Getting to the Entitlement Point, is what really Matters

Qualifying circumstances must always be treated as a variation.

It is a choice to argue badly as a tactic to distract, confuse, delay, frustrate, burn off, or bully our way to a commercially preferred, subjective solution.

We need to recognise a fallacious argument, not only for what it is, but agree together, that this is not the pathway to an efficient & fair resolution. Getting to the entitlement point, is what really matters.

NZS3910 Variation Notice & Decision Process

Where the Contractor considers any matter that should be treated as a variation, the Contractor shall give written notice to the Engineer to that effect. [9.2.3 simplified]

“Dear Engineer, I have given careful thought to [describe specific task, situation, or event] which I have to deal with under the contract, and I ask you to take note of this, and deal with it, as if the Principal had instructed it as a variation.”

The Engineer shall confirm that the [specific task, situation, or event] involves a variation or disallow a variation giving reasons for doing so. [9.2.4 simplified] (see attached table “NZS3910:2013 The Search for Variations”)

9.2.4 requires the application of interpreting a unique set of facts in the context of the contract to determine if the result, purpose, or meaning, fits one or more of 55 specific task, situation, or events to be “treated as variations”, found within NZS3910. 55 is limited number, it is not a hard task to call something in, or out, of bounds, is it?

Confirming that the matter involves a variation

The express terms do not require reasons to be given to anyone for a confirmation of a matter to be treated as a variation. But best practice is to communicate clearly to both parties how the claim and contract has been interpreted, to aid both parties to review the confirmation decision efficiently per 13.1 & 13.2.

Disallowing a variation for a notified matter

The Engineer must give their reasons for disallowing a variation for a notified matter. Any Engineers disallow decision must have eliminated all of 55 specific task, situation, or events to be treated as variations found within 27 clauses within NZS3910, or their decision is deficient. It is a given the Engineer is experienced and familiar with all of the provisions and can discard those considered irrelevant, by clearing stipulating which clauses are considered relevant to the matters related to the notice issued. By clearly signalling which clauses have been considered, remainder default to “not considered relevant”. But this must be a conscious decision by the Engineer. Then, in turn, each clause considered relevant, must be reasoned as to what extent it is, or is not, relevant.

Point [1] list the clauses considered relevant.

Point [2] rationalise all relevant clauses to the facts.

Point [3] ensure all facets of the claim notice, are responded to. (no question raised, goes unanswered).

Point [4] make sure it is clearly communicated on which basis, the decision turns.

Do Not Miss the Point

The Engineer cannot ignore a relevant clause, just because it was not specifically referred to by the Contractor in their notice. It is often argued that it is not the place of the Engineer to make the case for a variation claim for the contractor. The truth is it is not the Engineers place to deny any entitlement that has obvious merit, notwithstanding its lack of form in presentation.

The reason we provide an express clause allowing the contractor to give the Engineer notice, is to turn their mind to the subject matter, (again), to prevent injustice. It’s a backstop process. Preceding this, the Engineer, in most cases, has had the opportunity to determine if a VO arises, the first time they addressed the subject matter. In golfing terms, a mulligan or a do-over.

The making of Good Instructions or Decisions

Any direction the Engineer decides to instruct or is required to instruct, must first be subject to two tests;

[1] an uninstructed direction proposed, must be tested against definition of a Variation Order per 9.1.1, or 9.1.2 and if found meeting these definitions, instructed as a variation order; and

[2] an uninstructed direction proposed, must be tested against definition of a matter to be treated as a Variation [Order] per [33# NZS3910 clauses in the attached table], and if found meeting these definitions, instructed as a matter to be treated as a Variation [order];

Example; “Dear Engineer, the drawings you have provided under instruction are late, notwithstanding the scope is in accordance with the contract scope, please confirm the late issue of the drawings to be treated as a variation?”

[1] The Engineer is capable of knowing the facts giving rise to a matter to be treated as a variation before the contractor issues a notice.

[2] The Engineer is capable of identifying the Contractors claim is relevant to clause 2.7.7 without the contractor specifically referring to the clause.

The contract did not intend the Engineer to turn their mind, “as little as possible,” to what might be a variation, or treated as a variation, and let it slide, if the Contractor fails to give appropriate, or any notice. The purpose of having an Engineer, is to have a specialist guide the ball, into the nearest pocket, as early and as smoothly as possible, regardless of who owns the pocket.

The Point is, don’t be shy about recognising what a Variation is…

If the Contractor puts something in the wrong position, they have to rectify it at their own cost. The Contractor is also prohibited from varying the works 9.2.1. When a direction is instructed to move the position of something, this will always be a variation per 9.1.1 (e), even if the variation is caught in time and in sequence, such that there is no change in cost or delay to the works as a result. A change in cost, or a delay, is not the foundation of all variations.

If you change the colour specified to a new colour from within a standard colour range, the change of colour is a variation of scope, upon which the contractor must now perform on time, without fault. A variation, at its root, is a change in obligation.

Three Big Variation questions;

[1] Has the scope of works varied? Yes always = VO, (costs, if any, to be determined). What you actually built, must conform to what was agreed, or instructed to be built.

[2] is the subject matter conditional to there being a change in cost or delay to the works?

[3] is the subject matter conditional on it not being reasonably foreseeable?

Fifty Five Variation Triggers;

[1] 6 variation triggers are variation orders.

[2] A further 16 variation triggers turn on their unique circumstances.

[3] 33 variation triggers, for matters to be treated as variations, are only to be treated as variations if they satisfy a precondition that the subject matter has either caused a delay or altered the cost of the works.

[4] 7 of the 33 also require that the subject matter not be reasonably foreseeable.

Reasonably foreseeable. Given what is known, a reasonably foreseeable matter, is a currently unknown possibility that is obviously likely to be the case. If it is not obviously likely, the possibility of it being the case alone is not enough to say it is reasonably foreseeable.

Getting to the Point

Stop wasting time, get to the entitlement point of calling a variation, a variation or not, and always give your reasons tied to relevant variation triggers. Then value it appropriately, including nil value.

Download our Excel list of NZS3910 Variation and Time clauses here.

NZS3910'2013 the search for Variations 22 Jul 2021
Download XLSX • 104KB

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