MANAGING VARIATION ORDERS OF SELECTED

GOVERNMENT CONSTRUCTION PROJECTS TOWARDS

DEVELOPING A PROPOSED FRAMEWORK FOR
MITIGATING CAUSES AND EFFECTS
Introduction

Construction industry is considered as one of the most booming industries in the world especially
in the developing countries like the Metropolitan Manila. However, it also considered as one of
the most difficult industries in the world due to its increasing complexity and uniqueness. No
projects are exactly the same (Gokulkarthi & Gowrishankar, 2015). One of the greatest problems
encountered by the Project Managers in the construction industry is the cost overrun and project
delays (Sambasivan & Soon, 2007).

In the study of Aljohani in 2017, he claimed that construction industries have a poor reputation in
terms of finishing projects on budget and nine (9) out of ten (10) projects normally experience cost
overrun. Delays increase the cost of construction because of price adjustment and fluctuations in
the prices of various components, i.e., labour, fuel, cement and miscellaneous materials (Hanif,
Khurshid, Lindhard, & Aslam, 2016). Assaf and Al-Hejji (2006) as mentioned in the study of
Sambasivan (2007) found out that only 30% of the construction is finished on time and the average
project delay is between 10% to 30%. According to the statistics (McCarthy, 2014), the following
are the major international construction projects with the highest cost overrun: The Channel Tunnel
with $21.1 Billion, Three Gorges Dam with $16.1 Billion and Boston’s Big Dig with $13.4 Billion.

Various studies show that the greatest factor in the cost and schedule overrun is the changes in the
scope of the project also known as the variation orders (Jadhav & Bhirud, 2015). The occurrence
of variation order in the construction industry is a regular trend. The Department of Public Works
and Highways’ projects are no exception.

Variation order as defined in the Republic Act of 9184, is issued to cover any increase/decrease in
quantities, including the introduction of new work items that are not included in the original
contract or reclassification of work items that are either due to change of plans, design or alignment
to suit actual field conditions resulting in disparity between the preconstruction plans used for
purposes of bidding and the "as staked plans" or construction drawings prepared after a joint survey
by the contractor and the Government after award of the contract, provided that the cumulative
amount of the positive or additive Variation Order does not exceed ten percent (10%) of the
original contract price.

In the light of the above, variation orders should be regarded as the vital issue in the management
of construction projects of the DPWH. Thus, this study intends to investigate the significant causes
of variation orders, analyzed its impact to the projects’ cost and schedule and recommend course
of actions to reduce its frequency.

Objectives

The main objective of the study is to assess the management of variation order of selected
government agencies towards developing a proposed framework for mitigating causes and effects.

Significance of the Study

The study will be proven beneficial in the following aspects:

1. It will help project managers mitigate the project delays in the construction.
2. Project managers, contractors as well as the project owners will have more profit if cost
overrun will be reduced.
3. Provide recommendations to mitigate variation orders in the construction industry.
4. Serve as guidelines of Project Managers in handling variation orders.

Research Questions

1. What is the profile of selected government construction projects in terms of:

a. Cost (more than, less than)
b. duration,
c. funding source
d. Type
2. What is the extent of variation orders in the selected government construction projects in terms
of the following:
a. Actual cost vs projected cost
b. Actual duration vs projected duration
c. Phases in construction
3. To what extent do the following factors contribute to the causes of variation order:
a.
4. Is there a significant difference in the variation order when selected projects are grouped:
a. Cost greater than 300M
b. Cost less than 300M
5. Based on the results of the study, what recommendations may be offered by the researcher to
manage and mitigate the variation order?

Hypotheses
The study aims to test the following hypotheses:

Conceptual Framework

•Literature Review PROCESS • Causes of Variation Order

•Journals • Impact of Variation Order
•Online Journals and •Data analysis and • Recommendaations for
Researchs interpretation Variation Order
•Data processing and
consolidation
•Survey Questions
•Interviews

INPUT OUTPUT
Methodology

Literature
Review

Research
Design

Qualitative Quantitative
Analysis Analysis

Survey
Interviews Data of DPWH
Queastionaires

Figure 1: Research design

Research Design

After the extensive review of the literature, the researcher decided to use both the Quantitative and
Qualitative Analysis to improve the validity of the research findings. This process is known as
triangulation which consists of combinations of qualitative and quantitative methods strengthened
with the literature review (Ndihokubwayo, 2008). The following are the approach for the research
methods.
Literature Review

A total of 20 literatures were collected by the researcher to accurately investigate the relationship
of variation order to the project cost and schedule overruns. The information gathered from the
comprehensive review of the literature was used to define the survey questions and research
hypotheses. The following are formulated from the review of literatures:

1. The relationship of variation order to the project cost and schedule overruns.
2. The researcher synthesized the common causes, effects and recommendation mentioned in
the previous studies to formulate the survey questions.
3. The results of the study were compared to the findings in the literature.

Quantitative Research

As defined by Yilmaz (2013), Quantitative Research is used to quantify the problem by way of
generating numerical data or data that can be transformed into usable statistics. Quantitative
Research uses measurable data to formulate facts and uncover patterns in research. The researcher
collected data from the previous projects of DPWH and created a database of variation order. It
also conducted surveys to the respondents to verify the validity of the data and to capture additional
information. The following are the Quantitative data gathered from survey questions:

1. Causes of variation orders from contractors, project directors, project managers,

consultants
2. Effects of variation orders from contractors, project directors, project managers,
consultants
3. Relative Importance of the causes and effects.

Data from the DPWH projects are collected with the following information:

1. Additional cost incurred by the project due to variation order

2. Project delays experience by the project due to variation order
3. Frequency of variation order in DPWH projects

Qualitative Research

As defined by Yilmaz (2013), Qualitative Research is used to gain an understanding of underlying

reasons, opinions, and motivations. It provides insights into the problem or helps to develop ideas
or hypotheses for potential quantitative research. To help the researcher uncover the information
from the data gathered using the Quantitative Research, the researcher conducted interviews of the
respondents. Qualitative methods seek to determine the perception of the respondents to the
gathered data in terms of the following:

1. Implication of a particular cause and effect of variation order to the project’s cost and
schedule.
2. Reason for the existence of causes of variation orders.
3. Agent of a particular variation order (consultant, contractor, owner and others).
4. Preventive measures for every causes of variation orders.

Data from DPWH Projects

In order to achieve the research objectives, it is necessary to collect large sample to perform
statistical analysis. The information required were gathered from previous projects of DPWH
within the year 2010 to 2018. The following are the information required for each project.

1. Project name
2. Implementing office
3. Initial project cost
4. Final project cost
5. Project start date
6. Initial project completion date
7. Final project completion date
8. Variation Order information
a. Description
b. Causes
c. Frequency per project
d. Cost
e. Date
Related Literature

Introduction

Beneficial Variation Order

The audit of site instructions revealed that most variation orders were beneficial. However, 14%
of site instructions had waste associated with them (Ndihokubwayo, 2008).

Detrimental Variation Order

Problematic situations arising from the occurrence of variation orders included discrepancies
between the claimed and certified amounts (Ndihokubwayo, 2008). Variation orders impacted
project performance with regard to cost and time overruns and disputes between parties to the
contract. Most variation orders involved additional works (Ndihokubwayo, 2008).

Example of projects

Origin of Variation Order

Client

Consultant

Contractor

Causes

The complexity of works was the most predominant factor influencing the occurrence of variation
orders (Ndihokubwayo, 2008).
Impact of Variation Order

Cost Overrun

Schedule Overrun

Quality Degradation

Reduction

The reduction of the occurrence of variation orders was traced back to the pre-contract stage given
that the most predominant origin agent of variation orders was the client and then due to an unclear
brief of works to be executed (Ndihokubwayo, 2008).

Suggestions

Suggestions regarding the reduction of variation orders include (1) adequate planning in advance
is required by all involved parties before works start on site, (2) consultants should do a thorough
concluding design and working drawings and contract documents should be complete at tender
stage, (3) clients should provide clear brief, (4) enhance communication and all parties should be
proactive at all times, (5) works should be supervised with an experienced and dedicated supervisor
and (6) consultant should ensure that the design/specifications fall within the approved budget and
the budget team should be appointed and participate during the design phase (Ndihokubwayo,
2008).

(DONOLD, 2013) (Bhadmus, Ayodele, & Namadi, 2015)