The £85,000 variation and the email that may have authorised it

On the face of the contract, the claim is weak.

1. Foreseeability. API v2 was published three months before award. Under the contract the supplier carries the cost of complying with published, foreseeable third-party interface changes. That clause exists precisely for this scenario, and it bites.
2. 'Industry standards' cuts both ways. The supplier will argue that v2 was the industry standard at the time of performance and that working to v1 was never compliant. That argument supports our position on cost (the supplier should have priced for it) but supports their position on obligation (they must deliver v2 regardless). Useful: we can insist on delivery to v2 without conceding payment.
3. No written sponsor instruction. The variation clause is clear, and the technical lead is not the sponsor.

But the email is a real problem.

• 'You'll need to move to v2 at some point - please crack on' is an instruction to proceed, in writing, sent by someone the supplier reasonably believed to be acting for the employer. It is not a valid variation under the clause, but it may be argued as an instruction on which the supplier reasonably relied - a waiver or estoppel argument.
• It is also evidence that we directed the work rather than the supplier absorbing it, which weakens the foreseeability defence.
• The 'at some point' wording is our best counter: it is vague and does not authorise immediate additional expenditure. But litigation over the meaning of 'at some point' would cost more than £85,000.

Realistic assessment: maybe 60–70% likely we would win a full dispute on the documents. That is not a strong enough position to take a hard line, because the downside is not just £85,000 - it is the cost of delay plus a damaged relationship with the only supplier who can deliver the interface.

Immediate action: issue a formal written statement of the current position, signed by the sponsor, restating the scope, the version being delivered and the fact that the week 6 email was not a variation instruction. Do it this week, before the record drifts further.

Cost of the delay if we dispute and the supplier stops or slows

Item	Calculation	Value
Extended facilities and contractors	5 × £18,000	£90,000
Deferred benefit	£250,000 / 52 × 5	≈ £24,000
Management time and relationship damage	not quantified	-
Total cost of five weeks' delay		≈ £114,000

Cost of paying

£85,000, immediate and certain, plus the precedent.

So on pure economics, paying £85,000 to avoid £114,000 of delay looks right - and that is the trap. Three things break the comparison:

1. Payment may not buy the date. The supplier's five-week estimate is the same supplier's estimate that missed the v2 issue at bid stage. We could pay £85,000 and still be late, having lost both the money and the leverage.
2. Precedent. This is a single supplier on a long programme. Paying an invalid claim once establishes a norm, and every future interface change becomes a priced event.
3. It rewards a claim we believe is contractually weak. £114,000 is the cost of the worst case, not the expected case.

Recommendation - negotiate, do not pay in full and do not refuse.

• Target a fixed £45,000–£50,000 settlement, without admission of liability, in exchange for a package that is worth more than the money:
  • a firm delivery date with liquidated damages for late completion;
  • a full and final waiver of further claims arising from v2;
  • a written confirmation that the week 6 email was not an instruction under the contract;
  • the supplier absorbing any further v2.x changes.
• Get sponsor approval - the settlement with the date change almost certainly exceeds the PM's delegated limit.
• Record as a formal contract amendment through change control, not a letter.

What would change the recommendation: if the regulatory or business consequence of five weeks is material beyond the £114,000 (a hard external date, a lost trading window, a penalty regime starting), then certainty dominates and £85,000 with firm dates and LDs attached becomes the right buy. Establish whether such a date exists before the negotiation - if it does not, we have time and should use it.

Three failures are visible, and all three recur on every contract unless the system changes.

1. Specification referenced an uncontrolled standard

'In line with industry standards' is unenforceable without a version and a date.

• Every external interface reference in future statements of work must cite a specific version of a specific standard, dated, with a defined route for handling later versions (who bears the cost, by when, subject to what notice).
• Naming an industry standard without a version guarantees exactly this dispute.

2. Communications with the supplier were uncontrolled

• The technical lead had no delegated authority and did not know it. Publish a communication protocol in the contract: all instructions and clarifications flow through the project manager in writing, and anything else is of no contractual effect.
• Brief the internal technical team - in writing - on the authority limit and on why 'please crack on' costs money.
• Add a standing agenda item at the supplier progress meeting: any change to scope, version or standard is logged and routed, not agreed verbally.

3. The claim was managed as a surprise at week 12

• The v2 change was visible in week 6. An early-warning register would have surfaced the supplier's silence about it as a risk, not a claim.
• Require the supplier to report, monthly, any matter they consider likely to result in a claim - commercial early warning is standard practice on fixed-price contracts and costs nothing to ask for.

4. Delegated authority

• Restate, in the contract and internally, who may vary, up to what value, and what happens to instructions outside that limit (they are of no effect and must be ratified in writing by the sponsor).
• Check whether the technical lead's email can be ratified at all, or whether it is best treated as a course of dealing to be closed down formally.

5. Close the loop commercially

• Whatever is agreed, record it as a signed contract amendment, update the cost baseline and the benefits case for the five weeks, and reflect the settlement in the forecast before the next monthly report. A settlement that is agreed but not baselined will reappear as an unexplained variance.