Unbilled Variations: How Much Revenue Is Your Site Losing?

Contractors across the UK are losing tens of thousands of pounds annually to a largely invisible problem: unbilled variations. These are scope changes that occur on site but never make it onto an application for payment. The work gets done, the costs pile up, but the revenue disappears into thin air.

According to World Commerce & Contracting, an average of 9.2% of a contract's value is lost because contracts aren't properly followed after signing. For a £5 million project, that's £460,000 walking off site. Much of this leakage stems from variations that site teams perform but never document properly—or document too late to claim.

The harsh reality? You can't bill what you can't prove. And in construction, proof requires contemporaneous records captured in real time, not reconstructed weeks later when memory has faded and evidence has vanished.

What Are Unbilled Variations and Why Do They Matter?

A variation is any change to the scope of works defined in your contract. It could be an addition (extra cable runs), a substitution (different materials), or an omission (removing work from the programme). Under NEC4, JCT, and FIDIC contracts, you're entitled to payment for these changes—but only if you can demonstrate they occurred and quantify the impact.

Unbilled variations are the silent profit killers. They're the verbal instruction that never gets written down, the design change sketched on a drawing but not logged, the extra quantities installed because "it just made sense at the time." They represent real work, real costs, and real value—but they generate zero revenue because they're never formally claimed.

The financial impact compounds quickly. Miss a £2,000 variation every month across five projects, and you've lost £120,000 by year-end. That's not poor commercial performance—that's avoidable revenue leakage caused by inadequate documentation systems.

For UK contractors operating under NEC4 contracts, the stakes are even higher. Clause 61.3 imposes a strict time bar: notify the Project Manager of a compensation event within eight weeks of becoming aware, or lose your entitlement entirely. If your site team doesn't recognise a variation as a compensation event, or fails to capture the evidence when it happens, you've missed your window.

The Five Primary Causes of Unbilled Variations

Most unbilled variations stem from predictable, preventable failures in the documentation process. Understanding these causes is the first step toward eliminating revenue leakage.

1. Verbal Agreements Without Written Follow-Up

It happens dozens of times on every project: the Supervisor asks for an extra run of conduit, the Project Manager verbally approves a material substitution, the designer marks up a drawing during a site walk. Everyone nods, the work proceeds, and nobody writes it down. Three months later, when you submit your application, the client claims they never authorised it.

Verbal instructions are commonplace—and commercially fatal. Most standard form contracts require written instructions for variations. Without documentary evidence, you're relying on memory and goodwill, neither of which holds up in a dispute.

2. Site Teams Unaware of What Constitutes a Variation

Site managers and foremen are excellent at building things. They're often less clear on what's in the contract scope versus what's a chargeable extra. If your site team can't distinguish between contracted works and variations, they won't capture the evidence when changes occur.

One contractor lost £3,800 when 120 metres of cable tray installation went unrecorded after a verbal design change. The site team installed it, logged it in the site diary as "works completed," but never flagged it as out-of-scope. By the time the commercial manager realised, the evidence had gone—no photos, no measurements, no written instruction.

3. Inadequate Record Capture

Even when site teams recognise a variation, they often fail to capture the evidence needed to support a claim. A brief note in a diary—"installed extra tray in Plant Room B"—doesn't tell the commercial team what quantities were involved, what the original scope was, who instructed the change, or when it occurred.

Effective variation records require:

• Clear description of the change and its cause
• Quantities (measured, not estimated)
• Photographs showing before and after conditions
• Reference to the original contract scope
• Name of the person who instructed or approved the change
• Date and time the variation occurred

Without these details, your commercial team is trying to build a claim from fragments. Most survive commercial scrutiny about as well as a garden shed in a hurricane.

4. Inconsistent Logging Methods Across Projects

Some sites use notebooks, others use spreadsheets, a few use apps—and most use a chaotic combination of all three. When every project logs variations differently, commercial managers spend more time hunting for information than preparing claims.

Inconsistency also creates gaps. A site manager who moves between projects might capture excellent records on one site and nothing on another, simply because the systems are different. Standardisation isn't bureaucracy—it's the foundation of reliable revenue protection.

5. Delayed Documentation Efforts

The longer the gap between a variation occurring and being documented, the weaker your evidence becomes. Measurements become approximations, memories become uncertain, and physical evidence disappears as work progresses. An excavation backfilled two weeks ago is much harder to claim for than one photographed and measured on the day.

Under NEC4 contract management rules, contemporaneous records—captured at the time events occur—carry far more weight than retrospective accounts. Tribunals and adjudicators know the difference, and they're sceptical of claims supported by records created after the fact.

The Real Cost of Unbilled Variations to UK Contractors

Revenue leakage from unbilled variations isn't an accounting quirk—it's a direct hit to profitability that cascades through the business.

Consider a mid-sized contractor running ten projects simultaneously, each worth £3 million. If each project leaks just 2% of its value to unbilled variations (well below the industry average), that's £600,000 in lost revenue annually. For a business operating on 5% margins, that's equivalent to £12 million in revenue—or two entire projects' worth of profit.

The damage extends beyond the immediate financial loss:

• Cash flow pressure: Costs incurred but not recovered create funding gaps, forcing reliance on overdrafts or delaying supplier payments
• Margin erosion: Project margins calculated assuming full recovery vanish when variations go unclaimed
• Opportunity cost: Capital tied up covering unbilled work can't be invested in new projects or growth
• Relationship damage: Retrospective claims submitted months after work completes trigger disputes with clients who claim no knowledge of the changes

One contractor reviewed two completed projects and identified approximately £60,000 in variations they'd performed but never billed—work that met every definition of a compensation event under their NEC4 contract, but for which they had insufficient evidence to support a claim. The work was done. The costs were real. But the revenue was gone forever.

A Five-Point Framework for Eliminating Unbilled Variations

Recovering lost revenue from variations doesn't require revolutionary technology or huge commercial teams. It requires discipline, systems, and a clear understanding that construction record management is a revenue protection activity, not an administrative burden.

1. Immediate Real-Time Capture of Variations

Variations must be documented when they occur, not at the end of the week or during final account preparation. Real-time capture means recording the change on the day it happens, with photographs, measurements, and a clear description of what's different from the contract scope.

Site teams need tools that make this easy. A paper diary that lives in a site office drawer won't capture variations happening on Level 6 of a tower block. Mobile apps that allow instant photo uploads, voice notes, and location tagging remove the friction from documentation.

The goal is to make recording variations easier than ignoring them. When documentation takes 60 seconds instead of 20 minutes, it actually gets done.

2. Standardised Recording Templates

Every site should use the same variation recording template. It should prompt for the essential information commercial teams need to prepare claims:

• What changed?
• Why did it change?
• Who instructed or approved it?
• What quantities were involved?
• When did it occur?
• What's the contractual basis for the claim (e.g., NEC4 Clause 60.1(1))?

Templates don't stifle judgment—they ensure nothing critical gets forgotten. A standardised approach also means commercial managers can instantly understand records from any site, regardless of who created them.

3. Site Team Training and Empowerment

Site teams can't document what they don't understand. Training should cover:

• What constitutes a variation versus contract scope
• The financial impact of undocumented changes
• How to recognise compensation events under your contract forms
• What evidence is needed to support claims
• How to use documentation systems effectively

This isn't a one-off session—it's ongoing reinforcement. New starters, subcontractors, and agency staff all need clear guidance on what to record and when.

Empower site teams to challenge unclear instructions. If a change request is verbal, they should be authorised to request written confirmation before proceeding. Most clients will provide it when asked—they're far less willing to acknowledge it retrospectively.

4. Photo and Mobile Documentation Systems

Modern smartphones are extraordinary evidence-gathering tools. Photos capture context that words can't convey: the actual site conditions, the scale of work, the materials used, the access constraints that drove additional costs.

Effective photo documentation includes:

• Before photos: Show the existing condition before the variation
• During photos: Capture work in progress, proving it actually occurred
• After photos: Demonstrate the completed change
• Context shots: Wide angles showing location and surroundings
• Detail shots: Close-ups of key elements or measurements

Photos should be time-stamped and geo-tagged. Most site diary apps do this automatically, creating a chain of evidence that's difficult to dispute.

5. Weekly Variation Log Reviews

Site and commercial teams should review the variation log weekly. This creates a feedback loop: commercial managers can flag missing information while memories are fresh, and site teams learn what details matter most for claims.

Weekly reviews also catch variations that site teams didn't recognise. A commercial manager might spot that "additional drainage installed per Engineer's instruction" is actually a compensation event under NEC4 Clause 60.1(1)—a change to the Works Information—and can immediately request the additional evidence needed.

This isn't micromanagement. It's collaborative revenue protection.

Real-World Results from Structured Variation Documentation

The difference between ad hoc variation recording and structured documentation is measurable. One contractor implemented daily variation logging across their projects, using a standardised template and mobile app for instant capture.

In the following quarter, they submitted £86,000 in variation claims. Of those:

• All were supported by contemporaneous records captured on the day the work occurred
• All included photographs, measurements, and clear references to contract clauses
• Only one claim was challenged by the client
• Zero claims were rejected

Compare that to their previous approach—retrospective claims assembled weeks or months after work completed, supported by memory and patchy records. Challenge rates exceeded 40%, and rejection rates approached 25%.

The improvement wasn't because they performed more variations. It was because they finally captured the evidence needed to prove the variations they'd been performing all along.

What to Avoid When Managing Variations

Knowing what not to do is as important as knowing best practice. These common mistakes undermine even well-intentioned documentation efforts:

Relying on Final Account Stage to Identify Variations

Attempting to identify variations months after project completion is archaeology, not commercial management. Evidence has vanished, site staff have moved on, and clients have no incentive to agree retrospective claims. Variations must be captured during delivery, not reconstructed afterwards.

Accepting Verbal Instructions Without Challenge

Yes, most contracts require written instructions for variations. No, most instructions aren't written. But accepting verbal instructions without requesting written confirmation is asking for disputes. A polite "Can you confirm that by email?" solves most problems before they start.

Focusing Only on Large Variations

Small variations—£500 here, £1,200 there—seem hardly worth documenting. But they accumulate. Ten small variations per month at £800 each equals £96,000 annually. Document everything. Let commercial managers decide what to claim.

Using Different Systems on Different Projects

When every site uses different methods, nothing gets used consistently. Standardise across all projects. The system doesn't need to be perfect—it needs to be universal.

Treating Documentation as an Administrative Burden

Documentation isn't bureaucracy. It's evidence gathering for future claims. A site manager spending 15 minutes daily logging variations is protecting potentially thousands of pounds in revenue. That's not overhead—it's one of the most profitable activities on site.

How Digital Tools Change the Variation Documentation Game

Paper-based variation logs were better than nothing, but they had obvious limitations: no photos, difficult to search, impossible to share in real time, and vulnerable to loss or damage.

Digital construction documentation tools eliminate most of these problems. Modern site diary platforms allow instant mobile capture, automatic photo timestamping, cloud storage, and real-time visibility for commercial teams.

The most sophisticated systems go further: they analyse diary entries to identify potential compensation events that site teams might have missed. If your site manager logs "installed 40m additional ductwork following design revision by Engineer," AI-powered tools can flag that as a likely NEC4 Clause 60.1(1) compensation event and prompt for the supporting evidence needed.

This isn't about replacing human judgment. It's about augmenting it—catching opportunities that would otherwise slip through the gaps.

Frequently Asked Questions

What's the difference between a variation and a compensation event?

The terminology depends on your contract form. Under NEC4, compensation events are defined changes that entitle the contractor to adjustments in time and money (Clause 60.1). Under JCT contracts, the equivalent is a variation. Both refer to changes to the contract scope that trigger entitlement to additional payment, but the notification and assessment procedures differ significantly.

How long do I have to notify a variation under NEC4?

Under NEC4 Clause 61.3, you must notify the Project Manager of a compensation event within eight weeks of becoming aware that the event has occurred—or should have occurred if it's an instruction you expected. Miss that deadline, and you're time-barred from claiming. This makes immediate documentation critical.

Can I claim for variations if I don't have a written instruction?

It depends on your contract terms and the circumstances. Most contracts require written instructions, but courts and adjudicators may enforce payment if you can demonstrate the variation was instructed or approved by someone with authority, you reasonably believed it was authorised, and you have contemporaneous evidence proving the work occurred. It's far better to request written confirmation before starting, though.

What evidence do I need to support a variation claim?

Strong variation claims include: a clear description of what changed, who instructed or approved the change, when it occurred, measured quantities (not estimates), photographs showing before, during, and after conditions, reference to the original contract scope, and the contractual clause supporting entitlement (e.g., NEC4 60.1(1)). The more contemporaneous evidence, the stronger the claim.

Should I claim small variations or just absorb them?

Every variation you're contractually entitled to should be documented and considered for claiming. Small variations compound—ten £500 variations per month equal £60,000 annually. Clients don't absorb small variations you instruct them. Neither should you. Document everything and let your commercial manager decide what to pursue.

How can I train site teams to recognise variations?

Practical training works best: show real examples from your projects, explain the financial impact of missed variations, teach them to spot trigger phrases like "design change," "additional," "different material," or "Engineer's instruction." Provide a simple checklist: if it's not shown on the original contract drawings or specification, it's probably a variation.

The Bottom Line

Unbilled variations represent one of the largest avoidable profit leaks in UK construction. The work is performed, the costs are incurred, but the revenue vanishes because site teams don't capture the evidence needed to support claims.

Fixing this doesn't require revolutionary change. It requires discipline: real-time documentation, standardised processes, trained site teams, and weekly reviews to ensure nothing slips through. The contractors who implement these systems don't just reduce revenue leakage—they eliminate it.

The choice is simple: invest 15 minutes per day documenting variations, or write off tens of thousands of pounds in avoidable losses. One is profitable. The other is negligent.

Ready to stop losing revenue to unbilled variations? Gather's AI-powered site diary automatically detects potential compensation events in your daily records, ensuring you never miss a claimable change. Book a demo to see how it protects your profit margins.