Understanding Variations in Residential Construction

Variations cause more arguments between builders and clients than almost anything else on a house build. The worst kind is what I call the "grey variation".

A grey variation is written so the builder understands exactly what it means, but the client doesn't really understand what they're signing for.

Four of my favourites are edge protection (safety rails around roof edges and upper floors), hand carting (moving materials by hand when a truck can't get close), crane hire and rock removal. Each one depends on your site, so each one can be priced before you sign. Let's take rock removal as an example.

Many moons ago, fresh out of uni with a stack of torts and contract law subjects under my belt, I knew everything. Well, I thought I did. I'd often end up explaining to clients why a variation was justified and needed signing before the work could go ahead.

One day a client flatly refused to sign his rock variation. That meant his job folder sat on my already overloaded desk, so I needed to get to the bottom of it, fast.

After speaking with the QBSA (now the QBCC), the HIA and the QMBA (now Master Builders Queensland), it was pretty clear 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.

In other words: your builder has a soil test showing what they'll be digging through and building on. If they ignore it, they wear the cost when they hit rock on site.

Here's why the builder should include rock in the contract price, or at least as a Provisional Sum (PS). A provisional sum is an allowance for work that can't be priced exactly yet, like rock excavation; a Prime Cost (PC) item is an allowance for supplying things you haven't chosen yet, like tapware. Now say you're comparing quotes from two builders. One includes the likely rock cost, the other leaves it out. Who usually wins the job? The cheaper one.

So the builder doing the right thing by putting everything on the table loses the job to the builder who knows the variation is likely but leaves it out to keep the price sharp.

In my opinion, builders understand this completely. They choose to work in the grey area because of the uncertainty and the potential upside.

After all, variations are generally charged at a higher margin than the original contract work.

Have we reached a point where customers will respect the business that explains every part of its pricing and removes the grey areas?

If builders stopped relying on what the client doesn't know, and showed their margin openly, would clients accept that margin for the sake of transparency? Or would they rather keep the illusion?

Before You Sign

Read the soil report. Ask for rock, site access and crane allowances in writing, and ask what each provisional sum is based on. Ask how edge protection and hand carting are priced if your site needs them.

And remember: in Queensland, a variation must be in writing, describe the change and its effect on cost and time, and be agreed by you before the work starts.