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The caseworker is giving the applicant (your friend) a chance to review their application by submitting an application more suited to their circumstances before the first application (SET(LR)) is assessed (and rejected). This is called variation and that is how your friend can adjust their application with the Home Office.
Validation, variation and withdrawal of applications caseworker guidance wrote:(Page 18)
When the original and variation applications are made online, the applicant will have paid 2 fees.You must refund the fee for the first application.