Variation Order Procurement Impact Example

Situation

A client variation changes the specification of installed lighting fixtures after the original PO has been prepared. The cost increase is only $9,000, so the VO looks minor commercially. However, the change requires a revised submittal and a different driver model with longer lead time.

Procurement needs to show that the VO is not only a price change; it also resets part of the procurement schedule.

Inputs

Calculation

The direct net cost is $9,000. The procurement schedule impact is 7 + 21 + 10 + 3 = 41 days of additional exposure if the revised item sits on the critical path.

The VO should therefore be approved with schedule visibility, not only as a small cost variation.

Approval wording

Suggested wording: The VO has a net procurement cost impact of $9,000 but creates an estimated 41 days of procurement schedule exposure due to approval reset, revised lead time, and shipping. Approval should confirm whether the site sequence can absorb this impact.

What to watch before using this

Variation orders often hide procurement delay because the commercial value looks small. Check whether the VO resets submittal approval, changes the supplier, invalidates a previous quotation, requires a new brand approval, or changes freight mode. The approval note should show both direct cost and lead-time impact. If the VO affects critical path, procurement should not sign off on price alone.

How this would sit in an approval file

In a VO approval file, procurement should show the added scope, omitted scope, supplier price change, cancellation exposure, lead-time reset, submittal impact, and delivery effect. This prevents the variation from being reviewed as a cost-only item when it may also change the schedule. The buyer should also state whether the supplier has already committed material or whether the order can still be changed without cost.

The file note should be practical enough for the project manager and commercial team to use immediately. If approval delay will push the item beyond the site need date, say so. If the VO requires new technical approval, revised drawings, or a different supplier, show the effect separately from the net price.

Common mistakes in this situation

• Approving a VO without checking if supplier lead time resets.
• Netting additions and omissions without showing cancellation cost.
• Ignoring price validity expiry and revised delivery terms.
• Missing the effect of new submittal approval on the procurement programme.

Manager review wording: Procurement should approve the VO commercially only after the added cost, omitted cost, cancellation exposure, and revised delivery impact are visible in the approval note.

Buyer review checklist

Before this VO impact note is sent for approval, the buyer should confirm whether any supplier commitment has already been made. If material is already ordered, the file should show cancellation cost, restocking charge, supplier refusal risk, and whether the old material can be reused elsewhere. If the supplier has not started, the file should show whether price validity and delivery commitment still hold.

The review should also separate price impact from schedule impact. A low-value variation can still delay installation if it resets submittal approval or manufacturing. Management needs both views before approving the change.

Evidence to attach

• Supplier quotation, technical request, or project instruction.
• Calculation output from the matching I Love Procurement tool.
• Emails, approvals, dates, or supplier evidence supporting the assumptions.
• The matching template download completed with your real values.

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