Variations & Claims Close-Out

Section 1

Purpose

Note on JCT editions: JCT has published the 2024 Edition. This guidance cites JCT SBC/Q 2016 clause references; the commercial and payment mechanisms are substantively unchanged in the 2024 edition, but specific clause references should be verified against the contract edition in use on any given project.

Variations and Claims Close-Out is the formal process of settling all outstanding variations and claims arising from the construction contract, producing an agreed Variation Account and Claims Settlement that can be incorporated into the Final Account. It is the most commercially intensive activity of Stage 6 — requiring the QS to apply contractual valuation rules rigorously, assess claims objectively, negotiate professionally, and document all agreements robustly.

RICS Change Control and Management (1st ed., effective 1 April 2021) and RICS Ascertaining Loss and Expense (2nd ed., July 2024) establish the professional framework for this work. The QS must be able to distinguish between variations (changes to the scope of works) and claims (loss and expense, prolongation, disruption), apply the appropriate valuation methodology to each, and manage the close-out process systematically without leaving items open indefinitely.

Timely and rigorous close-out of variations and claims is essential: records deteriorate as time passes, people leave projects, and minor disagreements become entrenched disputes. The QS's professional obligation is to manage this process proactively — not to wait for the contractor to drive it.

Section 2

Key Principles

RICS Change Control and Management (1st ed., 1 April 2021): 7-step process — identify, assess, implement, record, value, agree, report; all variations must be instructed in writing before valuation commences.
JCT SBC/Q 2016 Clause 5.1–5.9: variation valuation hierarchy — (1) contract bill rates; (2) fair rates analogous to bill rates; (3) daywork (last resort); Schedule 2 quotation procedure for pre-priced variations.
RICS Ascertaining Loss and Expense (2nd ed., July 2024): loss and expense requires (i) a valid Relevant Matter under JCT Clause 4.23; (ii) actual loss — not anticipated or hypothetical; (iii) causal link between the Relevant Matter and the loss; and (iv) proper substantiation (labour records, subcontractor accounts, head office overhead calculations).
NEC4 Clause 60.1: 21 defined Compensation Events; Clause 61.3: 8-week time bar for contractor notification — claims notified late are time-barred unless the Project Manager should have notified.
RICS Extensions of Time (1st ed., 2015): Relevant Events (contractor entitled to EOT, Clause 2.29 JCT) versus Relevant Matters (contractor entitled to loss and expense, Clause 4.23); EOT is a prerequisite for loss and expense.
Prevention principle: if the employer causes delay but LADs are not adjusted via an EOT mechanism, LADs become unenforceable (Multiplex Constructions v Honeywell [2007]).

Section 3

Practical Application

Step 1

At PC, extract the full Variation Register; categorise all variations by status (agreed/assessed/disputed/not yet valued); list all outstanding L&E/claims with claim status and current positions of both parties.

Step 2

Send a formal close-out letter to the contractor's QS confirming the list of outstanding items and requesting an agreed timetable for settlement meetings — document this as the start of the close-out process.

Step 3

Work through variations systematically — apply JCT Clause 5.1–5.9 valuation hierarchy; for each item, prepare a detailed QS assessment with supporting measurements and rates; issue to the contractor for comment.

Step 4

For L&E/prolongation claims: verify EOT entitlement first; assess actual loss using RICS Ascertaining Loss and Expense methodology; request full substantiation; prepare a counter-schedule showing your assessment of the claim.

Step 5

Hold regular commercial close-out meetings with the contractor's QS; work through the schedule of outstanding items item by item; minute agreements and disagreements promptly after each meeting.

Step 6

For items where positions remain far apart, advise the client on the commercial case for settlement versus adjudication — consider the value of the disputed item, the cost of adjudication, the strength of each party's case, and the relationship implications.

Step 7

Once all items are agreed or formally disputed, produce the final Variation Account and Claims Settlement Statement, signed by both QSs; this becomes an appendix to the Final Account Agreement.

Section 4

Common Mistakes to Avoid

Leaving variations open without a written record of the position — if the project team changes, undocumented positions cannot be reconstructed from memory.
Accepting a contractor's loss and expense claim without verifying entitlement — loss and expense requires a valid Relevant Matter AND actual loss AND a causal link; claims without all three must be rejected.
Failing to apply the JCT valuation hierarchy — accepting daywork rates without checking whether contract bill rates could apply is a financial failure on behalf of the client.
Not minuting commercial close-out meetings — verbal agreements are unenforceable; all agreements must be confirmed in writing.
Ignoring the NEC8-week time bar for compensation event notifications — accepting late NEC claims that should be time-barred exposes the client to costs they are not obliged to pay.

Section 5

APC Competency & Quick Reference

Contract Practice Level 3 — variation valuation, L&E claims assessment, close-out process
Conflict Avoidance, Management and Dispute Resolution Procedures Level 2 — commercial settlement, adjudication decision

What is the JCT valuation hierarchy for variations and when does each rule apply?

JCT SBC/Q 2016 Clause 5.1–5.9: (1) Contract bill rates where the varied work is of similar character and executed under similar conditions; (2) Fair rates derived from bill rates where character or conditions differ; (3) Fair valuation (cost-plus) where no bill rates can be applied; (4) Daywork as last resort per RICS definition. The QS must apply the hierarchy in order — daywork cannot be used if bill rates exist.

What does a contractor need to demonstrate to recover loss and expense under JCT SBC/Q 2016?

Under Clause 4.23 (RICS Ascertaining Loss and Expense, 2nd ed., July 2024): (1) a valid Relevant Matter (e.g. late instructions, opening up/testing, employer's man failure to give access); (2) actual loss — not anticipated or budgeted; (3) a causal link between the Relevant Matter and the loss; (4) full substantiation — labour records, subcontractor accounts, overhead calculations.

What is the prevention principle and why is it significant for LAD clauses?

If the employer causes delay but the contract does not contain an EOT mechanism to adjust the completion date, the time for completion becomes 'at large' and LADs become unenforceable (Multiplex v Honeywell [2007]). The QS must ensure that employer-caused delays are granted EOT even if the contractor would have been late in any event, to preserve the LAD clause.

Section 6

Completion & Final Account Checklist

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Task

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Full Variation Register status reviewed at PC — all items categorised

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Formal close-out letter sent to contractor with timetable for settlement

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JCT Clause 5 valuation hierarchy applied to all variation assessments

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L&E claims verified for entitlement, actual loss, and causal link

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Commercial close-out meetings minuted and agreements confirmed in writing

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Client advised on settlement versus adjudication for high-value disputes

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Final Variation Account and Claims Settlement Statement signed by both QSs

Section 7

CPD Learning Outcomes

Apply the JCT SBC/Q 2016 Clause 5 variation valuation hierarchy systematically to assess all outstanding variations in the Final Account close-out process.
Assess loss and expense claims using RICS Ascertaining Loss and Expense (2nd ed., July 2024) methodology, verifying entitlement, actual loss, and causal connection before accepting any claim figure.
Manage the commercial close-out process with the contractor's QS, producing fully documented agreements and advising the client on dispute resolution options where positions cannot be reconciled.

Section 8