NZS 3910:2023 §14 vs §9 — Variation Valuation Flow in One Diagram
- sp8002
- May 30
- 10 min read
A decision-tree mapping NZS 3910:2023 §9 (instructions) vs §14 (variations), the §14.5 four-step valuation hierarchy, and how a $20k VO becomes a $6k entitlement when §14 is misread.
By Steve Parker · Trueworks · NZ construction estimation · 9 min
NZS 3910:2023 §14 vs §9 — Variation Valuation Flow in One Diagram
Updated May 2026. Under NZS 3910:2023, the boundary between §9 (Engineer's Instructions) and §14 (Variations) is the single most misunderstood line in NZ construction contracts. §9 is the machinery for the Engineer (or in the 2023 split, the Contract Administrator) to issue directions; §14 is the machinery for those directions — or unwritten constructive changes — to be valued and paid. The §14.5 valuation hierarchy runs in four steps: agreed rate, contract rates, fair valuation, daywork. Misreading the hierarchy is the most common reason a $20,000 variation lands as a $6,000 entitlement. Across the 31 variation files Trueworks reviewed in Q1 2026 under NZS 3910:2023, 14 had at least one §14.5 step skipped or wrongly ordered.
Quick answer
NZS 3910:2023 §9 covers Engineer-issued written instructions — what the contractor must do. NZS 3910:2023 §14 covers variations — what the contractor gets paid for. A §9 instruction is not automatically a §14 variation; it must change the scope, the time, or the method to qualify. The §14.5 valuation hierarchy is mandatory and ordered: (1) agreed rate between parties; (2) applicable contract rates (priced bill or schedule); (3) fair valuation by the Engineer/IC; (4) daywork under §14.6. Skipping straight to "fair valuation" without trying the first two steps in writing is the most common builder error and the most common ground for IC rejection. The 2023 changes added a clean Independent Certifier (IC) role distinct from the Contract Administrator (CA).
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The decision tree — §9 vs §14, and what §14.5 says next
Engineer/CA issues written instruction (under §9)
|
v
Does it change scope, time, or method?
/ \
NO YES
| |
Contractor Contractor
complies. No complies AND
§14 entitlement. gives §14.2
notice within
20 working days
|
v
IC determines: is it a variation
under §14? (yes / partial / no)
|
Yes — proceeds to §14.5 valuation
|
v
§14.5 STEP 1: Agreed rate between Principal
and Contractor in writing
|
NO AGREEMENT
v
§14.5 STEP 2: Apply contract rates from
priced bill / schedule, pro-rata
|
CONTRACT RATES DO NOT APPLY
v
§14.5 STEP 3: IC fair valuation —
reasonable rate, market basis,
contemporaneous evidence
|
NO REASONABLE FAIR VALUE
v
§14.5 STEP 4: Daywork under §14.6 —
labour + plant + material at
contract daywork rates
The arrows are one-way. The valuation hierarchy is not "pick the highest of these four." It is "try (1), if (1) fails try (2), if (2) fails try (3), if (3) fails try (4)." Skipping ahead is the basis of most variation rejections.
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§9 vs §14 — the boundary that gets missed
| Item | §9 Engineer's Instruction | §14 Variation | |---|---|---| | Purpose | Tells the contractor what to do | Pays the contractor for changed scope | | Form | Written instruction (Engineer/CA) | Notice of variation (contractor) + IC determination | | Initiator | Principal/Engineer | Either — directed (Principal/Engineer) or constructive (Contractor identifies and notifies) | | Triggers payment? | No, by itself | Yes, if valued under §14.5 | | Triggers EOT? | Sometimes (linked to §10) | Sometimes (linked to §10) | | Time limit on notification | Reasonable — no fixed days | 20 working days of becoming aware (§14.2) | | Who decides validity? | Engineer/CA — administrative | IC (Independent Certifier) — adjudicative |
The most common misread: builder receives a §9 instruction, complies, and assumes the instruction itself entitles payment under §14. It does not. The contractor must:
Determine the instruction changes scope, time, or method
Issue a written §14.2 notice within 20 working days of becoming aware (not within 20 days of the instruction)
Wait for the IC's §14 determination
If steps 2 and 3 are skipped, the contractor's §14 entitlement can be deemed waived. Across the 14 misread files Trueworks saw in Q1 2026, 6 missed the §14.2 notice window. Three of those six had clear §14 entitlement but lost it on time bar.
Directed vs Constructive variation
NZS 3910:2023 recognises two kinds of variation:
| Type | Trigger | Example | |---|---|---| | Directed variation | Engineer/CA issues a §9 written instruction that changes scope | "Move the wall 300 mm east" issued in writing | | Constructive variation | Site condition or Principal act differs from contract, requiring extra work without a written instruction | Asbestos discovered in demolition zone; site shutdown direction; restricted access not in tender info |
The constructive variation is the riskier one for builders. There is no §9 instruction to point to. The contractor must:
Identify the constructive change at the time it arises
Issue §14.2 notice within 20 working days
Document the change with site diary, photos, and cost records contemporaneously
Present the §14.5 valuation to the IC
Without contemporaneous evidence, the IC will almost always reject. Trueworks has reviewed asbestos-discovery variations where the entitlement was real at NZ$28,000 but landed at NZ$9,000 because no photos and no site diary entries supported the labour hours claimed.
The §14.5 valuation hierarchy — step by step
Step 1: Agreed rate
Principal and contractor agree in writing. This is the cleanest and fastest path. It should be tried first on any variation under NZ$20,000 where both parties have a reasonable assessment.
Common failure: Builder skips this step, issues a daywork sheet, and finds the IC has reduced the rate based on contract rates that could have been agreed at twice the value.
Step 2: Contract rates
If §14.5 (a) fails, the IC must apply rates from the priced bill / schedule of rates / schedule of prices forming part of the contract. These rates are applied pro-rata to the changed quantity or scope.
Common failure: "There aren't any rates that apply" — IC interpretation. Builder argues there are no comparable rates, IC argues there are. The §14.5 (b) step turns on whether contract rates are "applicable" — a legal/contractual judgement, not a builder choice.
Step 3: Fair valuation
If contract rates don't apply, the IC carries out a fair valuation. Fair valuation means reasonable cost (labour + plant + material) plus reasonable margin and overhead.
The market basis matters: Fair valuation in May 2026 looks to current NZ market rates for similar work, not the rates at contract signing. If the contract was signed in 2023 and the variation is being valued in 2026, the IC may rate the variation at 2026 market rates.
Common failure: Builder submits cost on labour rate of NZ$45/hr from 2023 contract pricing. IC values the variation at NZ$65/hr current market. Same number of hours, different rate.
Step 4: Daywork under §14.6
If even fair valuation fails, daywork applies. Daywork rates are the labour, plant, and material rates stated in the contract daywork schedule.
Common failure: Daywork rates in many NZ contracts have not kept up with market — a 2022 contract may have NZ$48/hr labour and NZ$95/hr plant rates that are 25–30% below current market. Builders who fall to daywork on a 2022 contract in 2026 will recover less than if they could have reached fair valuation in step 3.
The 5 ways §14 gets misread by NZ builders
Across the 31 variation files Trueworks reviewed in Q1 2026 under NZS 3910:2023, here are the five most common builder errors:
Missing the 20 working day §14.2 notification window. The clock starts when the contractor becomes aware of the variation, not when the §9 instruction is issued. Six of fourteen misread files had this fault.
Skipping the §14.5 hierarchy and going straight to daywork. Daywork is the floor, not the default. Going straight to daywork can give up 20–40% of a valid entitlement.
Treating a §9 instruction as automatically payable. A §9 instruction is a directive. Payment requires a §14 variation determination. Three of fourteen misread files had this fault.
Not documenting constructive variations contemporaneously. No site diary, no photos, no separate cost records. The IC rejects the claim and the contractor has no evidence to appeal.
Confusing the Independent Certifier with the Contract Administrator post-2023 split. The CA administers the contract day-to-day. The IC determines variations and certifies payments. Submitting variation paperwork to the wrong party can waste weeks. Two of fourteen misread files had this fault.
The 2023 changes — IC and CA split
NZS 3910:2023 separated two roles that the 2013 version had combined under "the Engineer":
| Role | Function | Independence | |---|---|---| | Contract Administrator (CA) | Day-to-day administration — issues §9 instructions, manages programme, processes payment claims | Acts for the Principal — not independent | | Independent Certifier (IC) | Determines variations under §14, certifies payment values, determines time and quantum disputes | Independent of both parties — adjudicative |
Pre-2023, a Principal-appointed Engineer issued instructions and certified payments — sometimes a conflict, often unsaid. Post-2023, the CA is openly the Principal's representative, and a separate IC takes the adjudicative role. The split clarifies impartiality.
The practical consequence: §9 instructions come from the CA, but §14 variation determinations come from the IC. Contractors should address §14.2 notices to the IC, not the CA, with a copy to the CA.
Worked example — $20k VO becomes a $6k entitlement
A residential builder on a 2024-signed NZS 3910:2013 conversion to 2023 contract receives a CA §9 instruction in March 2026: "Strip the existing kitchen layer to allow earlier subfloor inspection access; replace once inspection is signed off."
The builder estimates the work — strip out, store, replace, lost programme — at NZ$20,000.
Path A (builder skips §14.5 (a) and (b), goes to daywork):
80 hrs labour × NZ$48/hr daywork (2023 contract rate) = NZ$3,840
12 hrs plant × NZ$95/hr daywork = NZ$1,140
Material reuse, no replacement material = $0
18% overhead and profit = NZ$896
Total: NZ$5,876 → builder loses ~NZ$14,000 of real cost
Path B (builder works the hierarchy):
§14.5 (a) — proposes NZ$18,500 agreed rate. Principal rejects.
§14.5 (b) — IC reviews. Contract rates apply for strip-out (NZ$8.50/m² existing kitchen × 24 m² = NZ$204) but not for replacement. Partial application.
§14.5 (c) — IC fair valuation for replacement labour at 2026 market rate (NZ$72/hr labour + plant). 48 hrs labour + 12 hrs plant. = NZ$3,456 + NZ$1,140 = NZ$4,596 + 18% O&P = NZ$5,423.
§14.5 (b) for strip-out = NZ$204 + 18% O&P = NZ$241.
Daywork residual for storage management 16 hrs = NZ$768 + 18% O&P = NZ$906.
Total: NZ$6,570 + the $1k+ that comes from arguing the IC's fair-valuation rate up to current 2026 NZS 3910 standard
In real practice, Path B with a well-prepared §14 file commonly lands between NZ$14,000 and NZ$18,000 because the IC's fair valuation under §14.5 (c) tends to align with current NZ market rates when properly evidenced. The path matters as much as the math.
What this doesn't tell you
A decision tree is not a contract review. This article doesn't tell you:
Whether your specific clause numbers map cleanly. Some 2023 contracts include special conditions that override §14 procedure — particularly the §14.2 notification window and the §14.5 hierarchy ordering. Read the special conditions.
The interaction with §10 EOT. A §14 variation may or may not trigger an EOT. The two are linked but separate. Missing the §10 notice is a different failure mode and is dealt with separately.
What the IC's actual decision will be on your specific facts. ICs vary in approach. A favourable IC determination on a 2024 file is not a precedent for a 2026 file.
The cost of mounting a §14 claim properly. A well-prepared §14 file with valuation hierarchy worked out by an independent expert costs NZ$2,500–NZ$8,000 depending on complexity. On a NZ$20,000 variation, that's a 12–40% cost-to-recovery ratio. Sometimes a lower-cost agreed rate at step (a) is the right business call even if it's a discount to fair valuation.
The risk of an Adjudication or arbitration if the IC decision is wrong. Under the Construction Contracts Act 2002, either party can take an IC decision to adjudication. The cost is NZ$8,000–NZ$25,000+ and the time is 20+ working days.
The Principal's side of the same machinery. A Principal who feels a §14 valuation is too high can also push back. The IC machinery is two-sided; it isn't a builder's tool.
What Trueworks would do. We don't determine variations — we review them and tell you where the IC is likely to land. Get our second opinion before lodging if the entitlement is over NZ$30,000.
FAQs
Q: Is the 20-working-day §14.2 notification window strict? A: Yes, in most contracts. The clock starts when the contractor becomes aware of the variation, not when the §9 instruction is issued. Missing the window can amount to a waiver of §14 entitlement. Some special conditions extend or modify; check the contract.
Q: Can I jump straight to §14.5 (c) fair valuation? A: No. The hierarchy is sequential. The IC will require evidence that you tried (a) agreed rate and that (b) contract rates do not apply before reaching (c). Skipping is a common ground for IC rejection or reduction.
Q: Who pays the IC's fees? A: Usually split per the contract — often 50/50 between Principal and Contractor, sometimes loser-pays. Check special conditions.
Q: Does a constructive variation need a §9 instruction first? A: No. A constructive variation arises from a Principal-side change or site condition without an instruction. The contractor must issue a §14.2 notice and rely on contemporaneous evidence. This is harder to prove but valid under NZS 3910:2023.
Q: Is the new Independent Certifier role mandatory? A: Under NZS 3910:2023 as published, yes — the IC and CA roles are separated. In contracts using the 2013 version (still permissible by special agreement), the combined Engineer role remains. Always check which version your contract incorporates.
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