Defining Scope & Capturing Variations for Contractors
Let me start by being unequivocal. I am not a Quantity Surveyor, Cost Consultant or Commercial Manager. Those people have specialist skills and if your business is large enough to employ one (or more) – do it. However, I have worked with quite a few people who do magic with money and contract clauses, and I have been in roles which require extremely close attention to contracts, budgets, costs, labour, materials and time. Over the years, working mainly for the Client or Main Contractor, I have been on both the asking and receiving end of ‘could you just’. It can be a slippery slope, but defining scope and capturing variations helps Contractors to understand the true value of all that goodwill.
The Creepy Scope
‘Could you just’ is that little bit extra. The small favour. The short notice change in detail. The last minute design alteration. The quick trip to the trade store to pick up a few extra things. Whatever it may be, ‘could you just’ is something which falls outside of the scope and is therefore, technically, a variation. Lots of little ‘could you just’s’ can turn into an expensive undertaking, particularly for Contractors who don’t have the luxury of full time Project Managers or Cost Managers.
Of course, Contractors are not necessarily unsuspecting victims. Most will anticipate the risk of some form of scope creep and will make allowances for it in their contingencies or mark up when pricing a job. For those on ‘cost plus’ contracts, variations are less problematic. However, having witnessed the sometimes cutthroat approach of those who hold the purse strings, it is worth Contractors making sure they keep a handle on all the ‘could you just’s’.
The Value of Variations
It would be nice to operate in a world where everyone is fair and just. Where people are compensated for what they do and there are good professional relationships between all parties to a contract. Sadly, this is not always the reality. A good Client will understand the long term value of fairly valuing works, discussing appropriate compensation and being diligent about formalising changes to scope or site instructions. Ultimately, maintaining good relationships and working towards the same outcomes saves everyone time and money (and sometimes arbitration!). A bad Client will place less value on relationships and harmonious working environments and will do everything in their power to not pay.
Similarly, a good Contractor will see the value in being responsive and accommodating to their Clients. The way you approach the ‘could you just’s’ can be the difference between repeat business and a bad reputation. As with all things business, it is important to strike a balance between adding value and adding costs. No doubt most Contractors already know how to walk that line. Let’s face it, those who don’t aren’t around for very long.
However, it is worth making sure you do everything in your power to protect yourself by defining scope and capturing variations.
The Practical Bit
1. Hire an Expert.
Particularly for larger, long term projects, a contract or commercial specialist will almost always pay for themselves. If you can’t afford a full time employee, there are plenty of agencies or Consultancies who can provide the level of attention you need.
2. Know the scope, inside and out.
When pricing a job, be very clear about what work you will do AND what work you won’t do. Often being clear about what is NOT included is more important than defining what is.
3. Know the contract, inside and out.
How do you claim for variations? What constitutes a formal instruction under the contract? Do you need to agree costs before doing extra work or is there a pricing framework which means it can be priced at a later date? The Client will know the contract. So should you.
4. Always get it in writing.
It doesn’t always need to be a formal Purchase Order or Site Instruction but ask your Client to confirm their additional requirements in writing. If they can’t (or won’t…or haven’t), put your understanding of their verbal request in writing and ask them to confirm back to you in writing. These days, there is absolutely no excuse for a Client not requesting changes in writing. Show me a Client without access to email and I will eat my hat.
5. Track, track, track.
Record every single variation, no matter how big or small. If you don’t have a system in place, put it on a simple excel spreadsheet with the date, how it was instructed, who by, description of the variation and expected/actual cost (time and money). You may or may not decide to claim for all the extras but even if you don’t, it doesn’t hurt to show your Client all the added value they are getting.
If you have any good ideas on how to deal with ‘could you just’ let me know about them!