Why Waiting Until Final Account to Deal with Variations Is Costing Contractors Money

Whilst working in a client-side role, one thing I saw time and time again was contractors leaving variations until final account.

On the face of it, it seems harmless enough. Everyone is focused on delivering the project, managing labour, dealing with programme pressures, and keeping the project moving. The variation gets noted down somewhere with the intention of dealing with it later. The problem is that "later" often becomes six months down the line.

What I repeatedly saw was straightforward changes turning into lengthy commercial discussions simply because too much time had passed. Records were harder to find, people had moved on, and nobody could quite remember the detail. In some cases, more time was spent trying to discuss and justify the variation rather than the time they would have spent pricing and agreeing it when the work was carried out.

From my experience, the contractors who consistently recovered the value of their variations weren't necessarily the best. They were simply the ones who dealt with changes as they happened.

The Clock Starts Working Against You

One lesson I learned very quickly was that the longer a variation sits unresolved, the harder it becomes to agree. When the work has just been requested or identified.

The site manager/ project manager remembers the instruction.

A subcontractor remembers carrying out the work.

Photographs are available.

Labour records are to hand.

Material rates are clear.

The reason for the change is usually clear to everyone involved.

Fast forward six months and the situation can look very different. The original conversations have been forgotten. What everyone agreed was a change at the time suddenly becomes a debate about whether it was included in the original scope.

I've sat in enough final account meetings to know that these conversations rarely get easier with age.

Cash Flow Is Usually the Real Risk

One thing I noticed when working with contractors was that variations often became a cash flow issue.

The work had been carried out.

The labour had been paid.

The materials had been purchased.

But the variation hadn't been submitted.

In effect, the contractor was funding the additional work themselves while waiting for the opportunity to recover the cost at final account. This puts a lot of pressure on you commercially.

The Best Time to Agree a Variation Is When Everyone Still Remembers It

This might sound obvious, but it's something I rarely saw done consistently.

Ideally, your Project Managers are well versed in pulling out the additional scope quickly. This can then be captured for formal instruction.

Everyone understands why the work is required.

Everyone understands what changed.

Everyone can see the impact.

Leave it until final account and positions often become more entrenched.

Questions start appearing that were never raised at the time:

• Was the work instructed?

• Was it included in the original scope?

• Who authorised it?

• Is the value reasonable?

• Is there evidence to support it?

  
  

I've seen variations that should have taken ten minutes to agree become months of negotiation simply because they were left too long.

Good Records Win Commercial Arguments

If there is one thing I've learned over the years, it's that good records solve a lot of problems.

Nothing complicated. Just simple, consistent records.

• Photos.

• Labour allocations.

• Material invoices.

• Site instructions.

• 
  

Emails confirming conversations and instructions.

When these records are gathered at the time the work is carried out, pricing a variation becomes relatively straightforward.

Trying to recreate them at final account is a very different challenge.

Final Account Shouldn't Be the Starting Point

One of the biggest misconceptions I come across is the idea that final account is where variations should be dealt with.

In my view, final account should be the smallest amount of money due as possible. Ideally wrapping up variations as part of interim applications saves a lengthy discussion at the end of your project.

The best projects I've worked on had ongoing commercial conversations throughout the job. Variations were identified early, priced promptly, and agreed as quickly as possible.

As a result, final account meetings were relatively straightforward.

Something you should consider.

If you're a contractor or subcontractor, don't wait until final account.

As soon as a change happens:

• Record it.

• Price it.

• Submit it.

• Agree it.

  
  

The longer you leave it, the harder it becomes.