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Variation payment procedures

Change to agreed procedure has been notified

If you have received a letter from a contractor notifying changes to the procedure for variations, particularly if it states that they will only be considered for payment if they have satisfied onerous authorisation requirements (such as they must be signed by one of a small number of named Directors), send letter 4a - Proposed change for variations to the contractor telling him that he cannot unilaterally change the procedure after the contract has been agreed.

This letter should only be sent in instances where the contractor is trying to change the agreed contractual procedure – if you have already accepted an onerous authorisation procedure in your contract, you have no option but to comply with it although the advice under ‘Next steps’ may prove useful. 

Download Letter SampleLetter 4a - Proposed change for variations

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Next steps

Contractor changes procedure

If your contract contains provisions which allow the contractor to change the procedure for variations or he insists on changing it anyway, there are a number of things that you can do:

  • Try to get the procedure softened so that it only applies to variations above a minimum value (e.g. £1,000 or £5,000 depending on the size of your contract).
  • It can be difficult to do but refuse to carry out any variation work until the authorised instruction has been received.  Remember, you will only be doing what the contractor has asked you to do!
  • Accept the procedure on the proviso that any costs and/or delays incurred whilst awaiting authorisation will form part of the cost of the variation – this will ensure that the procedure is operated at the contractor’s cost rather than yours.
  • Carry out a couple of minor variations to see what happens – if the authorised instructions don’t materialise, you can then refuse to carry out any more as you will have proof that the procedure isn’t working.  It can often be useful to adopt a ‘1 strike and you’re out’ policy with a contractor because, if you give them the benefit of the doubt once and it doesn’t work, it will be easier to say no next time they ask you to do the same thing as you will have evidence to support your position.
  • Follow the procedure faithfully by putting the resources in place to get the authorised variations and pursue them relentlessly e.g. get the authorised Directors’ mobile numbers and phone them regularly.

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How to get it right next time

1. Check your contract

A lot of contractors have onerous procedural requirements for variations in their terms and conditions and you should look out for the following:

  • Limited number of people (usually senior Directors) authorised to sign variations
  • Unreasonable requirements for detail/legal basis for claim
  • Unreasonable timescales for giving notice
  • Conditions precedent for entitlement to claim
  • Variations/ extensions of time only valid where they constitute a variation order under main contract.

If you do accept a specific authorisation procedure for variations, make sure you follow it carefully because the contractor will be able to refuse to pay you if you don’t.

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