Contracts are predictions. Intended to govern the future relationship between parties, the reality is that contracts run into unanticipated conditions and events, necessitating changes. The more complicated the purpose of the contract, the more likely it is the parties will have to deal with the unexpected.
In contracts with the U.S. government, changes are addressed by “Changes” clauses. Changes clauses provide a procedure by which changes to a contract are identified and the contract modified accordingly. Changes may be actual or constructive. An actual change occurs when a contracting officer issues a written order pursuant to a Changes clause. A constructive change arises when a contractor is forced to change its performance of a contract without receiving a written change order.
Changes clauses require contractors seeking compensation for changes to preserve their rights by giving notice to the government. This article addresses how a contractor is to provide notice, how the notice requirements are enforced, and the resulting lessons for contractors.
Notice Required Under Changes Clauses
Changes clauses are usually incorporated into government contracts from the Federal Acquisition Regulation (FAR). The FAR contains six Changes clauses. The first three of these clauses, titled, Changes—Fixed-Price, Changes—Cost-Reimbursement, and Changes—Time-and-Materials or Labor-Hours, are to be incorporated into fixed-price supply contracts, cost-reimbursement contracts, and time-and-materials or labor-hours contracts, respectively.
These clauses provide that the contracting officer may, at any time and by written order, make changes within the general scope of the contract. If such a change order causes an increase in the contractor’s cost of performance or the time required for performance, the contractor may pursue an equitable adjustment to the contract. Yet, to preserve its right to seek such an adjustment, the contractor must first provide proper notice to the government.
The notice provisions in each of these Changes clauses are nearly identical. They state that after a change to the contract is ordered by the contracting officer, the contractor has 30 days from the date of receipt of the written order to assert its right to an equitable adjustment. However, if the contracting officer decides that the facts justify it, the contracting officer may act upon a proposal submitted after the 30 days have run, so long as it is submitted before final payment of the contract.
The fourth Changes clause, titled simply, Changes, is to be inserted in fixed-price contracts for demolition and construction. This clause has separate notice procedures for actual and constructive changes. The actual change provision is similar to the first three Changes clauses. The contracting officer may, at any time and by written order, make changes within the general scope of the contract.
View the entire article in PDF format here.