Variation Accounts – improve your chances of getting paid

In Contract Law, the burden of proof required for proving a claim is based on a simple legal principle known as ‘on the balance of probabilities’. In layman’s terms this means, based on the supporting evidence, that what you are claiming is probably correct.

So what does this have to do with variation account preparation, I hear you ask?

It’s simple; a well-prepared variation account is one that includes all of the relevant supporting evidence to confirm that what has been claimed for in the variation account is true and accurate and represents the value of the claim, consequently on balance it is probably correct.

From experience many small subcontractors fail to submit a detailed variation account within its final account; consequently they end up losing out on thousands of pounds, as they make final account settlements with the contractor for far less than is actually due.

The most severe example of this occurring that I can recall is as follows; in 2011 a small inexperienced mechanical services subcontractor who had been working for an extremely large experienced mechanical services subcontractor, on a flagship project in Old Trafford ,Manchester, agreed to a £40,000.00 reduction in the final account sum (I know what you’re thinking… ‘Idiots’ and you’re not wrong to think that – but we all know the pressures that are exerted by Banks).

They did this because ultimately they could not provide sufficient supporting evidence to substantiate the variation account and they wanted to resolve the account and move forward onto the next project. Following an investigation by Drake QS, after the event, it became apparent that the lack of evidence was due to the administrative failure of the small subcontractor to collect the necessary substantiation at the time the additional works took place.

Because they had not collected such support material, they were not in a position to provide the necessary evidence when it was requested and thus, faced with that reality, they ultimately accepted the much lesser sum. It is my belief that if they had collected the evidence to substantiate their claim, and presented it correctly, they would have prevented this loss from happening.

As you can imagine, this was a very harsh lesson to learn and is still a hard pill to swallow two years on for the small subcontractor.

So to avoid the same thing happening to you the question is, ‘what is supporting evidence and how is it collected’?

Examples of supporting evidence are: –

1. Copies of quotations submitted upfront to the contractor for the additional works if so required.
2. Copies of correspondence, emails, letters, faxes, meeting minutes that instruct the quoted works to proceed.
3. When the works have not been quoted upfront, copies of correspondence, such as emails, letters, faxes, meeting minutes, signed confirmation of verbal instruction sheets, etc that instruct the works to proceed.
4. Copies of invoices, which prove the cost of the materials purchased, the plant hired and /or the subcontractors employed.
5. Copies of drawings, which highlight any differences between the tender and as-fitted revisions.
6. Copies of signed work record sheets, which confirm hours worked by operatives and that have been signed by the contractor.
7. Finally any other pieces of relevant information that prove what I am claiming has occurred for example, photographs.

How is it collected?

It is better if the supporting evidence is collected at the time of the event (the term used for this is ‘concurrently) and stored away, for incorporation into the variation account when needed.

When preparing a variation account for inclusion in a final account submission, I need, the information detailed in points one to seven above. I produce the variation account in a logical and easy to follow format, so that it explains to the reader how and why there is an entitlement to the sums being claimed.

Simply, if you give each variation/piece of additional work a separate section in the variation account with all of the relevant supporting evidence behind it you are improving your chances of getting paid because not only will you have the relevant supporting evidence available when you present the account to your client but also the perception of the package is that here is a ‘claim’ from someone who knows what they are doing – and the contractor will move on to easier prey!

If you need any help with producing a final account or are having difficulty in agreeing a final account get in touch with us, if the above information is discoverable the chances of us securing payment for you are high

Remember “there is no substitute for a well-prepared variation account”