Contract Variations

BuyRight is currently in beta. We welcome your feedback and suggestions. For feedback, support or technical issues, please email ccsdesk@finance.gov.au

Contract Variations

Follow any process for contract variation that is set out in your contract. 

This page will guide you through the process for contract variations.

  • + provides additional detail under each step of the process
  • ► denotes an action step
  • Notes and text in the blue boxes provide additional information and tips
  • Click the orange “Why?” box to see the relevant section/s of the policy

Start at Step 1 below and follow the entire process

 

1. Assess if the Contract Variation is Simple or Complex
+

After a contract is established, it may become necessary to make changes. These changes can be minor administrative changes such as a change of address or they can be material changes that affect the duration, price and/or deliverables.

Entities should not seek, or allow, a contract variation where it would amount to a significant change to the underlying contract or significantly vary the scope of the contract in the following circumstances:

  • other potential suppliers may have responded differently to the amended contract scope in the tendering process which may have resulted in a different value for money outcome; or
  • the variation may compromise the value for money assessment.

Entities may seek or allow minor contract variations.

In instances where a significant change of scope is proposed or required, you may need to conduct a new procurement activity.  

Procurement activities, including contract variations, should be commensurate with the scale and the scope of the business requirement.

You need to determine the complexity of the proposed variation. The table below gives some examples to help guide your assessment.

Simple variations may include:Complex variations may include:
Change in billing instructions or address; Any change of terms and conditions;
Corrections to typographical errors; Proposed change of ownership
Changes in administrative or contact personnel listed in the Contract; Changes of Key Personnel named in the Contract
Change caused by minor legislative requirements. Changes caused by significant legislative requirements
Changes to a Contract under $80,000 which results in total expenditure under $80k Changes to a Contract under $80,000 which results in total expenditure over $80k
An extension of the term of the contract but which does not involve additional expenditure An extension of the term of the contract not previously contemplated which changes the scope and/or cost and not covered by an option,
Changes of delivery schedule requested by Customer or caused by issues which are beyond the control of the Supplier and does not involve additional expenditure.

Change in Scope:

  • Change in delivery schedule
  • Change in the quantity
  • Change in the nature of deliverables, ie the specifications

►  If the proposed variation is minor or simple, then follow this process with a light touch covering off the minimum level of requirements.

►  If the proposed variation is more significant or complex you may need to consider other issues and approaches. You may need to:

» seek procurement or legal advice.

» have discussions with the supplier, relevant team members or subject matter experts. 

» revise your risk management plan or do a new risk assessment.

The result of this may be a contract variation or you may need to conduct a new procurement process.

Entities should not seek, or allow, a contract variation where it would amount to a significant change to the underlying contract or significantly vary the scope of the contract in the following circumstances:

  • other potential suppliers may have responded differently to the amended contract scope in the tendering process which may have resulted in a different value for money outcome; or
  • the variation may compromise the value for money assessment.

Entities may seek or allow minor contract variations.

In instances where a significant change of scope is proposed or required, you may need to conduct a new procurement activity.  

Why?

2. Establish the Need for the Variation
+

You will need to establish why the contract should be amended. 

► Discuss the need for the variation with the delegate including an assessment of:

» whether this will still constitute value for money

» if this may compromise the initial procurement process

» whether this will transfer or create additional risk for either the entity or the supplier

» what effect this will have on the procurement outcomes

» whether a variation is the most appropriate procurement method.

► Seek agreement from your delegate to proceed with the variation (verbal or email).

 Contract Extensions

A contract must not be extended unless:

● it contains an option to extend,

● it is value for money to extend the contract and

● the contract has not yet expired. 

You should follow the process for extensions that is contained in the contract.  

Where necessary, you may be able to extend a contract by contract variation prior to the contract end date for a short period of time where;

a. the procurement sourcing process for a replacement contract is still ongoing and continuity of the supply of goods or services is essential, or

b. the scope and the value of the contract remain substantially the same. This is generally to allow for finalisation of the contract where minor delays have been experienced.

If your contract does not contain an option to extend, you will need to conduct a new procurement process (See here for more guidance on contract end dates).

Why?

3. Draft the Contract Variation
+

You will need to draft the contract variation to effect the required change.

Important

  • Contract variations must be agreed, in writing and signed by both parties.
  • Most contracts will specify a process and/or a template for contract variations. These MUST be followed when effecting a contract variation.
  • Contracts can be legally varied by the conduct of either party or even by a conversation or email. When discussing possible contract variations with a supplier, be careful not to imply acceptance and advise them that approval can only be granted in writing by the delegate.
  • The contract amendments should be written as a set of instructions to someone making changes to the current version of the contract, i.e. delete clause X and replace with new clause Y.

► >Verify the details of the change with the Supplier (Be careful that the supplier does not think that you are authorising the change). The supplier may need to supply a quote.

► Establish what changes are needed to the contract to effect the variation.

► Draft the contract variation using the template specified in the contract.

If there is no contract variation template in the contract, you could use the Commonwealth Contracting Suite (CCS) Contract Variation Form. For simple variations on minor contracts, an exchange of emails may be appropriate.

Why?

4. Obtain Delegate Approval Under PGPA Section 23
+

You will need to obtain delegate approval under the Public Governance Performance and Accountability Act 2013 (PGPA) Section 23 to vary an arrangement (contract). 

► Draft your approval minute (If you have used the CCS contract variation template then this will be automatically generated). For simple variations, this may alternatively be in the form of an email. Document why/how the variation represents value for money (VFM).

► Submit the approval minute to delegate for approval (include the draft contract variation).

If the variation includes changes in costs, the delegate MUST be made aware of the new total amount of contract ie. original contract cost + variations to date + this variation.

If a change in funding is required, check if your delegate holds the appropriate delegations. This can be found in your entity’s internal Delegations Schedule and/or Accountable Authority Instructions.

A contract variation should be completed and signed before it takes effect and before any additional goods and/or services are provided.

Why?

5. Formalise the Variation
+

Once relevant approvals have been granted, you can finalise the contract variation. 

► Provide the contract variation to the supplier for signature. The supplier is required to return a signed copy of the contract variation (either physically or electronically).

► Your delegate is also required to sign and return a signed copy of the contract variation to the supplier.

► After the variation has been formalised, enter this amendment into your entity's Financial Management Information System (FMIS). (You may also be required to submit supporting documentation).

► Entities MUST report variations over $10,000 on AusTender within 42 days of entering into an agreement (see CPR 7.18).  Your FMIS may facilitate this reporting or you may have to do this manually. Check with your CFO or your central procurement area.

Entities are required to report variations on AusTender that are over the reporting threshold ($10,000). If you have multiple variations where the cumulative total is valued at or above the reporting threshold, you may choose to report these on AusTender to correct the contract value.

Why?

6. Manage the Revised Contract
+

You may need to revise elements of your contract management processes and tools to accommodate the variation.

► Ensure delivered goods and/or services now meet new requirements.

► Ensure stakeholders and users are aware of the impacts of the amendments (if applicable).

► Revise the contract management plan and any other impacted management tools.

A new version of the contract should be amended incorporating the variation.  This is important, especially when several variations have been executed, so that you have the latest version of the contract for reference. You may also find It useful to maintain a marked-up working copy of the original contract and the variations to date to have visibility of the incremental changes and to demonstrate the evolution of the contract.

Why?

7. File Documents
+

You are required to retain all relevant documents in accordance with the Archives Act 1983. Relevant documents include any documents that record decisions and/or approvals, including those with signatures.

► File documents in accordance with your entity's records management practices.

Why?