In the Gulf, contractors say "variation order" or "VO" where others say "change order", because most regional contracts are based on FIDIC, which uses the term "Variation". The money is often significant: variations on building projects commonly add several percent to the contract value, and unrecorded or late-notified variations are among the main reasons contractors lose margin.
This guide covers what the contract and law say, a step-by-step process, how to price a variation, a worked example, the disputes we see most often and a variation register you can copy.
What do FIDIC and Gulf law say about variations?
The contract decides most of the process; the law fills gaps and sets limits. The table summarises the main sources contractors meet in the UAE and Saudi Arabia.
| Source | What it says about variations |
|---|---|
| FIDIC Red Book 2017, Clause 13 | The Engineer may instruct a Variation at any time before the Taking-Over Certificate (13.1). A Variation is started either by instruction (13.3.1), after which the contractor submits particulars within 28 days, or by a request for proposal (13.3.2). The Engineer then agrees or determines the value under Clause 3.7, using the measurement and valuation rules in Clause 12 |
| FIDIC Red Book 1999, Clauses 13 and 12.3 | Same principle with a simpler procedure: the Engineer may request a proposal or instruct the Variation, and it is valued under 12.3 |
| FIDIC claim notices (2017 Clause 20.2; 1999 Clause 20.1) | Notice of a claim for extra time or money within 28 days of becoming aware of the event; late notice can bar the claim |
| UAE Civil Code (Federal Law 5 of 1985, Article 887) | In a lump-sum contract on an agreed plan, the contractor cannot claim more than the lump sum unless the change was agreed or caused by the employer |
| UAE Civil Transactions Law (Federal Decree-Law 25 of 2025, Article 829) | For contracts signed from 1 June 2026, keeps the lump-sum rule and adds a court power to adjust price or time in exceptional circumstances |
| Saudi Civil Transactions Law (2023, Articles 470 to 472) | Variations are allowed if the employer instructs them or agrees to the contractor's request; no extra payment for work that is necessary to deliver the agreed design; fair remuneration where no price is agreed |
| Saudi Government Tenders and Procurement Law (2019, Article 69) | On government contracts, change orders may increase the contract value by no more than 10% or reduce it by no more than 20%. A new procurement law published in September 2026 raises the increase limit to 20% once it takes effect, expected in early 2027 |
What are the steps in a variation order process?
Whatever the contract form, a variation that gets paid in full passes through the same seven steps.
| Step | What happens | Who | Record to keep |
|---|---|---|---|
| 1. Instruction | Engineer or employer instructs a change, or the contractor identifies one (a drawing revision, a site instruction, a client request) | Engineer, project manager | Written instruction, or written confirmation of an oral instruction |
| 2. Register | The change gets a VO number and is logged, even before it is priced | Quantity surveyor | Variation register entry |
| 3. Notice | Contractor notifies cost and time effects within the contract deadline | Project manager, quantity surveyor | Notice letter with date sent |
| 4. Proposal | Contractor prices the change and states any effect on the programme | Quantity surveyor, planner | Priced proposal with build-up |
| 5. Approval | Engineer agrees or determines the value; employer approves if the contract requires | Engineer, employer | Signed variation order with agreed value |
| 6. Budget update | Approved value is added to the contract sum and the project budget | Quantity surveyor, project accountant | Revised budget by cost code |
| 7. Billing | Work done on the variation is claimed in the next interim payment application | Quantity surveyor | Payment application line, certified amount |
Two rules make the difference in practice.
Never do changed work on an oral instruction alone. If the engineer gives an instruction on site, confirm it in writing the same day. Many contracts treat an unconfirmed oral instruction as no instruction at all.
Notify even when you cannot yet price. Time bars run from when you became aware of the event, not from when you finish your estimate. Send the notice first, and the priced proposal when it is ready.
How do you price a variation?
Price from the contract first. Under FIDIC Clause 12 and most Gulf contracts, the order of preference is:
| Priority | Method | When to use it |
|---|---|---|
| 1 | Bill of Quantities rates | The varied work is the same kind of work, under similar conditions, as an item already in the BOQ |
| 2 | Rates derived from BOQ rates | The work is similar but not identical, for example a thicker wall or a different finish on the same substrate |
| 3 | New rate from cost plus profit | No BOQ item is relevant, or the quantity or conditions have changed enough that the BOQ rate no longer fits. FIDIC 2017 uses the percentage for profit stated in the Contract Data, or 5% if none is stated |
| 4 | Daywork | Small or unpredictable work, if the contract has a daywork schedule and the engineer instructs it |
When you build a new rate, show the build-up line by line: materials with supplier quotations, labour hours and rates, plant, overheads and profit. In FIDIC, "Cost" includes overheads, so overheads go into the cost before profit is added. A new rate without a build-up is the quickest way to have it cut.
Three items are often forgotten:
- Omissions. If the variation removes work, deduct it at the BOQ rate in the same VO.
- Time-related costs. If the variation extends the programme, preliminaries such as site staff, offices and equipment hire for the extra period belong in the claim, with the time impact shown on the programme.
- Effect on other work. Rework, idle labour and resequencing caused by the change are part of its cost, but they need records made at the time.
How is a variation priced and billed? A worked example
A contractor is building a villa compound in Dubai under a FIDIC-based contract with a 10% retention. On 3 September, site instruction SI-031 extends the boundary wall by 60 metres, 3 metres high. The contractor notifies on 8 September and submits VO-014 a week later.
| Item | Basis | Quantity | Rate (AED) | Amount (AED) |
|---|---|---|---|---|
| 200 mm blockwork | BOQ item 4.2 | 180 m² | 85.00 | 15,300 |
| Plaster, both faces | BOQ item 6.1 | 360 m² | 32.00 | 11,520 |
| Paint, both faces | BOQ item 8.3 | 360 m² | 18.00 | 6,480 |
| Stone coping | New rate (see below) | 60 m | 147.00 | 8,820 |
| Total | 42,120 |
The first three lines use BOQ rates, so there is nothing to argue about. Coping has no BOQ item, so it needs a new rate:
| Build-up per metre | Contractor's proposal (AED) | Engineer's determination (AED) |
|---|---|---|
| Stone, delivered | 115.00 (premium stone) | 90.00 (stone to specification) |
| Labour and plant | 35.00 | 35.00 |
| Direct cost | 150.00 | 125.00 |
| Overheads at 12% | 18.00 | 15.00 |
| Profit | 10%: 16.80 | 5%, per Contract Data: 7.00 |
| Rate | 184.80 | 147.00 |
The contractor's proposal came to AED 44,388; the engineer determined AED 42,120. The difference was the stone, which was a better grade than the specification required, and the profit percentage, which the Contract Data fixed at 5%. The contractor accepted, and VO-014 was approved at AED 42,120.
The approved amount was added to the contract sum and to the project budget under the boundary works cost code. In the month-7 payment application, the work was 60% complete:
| Payment application line | AED |
|---|---|
| VO-014, 60% of 42,120 | 25,272.00 |
| Less retention at 10% | (2,527.20) |
| Net amount for VO-014 | 22,744.80 |
Why do variation disputes happen, and how does a register help?
Most variation disputes are not about the rate. They are about whether the change was instructed, whether notice was given on time, and whether the work was in the original scope.
| Dispute | Typical cause | Prevention |
|---|---|---|
| "This was never instructed" | Oral site instruction, never confirmed | Confirm every instruction in writing within 24 hours |
| "Notice is out of time" | Contractor waited to finish pricing before notifying | Notify on awareness; price later |
| "It was in the original scope" | Drawings and specification read differently | Reference the tender drawing and BOQ item the change departs from |
| "The rate is too high" | New rate with no build-up, or BOQ rates ignored | Price from contract rates first; show a build-up for new rates |
| "The time impact isn't proven" | No programme analysis | Show the effect on the critical path with the updated programme |
| Paid for the addition, not the omission | Omissions not recorded | Record the omitted work and value in the same VO |
The tool that prevents most of these is a variation register, kept from day one and reviewed at every monthly cost meeting.
| VO no. | Description | Instruction ref. and date | Notice date | Status | Proposed (AED) | Approved (AED) | Billed to date (AED) | Time impact |
|---|---|---|---|---|---|---|---|---|
| VO-014 | Boundary wall extension | SI-031, 3 Sep | 8 Sep | Approved | 44,388 | 42,120 | 25,272 | None |
| VO-015 | Lobby floor: porcelain to marble | EI-009, 10 Sep | 16 Sep | Submitted | 33,000 | — | — | 4 days, under review |
| VO-016 | Additional power points, block B | Drawing rev. C, 22 Sep | Pending | Notified, not priced | — | — | — | To be assessed |
What does HYP see at contractors?
At contractors in the UAE and Saudi Arabia, our implementation team usually finds variations tracked in a quantity surveyor's personal spreadsheet. The register is accurate while that person is on the project, but finance cannot see it, so approved variations reach the budget late and pending ones are invisible in the forecast.
The most common loss is not a rejected rate; it is work done on a site instruction that never became a priced VO. When a variation register is reviewed alongside the monthly cost report, these show up while the instruction is still fresh enough to claim.
In HYP, variations are recorded against the project with their instruction reference, status and value. Approved VOs update the contract value and budget, and certified amounts flow into the payment application and the customer invoice. See how it works on our Construction & Engineering page.
Related reading: variations change the budget line in the cost report. See Construction Project Cost Control: Budget vs Committed vs Actual, Explained. For the subcontractor side of variations, see Subcontractor Payment Certificates: Tracking Retention, Advances and Deductions.
Sources
- FIDIC: Conditions of Contract for Construction (Red Book), 1999 and 2017 editions
- Fenwick Elliott: FIDIC 2017 claims and notice provisions
- K&L Gates: the new UAE Civil Transactions Law and construction contracts (2026)
- Watson Farley & Williams: Saudi Arabia's Civil Transactions Law and construction contracts
- Pinsent Masons: project adjustments under the Saudi Government Tenders and Procurement Law
- Clyde & Co: Saudi Arabia's new Government Tenders and Procurement Law (2026)