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Negotiating Variation Claims: How to Improve Your Success

Variation Claims
Construction
By Paul Netscher | Read time: 4 minutes

Most of us have at some time submitted variation claims to our customers for changes encountered during the course of the project. Some are for extra costs only, while others are the extension of time claims which usually also result in additional costs. On some projects, these claims are worth millions of dollars.

It’s essential that you submit a well thought through and substantiated variation claim. However, even if your claim is well presented and includes all the facts, clients usually require a meeting to discuss your claim. They often have questions, dispute your facts and calculations, or just believe that contractors automatically inflate their claims and it’s, therefore, their right to negotiate the claim down to a smaller value.

Sometimes they don’t understand the claim. In fact meeting with the client soon after the claim is submitted enables you to answer questions and explain the basis of the claim before the client’s team has made a firm decision regarding your variation claim. Once a claim is formally rejected it can be difficult to reverse the decision. Often egos come into play and people don’t want to be seen to lose face by backing down.

These claim meetings are important because they can secure extension of time and variation claims which can be worth millions of dollars. Failure to resolve these claims can see them drag out for months and even years – often costing huge amounts of time and money.

They can become bitter disputes, souring the relationship with your client and even damaging the project. As long as these variations aren’t settled your company is probably not being paid the claim, which can be detrimental to your company’s cash flow and possibly put your company’s future in jeopardy. You need to settle variation claims as amicably and as quickly as possible, ensuring you win what’s due to your company.

Face to face meetings with your client and their team is often useful to shortcut the claims process, giving you an opportunity to answer their questions and understand their concerns.

Unfortunately, many contractors go into these meetings ill-prepared, or with an attitude spoiling for a fight.

How to in your variation claims

Before the meeting

1. Read

Read through the variation claim to refresh your memory.

2. Backup

Ensure you take a colleague with, to back you up.

3. Explanation 

Explain the claim to the other person and ensure you both understand why there is a claim and how the costs or time for the claim were calculated. You don’t want to be contradicting each other in the meeting or have your colleague accept a lesser figure than you want.

4. Strengths

Understand the strengths and weaknesses of your claim. Be ready to support the strengths and to defend the weak points.

5. Documents

Take all the relevant documents, ensuring they are filed in the correct order and where supporting documents can be easily found.

6. The fall-back

Know what the ‘fall-back’ position or minimum is that you require. You won’t always be granted what you would like or what you have asked for.

7. Arguments

If you know some of the concerns or arguments that your client might have, then go prepared with counterarguments.

8. Contract

Know your contract document and your rights.

During the meeting

1. Be patient

Explain the basis of the claim clearly, logically and concisely. Present supporting documentation to support your words.

2. Explain it all

Don’t assume the other party is familiar with the facts of the case. 

3. Stay calm

Keep emotions out of the argument

4. Listen

Listen to what the other side has to say.

5. Arguments

Understand the other party’s arguments and use facts and the contract to explain why they are incorrect. Take the time to go through every argument even when you consider them annoying, irrelevant or trivial.

6. Concerns

Understand the other party’s fears or concerns and address these pointing out why the fears are unnecessary and presenting arguments to allay their concerns.

7. Admit when you are wrong

It’s pointless arguing over something when you are wrong. It costs you the moral high ground and you lose integrity.

8. Be prepared to grant small wins

Always keep your eye on the big picture.

9. Take Notes

Take notes during the meeting, particularly of questions that need to be answered and points that were agreed.

10. Emotional arguments

Don’t be swayed by emotional arguments. Don’t be intimidated by bullying tactics. There should be nothing personal about presenting a variation claim. The contract is the contract and the facts are the facts and everyone must abide by the contract rules.

11. Promisses

Don’t make threats or promises you can’t keep.

12. Don’t make rushed decisions

If necessary take a break to compare notes with your colleagues, rework calculations, and carefully consider options. However, when things are going well and the client is conceding points then keep the conversation moving quickly to a final agreement, even if this means making some small concessions.

13. Negotiations 

Learn when to break with the negotiations when your side needs to regroup or develop another strategy, or when it’s obvious the client is in a bad mood or preoccupied with other matters.

14.  Deadlocks

When there’s a deadlock know that it’s pointless repeating the same points. Repeating points and raising voices won’t change minds. Think of another tack or angle. It may be necessary to leave an issue unresolved and move onto other variation claims. Settlement of other issues may allow both parties to return to the deadlock with more open minds and a willingness to concede some points.

15. Summary

When a deadlock persists, sum up the issue, including the points of difference and the points of agreement. Often this summary can awaken both parties to how close the matter is to a resolution.

16.  Follow-up

If necessary set a date for a follow-up meeting.

After the variation claims meeting

1. Submit written answers to outstanding questions.

2. Confirm decisions and agreements made in the meeting in writing.

3. Where an item is deadlocked, or the client has rejected a claim:

    • Reconsider the facts and their reasoning. Why have they rejected the claim? Is there another way to convince them?
    • Ask for expert advice if necessary.
    • What are the options? If the client is resolute and unswaying in their rejection of the claim you either have to accept what has been offered, or you have to escalate the claim and follow the dispute resolution process.

Conclusion

Negotiating a variation claim successfully, achieving what you want without upsetting the client, is an art that requires some common sense, patience, an understanding of human nature, knowledge of the facts and the contract and an ability to present logical arguments. Settling variation claims won’t always be easy. Settling a variation claim successfully can be hard work.

For more on winning your next variation claim get a copy of the author’s book; ‘Construction Claims: A Short Guide for Contractors’. One review of this book says; “An excellent, concise and very practical guide to the successful claims process. This is a no-nonsense approach that gets on with it.”

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