Why Verbal Agreements are Costing Subcontractors Their Margins
In the residential sector, it’s not uncommon to agree on a variation with a handshake or a quick text to the site supervisor, but in commercial construction, doing this is the fastest way to lose money. Standard commercial head contracts, whether an AS4000 construct-only or an AS4902 design and construct agreement, enforce strict administrative procedures for managing scope changes and delays.
Throughout my time managing major institutional and commercial projects, like a highly technical hospital refurbishment and several $10M+ industrial facilities, I’ve watched the same scenario unfold time and time again. A subcontractor gets asked on-site to do some out-of-scope work. They jump on it to "help the builder out" and keep the relationship strong, but they don't submit a formal variation notice within the contract's strict timeframe.
Months later, at the final account stage, they try to claim the extra costs. Because there is no formal record in the project management system (like ProCore or Jobpac), and the contractual "time bars" for claiming a variation have long since expired, the claim gets thrown out. They basically did the work for free. The reality is, the Head Contractor also needs to budget and forecast costs, and if the project Contract Administrator isn’t aware of an upcoming variation, then there likely isn’t going to be any money left over to pay for it at the end of the job. Often, the Foreman or Site Manager will approve the variation, but they won’t let their Contract Admin know.
The Key Takeaways for Subcontractors
Implement Enterprise-Level Operational Systems: Subcontractors need to move away from manual paperwork and adopt robust, digital administrative workflows. Implementing industry-standard operational systems (such as ProCore, or even an Excel Spreadsheet) to formally track and submit RFIs and variations is essential. It creates a single, auditable "source of truth" that stops the dreaded "he said, she said" arguments at the end of a project.
The Legal Severity of the "Time Bar": Commercial contracts contain incredibly strict deadlines, often mandating a notification window of just five to seven days, for notifying the builder of a variation or a delay. Treat these time bars as absolute. If you miss the window, you legally waive your right to claim compensation, regardless of how genuine the extra work was. Set automated calendar alerts for every single RFI you submit.
Enforce a "No Paperwork, No Work" Rule: Train your entire on-site delivery team to politely but firmly refuse to start out-of-scope work without a written site instruction or an approved variation order. Institute an internal commercial gate: your site tradesmen shouldn't execute physical changes until your company's contract administrator has counter-signed the formal variation order from the head contractor.