Construction - Raising a Variation Order to a Customer

Stop work on the out-of-scope element. Log the verbal instruction in writing immediately - time, who instructed it, and what was requested. A timestamped WhatsApp message back to the site manager is sufficient.

Create a variation works order linked to the job. Record the description, date identified, and instruction source (customer name, site manager, or drawing revision reference).

Price labor at the fully burdened rate (20-40% above direct wage). Add materials at cost plus margin. Price programme impact as a separate line with a daily rate if the variation affects the project schedule.

Send the written variation order to the customer with scope description, price breakdown, programme impact (if applicable), and a clear instruction to approve in writing. State that work will not proceed without written approval.

Chase within 48 hours if no response. If the customer approves verbally on site, send an immediate written confirmation of the approval. Record the approval date and approver name on the works order.

Only start variation work after written approval. If materials are required, raise a purchase order linked to the variation works order and the job before ordering from the supplier.

Record labor hours against the variation works order as work proceeds. Capture actuals separately from the main contract scope to maintain clear cost visibility per variation.

Include the variation as a separate line item on the invoice, referencing the VO number and the customer's written approval date. Do not bundle into the main contract sum. Sync to Xero, QuickBooks, or FreeAgent.

Variation work is started on verbal instruction and priced after the fact - leaving the customer to dispute the charge because they never agreed to it in writing.

Labor on variation orders is quoted at the direct hourly wage rather than the fully burdened rate, meaning every variation is priced at a guaranteed loss.

Variation amounts are bundled into the main contract invoice without a separate reference, making them easy for customers to query or delay payment on.

Do I need a written variation order for small additional works on a construction project?

Yes - regardless of value. A common approach sets a minimum variation charge of $150-$500 depending on business scale, but every variation above that threshold should be documented and approved in writing before work proceeds. Verbal agreements lead to disputes at invoice stage. A confirmed WhatsApp message or email reply from the customer counts as written approval.

What should a variation order document include?

A clear description of the additional work, the reason it falls outside the original scope, the price breakdown (labor at burdened rate, materials at cost plus margin), any programme impact as a separate line, the date of instruction, and a sign-off instruction for the customer. Include the VO number so it can be referenced on the final invoice.

How do I handle a situation where a main contractor gives a verbal site instruction and then disputes the variation order?

Log every verbal instruction in writing immediately - a timestamped message back to the site manager confirming what was asked is your primary evidence. Keep a site instruction log for each project recording the date, time, who gave the instruction, and your written follow-up. This record supports your position if a dispute goes to formal adjudication.