Introduction to Variation Orders

In an ideal scenario, the contract that we sign with our client has everything accounted for - dimensions have been precisely accounted for, and the original plan discussed with the client remains intact with no changes. In the real world, however, things never go quite according to plan and there is a need for the original budget and scope of works to be adjusted to accommodate for that. Unfortunately, many people dread the additional paperwork required to keep track of all of these changes. Here is what you need to know to do variation orders well.

1. Provide Detailed Quotations

It's likely unnecessary to mention, but if you fail to provide your customers with comprehensive quotes that clearly define what is included and what is not, you will encounter difficulties in getting variation orders approved. While creating thorough quotes from scratch may consume time, the investment of time is minimal compared to the potential consequences. Misunderstandings with customers rank among the primary causes of financial losses for renovation and construction companies. Doing properly detailed quotations will help to minimise issues down the road.

2. Do it Early

Its important to let your client know as early as possible when a change to the scope of work needs to be made. This is important even if you do not plan to collect payment for these changes upfront. No one likes to be hit with additional charges later on that they did not approve or even know about in the first place. Failure to get approval in a timely manner often leaves many companies having to foot the bill for these extra expenses at the end of the day.

3. Get it in Writing

It is crucial to document any significant changes to a project in black and white. This could be as simple as a text over Whatsapp, all the way to getting a signed contract listing all of the changes to be made. Whether it involves a material delivery delay or a price alteration, failing to put it in writing leaves you without evidence of the conversations that took place, which may lead to complications down the line. Ensure that you get a proper response so that there are no disputes in the future.

4. Keep Track of the Variations

You should have some way of consolidating all of this information, from the current overall scope of work to whether payment has been collected for the changes. This can be time consuming but is essential to running the project smoothly and ensuring that your team is aware of what they need to do on site. Having something as simple as the current total confirmed project value will also be useful in future conversations with the client as well as better being able to track your project profitability.

5. Don’t Forget Omissions and Reductions

When considering Variation Orders, our typical focus is on additions to a project. However, it is equally important to submit a formal change order request to your customer in order to obtain written approval for any omissions or reductions. If you have clearly specified something in writing within your quotation but do not receive written acknowledgement that it will not be implemented, you could find yourself responsible for completing that work by the project's end.

6. A Necessary Inconvenience

With all of the responsibilities that one has to juggle in order to properly manage a project, Variation Orders can be viewed as an inconvenience. However, in the majority of projects, the financial outcome is determined by events that occur after the initial quote is signed. Effectively managing Variation Orders is one of the most effective ways to ensure profitability for every job and addressing any potential financial gaps in your estimates.