section discusses the causes of Variations that were related to the Contractor. In some cases, the contractor may suggest Variations to the project, or the Variations may be required because the contractor fails to fulfil certain requirements for carrying out the project.

Lack of Contractor’s involvement in design: Involvement of the Contractor in the design may assist in developing better designs by accommodating his creative and practical ideas (Arain et al., 2004). Lack of Contractor’s involvement in design may eventually cause Variations. Practical ideas which are not accommodated during the design phase will eventually affect the project negatively.

Unavailability of equipment: Unavailability of equipment is a procurement problem that can affect the project completion (O’Brien, 1998). Occasionally, the lack of equipment may cause major design Variations or adjustments to project scheduling to accommodate the replacement.

Unavailability of skills (shortage of skilled manpower): Skilled manpower is one of the major resources required for complex technological projects (Arain et al., 2004). Shortage of skilled manpower is more likely to occur in complex technological projects. This lack can be a cause for Variations that may delay the project’s completion date.

Contractor’s financial difficulties: Construction is a labour intensive industry. Whether the Contractor has been paid or not, the wages of the worker must still be paid (Thomas and Napolitan, 1994). Contractor’s financial difficulties may cause major Variations during a project, affecting its quality and progress and in some cases even the safety of the site is affected if there is an argument.

Contractor’s desired profitability: Contractor’s desired profitability can be a potential cause of Variations in construction projects. This is because Variations are considered a common source of additional works for the contractor (O’Brien, 1998). The Contractor may eventually strive to convince the project Employer to allow certain Variations, leading to additional financial benefits for him.

Differing site conditions: Differing site condition can be an important cause of delays in large building projects (Assaf et al., 1995). The contractor may face different soil conditions than those indicated in the tender documents. Eventually this may affect his cost estimates and schedule negatively.

Defective workmanship: Defective workmanship may lead to demolition and rework in construction projects (Fisk, 1997; O’Brien, 1998). Defective workmanship results in low quality in construction projects (Arain et al., 2004). Even the Contractor bares the cost of the defective work, but this also may affect the project negatively, leading to rework and delay in the project completion.

Unfamiliarity with local conditions: Familiarity with local conditions is an important factor for the successful completion of a construction project (Clough and Sears, 1994). If the Contractor is not aware of local conditions, it would be extremely difficult for him to carry out the project. Eventually, project delays may occur that end up with vital Variations in the entire design entity.

Lack of a specialized construction manager: The construction manager carries out the construction phase in an organized way to eliminate the risks of delays and other problems. Lack of a specialized construction manager may lead to defective workmanship and delay in the construction project.

Fast track construction: Fast track construction requires an organized system to concurrently carry out interdependent project activities (Fisk, 1997). When the public and private sectors have large funds and want to complete projects in a very short time, complete construction drawings and specifications may not be available when the contractor starts work (Arain et al., 2004).Eventually, this procurement mode may cause major Variations.

Poor procurement process: Procurement delays have various negative effects on other processes in the construction cycle (Fisk, 1997). Occasionally, the procurement delay may cause an entire change or replacement for originally specified materials or equipment for the project (Arain et al., 2004). This may therefore cause a need for project activities to be reworked.

Lack of communication: Detrimental Variations, which affect the projects adversely, can usually be managed at an early stage with strong and incessant communication. A lack of coordination and communication between parties may cause major Variations that could eventually impact the project negatively (Arain et al., 2004).

Contractor’s lack of judgment and experience: The consultant’s lack of professional experience increases the risk of errors during construction (O’Brien, 1998). This lack may cause major construction Variations in a project, when both Contractor and consultant could not identify or foresee the problems in the planning stage due to both parties are lacking of experience. Eventually, this may affect the project quality and delay the project completion.

Long lead procurement: Procurement delays have various adverse affects on other processes in the construction cycle (Fisk, 1997). Occasionally, the procurement delay may cause an entire change or replacement for originally specified materials or equipment for the project. Delay in long lead procurement is a common cause of delays in building projects (Assaf et al., 1995).

Honest wrong beliefs of contractor: As mentioned earlier with respect to honest wrong beliefs of the consultant, honest wrong beliefs of the contractor can also be a potential cause of Variations in construction projects. Contractors, without having firsthand knowledge, may make decisions based on their wrong beliefs which would adversely affect the quality and pace of the project.

Complex design and technology: Complex design and technology require detailed interpretations by the designer to make it comprehensible for the Contractor (Arain, 2002). A complex design may be experienced for the first time by the Contractor. Eventually, the complexity may affect the flow of construction activities, leading to delays in the project completion.

Lack of strategic planning: Proper strategic planning is an important factor for successful completion of a building project (Clough and Sears, 1994; CII, 1994a). The lack of strategic planning is a common cause of Variations in projects where construction starts before the design is finalized, for instance, in concurrent design and construction contracts (O’Brien, 1998).

Contractor’s lack of required data: A lack of required data may affect the contractor’s strategic planning for successful project completion, leading to frequent disruptions during the construction process. This is because a lack of data can result in misinterpretation of the actual requirements of a project (Assaf et al., 1995; Arain et al., 2004).

Contractor’s obstinate nature: As mentioned earlier with regard to the obstinate nature of consultant, likewise, this can be a potential cause of Variations in construction projects. If the Contractor is obstinate, he may not accommodate creative and beneficial ideas suggested by others. Eventually, this may cause major Variations in the later stages and affect the project negatively.

D. Other Variations

This section discusses the causes of Variations that were not directly related to the project team.

Weather conditions: Adverse weather conditions can affect outside activities in construction projects (Fisk, 1997; O’Brien, 1998). When weather conditions vary such as the various monsoon seasons in Malaysia, the contractor needs to adjust the construction schedule accordingly. Occasionally, this may affect the project progress negatively, leading to delays in construction.

Safety considerations: Safety is an important factor for the successful completion of a building project (Clough and Sears, 1994). Noncompliance with safety requirements may cause major Variations in design. Lack of safety considerations may affect the project progress negatively, leading to serious accidents and delays in the project completion.

Change in government regulations: Local authorities may have specific codes and regulations that need to be accommodated in the design (Arain et al., 2004). Change in government regulations during the project construction phase may cause major Variations in design and construction. This can affect a project negatively depending on the timing of the occurrence of the changes.

Change in economic conditions: Economic conditions are one of the influential factors that may affect a construction project (Fisk, 1997). The economic situation of a country can affect the whole construction industry and its participants. Eventually, this may affect the project negatively, depending on the timing of the occurrence of the Variations.

Socio-cultural factors: Professionals with different socio-cultural backgrounds may encounter problems due to different perceptions, and this may affect the working environment of the construction project (Arain et al., 2004). Lack of coordination is common between professionals with different socio-cultural backgrounds (O’Brien, 1998). Eventually, project delays may occur that end up with vital changes in the entire project team.

Unforeseen problems: Unforeseen conditions are usually faced by professionals in the construction industry (Clough and Sears, 1994; O’Brien, 1998). If these conditions are not solved as soon as possible, they may cause major Variations in the construction projects. Eventually, this may affect the project negatively, leading to reworks and delays in the project completion.

The Effects of Variation

As stated in Max Abrahams in his book Engineering Law and the ICE Contracts, most of the employment given to the legal profession on engineering work is to do with disputes about Variations.

Most significant number of claims emerged are from Variations, and that the Variation clause exists mainly is to protect the client/employer.

If the majority claims by the contractors and the greatest problem in contract management are both caused by Variation, then either the variation must be reduced or eliminated, or a better legal and practical framework must be created so that they can be solve with more effectively. The simple answer to this is to be able to avoid use the of variation clause in the contract..

However, if a contract does not provide such clauses, the client may find himself unable to do something and accepting an unsatisfied product because he could not change what he now wants, although in return for great certainty with regard to price and possibly time. The existence of a variation clause improves the potential for securing and improving end product, but with a price, for the client then have less certainty about the price to be paid and the time for completion.

In addition it to be said that the existence of Variation clause itself will also generate Variations cost, because the complete design at tender stage can be avoided. The extend to which completed design is to avoided at the tender state and extend to which the client has not secured a fixed price is generally considerable. Consider for instance, the parts of building project which are consider being variable in any event:

Prime cost sums

Provisional sum

Provisional quantities

Contingencies

Day works

Fluctuations

Therefore, it is rare that a building contract sum is fixed.

It is considered unwise that the contract should not contains Variation clauses because the consequence of inability to change the works as a right would, inevitably, lead on occasion to waste of resources.

Some contracts do not contain Variation clauses, and such contract is very common in North America. This does not mean the Variation would not arise, only that the client has no contractual rights to vary the works.

What we need is not about eliminating the Variation clauses, but to have better defined clauses. An inefficiently defined variation clauses can be easily identified, as variation occurs more often in works of alteration than on new works yet the system if control is not better; the same clauses are frequently used notwithstanding the fact that variations can to a great extent be reasonably anticipated on works of refurbishment or alteration.

An improved legal framework and system of control must be also being willingness on the part of the professionals to use the variation clauses as intended and not to abuse it.

Abuse can occur for various reasons:

Where a clause is implemented because the scheme was not ful