Variation Costs: How Changes Affect Your Building Budget (and How to Manage Them)
- Corey Brown
- 5 days ago
- 9 min read
Introduction
Embarking on a home renovation or building project is an exciting venture, a chance to transform your living space into the dream you've always envisioned. However, the path from blueprint to reality isn't always smooth. One of the most significant, and often unexpected, challenges homeowners face is the phenomenon of 'variations' or 'change orders.'
These alterations to the original project scope can dramatically impact your budget and timeline, turning a dream project into a financial and logistical headache. If you're searching for information on 'variation costs,' 'building budget changes,' or 'managing renovation expenses,' you've come to the right place. This guide will demystify the intricacies of variations, providing you with actionable strategies to navigate these changes effectively and protect your investment. We'll delve into the common causes, the financial implications, and, most importantly, how to proactively manage variations to keep your project on track and within budget. Let's equip you with the knowledge to safeguard your building project and ensure a successful outcome.
Table of Contents
What Are Variations in Building Projects?
At its core, a 'variation' in a building project refers to any deviation from the initially agreed-upon plans, specifications, or contracts. These changes, formally documented as 'change orders,' represent alterations to the original scope of work. Understanding the nuances of variations is crucial, as they can range from minor adjustments, like a change in tile color, to major structural modifications, such as relocating a load-bearing wall.
To provide a clearer picture, let's break down the key elements:
Contractual Basis:
Variations are intrinsically linked to the initial contract. This document outlines the agreed-upon work, materials, and costs. Any alteration to these terms constitutes a variation.
Documentation:
Proper documentation is paramount. Every variation should be recorded in writing, detailing the change, the reasons behind it, the associated costs, and the impact on the project timeline. This documentation serves as a legal record and helps prevent disputes.
Scope of Work:
Variations directly affect the scope of work, which is the defined set of tasks and deliverables. Changes to the scope can involve adding, removing, or modifying tasks, leading to adjustments in labor and material requirements.
Cost Implications:
Variations almost always result in additional costs. These expenses can arise from increased material prices, additional labor hours, or specialized equipment rentals.
Timeline Impact:
Changes to the scope of work can also extend the project timeline. Delays can occur due to material procurement, revised scheduling, or the need for additional permits.
The Builder's Perspective:
It's essential to understand that variations aren't simply about 'clipping the ticket' for builders. They involve significant time and effort in:
Re-estimating costs and sourcing materials.
Rescheduling labor and coordinating subcontractors.
Documenting changes and managing potential delays.
Some companies charge a variation fee to cover the time spent on the administration of these variations, as sometimes the homeowner decides not to proceed, after all the work has been done.
Fixed-Price vs. Charge-Up Contracts:
While variations are typical in fixed-price contracts, where the builder agrees to complete the project for a set amount, they also occur in charge-up contracts (time and materials).
In charge-up contracts, it's equally important to document variations, especially regarding the time implications, as these costs accumulate.
Homeowners must stay vigilant in charge-up contracts, as unchecked variations can lead to substantial cost overruns at the project's end.
Essentially, variations are the 'moving targets' in a building project. They are the changes that evolve from the original plan. Understanding their nature and impact, including the builder's perspective, is the first step towards effectively managing them.
The Impact of Variations on Your Budget
When variations arise, it's easy to focus solely on the cost of the additional materials. However, the true cost extends far beyond this. Homeowners need to consider:
Labor Costs:
Variations often require additional labor hours, which can significantly increase expenses.
Project Delays:
Delays caused by variations can lead to holding costs, such as extended rental fees or lost productivity.
Hidden Costs:
Unexpected expenses, like specialized equipment rentals or permit revisions, can arise.
The Builders Time:
The time it takes to quote, and organize a variation is time taken away from the project, and other projects.
The accumulative effect:
One small variation may not seem like much, but multiple small variations add up to a large sum of money. This is especially true on charge up contracts where every hour, and every piece of material is charged to the owner.
By understanding the comprehensive cost implications, homeowners can better appreciate the importance of proactive variation management.
Strategies for Managing Variation Costs (Detailed Strategies)
Preventing variations entirely is often unrealistic, but proactive management can significantly minimize their impact. Here's a comprehensive breakdown of effective strategies:
Meticulous Planning and Comprehensive Documentation
Detailed Blueprints and Specifications: Invest in thorough architectural and engineering plans. Ensure every detail, from electrical layouts to plumbing specifications, is clearly documented. This reduces ambiguity and minimizes the likelihood of misinterpretations.
Material Selection and Samples: Finalize material selections early in the process. Obtain physical samples and confirm specifications to avoid last-minute changes due to dissatisfaction or unavailability.
Site Inspections and Assessments: Conduct comprehensive site inspections before commencing work. Identify potential issues like soil instability, hidden utilities, or drainage problems. Document these findings and incorporate them into the project plan.
Written Contracts: Ensure your building contract is extremely detailed. It must include all agreed upon materials, and an allowance for each section of work, this will allow for easy price changes.
Photo and Video Documentation: Take photos and videos of the site before, during, and after each stage of construction. This visual documentation can be invaluable in resolving disputes and tracking progress.
Open and Transparent Communication with Your Builder
Regular Meetings: Schedule regular meetings with your builder to discuss progress, address concerns, and review potential variations. Document all discussions and agreements in writing.
Prompt Responses: Respond promptly to your builder's inquiries and requests for information. Delays in communication can lead to project delays and increased costs.
Clarify Expectations: Clearly communicate your expectations regarding quality, timelines, and budget. Seek clarification on any points of confusion.
Establish a single point of contact: Having one person that is the point of contact between the builder and the owner, will reduce miscommunication.
Establishing a Robust Contingency Fund
Allocate a Realistic Percentage: Set aside a contingency fund of 10-20% of the total project budget to cover unexpected costs. The percentage should vary depending on the complexity and risk of the project.
Prioritize Spending: Use the contingency fund judiciously. Distinguish between essential variations and discretionary upgrades.
Track Contingency Usage: Maintain a detailed record of how the contingency fund is used. This helps you monitor spending and avoid overruns.
Implementing a Formal Change Order Process
Written Change Orders: Require all variations to be documented in writing, using a standardized change order form.
Detailed Scope of Work: Each change order should include a detailed description of the revised scope of work, including materials, labor, and timelines.
Cost Breakdown: The change order must include a clear breakdown of the associated costs, including material prices, labor rates, and overhead.
Timeline Adjustments: Document any adjustments to the project timeline resulting from the variation.
Signatures and Approvals: Ensure all change orders are signed and approved by both the homeowner and the builder.
Variation fees: ensure that the change order mentions any variation fees that are charged by the building company.
Proactive Problem-Solving and Flexibility
Anticipate Potential Issues: Work with your builder to identify potential risks and develop contingency plans.
Embrace Flexibility: Be prepared to adapt to unexpected challenges and make informed decisions.
Seek expert Advice: Consult with architects, engineers, or other professionals when faced with complex variations.
By implementing these strategies, homeowners can mitigate the impact of variations and maintain control over their building projects.
Real-World Examples of Variation Scenarios
To truly grasp the impact of variations, let's examine some common scenarios that homeowners often encounter:
The Hidden Utility Surprise
Scenario: During excavation for a foundation, the crew discovers an unmarked underground gas line that was not indicated on the original site survey.
Impact: This requires immediate stoppage of work, rerouting the gas line, obtaining new permits, and potentially redesigning portions of the foundation.
Cost Implications: Significant increase in labor costs, material costs for new piping, permit fees, and potential delays leading to holding costs.
Management Strategy: A thorough initial site survey and contingency planning could have mitigated some of the impact. The homeowner and builder should have immediately documented the finding, and proceeded with a change order.
The Evolving Design Vision
Scenario: The homeowner, after seeing the initial framing, decides they want to increase the size of the master bathroom and add a skylight.
Impact: This requires redesigning structural elements, reordering materials, and rescheduling subcontractors.
Cost Implications: Increased material costs, significant labor costs for demolition and reconstruction, and potential delays.
Management Strategy: While design changes are understandable, a clear change order process is essential. The homeowner must understand the full cost and timeline implications before proceeding.
The Material Availability Issue
Scenario: The homeowner selected a specific imported tile that becomes unavailable due to supply chain disruptions.
Impact: The homeowner must select a substitute tile, which may require adjustments to the design and installation process.
Cost Implications: Potential cost differences between the original and substitute tile, and possible labor costs for adjustments.
Management Strategy: The builder should have communicated potential material availability risks early on. The homeowner and builder should work together to find suitable alternatives and document any cost changes.
The Unforeseen Ground Conditions
Scenario: After digging the foundations, the ground is found to be unstable, and requires piers to be installed to support the foundations.
Impact: This will require specialist equipment, and a specialist sub contractor.
Cost Implication: Large increase in cost, and large delays.
Management Strategy: A soil test should have been done before hand, but sometimes these things are unavoidable. A large contingency fund, and good communication is key.
The Regulatory Change
Scenario: During the project, the local building code is updated, requiring the installation of additional fire safety measures that were not in the original plans.
Impact: The builder must incorporate the new requirements, which may involve additional materials and labor.
Cost Implications: Increased material and labor costs, and potential delays for inspections and approvals.
Management Strategy: The builder should stay updated on building code changes. The homeowner should be prepared for potential regulatory changes and include a buffer in their contingency fund.
These examples illustrate the diverse nature of variations and the importance of proactive management. By understanding these scenarios, homeowners can better prepare for potential challenges and make informed decisions.
Practical Tips for Homeowners
Navigating variations in a building project can be challenging, but with the right approach, homeowners can minimize their impact and protect their investment.
Here are some practical tips:
Prioritize Thorough Planning and Research
Invest time in detailed planning before construction begins.
Research and select materials carefully, considering availability and cost.
Obtain multiple quotes from reputable builders and compare them thoroughly, focusing on value and experience, not just the lowest price.
Conduct thorough site investigations and soil tests before work begins.
Maintain Clear and Consistent Communication
Establish regular communication channels with your builder.
Document all conversations and agreements in writing.
Don't hesitate to ask questions and seek clarification.
Establish one point of contact.
Be Decisive and Minimize Changes
Finalize design decisions before construction starts.
Avoid making changes on a whim, as they can lead to costly variations.
Understand that even small changes can have a ripple effect on the project.
Understand Your Contract Thoroughly
Review the building contract carefully, paying attention to clauses related to variations.
Clarify any ambiguities or concerns with your builder or a legal professional.
Ensure that the contract has allowances for each section of work.
Ensure the contract states the builders variation fee.
Build a Realistic Contingency Fund
Allocate a contingency fund of 10-20% of the total budget.
Use the contingency fund wisely, prioritizing essential variations.
Track all contingency fund expenditures.
Document Everything Meticulously
Keep a detailed record of all plans, specifications, contracts, change orders, and communication.
Take photos and videos of the construction progress.
Retain all receipts and invoices.
Be Proactive and Flexible
Anticipate potential challenges and develop contingency plans.
Be prepared to adapt to unexpected situations.
Seek expert advice when needed.
Understand the accumulative effect.
Realise that small variations add up to large costs.
Especially on charge up contracts.
By following these practical tips, homeowners can navigate variations with greater confidence and minimize their impact on their budget and timeline.
Conclusion
Building or renovating a home is a significant investment, and variations are an inevitable part of the process. However, by understanding the nature of variations, implementing proactive management strategies, and maintaining open communication with your builder, you can minimize their impact and safeguard your budget.
Remember that variations are not always about unexpected problems; they can also arise from evolving design preferences or changing circumstances. The key is to be prepared, informed, and flexible.
Here are the essential takeaways to keep in mind:
Plan meticulously: Thorough planning and detailed documentation are your first lines of defense against costly variations.
Communicate openly: Clear and consistent communication with your builder is crucial for managing expectations and resolving issues.
Build a contingency fund: A realistic contingency fund provides a safety net for unexpected expenses.
Document everything: Meticulous record-keeping protects your interests and helps prevent disputes.
Prioritize value over cost: when obtaining quotes.
Understand the accumulative effect: small variations add up.
At Kiwi Built, we understand the importance of transparency and streamlined communication throughout your building journey. That's why we utilize Buildertrend, a comprehensive project management software that provides our clients with real-time access to crucial project information. Through the Buildertrend app on your phone or desktop, you can easily track your budget, review variations, access site photos, and view daily logs, ensuring you're always informed and in control. We cover most of the above points in this software.
By embracing these principles and leveraging the tools we provide, you can navigate variations with greater confidence and ensure a successful outcome for your building project.
If you're embarking on a building or renovation project, don't hesitate to seek expert advice and work with reputable professionals who prioritize transparency and collaboration. Taking the time to understand and manage variations effectively will ultimately lead to a more rewarding and stress-free building experience.
Comments