How are variations valued?
The contract usually sets a hierarchy: use contract rates where the varied work is similar; adapt those rates where conditions or quantities differ; use fair market rates where there are no relevant rates; and, as a last resort, use actual cost plus a percentage. PSSCOC 2020 clause 20.1 follows this pattern, with cost plus 15% as the fallback. Agreeing a quotation before the work starts avoids the argument.
From the RRD Field Guide, checked against the sources cited in Variation Orders and Provisional Sums: How to Stop Surprise VOs on Singapore Building Works. General information, not advice for your project.
The fuller picture
Surprise variation orders usually come from scope that was never fully defined, items excluded from the quote, provisional sums used as placeholders, and concealed site conditions. Owners reduce them by defining scope in drawings and an itemised schedule, pricing exclusions when comparing quotes, requiring written instructions and quotations before varied work starts, and agreeing valuation rules in the contract.
More questions on this topic
- What is a variation order?
- What is the difference between a provisional sum and a prime cost sum?
- Is a lump-sum quotation fixed no matter what?
- Can a contractor claim for variations done on verbal instructions?
- What are dayworks?
- How should I compare quotations with different exclusions?
- Who bears the cost of concealed conditions found during A&A works?