“Requests for Equitable Adjustment – Essential in Government Contracting”
The following blog is the fourth in a series of special guest and ReliAscent partner blogs, contributed by Richard Busch of the Busch Law Firm, and Mike Anderson, of ReliAscent. This series covers important topics ranging from an introduction to government contracting, to requests for equitable adjustments, risk management, contract change orders, and scope creep. Additionally, our series will cover government financial assistance efforts, and how defense contractors--both small and large business (along with subcontractors)--can increase profits, improve their ability to strategically plan for the future and remain profitable.
By combining DCAA compliance and accounting expertise with defense contracting and FAR compliance legal representation and consultation, ReliAscent and Busch Law can help position contractors for financial success…
"Maintain the benefit of the bargain during performance through requests for equitable adjustment."
Government Contract Changes
There is no perfect contract. Changes to the contract performance baseline is a common occurrence. When contracting in the federal, state, or local government market place, the contractor must be prepared to effectively manage any changes to the negotiated performance baseline.
Most importantly, the Government Change clause provides a regulatory procedure to process an equitable adjustment due to a change to the work effort. A Request for Equitable Adjustment is an administrative procedure used by the contractor to avoid a conflict and maintain the benefit of the bargain originally negotiated between the parties in an administrative action.
What Makes Government Contracts Unique
The Federal Acquisition Regulation Changes clause gives broad powers to the government to adjust the contract performance baseline. Good contract administration is not only important but required in order to:
- Manage technical changes in a timely manner;
- Avoid any misunderstandings;
- Take mutually “agreed to” corrective actions, if necessary; and
- Negotiate an administrative resolution without a dispute.
In that regard, the parties may mutually agree to changes considered to be part of the original work effort. In addition, the Changes clause provides that the contractor may propose changes to the work to:
- Gain more efficient performance;
- Provide greater quality of the contract end product; and
- Demonstrate a collaborative approach with their customer to achieve mission success.
The Changes clause also provides for the Government to issue a “unilateral” administrative change under specific circumstances. It is important for the Contractor to recognize when and if the change must be bilateral and not unilateral.
Finally, this unique provision could allow the Government to order additional work within the general scope of the contract without conducting a full competition for the additional work.
Government Subcontractors
The Request for Equitable Adjustment from the prime contractor may include the cost of any changed work of the Subcontractor. This “ripple effect” from Subcontractor to Prime contractor to the Government must be effectively managed. A subcontractor Request for Equitable adjustment is a specialized process to recover compensation for additional work performed on the subcontract. These “Pass-Through” claims must be developed and administered in such a manner to effectively recovery within the complex regulatory process of the Federal Acquisition Regulation.
Government Contract Administration
A successful prime or government subcontractor will always administer their performance against the requirements of the original performance baseline. The Contractor must ensure any proposed change is within the general scope of the contract and properly documented. Accurate cost records are vital to the development of any increased costs requested. Most importantly, a Request for Equitable Adjustment is an administrative function which would allow recovery of consultant and attorney’s fees as an allowable cost.
This process is very unique to Federal Government contracts and many contractors do not understand how to process requests for Equitable Adjustments. This is where experience is a big factor in not only knowing when this is possible but how to do it and what to ask for when you do it. It is not uncommon for a government contractor to rely on a consulting expert in the field to help with these requests. A good consulting expert (like ReliAscent and The Busch Law Firm) will not only know how to process this but when to process it and how to negotiate this to achieve the optimum result for the contractor.
- Richard Busch
Managing Partner, Busch Law Firm LLC