Understanding Variations in Residential Construction

Well, variations, where to we begin.

Variations form one of the most contentious issues in residential building construction. The most problematic of the variation is the “grey variation” this is the variation that is written in such a way that the builder understands completely the intent of the variation yet the client may not fully understand what they are signing for.

Lets, for example, take four of my favourite variations, edge protection, hand carting, crane hire and rock removal.

Many moons ago, when I was just out of uni, and having completed quite a few torts and contract law subjects, I knew everything – well I thought I did at least. Often I would end up in discussions with clients about variations and the reason why the variation was justifiable and needed to be signed for the work to be carried out.

One day I had a client who refused flatly to sign his rock variation. Because this meant that this particular job folder had to hang around my already well stacked desk, I needed to get as much information as possible to sort this out – and fast.

Having spoken with the QBSA, HIA & QMBA it became quite evident as to who was right.

If a variation is reasonably foreseeable at the time of contract preparation then, if it is not incorporated into the contract, it is not a deemed variation during construction.

What this means is that because your builder has soil test that show what materials they will be excavating and building upon, if they choose to ignore the facts, they will be responsible for the costs when encountered onsite.

Put another way as to why the builder must incorporate rock variations into the building contract, or at least make Prime Cost items, is that say you as a customer have paid deposits to two builders at once. One builder factors in these “variation” amounts into the contract yet the other does not. The general outcome of “who shall win the job” will be the cheaper of the two.

In this instance the builder who is doing the right thing by putting it all on the table to see is losing the job to the builder who knows there is a high likelihood of the variation being required yet chooses to omit it to ensure that they keep a keen contract price.

In my opinion Builders understand these facts completely. They chose to operate in the “grey area” because of the uncertainty and the potential monetary upside.

I mean, variations are generally charged at higher margin than contract variations.

Are we at a point in time in business & society where customers will have greater respect for the business that clearly explains every element of pricing and removes these “grey areas”?

If Builders stop these stupid practices, I mean its based on a premise of knowledge and taking advantage over another because of a lack of knowledge, and show how much money they are making on the project, would the Client agree to margin that is made clear to them for the sake of transparency or would they prefer to continue with the illusion of transparency?

In conclusion, transparency in variations can transform the construction industry by fostering trust and clarity between builders and clients. By eliminating the “grey areas” and ensuring all foreseeable costs are upfront, builders can cultivate a more honest and respectful relationship with their clients.

This shift not only benefits the clients by providing clear expectations but also allows builders to stand out as trustworthy and ethical professionals in the competitive construction market. Ultimately, a commitment to transparency could lead to a more sustainable and mutually beneficial industry standard.