What is variation order?
A variation order is work outside the original contract scope that the client has instructed, priced and agreed separately — and until it is agreed, it is work being done for nothing.
Also called change order, VO, EOT claim.
Variation order in plain words
Variations arise constantly: a design change, a site condition, an instruction given verbally on a Tuesday. Each needs to be notified, priced, agreed and then billed, and each of those steps has its own queue.
Variation order: a worked example
One variation, from instruction to payment.
- Instruction given on site
- 11 Feb · recorded in the site diary only
- Notified formally
- 4 Mar · 22 days later
- Priced and submitted
- 19 Mar
- Agreed by client
- 28 May · 70 days in negotiation
- Billed in the next RA bill
- 12 Jun
- Instruction to billing
- 121 days, with work executed from February
The cost was incurred in February. Only the entitlement was missing, and it was missing for four months.
Why does variation order matter?
Unagreed variations are the quietest form of trapped cash on a project. The cost has already been incurred; only the entitlement is missing.
Where does variation order mislead?
A variation's real clock starts at the instruction, which often exists only in a site diary or an email. Measured from the day it entered the system, the delay looks like weeks when it has actually been months.
What do people get wrong about variation order?
- Starting the clock at formal notification
- The instruction usually exists weeks earlier in a site diary or an email. Measured from notification, months of exposure disappear.
- Executing before the variation is agreed
- Common and sometimes unavoidable, but it converts a pricing conversation into a claim. The figure worth watching is the value of work executed against unagreed variations.
How does Crestline measure variation order?
Crestline tracks variations as their own cases and, where the instruction date exists in any system, measures from it rather than from the day the claim entered the workflow.