Contract variations

Over the term of a contract, changing circumstances may affect DCJ, service providers and our clients. To ensure our human services contracts are delivering the outcomes expected, variations may be required from time to time.

This information is for service providers contracted by us, about contract variations, how to seek consent for a contract variation and how DCJ manages them.

What is a contract variation?

A contract variation changes the obligations for either or both parties under an existing contract.

Variations include (but aren’t limited to) changes to scope, value, term, intellectual property rights, liability, and termination rights.

Variations to a contract can be made:

• at the contract level, affecting one service provider.
• at the program level, affecting all service providers contracted to deliver the program services.

There are a number of human services contracts with program specific information and clauses about variations.

Changes can be made to the Agreement for Funding of Services’ Schedule (PDF, 201.8 KB) but not to the Standard Terms.

When is a contract variation required?

Some changes are more significant than others and the need for a contract variation depends on the terms of the relevant contract.  While some changes may not need a contract variation, the relevant clause may provide that the proposed change needs to be notified and approved by the relevant specified party or that some other condition applies.

A variation is required if what’s proposed changes the obligations for either or both parties under the contract. In the first instance, discuss the proposal with your DCJ contract manager who will inform you if a contract variation is required.

Common variations made to our human services contracts include:

• extending the contract term when the contract doesn’t include an extension option
• changing the contract volumes or outputs
• increasing or decreasing funding
• adding responsibilities or deliverables, to enhance service delivery
• changing the geographic coverage of services
• changing or replacing a service type within a program activity
• changing the target cohort
• changing contract milestones
• changing reporting requirements
• correcting a significant error (if it alters the meaning in the contract).

Where there are existing subcontracting arrangements in place, these arrangements can also be extended (if required) as part of the variation. However, for any new subcontracting arrangements you will need to follow the usual process and submit an application form to request consent from DCJ for the new subcontract arrangement.

When is a contract variation not required?

The following examples aren’t considered contract variations, as they don’t change the obligations under the contract.

• A service provider changes its trading name, but the Australian Business Number (ABN) listed in the contract remains the same.
• A service provider changes its business address.
• A service provider changes its bank details.
• Correcting a minor error that doesn’t alter the meaning in the contract; for example, an address is misspelt but still clearly identifies the location.
• Change of control including mergers, acquisitions and amalgamations.
  
• New sub-contracting arrangements (these are dealt with under the subcontracting process).
• Where you want to exercise an option within an existing contract provision, such as:
  • Where a contract has an existing ‘contract amendment clause’, changes can be made to the contract without a variation.
  • Depending on your contract, exercising an option will not require signatories from a service provider. DCJ already has the right to exercise the option because it was agreed in the contract. Regardless of the contract provisions, discussion of the contract details with the service provider is required before DCJ exercises the option, as well as written notice provided on the decision to exercise an option.

Who can propose a contract variation?

Contract variations can be initiated by either party to the contract and must be mutually agreed by both parties to the contract.

How does it work?

If DCJ proposes a variation, we will liaise with you to ensure you understand the implications and support the change proposed.

For a service provider to propose a variation, you must contact your DCJ contract manager in the first instance to discuss the proposed change.

Contract variations proposed by you must be made in writing to your contract manager, including details of the proposal.

DCJ will consider and assess the proposal to determine if the proposed change will affect service delivery or program outcomes, or if there are any associated issues and or risks to you, DCJ or other stakeholders.

Variations to human services contracts are made in the form of a letter of variation rather than by marking up changes in the contract document. DCJ will draft a letter of variation to set out the details of the variation and issue the letter to you. Your contract manager will advise if the letter of variation is to be issued via the Payment and Contracts System (PACS) Portal or in another way.

What do service providers need to do?

You must review and approve the letter of variation. It is important you consider the impact the proposed change will have on the service delivery, outcomes, contract value, and other changes that may result from the proposed change.

If you disagree or are concerned with the letter of variation, contact your contract manager to discuss and/or negotiate to ensure agreement can be reached.

Once agreed duly authorised representatives from your organisation will need to sign the letter of variation which then forms part of the contract. A copy of the signed letter of variation will be provided to you or made visible in the PACS Portal along with your existing contract document.