The enigma of variations - how to handle them and keep on top of your build costs.
The biggest area of contention between builders and customers is always variations. Why? Because variations from the plan that was agreed in the contract almost always mean extra costs. After years of experience, here are my tips for avoiding variations when possible, and how you and your builder should handle them if they crop up.
What are variations?
The first thing to realise is that variations can be a builder’s worst nightmare, as well as yours, if they aren’t handled properly. And the only way to handle them properly is to not shy away from the subject.
Before you start building, before you sign a contract, you and your builder should have a conversation about variations. It’s important you both understand what counts as a variation, under what circumstances they can happen, who pays for them, and how they are managed.
Variations are just a reality of building. They happen on most projects because, as some famous general once said, no matter how good your plan is it never survives contact with reality.
Two types of variations
Builders make a distinction between two types of variations.
Owner variation: This is when you as the customer change something in the agreed specifications after the contract is signed. For example, perhaps you change something about the design or layout, or you upgrade a fixture or fitting. If that change costs the builder more money, which it invariably will, then the cost will be passed on to you.
Builder variation: Usually this is to cover for something that is not allowed for in the contract but that builder could not realistically have been aware of beforehand. The most obvious example is that your builder finds something underground when digging out your foundations that costs extra to remove or fix.
It should be specified in your contract that in both of these cases it is you, the customer, who pays for these variations. A good contract will stipulate these conditions and have allowances already built into the price so that you don’t get a nasty surprise.
Prime cost and allowances
In your contract you should have an allowance called prime cost or provisional sum which is to cover all your fixtures and fittings (plumbing, taps, appliances, flooring, and so on). You agree this sum with your builder and put it in the contract. Then, when you go shopping and choose your fixtures and fittings, if you go over this amount you pay any extra, and if you spend less you get a credit.
Avoiding additional costs for owner variations is pretty easy. Just make sure you have made all your choices up front, and that the prime cost allowance you agree with your builder in your contract is sufficient. If you want solid gold taps that’s fine, just put that cost in the contract.
Talk it through before you sign a contract
You should also ask your builder upfront what they will count as an owner variation. For example I don’t worry too much about a customer changing the location of, say, a light fitting. But some do and will charge it as a variation. So ask up front where that line is.
You can also try to guard against builder variations by having an open discussion with your builder before signing the contract. Ask them if there is anything about the site they are nervous about. If there are, be sure to include a provisional sum allowance in the contract. In a new build there should be very few builder variations once the groundworks have been done.
Ensure it’s clear between you and the builder who pays if, for example, you or your architect has specified something incorrectly in the plans? Who pays if a mistake has been made on the engineering that means a change in materials or design has to be made? For me, if a mistake has been made by an engineer that I contracted, my customer doesn’t pay for that. If the customer contracted them, then it’s on them.
How to handle variations
As I’ve already mentioned, don’t dance around the subject with your builder. Discuss variations early in the process before you sign the contract and include provisions in the contract if you need to.
If variations do crop up, of either type, no variation work should be done until the builder has fully explained the reason for the variation, laid out the additional costs, and you have both signed off on the work. At this time you and your builder should decide who pays and when these extra costs will be invoiced, after the variation work is completed or at the end of the project.
Make sure you get all the above details in writing. It is ultimately up to you to ensure you keep track of all additional expenses. Your builder’s job is to provide you with the accurate information you need to do that.
Beware of low quotes
The first rule of building is to be extremely wary of a quote that comes in significantly lower than any others. Some builders will de-spec a build, which means they only quote for the very minimum specifications up front in the hope of landing the job. Then throughout the job they will pile on as many variations and upgrades as they can to bring the price back up to what it should have been to start with. In fact because you haven’t planned properly in advance it’s likely you will end up paying much more.
I prefer to be honest up front, put everything on the table that a customer tells me they want, and quote for that. Even if it means my initial quote is higher, I know that there will be fewer variations as we go along.
That’s where your due diligence is all important. Speak to your builder’s past customers and ask them what variations they got charged for.
If you’re planning a luxury customer rebuild, renovation, or extension in the Bayside or Peninsula areas, arrange a half-hour exploratory call with me and I’ll be happy to answer all your questions, including ones about variations.