Ensure that you follow any process for contract variation that is set out in your contract.
This page will guide you through a general process for contract variations but you must adhere to your contract requirements.
Start at Step H.1 below and follow the entire process
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 where:
- 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. Some examples may include:
- Simple variations may include a change in billing instructions or address or typographical errors.
- Complex variations may include changes in scope such as change in delivery schedule or the nature of deliverables (i.e. specifications).
- A variation to change contact personnel in a contract may be simple but a change of specified personnel may introduce more complex aspects to the variation.
Whether a variation is simple or complex will depend on the risks that the change will introduce (or reduce) to the performance of the contract.
► 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. Additional guidance can be found in the Australian Government Contract Management Guide on the Department of Finance Website.
You will need to establish why the contract should be varied.
► 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).
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 no extension option exists, 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 and there is a requirement for the continued supply of the goods or services, you will need to conduct a new procurement process (for more guidance see contract end dates).
You will need to draft the contract variation to effect the required change.
- Contract variations should 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. If discussing a possible contract variation with a supplier, be careful not to imply agreement until all aspects have been finalised, including any internal approvals from relevant delegates.
- 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.
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.
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 $10k on AusTender within 42 days of entering into an agreement (see: CPRs 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 ($10k). 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.
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.
For longer term or more complex contracts, you should consider maintaining a ‘master version’ of the contract that includes any contract variations in mark up. This is important, especially when several variations have been executed, so that you have a copy of the latest version of the contract to refer to. This will facilitate search functions while maintaining continuity and recording the evolution of the contract.
Additional guidance can be found in the Australian Government Contract Management Guide on the Department of Finance Website.
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.
- Archives Act 1983
- Freedom of Information Act 1982
- Commonwealth Procurement Rules (CPRs) Section 7 – Records
