For capital construction projects that uses the FIDIC form of contract, A variation is a change in the form, quality or quantity of the works as defined in Sub-clause 51.1 of the Conditions of the Contract. Its impact on the Contract value and/or duration shall be assessed and evaluated in accordance with Clause 52 of the Contract Conditions. A change or variation may be initiated by the Employer, Contractor, Engineer, Engineer’s Representative or by the Government through new regulations issued after signing of the Contract.
To improve the management of variations, a three-stage change management process will be adopted. The first stage will be to capture all types of potential changes that could result in variation orders, the second stage is variation orders while the third will be the budget adjustment caused by change orders. There are different types of potential changes on capital construction projects depending on the occurred event that could result in a change. Examples of those include Early Warning Notification (EWN), Claim Notice, Design Change Notice (DCN), Field Change Request (FCR), Value Engineering Proposal (VEP), Extension of Time Request (EoT) and Initial Variation Order (IVO). All of those potential change document types could be used on the same project.
There are more than 40 events that could trigger the issuance of a potential change record. Those include for example the events of Acts of God, Acts of Government, Actual and Constructive Acceleration, Adverse Weather, Cardinal Change, Commercial Impracticability/ Performance, Commercial Impracticability/ Supply, Constructive Change, Defective Specifications, Delay of Approvals, Delayed Issuance of Change Orders, Delayed Notice to Proceed, Destruction of Work, Destruction of Materials, Differing Site Conditions, Early Completion Prevented, Impossibility of Performance, Improper Inspection, Inadequate Supervision, Inadequate Utilities, Interference, Labor Shortage, Lack of Access, Lack of Information or Decision, Lack of Permits, Lack of Right of Way, Late Drawings, Defective Material, Payments Not Made, Scheduling Difficulties, Stacking of Trades, Strikes, Nominated Subcontractor Delay, Superior Knowledge/ Misrepresentation, Supplier Delay, Suspension of Work/Delay. Covid-19 Disruption among others.
The FIDIC contract conditions include the clauses that provide the entitlement for a change event. Examples of those clauses include 1.9 Delayed Drawings or Instruction, 1.13 Compliance with Laws, 2.1 Right of Access to the Site, 4.6 Co‐operation, 4.7 Setting Out, 4.12 Unforeseeable Physical Conditions, 4.24 Fossils, 7.4 Testing, 8.4 Extension of Time for Completion, 8.10 Payment for Plant and Materials in Event of Suspension, 9.2 Delayed Tests, 10.2 Taking Over of Parts of the Works.
The potential change record will be submitted to the Employer or his authorized representative for review and comments. The Employer shall evaluate the IVO’s technical, cost and time implications and submit the recommendation for either tentative approval or total rejection, as the case may be. The review and approval process should be aligned with the authority approval levels as set in the project’s Delegation of Authority (DoA) matrix. The status of the potential change record will be either Approved, Disputed, Rejected, Withdrawn or Submitted if it is still under review.
Following the Employer tentative approval, the Contractor will be informed of the intention to vary the Works or part of them. At the same time, the Employer team with the input from the Contractor, will assess more thoroughly the time and cost implications of the varied work to reach an agreement on the change implications. All review and approval tasks should be aligned with the authority approval levels as set in the project’s Delegation of Authority (DoA) matrix.
Upon reaching an agreement on the final impact of the change on cost and time, the Employer will issue the Change or Variation Order (CO/VO) to the Contractor. If the Contractor disagrees on either the technical, cost or time assessments, he may reserve his rights. However, he shall carry out the varied work as requested. Similar to the potential change orders, the status of Change or Variation Order (CO/VO) will be either Approved, Disputed, Rejected, Withdrawn or Submitted if it is still under review.
Using a Project Management Information System (PMIS) like PMWeb, the business processes for potential change orders, change orders and change events for awarded contracts comes ready out-of-the-box. In addition, the three business processes are integrated to avoid data redundancy and enforce project governance.
The potential change order template header will include the data fields for project name, contract number, subject, potential change order document type (EWN, Claim Notice, DCN, FCR, VEP, EoT and IVO), project event that has caused the change, when the contractor has become aware of this event and explanation of the event, contract condition clause that gives entitlement for a change, project schedule activity that will be first impacted by this change and any other data fields that the Employer believes are needed to better manage those potential changes. The data fields that require selecting the value from a list, PMWeb selection list module will be used to create those values dictionaries.
The potential change order header will also include an automatically generated table to summarize the original contract’s value and duration, approved changes to date, revised value and duration and the current potential change value.
The detailed table of the potential change order template will itemize all cost items included in the change. For each item, there will be a field for the relevant cost breakdown structure (CBS) level associated with the change cost. In addition, other fields to improve the description of each cost item will be added.
If the potential change order was tentatively approved, the Generate command will be used to create the Change/Variation (CO/VO) record. Similar to the potential change order template, the PMWeb change order template can be designed to all data fields that the Employer might require. In addition, it will also include an automatically generated table to summarize the original contract’s value and duration, prior approved changes, prior revised value and duration, total of the current change order value and duration, and current contract revised value and duration.
The detailed table of the change order template will be imported from the potential change order record it was generated from. Of course, those values will be modified to reflect what agreed on.
PMWeb Change Event module will be used to align the approved change order or orders as well as potential change orders with the budget adjustment made to provide the authorized funds for those changes. Usually, the budget adjustment will be in the format of a budget transfer from the project contingency cost element to the cost elements of the items included in those approved change orders. Those cost elements will be defined using the cost breakdown structure (CBS) levels.
For most capital construction projects, the Employer can only issue the Order to Commence letter for varied work to the Contractor to carry out the work when the budget adjustment for the approved baseline budget has been approved. Only then will the VO be considered valid and the Contractor liable to carry out its contents.
The details of the budget adjustments will be captured using PMWeb Budget Request module which is another ready-to-use module. The budget adjustments could be for omissions, additions or transfers with the option to allow transfers across different projects.
Similar to all other business processes managed in PMWeb, supportive documents that are usually associated or required for each potential change orders, change order or change event as well as budget request business processes transaction can be attached to the template.
It is highly recommended to add details to each attached document to better explain to the reader what is being attached and viewed. In addition, links to other relevant records of other business processes managed in PMWeb can be also linked to the records of those change order related business processes.
It is highly recommended that all those supportive documents, regardless of their type or source, get uploaded and stored on PMWeb document management repository. PMWeb allows creating folders and subfolders to match the physical filing structure used to store hardcopies of those documents.
To ensure that the submit, review and approve dates of each potential change orders, change order or change event as well as budget request business process transaction submission are captured, a workflow will be assigned to each one of those business processes. The assigned workflow will map the submit, review and approve tasks, role or roles assigned to each task, task duration, task type and actions available for task. In addition, the workflow could be designed to include conditions to enforce the approval authority levels as defined in the Delegation of Authority (DoA) matrix.
When any of the potential change orders, change order or change event as well as budget request business process transaction is initiated, the workflow tab available on the relevant template will capture the planned review and approve workflow tasks for each transaction as well as the actual history of those review and approval tasks. The captured workflow data will include the actual action data and time, done by who, action taken, comments made and whether team input was requested.
About the Author
Bassam Samman, PMP, PSP, EVP, GPM is a Senior Project Management Consultant with 40-year service record providing project management, project controls services and project management information system to over than 200 projects with a total value in excess of US $100 Billion. Those projects included Commercial, Residential, Education and Healthcare Buildings and Infrastructure, Entertainment, Hospitality and shopping malls, Oil and Gas Plants and Refineries, Telecommunication and Information Technology projects. He is thoroughly experienced in complete project management including project management control systems, computerized project control software, claims analysis/prevention, risk analysis/management (contingency planning), design, supervision, training and business development.
Bassam is a frequent speaker in topics relating to Project Management, Strategic Project Management and Project Management Personal Skills. Over the past 40 years he has lectured at more than 350 events and courses at different locations in the Middle East, North Africa, Europe and South America. He has written more than 550 articles on project management and project management information systems that were featured in international and regional magazines and newspapers. He is a co-founder of the Project Management Institute- Arabian Gulf Chapter (PMI-AGC) and has served on its board of directors for more than 6 years. He is a certified Project Management Professional (PMP) from the Project Management Institute (PMI), a certified Planning and Scheduling Professional (PSP) and Earned Value Professional (EVP) from the Association for the Advancement of Cost Engineering (AACE) and Green Project Management (GPM).
Bassam holds a Masters in Engineering Administration (Construction Management) with Faculty Commendation, George Washington University, Washington, D.C., USA, Bachelor in Civil Engineering – Kuwait University, Kuwait and has attended many executive management programs at Harvard Business School, Boston, USA and London Business School, London, UK.