How do you price a variation?
Price a variation using the rates in the contract first. If none apply, use a fair cost build-up of labour, materials, plant and subcontractors, plus overheads and margin as the contract allows.
Start with the contract
Read how the contract says a variation is valued. Many contracts list an order: agreed rates first, then rates in the schedule, then a reasonable rate.
Use the first method that fits. If you skip to a cost build-up when a rate already exists, the other side will reject the figure.
What a build-up covers
- Labour hours at the stated rates, with on-costs.
- Materials at cost, with supplier quotes or invoices.
- Plant and equipment, hired or owned.
- Subcontractor quotes, passed on at cost.
- Overheads and margin, only as the contract allows.
Time and omissions
Price the time effect on its own line. If the change delays the critical path, you may also have an extension of time claim and delay costs.
Work that is taken out is a credit. Show it clearly, because a one sided price loses trust.
Match every line to a record. A price made at the time of the change, with quotes and timesheets, is much stronger than a price made months later. Every Australian state and territory has its own security of payment law, so also check the time limit for claiming the sum.
Related answers
Questions
Can I add a margin to a variation?
Often yes, but only as the contract allows. Check whether it sets a fixed percentage or a rate.
Should I price before or after the work?
Before, if the contract allows it. A price agreed before the work removes most of the argument later.
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