Pricing a variation before it is built

The retrospective valuation of variations is the least satisfactory part of commercial management. The work is built, the resources are gone, the records are partial, and two surveyors reconstruct a price from evidence neither of them controls.

Every major form provides an alternative. JCT has a quotation procedure under which the contractor prices the change, including its time effect, before carrying it out. NEC4 goes further and makes quotations the primary mechanism for compensation events rather than an option.

What a quotation should cover

• The value of the work itself, with a breakdown that can be tested
• Any adjustment to preliminaries, stated separately
• Any extension of time required, expressed in days or weeks
• Any loss and expense arising, or a statement that none is claimed
• The cost of preparing the quotation, where the contract allows it
• Any assumptions the price depends on

That last item is the one most often omitted and the one that causes the most trouble. A quotation priced on the assumption of uninterrupted access, or of working within normal hours, should say so. Otherwise an accepted quotation becomes an argument about what was included.

What acceptance settles

This is the attraction. Accepting a quotation properly settles the value and the time effect together, at the point where both are still capable of being estimated.

The consequence is that the change is closed. It does not reappear at the final account, it does not accumulate into a delay claim, and the contract sum moves by a known amount on a known date.

On a job with forty variations, closing thirty of them this way removes most of the final account before the final account exists.

Why it is used so rarely

Time pressure

The mechanism has periods: the contractor prices within a stated time, the employer accepts or not within a further period. On a change that has to happen this week, those periods feel unavailable, so the change is instructed and valued later.

Often that pressure is real. Often it is a habit. The changes that genuinely cannot wait are fewer than the changes that are treated as though they cannot.

Fear of overpaying

A quoted price includes the contractor's assessment of risk, and it will usually exceed what a retrospective measured valuation would produce for the same work.

That premium is real, and it buys certainty on both cost and time. Whether it is worth paying is a commercial judgement that should be made deliberately, not avoided by defaulting to retrospective valuation on everything.

Nobody manages the periods

The quotation procedure has deadlines on both sides. If the employer does not respond within the period, the mechanism may lapse and the change falls back to ordinary valuation. Where nobody is tracking the periods, that lapse happens by default and the option is lost without a decision being taken.

Making it work in practice

• Decide at project set-up which kinds of change will be quoted and which will be instructed and valued
• Use quotations for discrete, definable changes; use instruction and valuation for genuinely urgent or open-ended work
• Diary the response period the day a quotation arrives, as a hard deadline
• Require assumptions to be stated, and test them before accepting
• Record the acceptance itself, with its date, on the variation record rather than only in correspondence

The half-used version

A pattern worth naming: the contractor submits a quotation, nobody accepts or rejects it, the work proceeds, and at the final account the quotation is produced as evidence of the value.

It is not agreement. It is one party's price, unaccepted, for work that has since been built. It carries some weight as a contemporaneous view and it settles nothing.

If a quotation is not going to be accepted, say so and say why, in writing, at the time. That single reply is what keeps the position clear a year later.