As a law firm, Malyszek & Malyszek’s primary goal is ensuring that our clients avoid costly disputes that may end up in litigation. The first step is to ensure that your company is in compliance with all the requirements of the Federal government.
Change Orders are the least preferred method for changing contracts. In agreement with FAR 43.102(b), contract modifications should be priced before their execution if this can be done without unpleasantly affecting the interest of the Government. At least a ceiling price should be negotiated if a substantial cost increase could result from a contract modification and time doesn’t permit negotiation of a price. In cases where pre-pricing of a change is impractical, individual change orders may be delivered as they effect immediate change to the contract.
A change order is a written order signed by the Contracting Officer, directing the contractor to make a change that the Changes Clause permits the contracting officer to order without the contractor’s consent. The contractor must continue enactment of the contract as changed. However, in the case of an incrementally-funded cost refund contracts, the contractor is only bound to continue performance under the constraints of funding in agreement with the Limitations of Funds Clause.
A Request for Equitable Adjustment (REA) allows a contractor to recover costs associated with any suspensions or terminations. Use of a REA is guided by a number of FAR clauses such as FAR 52.42-14, FAR 52.236-2, 52.249-2, FAR 52.243-1, and 52.212-13.
REA’s require that costs be reasonable and can include profit, overhead, and consulting fees. Claims don’t allow for any consulting fees or preparation costs and do not allow any legal expenses to be recovered. (See FAR 31.205-47(f)(1)). REA is like a claim, but is regarded as less combative than a claim.
The standard changes clause (FAR 52.243-1) allows a federal agency to modify the terms of the contract under certain circumstances. These changes may be formal changes or they can be constructive changes, which are informal (usually verbal) adaptations. For both types of changes the contractor can submit a request for equitable adjustment (REA) or change order proposal, and recover the cost of the change, plus a profit.
Contact Malyszek & Malyszek now for more information about change orders.