Techniques for valuation of variation works

Abstract

Construction industry in Malaysia is typically considered as fragmented. Lack of integration tends to incur additional costs from rework. The variations arise in the contract need to be valued accordingly depend upon the nature of the variations. The valuation of variations has long been recognized as one of the commonest sources of disputes in the construction industry. The main reason for the disputes is the claims from contractor which frequently do not represent the true value of the works. The techniques for the valuation of variations need to be assessed to determine whether the rules for valuation of variations in the standard forms of contract are adequate and appropriate to reduce the disputes. The objectives of this study is firstly to study the techniques for the valuation of variations and problems associated with it, secondly, to investigate the relevant legal cases of contract law in relation to the valuation of variations and finally to identify the feasible solution of minimizing the disputes in valuation of variations. The scope of this study is limited to the public sector construction contract and the methodology of this study based on the secondary and primary data analysis. The study assumes that different types of project contracts adopt a different method of valuing the variation works. Each contract has stipulated the valuation rules, but it is a need to properly select the most adequate and appropriate techniques of valuing the variations through a right selection of contracts. Historically, disputes in valuation are occurred as many related legal cases have been recorded. The tendency of disputes can be reduced if a project uses the contracts that contain the most effective techniques for valuing the variation claims. The study shows that in Malaysia despite the fact that valuation is a factor contribute to disputes, nowadays it has no longer a major problem in public sector’s contract management. Disputes related to claims of variation works can be avoided by overcoming the problems of the disputes. This can be achieved through the proper selection of type of contracts which contain the most effective methods of valuing the variation claims.