A change does not buy you a new rate.

A change does not buy you a new rate

There is a belief on most sites that a variation and a new rate arrive together. Something changes, therefore the old price no longer applies, therefore we agree a new one.

The contract doesn't work like that. Your bill rate is remarkably durable, and sub-clause 12.3 sets out precisely what has to be true before it stops applying. Most changes never meet the test, and the work gets valued at the rate you already gave.

Which is usually fine, and occasionally very expensive. So it is worth knowing the gates — and worth knowing that the one everybody quotes isn't the one the rock goes through.

Who can vary, until when, and what they cannot take

Variations are initiated by the Engineer under the variation procedure, and the window closes at the taking-over certificate for the works. After that there is no unilateral right to change the scope.

There is also a limit that contractors rarely think to use. A variation cannot be used to omit work so that the employer or somebody else can do it instead, unless both parties agree. Scope can be removed from the contract; it can't quietly be moved to a competitor. The only carve-out is where you have failed to remedy defects.

And once a variation is instructed you are bound by it and must get on with it promptly — which is the trade-off for the objection rights that come next.

Three reasons to say no

You may resist an instructed variation by giving a prompt notice with detailed supporting particulars, on three grounds only.

The first uses a word you have already met: the varied work counts as Unforeseeable, judged against what the Specification says the works are and how far they reach. Note the capital letter. That is the defined term Week 2 warned you about, and it means the test from Risk Week 14: what an experienced contractor could reasonably have foreseen by the base date. The same words that decided who owned the rock decide whether you can decline this instruction.

The second is that you can't readily obtain the goods the variation requires. The third is that it would harm your ability to meet your health and safety or environmental obligations.

The Engineer then has to respond promptly by cancelling, confirming or varying the instruction, and anything confirmed or varied becomes an instruction you are bound by. The route is short, and it is the only one there is.

When your rate stops applying

Now the valuation itself. Work is valued by measuring it and applying the appropriate rate, and the appropriate rate is the one in the bill for that item — or, where there is no such item, the rate given for similar work.

A detail worth carrying around: an item that appears in the bill with no rate against it is treated as included in the other rates. A blank isn't an opportunity.

A new rate becomes appropriate by one of two routes. The first is about character: the item isn't in the bill and no existing rate fits, because the work isn't of similar character or isn't carried out under similar conditions to anything priced.

The second is about quantity, and it is a compound test. The measured quantity has to move by more than ten percent; that movement multiplied by the bill rate has to exceed one hundredth of one percent of the Accepted Contract Amount; the change has to shift the unit Cost by more than one percent; and the item mustn't be marked as a fixed-rate item. All four, or the rate stands.

The rock never goes near the ten percent gate

Apply that to the job this site has been running since Track 2, and something useful falls out.

Forty-two piles were priced. Forty-two piles are being driven. Seventeen of them meet rock. The measured quantity hasn't moved at all, so the quantity route fails at its first test and the other three are never reached. For the record, one hundredth of one percent of a million-dollar contract is $100 — a threshold this job would clear easily, if only the quantity had changed.

The rock qualifies on the other route entirely. Driving a pile through rock isn't work carried out under similar conditions to driving one through the ground you priced. Same item, same quantity, different job.

And then the derivation, which is where a lot of claims quietly lose money. The new rate comes from relevant bill rates with reasonable adjustment. Only where nothing relevant exists is it built from the reasonable Cost of doing the work plus the profit percentage stated in the Contract Data — five percent if nobody filled it in, exactly as Week 4 found.

Reasonable Cost. The $2,850 the piling actually cost was a reactive number produced by an unplanned situation, against $1,900 planned. Some of that gap is the rock. Some of it is the mobilisation nobody had arranged. The contract entitles you to the first and invites an argument about the second, which is why Week 1's contemporary records decide how much of $48,450 you actually see.

The proposal nobody asks for

There is a second way a variation can start, and it is much less used than it deserves.

Before instructing anything, the Engineer may send a notice describing a proposed change and ask you for a proposal. You respond as soon as you reasonably can, either explaining why you cannot comply or setting out what you would do, what it does to the programme and any extension of time, and what it does to the price, valued under the measurement rules.

The difference is enormous and it is all about sequence. Under an instruction, you build first and argue about value afterwards, with the work already done and your leverage gone. Under a request for proposal, both sides find out what the change costs while there is still the option of not making it.

You can't force the Engineer down this route. You can suggest it, in writing, the moment a change of any size appears — and a surprising number of engineers say yes, because they would also rather know the number before committing.

Practical insight

Take one variation you are currently arguing about and ask the questions in order.

Is there an item in the bill that covers this? If yes, is the work of similar character and carried out under similar conditions? Most of the time the honest answer is yes, and the rate applies — which is worth knowing before you build a case on the assumption that it doesn't.

If the quantity has moved, do all four tests pass? Write the numbers down rather than asserting the change was significant. Ten percent is a measurable thing, and so is the hundredth of a percent of the contract amount.

If you are into a new rate, derive it. Start from your own bill rates and adjust them, and only fall back to Cost plus the stated percentage when nothing relevant exists. A rate built from your actual spend, presented without that derivation, invites the answer that your spend was your own problem.

And on the next change of any size, send one sentence asking whether the Engineer would like a proposal before instructing. It costs nothing, it occasionally saves the entire argument, and almost nobody does it.

Key takeaways

✔ Your bill rate is durable. A change doesn't automatically create a new rate — sub-clause 12.3 sets out what has to be true first.

✔ A variation can't omit work so the employer or another contractor can do it instead, unless both parties agree.

✔ You may object to an instructed variation on three grounds only: the work counts as Unforeseeable against the Specification, the goods aren't readily obtainable, or it harms health, safety or environmental compliance.

✔ The quantity route needs all four tests: over ten percent movement, exceeding one hundredth of one percent of the Accepted Contract Amount, over one percent change in unit Cost, and not a fixed-rate item.

✔ The character route needs none of those numbers — only that the work is not of similar character or not under similar conditions. That is the route the rock takes.

✔ An item in the bill with no rate against it is deemed included in the other rates.

✔ A new rate is derived from relevant bill rates, and only from reasonable Cost plus the stated profit percentage when none are relevant. What you actually spent is evidence, not an answer.

What's coming next

Everything in Phase B so far has been about a change somebody agrees is a change. The harder cases are the ones where nobody instructed anything and the job still cost you more — the drawing that arrived four weeks late, the access that opened in the wrong sequence, the third-party approval that nobody chased. There's no variation to point at, and yet the entitlement may be real. Next week we look at how you build one of those before it becomes a claim: what the contract actually requires you to prove, and why the work of assembling it starts long before you decide to ask for anything.