The Legal Importance of Documenting Variation Orders in Contracting in Bahrain
In Bahrain’s contracting sector, variation orders are a routine part of project management. They are formal instructions to change the scope of work, specifications, or timelines after the contract has been signed.
While variations are common in construction and contracting projects, failing to properly document them can lead to payment disputes, delays, and even arbitration. This blog explains why documenting variation orders is critical, the legal framework in Bahrain, and how to ensure variations are handled correctly.
What Is a Variation Order?
A variation order is a written document issued by the employer, engineer, or project manager instructing the contractor to carry out changes that modify the original contract scope.
Common variations include:
- Design modifications or material substitutions
- Additional works or omissions
- Changes to project sequencing
- Adjustments to dimensions or quantities
Legal Significance in Bahrain
- Contractual Basis
- Most contracts, especially FIDIC-based agreements used in Bahrain, contain detailed variation clauses.
- These clauses set out who can issue variations, how they should be documented, and how cost/time impacts are calculated.
- Payment Entitlement
- Without a documented variation order, contractors risk losing the right to claim additional payment for extra work.
- Employers may also face inflated claims if changes are not formally approved.
- Time Extensions
- Variations often impact the project schedule. Proper documentation supports claims for an Extension of Time (EOT).
- Dispute Prevention
- A signed variation order serves as evidence if disagreements arise over whether work was authorized.
Risks of Not Documenting Variations
- Unpaid work due to lack of proof the change was instructed
- Project delays without EOT entitlement
- Inflated or exaggerated claims from contractors
- Regulatory non-compliance if changes affect approvals or permits
Best Practices for Documenting Variations
- Use Standard Forms: Adopt consistent templates for issuing and approving variations.
- Include Key Details: Describe the change, reason, cost impact, and time adjustment.
- Get Signatures: Ensure the variation order is signed by authorized representatives.
- Link to the Contract: Reference the relevant contract clause authorizing the change.
- Maintain Records: Keep all correspondence, drawings, and approvals attached to the variation order.
Example:
A contractor in Bahrain was hired to build a hotel under a lump-sum contract. During construction, the employer requested additional landscaping and an upgraded lighting system. The contractor completed the work without a formal variation order, relying on verbal instructions.
When the final invoice was submitted, the employer refused to pay for the extra work, claiming it was included in the original contract. Without written evidence of the change, the contractor faced significant difficulty proving entitlement to payment.
A lawyer reviewing the matter concluded that the absence of a signed variation order shifted the legal balance in favor of the employer, despite the contractor’s actual performance of additional work.
Best Practices
For Contractors:
- Never proceed with changes without a signed variation order.
- Train site staff to recognize and report scope changes immediately.
- Keep a variation log for tracking all changes and approvals.
For Employers:
- Require all variations to be costed and approved before work starts.
- Control unauthorized changes by limiting who can issue instructions.
- Regularly review variation logs to track project cost and time impact.