MIZAN-TEPI UNIVRESITY

TEPI CAMPUS
COLLEGE OF ENGINEERING AND TECHNOLOGY
DEPARTMENT OF CONSTRUTION TECHNOLOGY AND
MANAGEMENT

STUDY ON IMPACT OF VARIATION ORDER IN TEPI TOWN

BUILDING CONSTRUCTION SITE

A Thesis Submitted to The Department of Construction Technology and Management in

Partial Fulfillments of the Requirements for The Degree of Bachelor of Science in
Construction Technology and Management

GROUP MEMBERS ID NO

1. ALGENA ALEMU…………………….……...ETR/0099/11
2. TAKELE DAWIT……………………….……ETR/0935/11
3. AREGA ESAYAS……… ……………………ETR/0131/11
4. PETROS ABAHYNE…………………………ETR/0811/11
5. BETSEGAW KALEB………………………...ETR/0221/11

May 3, 2023

Tepi, Ethiopia

1
 DECLARATION
This research thesis our original work and has not been presented for a degree in any other
university.

Name Signature Date

1. Algena Alemu ______________ _______________

2. Takele Dawit ______________ _______________
3. Arega Esayas ______________ _______________
4. Petros Abayneh ______________ _______________
5. Betsagaw Kaleb ______________ _______________
This thesis submitted to examination with our approval as university supervisor.

Advisor Name Signature Date

Mr. Getish L. (Msc) _______________ ________________

Ms. Bilen T. (Msc) _______________ ________________

II
 AKNOWLEDGEMENT
First; of all and above all, we would like to thank God for his merciful and endless guidance through
our life and for giving us support.

Secondly; it is our pleasure to thank our advisers, Mr. Getish L.(MSc) and Ms. Bilen T.(MSc) who
made this contributed his experience for us in period we prepared our research paper possible with
his commitment, encouragement, supervision, and support. His patience and kindness will never be
forgotten. We have enjoyed working with him and appreciate the support and opportunities he
provided. We also would like to thanks all examiners that in the time of examination for given
comment on our proposal in generally thanks all who assist us in our work.
 ABSTRACT
Complexity and involvement of different stakeholder in construction industry resulted in change of
idea, plan and scope of work from time to time in one project. This change of scope and plan arises
variation order which is inevitable in construction projects. Variation is common in all types of
construction projects and it affects the parties involved in construction works especially contractors
who change idea on the paper into as physically tangible things on the ground, it determines the
time limits and anticipated budget of the projects. Variation order is observed as one of the most
frequently occurring issues in construction projects of Ethiopia. Like other regions of the country,
construction projects in Tepi town building construction site are suffering from the impact of
variation orders. These variations are known to impact various aspects of the projects and stake
holder involved in construction works. This study the assessed of the impact of variation order in
Tepi town construction site. The objectives of the study were firstly to determine the common causes
of variation orders secondly to identify the effect of variation order and finally forward possible
recommendation in order to minimize variation order. Through study of literature review, about 26
common causes of variation orders that related to client,27that related to consultant and 27 that
related to contractor and 9 common effects of variation order and 10 common impact of variation
order and15 forward possible recommendation in order to minimize variation order were
identified. Questionnaire survey were carried out to determine the above stated objectives and the
questionnaire responses were analysed by using the Relative Index method. From these analyses
the most cause of variation order, the most projects exposed to variation orders, the key players of
variation orders, the major effect of variation orders from this also identify the major impact of
variation order and the most recommendation to minimize variation order were forwarded.

Key words: Cause, Effect, Impact, Variation order, Stakeholders, Key player, Construction
projects
CHAPTER ONE

1. BACKGROUN OF THE STUDY

Construction industry in Ethiopia has been on fast growing mode which plays an instrumental role
in the country development. With the announcement of the government five years Growth and
Transformation Plan (GTP) in 2010, the construction industry is said to be the most beneficial sector
as their lots of projects being rolled out by the government and to be carried out in the five years’
plan. The implementation of government projects is expected to provide further thrust to the
construction sector in the country.

However, the industry is associated with significant problems like schedule delay and cost overrun.
This is because of, always construction industry has variations, escalation, omission and addition
due to uncertainties and changes or variation that are difficult to reasonably predict. Uncertainties
and Changes are the two most important issues considered in contract change management.
Uncertainties are issues that can either be difficult to reasonably predict or unknown during the
planning phase of procurement and contract management. Changes or variations are issues
requiring alterations during the implementation of procurement and contract management
(Woubshet,2007). Changes or Variation may be initiated directly by the Engineer, Design
consultant, Owner or Contractor. For instance, (FIDIC RED BOOK 1987 clause 51.1, PPA, 2006
clause 38) provided provisions for alterations. However, each change request must be carefully
reviewed against the project plans and specifications to verify the necessity of variation to the
construction contract and should be approved by the employer/client or employer’s representative.

As the number of variation orders on a project increases, so does the possibility of misunderstanding
among the contracting parties. Such a misunderstanding may occur because one or more of the
parties lacks full knowledge of the variation order process itself, the costs involved in implementing
changes, or the delays, conflicts, and interruption of the construction sequence and schedule which
can adversely impact project coordination.

The expansion of large and complex buildings which attracts different construction companies from
all over the country and the problem of inexperienced consultants and client has led to inadequate
design resulting in many changes to plans, specifications, and contract terms. Most building projects
in Tepi town were poor performed and delayed with certain amount of variation orders increasing

1
from the original value of the contract sum. Due to this reason the projects were delayed, poorly
performed and the cost of the projects increased.

The focus of this study would be on construction projects in Tepi town building construction site.
Major problem of construction industry in general and building construction project due to variation
is pointed out background of the study. So there is a cause for a study to be made on the impact of
variation order in Tepi town building construction sites.

1.2. Statement of the problem

Today variation order on building construction project have the potential to unnecessarily increase
or decrease the cost of construction without adding value to the project in which case they may be
regarded as waste, and the identification of their causes might lead to their reduction possible
elimination and subsequent improvement in overall project performance. Variation orders have
become a common problem in building construction project in Tepi town.

And in different building construction project in Tepi town they have affect by variation order like
delay, disputes and sometimes generate significant cost and duration impact etc.

But for different effect of variation order in Tepi town there is no unique method is available for
minimizing. However, to minimizing the impact of variation order we need to use detail study and
research.

1.3. Research questions

1. What are the common causes of variation order in construction building site in tepi town?
2. What are the major effects of variation order in construction building site in tepi town?
3. How can variation orders be minimized?

1.4. Objective of the study

1.4.1. General objective
The overall general objectives of this study is to study the impact of variation orders in Tepi town
Building Construction sites in order to take remedial measures to minimize them.

1.4.2. Specific objectives

 To determine the common causes of variation orders in Tepi town construction site
 To identify major effects of variation order in Tepi town construction site
 To forward possible order to minimize variation order.
1.5. Significance of the study
In Tepi town there is a number of construction project those project have delayed and many projects
are terminated due to disagreement on the variation. There is also disagreement and still not
answered question. The finding of this research therefore, may have its own contribution on contract
administration of the implementing agent in the future in general and in minimizing variation order
in construction projects in particular.

1.6. Scope of the study

Today there are plenty of projects which are currently under construction of Ethiopia. In order to
achieve the stated objectives of the study, the scope would be narrowed to a specific and manageable
area in order to achieve the objectives of the study. Therefore, the study will be conducted to Tepi
town building construction sites. All the contractor’s and construction projects at this time on the
sites are inclusiveness.

1.7. Limitation of the study

During the research work we have been facing a number of constraints. Some of the major
limitations of this thesis are mentioned as follows:

• Time limitations;

• Shortage of budget;

• Some stakeholder’s consultant is no exist

• Limitation of existing construction sites; and

• Willingness of the construction stakeholders to respond the required information.

1.8. Organization of the research

This paper is going to be done with five main chapters. These are the introduction, literature review,
the research methodology, data analysis and discussions, and conclusion and recommendations.

Chapter One: Introduction: This chapter provides discusses on general introduction, background
of the study, statement of the problem, objectives, scope, significant of and research organization
of the thesis.

Chapter Two: Literature Review: Reviewed the theoretical development for the concept related to
the basics of variation, its nature, causes, effects, impact and methods or strategies on how to
minimize variations.

Chapter Three: Research Methodology: This chapter discussed the tools and methods used for
data collection in order to achieve the objectives of the study.
Chapter Four: Data Analysis and Discussions: This chapter constituted the analysis of data
gathered with the research instruments. This chapter followed questionnaires developed to clearly
establish the researchable problem for the study.

Chapter Five: Conclusion and Recommendations: This is the final chapter of the research in which
conclusions and recommendations were drawn based upon the analysis data, linking them to the
problem statement and objectives of the study.
 CHAPTER TWO

2. LITERATURE REVIE
2.1. Nature of Variation orders
The nature of variation orders can be determined by referring to both the reasons for their
occurrence and succeeding effects. (Arain and Pheng, 2005b) Distinguished two types of variation
orders namely in order to their nature; beneficial and detrimental variation orders.

2.2 Causes of Variation Orders

Many researches have been conducted to organize the factors responsible for the causes of variation
orders that take place during the construction process of a project.

According to statistics directed by Muhammed et al. (2015) state that client related factors
contribute about 30% of the total causes of variation orders, while consultant and other factors
contribute about 65% and 5% respectively.

2.2.1 Client Related Factors

Inadequate project objectives: Unclear communication of project objectives can cause difficulties
and variations in a project. Project objectives should be understood among all parties in order to
avoid numerous changes that can occur during the work process. Having an effective and efficient
communication method can help achieve the overall project objectives (Ibbs et al., 1995).

Change of scope: During the construction of a project, the Client performs various change orders
due to his lack of participation in the pre-tender phase and during the execution of the project. The
Client is not much involved in the design and resources used in the project (Arain et al., 2004).
Therefore, the implementation of the project is affected by issuance of variations.

Substitution of material: According to Chappell et al. (1996), change orders for material
substitution have impacts on the construction process of the project. Material substitution change
orders can occur due to various reasons including financial problems requiring substituting the
material with a lower quality in order to reduce cost. Another reason would be that the construction
site requires more competent material. Change orders associating with material substitution can
then affect equipment, labor, time and cost. Therefore, it is required to have a proper management
material process with a well-established specification, storage and installation.

Financial problem: Clough et al. (1994) and Ibbs et al. (1995) state that client’s financial problems
are one of the most important reasons that causes time delay in projects. This is to due to financial
issues arising from inflation, sudden price changes and unacceptable claims, affecting the client’s
cash flow. This then leads to changes in scope as the Client aims to reduce the project cost,
impacting the implementation of the project.

Change of Schedule: Clients often change the schedule of the project that indicates cost and
schedule consequences for the Contractor’s resources as a result of the change that occurred during
execution of the project (O’Brien, 1998).

Unilateral decisions: Clients can perform unilateral decisions without observing the consequences
that can go behind these decisions. These decisions can sometimes be disfficult to implement,
affecting the projects time and cost (El-Sadek, 2016)

Clients do not perform decisions in the correct time: Decisions regarding the work process must
be made in the correct timing to ensure project achievement. Memon et al. (2014) stated that the
incapability to perform the decisions at the correct time can affect the project schedule and costs,
resulting in a variation orders taking place.

2.2.2 Consultant Related Factors

Error and omission: As indicated by Arian et. al (2004) and Assaf et.al (1995), a project having
problems with the design or inadequate details in the design would significantly affect the work
progress and the project time schedule.

Design complexity: Design drawings can be often difficult to execute if the project is complex,
therefore, a procurement method of Design-Build method should be chosen in order for the
contractor to be involved during the design stages. Difficult designs are addressed through various
method statements according to the complexity of the design which requires more time and cost
(El-Sadek, 2016).

Change in design: These change orders on behalf of the consultant occur to various reasons. One
was mentioned by Arian et al. (2004) was due to improvement in designs naturally occurring during
project construction. Fisk (1997), on the other hand, mentions that the occurrence of change orders
in a project is highly possible due to projects starting before the completion of the final design.
Other reasons at which changes in design occur are that engineer consultants perform technical
design changes involving mechanical, electrical and plumbing changes while architect consultants
perform structural changes that then cause important change impacts on the project.

Conflicting contract documents: A project having several contract documents may

produce misunderstanding in conveying the project scope. This is due to the fact that the contract
documents may not be properly coordinated among all parties, therefore, impacting the project. One
of the impacts could involve time delays as a misunderstanding in one of the contracts can easily
affect the schedule of the other contracts documents involved. So in order to have an effective
execution of the project, the contract documents must be properly managed among the parties and
with other contracts in the project (CII, 1986).

Insufficient design: Fisk (1997) states that insufficient designs can be a common cause for change
orders in a construction project, affecting time schedule and leading to a cost increase.

2.2.3 Other Related Factors

Differing site condition: Assaf et al. (1995) clarifies that delays can occur due to physical condition
of the project differing from which have been mentioned and stated by the consultants in the
contract documents. Differs in site conditions include: rock existence, soil conditions, and various
other reasons. These site conditions can lead to increase in costs, time delays and even claims if the
contractor represents mistaken contract documents. These differing site conditions can be avoided
through effectively evaluating the site before beginning of construction. One of ways to manage
time and cost impacts is to ensure the correct time and economic study has been conducted through
the addition of a contingency to reduce and cover the impacts to account for any unforeseen
conditions.

Lack of co-ordination among parties: Lack of co-ordination among consultants, client and
contractor leads to misunderstanding of the contractor in selection of equipment, material and labor
during the execution of the project. These coordination problems can severely affect the project if
not dealt with at early stages and effectively managed by all parties (Arain et. al., 2004).

New government regulation: As indicated by Arain et al. (2004), project designs should follow
specific codes and regulations according to the government organizations at which the project is
performed in. However, changes in laws can severely impact the project, affecting project
construction design. Delays can also occur if the project design does follow the government
organizations, affecting the project’s completion date.

Weather Conditions: Changing weather conditions can have significant impacts on the project
construction specifically productivity as it results in project delays. These weather conditions
include snow, wind, rain and severe hot and cold weathers. Contractor must take into accounts
models for forecasting the weather in order to minimize any delays that can occur (O’Brien, 1998).

Value Engineering: It is a process of replacing the existing materials with an alternative material
achieving the same quality, but with a lower cost. This process involves improving the project
function and costs, however, it involves a high risk of initiating various change orders (Dell, 1982).
Usually, the value-engineering process should be performed during the design phase of the
project’s.

Safety Considerations: The construction project must be executed in a safe environment following
safety regulations and secure working conditions for all employees. However, if this is not properly
managed, accidents can occur impacting the project schedule. Regular safety checks, accident
avoidance, safety training for employees and process of dealing with emergencies are procedures
that should be effectively managed to maintain a safe and secure project implementation (Clough
et al., 1994).

Required labor skills unavailable: Projects that have difficult technology necessities require
specific know-how and skills by the labor. Complex designs and method statements need extreme
professional skilled labor to implement these designs and perform all the required modifications
and tests. However, if the project has a shortage of skilled labor, then this may result in occurrence
of variation orders, affecting the

project time and cost (Arian et. al., 2004).

Table:1 Cause of variation order

Author name
Cause CII savido Clough O Brien Wang Gray & Geok Arian
Et al & sears Hughes et al.
(1990) (1992) (1994) (1998) (2000) (2001) (2002) (2004)

among
contract 
documents
Change
in 
specifications
by consultant
Owners
financial  
problems
CAUSES CII savido Clough O Brien Wang Gray & Geok Arian
Et al & sears Hughes et al.
 (1990) (1992) (1994) (1998) (2000) (2001) (2002) (2004)

Contractor
financial 
difficulties
Shortage of 
skilled
manpower
Unavailability 
of
equipment’s
Poor 
procurement
process
Change 
in
scope of the
project

Impediment  
to prompt
decision
making
process
Obstinate  
nature of
owner
Change in  
specifications
by the owner
Changes in 
design
Inadequate 
design
 Lack of  
strategic
planning
Poor  
workmanship
Design   
complexity
Inadequate 
working 
drawing
details
Change in  
schedule

2.3 Effect of variation order

Variation orders exert various effects on the projects. Numerous researchers (CII, 1986; CII,

1990a; Clough and Sears, 1994; CII, 1994; Thomas and Napolitan, 1995; Fisk, 1997; Ibbs et al.,
1998) have highlighted the effects of VO. The review of these studies resulted in identifying 9
effects as discussed below.

Delay in completion: Variations often hinder the project progress, leading to delay in achieving
the targeted milestones during construction (CII, 1995; Ibbs, 1997). Zeitoun and Oberlender (1993)
reported that a variation may delay the projects by 9% of the original scheduled time duration for
projects. Kumaraswamy et al. (1998) studying delay problems in construction projects of Hong
Kong summarized that 50% of the projects surveyed were delayed because of variations. In
reducing the delay of a project, the contractor would try to accommodate the variations by utilizing
the free floats in the construction schedules.

Increase in project cost: Increase in project cost is regarded as the most common effect of
variations (CII, 1990a). Any alteration or addition is the design during execution of the project may
results in demolition or rework of any project component and eventually increase the project cost
(Clough and Sears, 1994). Hence, in order to keep overall project, cost unchanged; normally in
every construction project a contingency sum is allocated which caters possible variations in the
project. Further, variations require processing procedures, paper work and reviews before they can
even be implemented (O’Brien, 1998). The process and implementation of variations in
construction projects would increase the overhead expenses for all the participants concerned.
Normally these overhead charges are provided for from the contingency fund allocated for the
construction project.

Quality of projects: Variations affect the quality of work adversely (Fisk, 1997). CII (1995)
reported that the quality of work is frequently affected by frequent variations because contractors
have to compensate for the losses by cutting corners.

Causes rework: Variations in construction often results in rework and demolition (Clough and
Sears, 1994) if the variations are occurred during the construction is underway or even completed
(CII, 1994). This effect is to be expected due to variations during the construction phase while
variations during the design phase do not require any rework or demolition on construction sites.

Logistics delays: Variation may cause requirement of new or additional amount of material and
equipment’s which results in logistics delays (Fisk, 1997). Hester et al. (1991) mentioned that
logistics delays are among the significant effects of variations in construction projects.

Altogether with above part of the literature review, total 9 major effects of variations were identified
by reviewing nine previous published research works as summarized in Table.

Table 2: Effect of variation order

Effect of the CII Clough & Thomas Fisk O Arian et

Hester et
variation (1990) Sears(1994) & (1997) Brien al.
al.(1991)
Napolitan (1998) (2004)
(1995)

Delay in the 
completion
Slower project  
progress
Increase in 
project cost
The quality of  
projects
Causes rework  
 Unnecessary 
procurement
Logistics  
delays
Causes non value  
activities

Loss of  
productive

2.4 Impacts of Variation Orders

Given a well-structured schedule of works, maximum project performance would be achieved if
the work invariably flows smoothly within time limits and anticipated budget constraints. However,
it is rare that projects perform precisely in line with their original schedule due to reasons such as,
for example, business condition changes, delivery slips, and corrections to design (Al-Hakim,
2005b). The occurrence of variation orders has an adverse impact on project performance. Thomas
et al. (2002) suggest that variability generally impedes project performance. Ibbs (1997) concluded
that variation orders affect project performance as they adversely affect productivity and project
costs. According to Arain and Pheng (2005b) variation orders are an unwanted but inevitable reality
of any construction project. Further, Hanna et al. (2002) found that projects with many variation
orders cause the contractor to achieve lower productivity levels than planned. Variation orders
adversely impact project performance in terms of cost overruns, time overruns, quality degradation,
health and safety issues and professional relations.

2.4.1 Cost overruns

Construction projects involve recognized phases of which two are particularly important, namely
the pre-construction and construction phases. Given that the construction phase typically consumes
more resources than the pre-construction phase, attention to cost planning Is focused on the
construction phase. Clients desire to know in advance the total cost of their finished construction
projects. Clients prefer final construction costs to equate to the originally forecast tender figure.
Unfortunately, many construction projects incur cost overruns. However, all variation orders do not
increase the costs of construction. Omissions in most cases reduce costs while additions increase
costs (Ssegawa et al., 2002). Various studies have revealed that variation orders contribute to these
cost overruns. A study of the effects of variation orders on institutional building projects revealed
that variation orders contributed substantially to increases in construction project costs (Arain &
Pheng, 2005).
The analysis of variation orders on 12 combined sewer overflow projects found that costs escalated
by 7% of the original project costs (Mohamed, 2001). Arguably, the more the number of variation
orders, the more they are likely to affect the overall construction delivery cost. In fact, variation
orders have both a direct and indirect effect on cost. Direct costs constitute the additional costs
incurred to perform the activities of the current variation orders.

Bower (2000) identified the following direct costs associated with variation orders:

• Time and material charges related to immediately affected tasks;

• Recalculation of network, increased time-related charges and overheads;
• Reworks and standing time;
• Timing effects for example winter time;
• Inflation, change to cash flow and loss of earnings; and Management time, head office and
site charges.
• While the direct costs associated with a variation order can be easily calculated, Bower
(2000) argued that indirect costs are more difficult to quantify. Indirect costs are costs
incurred as a result of variation orders, whether they are apparently linked to them or not.
These include:
• Rework and making good on affected trades other than the actual variation order. It was
revealed that the cost of rework caused by variation orders accounted for more than four-
fifth of the total costs of rework (Love & Li, 2000).
• Change in cash flow due to effect on inflation and financial charges;

2.4.2 Time overruns

Clients require their construction projects to be completed within minimum time limits. It is
anticipated that projects finished within the shortest possible time achieve some monetary savings.
Contractors are heavily penalized when they exceed the original project delivery date. The penalty
imposed is meant to compensate damages suffered by the client owing to the prolonged delivery
period. Several authors agree that variation orders present as one of the reasons for project time
overruns (Chan & Yeong, 1995, Mohamed 2001). It was found that variation orders issued during
various phases of construction projects negatively affected both the completion time and costs of
projects (Koushki, 2005). Hanna et al. (2002) found that as the number of variation orders increases
the more significant productivity losses become. Productivity is the amount of output over a unit of
time. Therefore, loss in productivity implies loss of time and subsequent delays. Yogeswaran et al.
(1997) classified delays into 'excusable' and 'non-excusable', where the former category relieves the
c3ontractor of liability for liquidated damages and the latter is due to the contractor's culpable delay.
2.4.3 Quality degradation
Patrick and Toler indicated that contracts with a significant degree of risk for unknown variables
such for example, lump sum, contractors may cut corners on quality and quantity to maximize
profits. If variation orders are frequent, they may potentially affect the quality of works. Quality
may be compromised as contractors try to compensate for losses they are not optimistic about
recovering.

2.4.4 Health and Safety

Variation order occurrence can lead to revision of health and safety considerations. The OHS

(2003) clause 5.3 (e) stipulates that where changes are brought about, sufficient health and safety
information and appropriate resources are to be made available to the contractor to execute the work
safely. This is because change in construction methods, materials and equipment may require
additional health and safety measures (Arain & Pheng, 2005). Furthermore, the OHS (2003) clause
5.14 requires the contractor3 to provide the principal contractor4 with any information which might
lead to health and safety of any person at work carrying out construction work or any person who
might be affected by the work of such a person at work or which might justify a review of the health
and safety plan.

2.4.5 Professional relations

A construction project is not merely brick and mortar brought together. Rather, it creates
professional relationships between parties to the contract. Each project successfully completed
constitutes an added experience to participants and their reputation builds up. But disputes may
arise between parties to the contract due to variation orders. Misunderstandings may arise when
contractors are not satisfied with the determination of the valuation of variation orders by the
client’s consultant. Parties to a contract are left to argue over the cost, time effects and due
compensation of a variation order (Bower, 2000). Possibly because contractors are not confident
about the outcome of such negotiations, they usually request higher values for variation orders than
the actual cost incurred. Bower (2000) opined that consequently there is tension between parties as
the contractor continually pushes the client to settle claims for additional costs while invariably
feeling that the reimbursement has been insufficient. This can be very damaging to the relationship
between the representatives of all parties (Bower, 2000). Charoenngam et al. (2003) remarked that
disputes between the client and the contractor can occur if variation orders are not managed
carefully. Harbans (2003) warned that unless a mutually acceptable solution is agreed by the parties,
valuation of variations in the form of variation orders will continue to remain at the forefront of
disputes and claims making their way ultimately to arbitral tribunals or the corridors of justice.
Finsen (2005) found that a large proportion of current arbitrations were on claims for additional
time and additional expenses. Ssegawa et al. (2002) reported that more than one-third of disputes
pertained to how to determine losses that stem from variation orders. The excessive occurrence of
variation orders due to design errors or omission may undermine the professionalism of the
designer. Workers are demoralised when they have to demolish a portion work that they had already
completed.

Assaf et al. (2006), CII (1995), Hester et al. (1991), Fisk (1997) and O’Brien (1998) have all
highlighted about the impact of variation orders on a construction project. These variation orders
can have a massive and numerous impacts on an ongoing project.

Progress Impact: One of the most significant impacts of variation orders is time delay.

And, often time delays, may result in a cost increase (Assaf et al., 2006).

Cost: Variation Orders can have an impact on cost as well. Therefore, construction projects should
account for a contingency percent to take into consideration any variation orders that may take place
during the construction of the project (Assaf et al., 2006).

Quality degradation: Quality of work within a project can be affected by the amount of variation
orders issued during the project. High issuance of variations can easily affect the quality of work
due to the fact that contractors are cutting costs in order to compensate for losses, leading to
reduction in quality (CII, 1995).

Productivity degradation: Variation orders are directly proportional with productivity degradation
as they lead to work disruptions. These work disruptions result in delays and repetition of work
since it is associated with labor productivity as it can simply demotivate all employees working
within the project. Productivity degradation can result in increase in cost budgets. These increases
in cost budget are a result of

employees working for long periods and working overtime to compensate for time delays (Hester
et al., 1991).

Procurement delay: O’Brien (1998) states that as a result of variation orders arising within a
project can often lead to procurement delays as these variation orders may require new resources,
new materials, particular equipment or revised procurement requests for the ongoing construction
projects.

Logistics delays: It is significantly possible that some variation orders may be established on the
need of new materials, tools and equipment, leading to logistics delays (Hester et al., 1991).
Damage to firms’ reputations: Variations can lead to claims and disputes; and these disputes can
be predicted to damage the firm’s reputation that may as well lead to problems reaching bankruptcy
(Fisk, 1997).

Poor safety conditions: Variations can have a huge impact on the safety within a construction
project as these variations can lead to changes in material, equipment and the construction method
itself that would then require additional observation and safety procedures (O’Brien, 1998).

2.5. Strategies to Minimize Variation Orders

Many times delays, cost overrun and quality defects of a construction can be attributed to variation
at various stages of the project. Variations and conflicts in construction projects, at work, and even
in our daily lives are very common (Arain and Pheng, 2006). The potential impact of variation
orders can be minimized if possible strategies are clearly suggested. As Arain (2005) suggested,
variations can be reduced with due diligence during the design stages. Furthermore, it would assist
professionals in taking proactive measures for reducing variation orders for building projects if
strategies are suggested. In order to minimize variation orders control system should be established
for the ultimate benefit of owners. As Baharuddin (2005) concluded, variation orders can be
minimized if all the parties involved in projects are aware that preliminary work before tendering
must be carried out, for example detailed site and soil investigations. While design errors and
omissions cannot be completely avoided, they can be reduced especially if designers assessed their
workloads before committing themselves to new contracts (Ruben, 2008). In another way, the
designers should ensure enough time and experienced human resources to deliver a sound design
within the proposed time frames. Ruben (2008) identified recommendations to reduce the
occurrence of variation orders. Among other recommendations, Baharuddin (2005) identified the
suggested strategies to reduce the occurrences of variation orders. Many studies were conducted to
find out possible strategies to minimize variation orders.

List of strategies that suggested by different researchers to minimize variation orders are identified
as follows (Bower, 2000; Baharuddin, 2005; Chan and Yeong, 1995; Arain, 2005; Ruben, 2008;
Bin-Ali, 2008; Willis, 1980; Ming et al., 2004; Levy, 2006; Al-Hakim, 2005a; Sweeney, 1998;
Formoso, 1999). These are:

• Adequate planning is required by all involved parties before works start on site;
• The consultant should produce a concluding design and contract document;
• Drawings should be complete at tender stage;
• Adequate time should be spent on pre-tender planning phase;
• Clients should provide a clear brief of the scope of works;
 • All parties should forecast to overview unforeseen situations;
• Closer consultant co-ordination is required at design stage;
• Enhance communication between the parties;
• Works should be supervised with an experienced and dedicated supervisor;
• Consultant should ensure that the design/specifications fall within the approved budget and
the budget team should participate during the design phase;
• Get accurate information and research with regard to procurement procedure, material and
plant;
• Carry out detail site investigation including detail soil investigations and consider it during
tendering stage;
• Have the land application or land purchase completed before awarding contracts;
• Once the tender is awarded, there should be no changes to the specifications; and
• Place experienced and knowledgeable executives in the engineering and design department.

CHAPTER THREE

3. RESEARCH METHODOLOGY
3.1 Introduction
The aim and purpose of this chapter is to outline the research methodology utilized in the study, to
comment on how the research will controlled and monitored, and to ensure validity and reliability
of the research data and procedures associated with the subsequent analysis and presentation of the
data.

According to Walliman (2005), a plan of action must be developed that shows how the problems
will be investigated, what information will be collected using which methods, and how this
information will be analyses in order to arrive at conclusions and develop recommendations.
Research projects synthesis and analyses existing theory, ideas, and findings of other research, in
seeking to answer a particular question or to provide new insights (Fellows & Liu, 1997).
Once the problem statement has been formulated, it should become evident what kind of data will
be required to study the problem, and also what kind of analysis would be most appropriate to
analyses the data (Walliman, 2005). The problem investigated in this study is the potential of
variation orders on construction projects to impact the overall performance of these projects
through, inter alia, increasing the cost of construction without adding value to the project. It is
anticipated that the identification of the causes of variation orders may lead to their reduction,
possible elimination and improvement in overall project performance.

A number of hypotheses will be tested. According to Neutens and Rubinson (2002), the hypothesis
is the tentative attempt by a researcher to predict the significant results of the research study process.
When a research problem has been identified, it is necessary to indicate how the problem will be
investigated or overcome to formulate research objectives (Walliman, 2005). These are linked to
hypotheses as anticipated answers to the research problem.

3.2. Area of study

The study is scoped to Tepi town, which are found in southern west of Ethiopia.

3.3. Research design

The questionnaires were adapted to collect detailed information about respondent’s experiences
and impressions about causes, effect and recommendation to minimize variation order in Tepi town
building construction site. It was also used to collect preliminary information to help in structuring
the questionnaires. The questionnaire survey was also adapted to get feedback on opinions of
respondents‟ about impact of variation order in Tepi town building construction sites.

3.4. Sources of data

This study started with problem identification. For clearly to understanding; we collected our data
by using both primary and secondary data.

Primary source is data for the study will be obtained through distribution of questioners to
professional consultants, contractors and client involved in the building construction. And prepare
questioners are necessary ways of primary source data collection techniques to evaluate, assess and
identify the impact of variation order in Tepi town building Construction sites.

Secondary source is one of data collection techniques which focused on data was collected former.
the data may be available in different forms such as report, journals, research, book and website.

3.5. Data collection

3.5.1. Questionnaire
Questionnaire is one of data collecting method and it is the easiest and take limited time to collect
data effectively. The questionnaire Formulating, first from identified variables, the questionnaire
was formed to gate from different (client, contractor consultant) that was involved in Tepi town
building construction site. The questionnaire that involved both open and closed question.

3.6. Method of Data Analysis

The responses to the questionnaire was based on Likert’s scale of five ordinal measures which was
from one 1 to five 5 arranged in ascending order according to the degree of contribution to each
question. The main approach used to analyze the data was by using the Relative Index (RI)
technique. The responses are analyzed using the Microsoft Excel software package. The analysis
included ranking the factors in terms of degree of effecting. In the computation of the relative index
the following formula was used;

RI = (5n5 + 4n4 + 3n3 + 2n2 + n) ……… Equation 3.1

5(n5 + n4 + n3 + n2 + n)

Where:

RI = Relative Index n5, n4, n3, n2, n1 = Number of

responding indices.

n5 = Number of frequency Very high response n4 = Number of frequency „Very ‟ response

n3 = Number of frequency „Moderate ‟ response n2 = Number of frequency „Less ‟
response. n1 = Number of frequency „Not at all ‟ response.
 CHAPTER FOUR

4. DATA ANALYSIS AND DISCUSSION

4.1. Introduction
In this chapter the data was analyses by using questionnaires sheet only. The survey was done on
contractors, consultants and client as discussed on methodology of this thesis but do to limit of time
and budget we didn’t gate the consultant. The method used is discussed in Chapter 3. The data was
collect from the questionnaires were tabulated and analyzed according to their ranking on Relative
Index (RI). The chapter concerns analysis and discussion on causes of variation orders, effect of
variation order, recommendation in order to minimize variation order. The questionnaires are
analyzed by taking the perspective of two main constructions (contractors, client).

4.2. Data from questioner sheet

In Tepi town there is limitation of construction site, so that in the time of data collection we give
our questioner sheet to Some construction stakeholders (which is 3 project namely Luci, Sheh
Ahmed Endiri fuel station, Yahannes Halle construction site.) from those project we gate 3
contractors and 3 clients.
Data that are collected from by given questioner sheet to some stakeholders (contractor, client) with
concerning cause of variation order, effect of variation order and recommendation to minimize
variation order in Tepi town construction site.

4.3. Causes of Variation Orders

4.3.1. Client related
As sown in Table below, the most raked causes of variation orders by all respondents were client
do not perform decisions in correct time are the greatest cause of variation order related to client it
is (IR 0.6) and weather condition is the poor cause of variation order that related to client.

Table. 3 causes 0f variation Orders related to client

Cause of variation order RII Rank

related to client
clients do not perform 0.6 1
decisions in correct time
Different site condition 0.5 2
substitution of material 0.5

Inadequate project 0.5

objectives

Change of schedule 0.4 5

Health and safety considerations 0.4

Lack of communication 0.4
Contractor's lack of required data 0.4

Change in economic conditions 0.4

change of scope 0.4

unilateral decisions 0.4

Socio-cultural factors 0.4

Technology change 0.4

Lack of coordination 0.4

unfamiliarity with local conditions 0.4

Design complexity 0.3 16

Change of schedule 0.3

Change in government regulations 0.3

financial problem 0.3

financial problem 0.3
Poor procurement process 0.3

Lack of strategic planning 0.3

Poor work man ship 0.3
lack of specialized construction manager 0.3
Inadequate working drawing details 0.2 25
Weather conditions 0.2
4.3.2. Contractor related
Unfamiliar with local condition is the greatest of variation order that related to contractor it have
(IR0.86) and lack of communication is the list of cause of variation order it have (RI0.4).

Table.4 cause of variation orders are related to contractor

Cause of variation orders are related to RII Rank
contractor
unfamiliarity with local 0.86 1
conditions

Change in government 0.86

regulations
weather conditions 0.73 3
Change in design 0.73
Change in specifications by 0.73
owner
Health and safety considerations 0.73
Lack of contractor's involvement in design 0.66 7

change in economic condition 0.66

design complexity 0.66
shortage of skills man power 0.6 10
Inadequate working drawing details 0.6

Impediment in prompt decision making 0.6

process

Poor procurement process 0.6

Change of scope of the project 0.6
differing site conditions 0.6
 Contractor's lack of required data 0.6

Chang of schedule 0.6

lack of strategic planning 0.6

technology change 0.53 19

conflicts between contract 0.53
document
Lack of consultant's knowledge 0.53
of available materiel

Socio-cultural factors 0.53

Errors and omissions in design 0.53

lack of specialized construction manager 0.46 24

lack of coordination 0.46

poor work man ship 0.46

Lack of communication 27

0.4

4.4 Effect of Variation Orders

As sown in Table below, the most raked effects of variation orders by all respondents (client,
contactor, consultant) were Delay in Completion is the greatest effect of variation order in Tepi
town construction site which is (IR 0.95) and construction site cause of rework is the list of effect
of variation order in Tepi town construction site which is (IR 0.55).

Table 5 Effects 0f variation orders

EFFECTS OF VARIATION

ORDERS
Delay in 0.95 1
Completion
 Loss 0.95
of
Productivity
Slower 0.9 3
project
progress
The quality 0.9
of projects

Increase in 0.85 5
project cost
causes non value adding 0.7 6
activities

Logistics delays 0.7

Unnecessary 0.55 8
procurement

Causes 0.55
rework

4.5. Impact of Variation Orders

As sown in Table below, the most raked impact of variation orders by all respondents (client,
contactor, consultant) were Poor safety conditions is the greatest effect of variation order in Tepi
town construction site which is (IR 0.85) and Health and Safety is the list of impact of variation
order in Tepi town construction site which is (IR 0.55).

Table 6. Impact of variation orders

Impacts of Variation RII Rank
Orders
Poor safety conditions 0.85 1
 Logistics delays 0.85

Procurement delay o.75 3

Productivity degradation 0.75

Progress Impact 0.75

Time overruns 0.7 6

Professional relations 0.7
Quality degradation 0.7
cost overruns 0.6 9
Health and Safety 0.55 10

4.5. Recommendation to minimize Variation Orders

As sown in Table below, the most raked recommendation to minimize variation orders by all
respondents (client, contactor, consultant) were carry out detail site investigation including detail
soil investigations is the greatest recommendation to minimize variation order in Tepi town
construction site which is (IR 1) and All parties should forecast to overview unforeseen situations
is the list of recommendation to minimize of variation order in Tepi town construction site which
is (IR 8).

Table 7. Strategies to minimize variation order

Strategies to Minimize
Variation Order
Carry out detail site 1 1
investigation including
detail soil investigations
and consider it during
tendering stage;

The consultant should 0.95 2

produce a concluding
design and contract
document;
Closer consultant co- 0.95
ordination is required at
design stage;

Enhance communication 0.95

between the parties;

Consultant should ensure 0.95

that the
design/specifications fall
within the approved
budget and the budget
team should participate
during the design phase;

Once the tender is 0.95

awarded, there should be
no changes to the
specifications; and

Have the land application 0.95

or land purchase
completed before
awarding contracts;

Adequate planning is 0.95

required by all involved
parties before works start
on site;
Clients should provide a 0.95
clear brief of the scope of
works;
Drawings should be 0.9 10
complete at tender stage;

Adequate time should be 0.9

spent on pre-tender
planning phase;

Get accurate information 0.9

and research with regard to
procurement procedure,
material and plant;

Place experienced and 0.9

knowledgeable executives
in the engineering and
design department.

Works should be 0.8 14

supervised with an
experienced and
dedicated supervisor;

All parties should forecast 0.8

to overview unforeseen
situations;
4.6. Discussion
In this section discuss the questionnaires that answer from different building construction site in
Tepi town building construction site. That discuss in the cause, effect, impact and recommendation
to minimize variation order.

4.6.1 Causes of Variation Orders

There is some building construction site in Tepi town building construction, as those site give
information in the form of answer of questers sheet, thy give information about causes of variation
orders. As in the above list the ranked in Table it is indicate rank of different list of cause of variation
order from this the first the greatest cause of variation order related to client is clients do not perform
decision in correct time, different site condition, substitution of material.

Clients do not perform decision in correct time is the first major cause of variation orders in Tepi
town construction site This could also be caused due to different site condition, substitution of
material is indeed one of the most causes of variation orders and this fact is supported by the
questionnaires sheet.

Secondly case that related to contractor from this the greatest cause of variation order in Tepi
town construction site is unfamiliarity with local conditions, weather conditions, change in
design. In generally cause of variation order in Tepi town construction site that are mostly happen
by clients is clients do not perform decision in correct time, different site condition, substitution
of material and contractors is unfamiliarity with local conditions, weather conditions, change in
design

4.6.2 Effect of variation order

As in the above list the ranked in Table it is indicate rank of different list of effect of variation order
from this the first the greatest effect of variation order is delay in completion, loss of productivity,
slower project progress, increase in project cost. As those effect is from different cause of variation
order, the information of effect of variation order if from different contractors and clients.

In generally in Tepi town there is different effect of variation order are happening that effect from
different cause of variation orders.

4.6.3 Impact of variation order

As in the above list the ranked in Table it is indicate rank of different list of impact of variation
order from this the first the greatest impact of variation order is poor safety condition, logistics
delays, procurement delay, progress impact, time overran. As those impact is from different cause
of variation order, the information of impact of variation order if from different contractors and
clients.

In generally in Tepi town there is different impact of variation order are happening that effect from
different cause of variation orders.

4.6.3. Recommendation to minimize variation order

As sown in Table above, the most raked recommendation to minimize variation orders by all
respondents (client, contactor, consultant) were carry out detail site investigation including detail
soil investigations is the greatest recommendation to minimize variation order in Tepi town
construction site which is (IR1) and All parties should forecast to overview unforeseen situations
is the list of recommendation to minimize of variation order in Tepi town construction site which
is (IR8).
 CHAPTER FIVE

5. CONCLUSION AND RECOMMENDATIONS

5.1. Conclusions
As it is clearly stated in the first chapter one of the main objectives of this research were to
determine impact of variation order in Tepi town building construction site which is followed by
common causes of variation orders, effect of variation order and recommendation in order to
minimize variation order. To achieve these objectives, the study use questionnaire survey as a
research instrument. The result obtained in this processes has been presented and discussed in the
previous chapter. In this chapter the major finding of the research which has been discussed before
will be briefly summarized in accordance with the objectives of the research.

The first objective of this research was determine the impact, cause, effect, and recommendation to
minimize of variation order 10,10,10 variable(impact), 26 ,27, 26 variable(cause)
9,9,9variable(effect) 15,15,15 variable(recommendation) for client, contractor consultant
respectively. were identify from literature and respondent were then requested to rate these factors
based on their experience in terms their occurrences. The result showed

According to impact of variation order: - cost overruns, Time overruns, Quality degradation,
Poor safety conditions……. etc.

According to cause of variation order

Related to contractor: - lack of specialized construction manager, change in government

regulation, lack of consultant knowledge of available materials, lack of contractor involvement in
design, socio-cultural factors… etc.

Related to client: - additional work requirement by client, design change, using design that not
compatible with site condition, missed item of work…etc.

According to effect of variation order

Delay in Completion, Increase in project cost, Causes
rework, Slower project progress, etc.

According to recommendation to minimize variation order: - adequate planning is required by

all involved parties before works start on site, have the land application or land purchase completed
before awarding contracts, Adequate time should be spent on pre-tender planning phase…etc.

In general, in Tepi town building construction site there is impact of variation order that have come
from different cause, and it have effect and impact and recommendation to minimize that are list in
above.
5.2. Recommendations
Based on the findings of the research and its conclusion, the following recommendations were
expected from the key role players of construction project stake holders to manage variation orders
and how variation is minimized, the recommendations of this thesis are as follows:

An understanding of the causes of variation orders would be helpful for building

professionals in assessing variation orders.
The client should allow sufficient time to prepare an elaborately detailed project brief. This
will eliminate frequent variations to the original plan of the project due to client change of
mind.
There should be effective communication between the contracting parties and spend adequate
time on pre-tender planning phase to eliminate design discrepancies, inadequate shop
drawing details, Ambiguous design details, Conflicts between contract documents and
inadequate working drawing details.
It is good for clients to fulfill contractual obligations, especially with regards to payment of
contractor’s works duly executed, or settlement of fees accounts of consultants and
ownership of construction site. Clients should ensure that adequate funds are available
before projects are started, so that contractors can be paid in accordance with contract
document.
Consultant should have knowledge about the material and equipment he specifies for works,
produce a concluding design and contract documents and co-ordinate closely at design stage
with other parties.
Variations can be minimized if consultants produce a complete design as change of design
was the major cause of variations.
Direct communication among the project team is a key to eliminate variations occur due to
communication gap during design and execution phase.
Consultants should give sufficient time for planning and design phase, this will assist in
minimizing variation orders due design changes at construction stage.
A detailed design would be able to exert control to unnecessary interference from consultants
or other external influences.
The consultants should prepare completed contract document before the tendering stage.
This minimizes variation orders occur due to change of specifications.
Contractors should identify and inform the varied item of work to the client before the
activity starts to reduce variations. Because the client will have sufficient time to check the
varied item in different perspectives to give work order at minimum variations.
There should be improvement in project management, and improved decision making
process on the part of the client during project execution stage so as to minimize the
occurrence of variation orders.
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