Valuing Variations is often a complex area of assessment for the Superintendent, Client or Contractor in relation to variations.
In Autralia, the common contract regime for valuing variations is, generally, as follows:
1. the Proprietor (usually through the Superintendent acting as agent of the Proprietor) and the Contractor attempt to agree on the value of the approved variation;
2. failing such agreement, the Superintendent assesses the value of the variation in accordance with any pre-agreed (at the time of entering into the contract) rates which may be applicable for such variations;
3. where there is no such applicable pre-agreement, the Superintendent determines a "reasonable sum", including an amount for the builders on-costs and profit (but, depending in all circumstances, on the express language of the contract).
For example, clause 40.5 of AS2124-1992 provides:
Where the Contract provides that a valuation shall be made under Clause 40.5, the Principal shall pay or allow the Contractor or the Contractor shall pay or allow the Principal as the case may require, an amount ascertained by the Superintendent as follows -
(a) if the Contract prescribes specific rates or prices to be applied in determining the value, those rates or prices shall be used;
(b) if Clause 40.5(a) does not apply, the rates or prices in a Priced Bill of Quantities or Schedule of Rates shall be used to the extent that it is reasonable to use them;
(c) to the extent that neither Clause 40.5(a) or 40.5(b) apply, reasonable rates or prices shall be used in any valuation made by the Superintendent;
(d) in determining the deduction to be made for work which is taken out of the Contract, the deduction shall include a reasonable amount for profit and overheads;
(e) if the valuation is of an increase or decrease in a fee or charge or is a new fee or charge under
Clause 4.5, the value shall be the actual increase or decrease or the actual amount of the new fee or charge without regard to overheads or profit;
(f) if the valuation relates to extra costs incurred by the Contractor for delay or disruption, the valuation shall include a reasonable amount for overheads but shall not include profit or loss of profit;
(g) if Clause 11(b) applies, the percentage referred to in Clause 11(b) shall be used for valuing the Contractor's profit and attendance; and
(h) daywork shall be valued in accordance with Clause 41.
When under Clause 40.3 the Superintendent directs the Contractor to support a variation with measurements and other evidence of cost, the Superintendent shall allow the Contractor the reasonable cost of preparing the measurements or other evidence of cost that has been incurred over and above the reasonable overhead cost.
Effectively, the Superintendent is being asked to put a valuation on works which, by definition, was not agreed between the parties at the time of entering into the contract. It is work which the Contractor is obliged to perform (the Contractor bound himself to do this by entering into a contract which included a variation clause). The parties did not agree, at the time of entering into the contract, on how much the Contractor would be paid for such work. They merely agreed on the valuation regime.
It is a contractual term, therefore, between the parties, decided upon at the time of entering into the contract, that the Superintendent is to have the last word on the valuation of variations.