Civil Construction Progress and Variation Claim Best Practices
With thin profit margins and high costs, getting paid promptly is critical for managing civil construction cash flows. To be paid properly, you need to be on top of your progress and variation claims.
Whether you’re engaged by a government department, a property developer or as a subcontractor on a major construction project, most likely you need to lodge variation claims to get paid for anything out of the original scope of works and progress claims to get your incremental payments. These claims are often a source of friction between civil contractors and your customers, but it doesn’t need to be this way. By following some simple best practices you can get paid faster while maintaining a great relationship with your customers.
Before project kick-off
Good contract management starts well before you break ground. Too frequently, civil construction contracts are entered into with insufficient thought into what the contractor’s obligations are under the contract and how your customer (we’ll refer to them as the principal) will pay you incrementally through the project.
This is a recipe for disputes, delayed payments and strained relationships. In our experience, most principals do not set out to treat their contractors unfairly, but often these contracts are managed by inexperienced employees who do not fully understand best practices.
Prior to project kick-off, we recommend that you:
- Fully understand your contract and your obligations. If you see any issues, address them with the principal with reasons why the terms are not mutually beneficial.
- Ensure you have everything in order (eg, insurance, bank guarantees, certifications, etc).
- Confirm with the principal how progress on each contract item will be measured, their expectations for submitting progress and variation claims and what you can expect from them in terms of time for approvals and payment.
- Also confirm how you will work through any variations in the project, especially if you are expected to commence variation works before a variation request is approved.
- Get all of your templates properly set up including your contract schedule, variations template and other critical documents in order, ensuring that all of your contract and security of payments details are correct.
During the project
By communicating well with your principal prior to project kick-off and clarifying any potential issues you should already be well set up for a successful project.
Good contract management during the contract is largely good communication with your principal. Most issues can be resolved satisfactorily if you communicate often and early, provide supporting information in a well-organised and easily absorbed format and demonstrate why you believe that your request is within the contract and legal requirements and that it is fair.
If you observe anything that you believe is outside the original scope, let your principal know as soon as possible. Ideally, you will meet with the superintendent and their technical representative on-site to work through the principals. If the variation works are to be done on a cost-plus or daywork basis, ensure you are keeping very good records of these as you progress on the variation works.
For progress claims, ideally, you should have an in-principal agreement from your principal before submitting your claim. When possible, progressively agree with your principal completion of work zones and how much you are entitled to claim – this will make the final approval a much simpler and quicker process. Get your claims in as close to the due date as possible with all supporting documentation to back up your claim. If you have agreed on the principles for measuring progress before the project kick-off this should be straightforward on both sides.
Once you get to practical completion as defined within your contract don’t forget to claim bank guarantee/retention release, and to put in a reminder when your final release is due at end of the defects liability period if required.
After the project
Typically civil contractors work with the same principals repeatedly over many years. It is in everyone’s best interest to build a long-term relationship. Your contract management is not complete at the end of the project.
At project completion, make a point to follow up with your principal to discuss what went well and what can be improved on both sides. This is a great opportunity to build trust and encourage your principal to make improvements to ensure your next project is even better.
About Varicon – Progress and Variation Claims Management Software for Civil Construction
Varicon is the leading construction cost and contract management platform for civil contractors. Varicon founder James Baker spent over a decade working as a civil construction project manager, operations manager and superintendent for a diverse range of civil contractors and government asset owners. We help civil contractors to connect their cost and contract management data, simplify cost management on the job site and in the office and to better manage contracts.
If you’re still managing your construction costs and contracts with Excel get in touch to discuss how we can help you step up to the next level!