Contract Changes

During performance of a government contract, changes may be required.  A contract change is any addition, subtraction, or modification of the work required under a government contract.
Categories

1. Administrative. These unilateral changes are made in writing by the contracting officer, and do not affect the substantive rights of the parties. FAR 43.101. These include:

a. Changes to appropriations data (e.g., to update for new fiscal years);

b. Changing points of contact or telephone numbers.

2. Substantive. These changes alter the terms and conditions of the contracting ways that affect the substantive rights of the parties by adding, deleting, or changing the work required and/or compensation authorized under the contract. These may be made unilaterally (for changes authorized by a changes clause) or bilaterally (with agreement between the two parties).

Methods.

1. Unilateral. The contracting officer may make certain changes to the contract without contractor agreement or negotiation prior to the change. These changes include those of an administrative nature or those authorized by the changes clause in that contract, and are executed using a change order.

a. Changes clauses provide the contracting officer with authority to make certain unilateral contract changes. FAR 43.201. Some main changes clauses include:

(1) Fixed-Price Supply Contracts – FAR 52.243-1. This clause authorizes changes to:

(a) Drawings, designs, or specifications when the supplies to be furnished are to be specially manufactured for the Government in accordance with the drawings, designs, or specifications.

(b) Method of shipment or packing.

(c) Place of delivery.

(2) Services – FAR 52.243-1 ALTERNATE 1. This clause authorizes changes in

(a) Description of services to be performed.

(b) Time of performance (i.e., hours of the day, days of the week, etc.).

(c) Place of performance of the services.

(3) Construction – FAR 52.243-4. This clause authorizes changes:

(a) In the specifications (including drawings and designs);

(b) In the method or manner of performance of the work;

(c) In the Government-furnished property or services; or

(d) Directing acceleration in the performance of the work.

b. Other Clauses Authorizing Unilateral Changes.

(1) Suspension of Work. The contracting officer may unilaterally suspend work for the convenience of the government. However, if the delay is unreasonable, the contractor is entitled to an adjustment of the contract price, through a contract modification, to account for added expense. Note that suspensions of work may entitle the contractor to recover additional costs, but not profit (since the work has not changed). FAR 52.242-14

(2) Property Clause. This clause gives the contracting officer broad power to unilaterally increase, decrease, substitute, or even withdraw government-furnished property. FAR 52.245-1

(3) Options Clause. These clauses give the contracting officer the ability to unilaterally extend the contract, or order additional supplies/services. 52.217-6 thru 52.217-9

(4) Terminations. The contracting officer can unilaterally terminate a contract for convenience or default FAR 49.5.

2. Bilateral. As with any contract, the parties may agree to change the terms and conditions of the original contract. In such cases, the parties have actually created a supplemental agreement.2 In government contracting, the parties can only agree to make changes within the scope of the original contract.

a. Differing Site Conditions. Contractors must “promptly notify the Contracting Officer, in writing, of subsurface or latent physical conditions differing materially from those indicated in this contract or unknown unusual physical conditions at the site before proceeding with the work.” The contracting officer must then pay an equitable adjustment to account for the conditions, though only when the contractor properly proposes the equitable adjustment. FAR 52.236-2; 52.243-5

b. Other In-Scope Changes. The parties may agree to a change that falls within the scope of the original contract.

3. Form and Procedure.

a. Required Form. The FAR prescribes the use of Standard Form (SF) 30, “Amendment of Solicitation/Modification of Contract,” for all contract modifications, both unilateral and bilateral. (FAR 43.301)

b. Timing Changes may be made at any time prior to final payment on the contract. Final Payment is the last payment due under the contract, and the contractor must take the payment with the understanding that no more payments are due. See Design & Prod., Inc. v. United States, 18 Cl. Ct. 168 (1989); Gulf & Western Indus., Inc. v. United States, 6 Cl. Ct. 742 (1984).

c. Definitization. Any contract change likely requires an increase in the cost of performance. This amount must either be negotiated ahead of time, or a maximum allowable cost identified, unless impractical. FAR 43.102(b)

d. Fiscal Considerations. Proper appropriated funds must be available to fund any contract modification. Otherwise, availability of funds or price limitation clauses must be included. (FAR 43.105(a)).

e. Government Benefit. There must be some benefit to the government in order to justify a contract change. Northrop Grumman Computing Systems, Inc., GSBCA No. 16367, 2006-2 BCA ¶ 33,324.