Raise a subcontract variation

Add or remove scope on an existing subcontract by raising a variation, and say on each line which part of the contract it changes, so the purchase order always shows the net position line by line.

When to use this

When the work under a signed subcontract changes — more of an existing item, less of it, or a new item that wasn't in the original contract — and you need the change recorded and then approved. Once the variation is raised and submitted, it goes through Approve a subcontract variation.

Prerequisites

• Subcontract in Signed, Active, PC, or DLP status — see Subcontract states
• You know which contract line (or earlier variation line) each change relates to
• Permission to create variations for this subcontract's subsidiary

Walkthrough

1. Open the Subcontract record, go to the Variations subtab and click New FC PF Subcontract Variation.
2. The new variation opens with its Status (Draft), Variation Sequence, Project and Department already filled in from the subcontract.
3. Fill in the variation header:
   • Description: what the variation is for. This is the variation's text everywhere it's listed, so make it clear. There's no separate Name to enter.
   • Variation Type and Reason.
4. On the Schedule of Values subtab, add a line for each change in the Variation Lines list:
   • Choose the line it changes in Varies Line (see Choosing the line a variation varies below). This is required for a deduction and optional for an addition.
   • Enter a Description, and the Quantity and Rate, or the Amount (Signed). For an addition, the amount is positive; for a deduction, it's negative.
   • Check the Item, Cost Centre and Phase. When you pick a Varies Line, they're filled in from the line it varies. For a new item, choose them yourself.
5. Click Save. The variation is saved in Draft, and you can come back and change it.
6. When it's ready, click Edit, set Status to Pending Approval, and save. It's now waiting for approval.

You don't need to fill in Line or Change Kind. The line number is filled in automatically when you add a new line, and Change Kind is set for you from the amount and the Varies Line:

What's filled in for you on save

• Value (Signed) is the total of the variation's lines. It's worked out again every time you save, so you never type it.
• The Summary box at the top right shows the subcontract's Original Contract Value, the Approved Variations so far, the Contract Value Before this variation, this variation's Additions, Deductions and total, and Revised If Approved: what the contract will be worth once it's approved.
• A Variation Estimate is created on the project (see The variation estimate below).

Every line needs an Item and a Cost Centre

Every line must have an Item and a Cost Centre, and a Phase when the project uses phases. A line that varies another line always takes the Item, Cost Centre and Phase of the line it varies. That keeps the change on the same item and cost centre on the purchase order and in your job costing. If a line is missing any of them, the variation can't be saved and the message names the line.

Choosing the line a variation varies

The Varies Line list shows every line on this subcontract that a variation can change:

• The subcontract's original contract lines, shown with their line number, description and value — for example Line 1 · Tiling · $32,000.00
• The additions on earlier approved variations, shown with the variation number and line number, as on the Schedule of Values — for example VAR13/2 · Extra waterproofing · $3,000.00

Only this subcontract's lines are listed. Lines from draft, pending or rejected variations never appear, and neither do deductions.

Deductions must say which line they vary

A deduction (negative amount) must have a Varies Line. The line can't be added to the variation without one. This keeps every reduction tied to the work it comes off, so the purchase order and the subcontract stay in step.

Additions can vary a line or stand alone

An addition (positive amount) can go either way:

• Vary an existing line — for more of the same work. On approval the amount is added to that line on the purchase order.
• Leave Varies Line blank — for a genuinely new item. Choose its Item, Cost Centre and Phase yourself. On approval it becomes a new line on the purchase order.

A line can't go below $0

A line, together with everything that varies it, can't go below $0. If a deduction would take a line below $0, the variation can't be saved, and the message tells you how much is left to deduct from that line.

Other rules

• A deduction can't vary another deduction — choose the original line, or the addition it reduces.
• A line can't vary another line on the same variation.
• Lines imported, or entered on their own rather than on the variation, follow the same rules.

The variation estimate

So that the change is costed on the project as well as on the subcontract, the first time you save a Draft or Pending Approval variation a Sales Estimate is created on the project for it:

• It has one line for each variation line, with the same Item, Cost Centre, Phase and amount, priced at the project's Default Margin %.
• The variation's Variation Estimate field links to it, and the estimate links back to the variation.
• It's kept in step for you. Each time you save the variation while it's Draft or Pending Approval, the estimate's lines are updated to match.
• Once the estimate is in a contract, it's left alone. From then on, any change to its pricing is made on the estimate itself, and saving the variation no longer updates it.
• If the variation is rejected, the estimate's lines are removed and the estimate is made inactive (unless it's already in a contract).

If the estimate can't be created or updated, the variation still saves, and the Estimate Problem field on the variation says what went wrong. Fix the cause (for example, a missing Item on a line) and save the variation again to retry.

What happens on approval

When the variation is approved, the purchase order is updated to hold the net position of each line:

• A deduction reduces the line it varies, rather than adding a negative line to the purchase order.
• An addition that varies a line increases that line.
• A new item becomes its own purchase order line.

The line keeps its rate and its quantity changes, so the purchase order always matches the subcontract's own lines. For example:

• A lump-sum line of 1 × $32,000.00 less $5,000.00 becomes 0.84375 × $32,000.00 — $27,000.00.
• Deducting 50 m² from a 400 m² line at $80/m² leaves 350 m² at $80/m².

Keeping the rate is what keeps payments right once work has been claimed. Claims are received and billed against the line at its rate, so if 10% of the Tiling line ($3,200.00) has already been billed, the remaining 0.74375 at $32,000.00 ($23,800.00) brings the total to exactly $27,000.00.

A change priced at a different rate from its line still keeps the line's rate: adding 10 m² at $90/m² to an $80/m² line adds $900.00, shown as 11.25 m² at $80/m². If the quantity itself matters, raise it as a new item instead.

Variations are checked again at approval, because another variation may have been approved against the same line since this one was raised. If the line no longer has enough left for the deduction, the approval is stopped and the message tells you how much is left.

Worked example

The subcontract has one original contract line: Line 1 · Tiling, 1 × $32,000.00. Its first variation is numbered VAR13 and has two lines:

After VAR13 is approved:

• The purchase order shows Tiling at $27,000.00 and Extra waterproofing at $3,000.00 — a total of $30,000.00, the subcontract's new Revised Contract Value.
• The subcontract's Schedule of Values subtab lists SOV1 (Tiling, $32,000.00), then VAR13/1 (−$5,000.00, Approved) and VAR13/2 ($3,000.00, Approved), and ends with Revised Contract Value (approved) of $30,000.00. See Where variations show on the subcontract.
• On the next variation, Varies Line lists Line 1 · Tiling · $32,000.00 and VAR13/2 · Extra waterproofing · $3,000.00. VAR13/1 isn't listed, because it's a deduction.
• A later deduction of $30,000.00 against Line 1 can't be saved — Tiling has only $27,000.00 left to deduct.

Where variations show on the subcontract

Variations subtab. Every variation on the subcontract, with its ID (VAR1, VAR2…), Description, Variation Type, Value (Signed) and Status. Variations are numbered across your whole account, not per subcontract, so the first variation on a subcontract won't necessarily be VAR1.

Schedule of Values subtab. From Signed onwards, a read-only list of the contract as it stands:

• The original contract lines, as SOV1, SOV2…
• Then each variation line, as the variation's number and the line number — for example VAR13/1 — with its Status: Approved (or Consolidated) or Pending Approval. Draft and rejected variations aren't shown.
• The columns are Line, Description, Cost Centre, Phase, Status and Amount.
• Two totals at the bottom:
  • Revised Contract Value (approved): the original lines plus approved variations only. This matches the subcontract's Summary box and the purchase order.
  • Total including pending: the same, plus variations still in Pending Approval.

Before the subcontract is Signed (Draft, Tendered or Awarded), the Schedule of Values subtab shows the editable contract lines instead — see Create a subcontract.

What success looks like

• The variation is saved with every line showing a Line, Item, Cost Centre (and Phase, if the project uses phases) and Change Kind, and every deduction showing a Varies Line.
• Value (Signed) equals the total of the lines.
• Variation Estimate links to the variation's estimate on the project, and Estimate Problem is blank.
• Once you've set it to Pending Approval, it shows on the subcontract's Schedule of Values with that status and is counted in Total including pending, ready for approval.

Gotchas

• You can't save a deduction without a Varies Line. If you don't know which line the reduction comes off, check the subcontract's Schedule of Values first.
• The line you need isn't in the list? It may be on a variation that is still in draft, pending approval, or was rejected — only approved variations' additions are listed. Approve that variation first, or vary the original contract line instead.
• Changed the Item or Cost Centre on a line that varies another, and it changed back? A varied line always keeps the Item, Cost Centre and Phase of the line it varies. To use a different item, leave Varies Line blank and raise it as a new item.
• The $0 limit is per line, not per subcontract. A deduction can be blocked on one line even though the subcontract as a whole has plenty of value left. Split the deduction across the lines it really comes off.
• The $0 limit doesn't consider what has been claimed. Nothing stops a deduction taking a line below what the subcontractor has already claimed and been paid for it — check the claimed-to-date position first.
• Once a variation is approved or rejected, its lines are read only. They show as a list on the Schedule of Values subtab. To change an approved variation, raise another one.

Related

• Approve a subcontract variation
• Raise a back-charge
• Create a subcontract
• Assess a subcontractor claim