FEDCON Summit

1. North Carolina Military Business Center
2012 FEDCON SUMMIT
Post Award Issues:
Change Orders
11 October 2012
Paulanne Page
Military Construction Specialist

2. Agenda
• Contract Change Order Clauses
• Types of Changes Orders
• Change Order Administration Needs
• Brief Info on Claims
• Questions

3. Change Order Clauses
FAR 52.243 -The “Changes Clause”
• Enables the government to make changes to the contract during
performance:
• (a) The Contracting Officer may at any time, by written order, and without
notice, make changes within the general scope of the contract in any one
or more of the following:
• (1) Drawings, designs, or specifications
• (2) Method of shipment or packing
• (3) Place of delivery
Virtually every contract contains provisions that address what can be
changed, how it can be changed, and the required process for the changes.

4. Change Order Clauses
FAR 52.243 - The “Changes Clauses”
• The Construction Contract Changes Clause at FAR 52.243-4 applies only to
construction contracts and states that only costs incurred within 20 days
from the time that the contractor gives notice are recoverable.
• The Notification of Changes Clause at FAR 52.243-7 requires that the
contracting officer be notified of a constructive change promptly, usually
within 30 days.

5. Change Order Administration
• Impact to Schedules
• Contract Administrative Deliverables
– Reports (Progress, Quality, Testing)
– Forms
• Change Order Billing Deliverables
– Schedule of Pricing/Values
– Invoices
– Certified Payroll (Davis Bacon and Service Act)

6. Changes to the Contract
Types of Contract Changes:
• Written Changes
- Client Request
• Constructive Changes
- Identified Statement of Work change in
relationship to contract document requirements.

7. Written Change Orders
Determine If the Work Is Properly Ordered under the
Contract or If the Work Is a Change.
• Determine whether the work is within the scope of the contract.
• “Within the scope” determined by:
– Nature of the work
– Cost of the work
– Degree of work disruption
• If not, then the work is a change, and you must put the
Contracting Officer on notice that you consider it to be a
change and intend to seek an equitable adjustment

8. Written Change Orders
Confirm the Order Is in WRITING
• Change orders from the Government must be in writing to
be effective.
• If the Government does not put the order in writing, YOU
should send a confirming letter.

9. Written Change Orders
Clarify Any Ambiguities & Confirm Any Missing Details.
• Contractors have a duty to inquire - contractors do not get the
“benefit of the doubt”.
• Make sure any clarifications are put in writing - if Government does
not put it in writing, send a confirming letter.
• Do not sign off on the change or submit a price until all issues are
resolved - if you do, you’ve waived any arguments you might have.
• Additional reason for clarifying order – can’t correctly price work
without full understanding of the requirements.

10. Written Change Orders
Entitled to Recover As a Result of the Change.
• The amount of the adjustment is almost always the cost impact to
the contractor.
• Contractor has the burden of proving the cost impact.
- Estimates – must be supported by detailed, substantiating data;
vague estimates without any factual support are not sufficient.
- Actual cost data (if work already performed).
• Allowable overhead and reasonable profit can also be recovered.
• Many construction contracts include contractual limitations
on the overhead and profit that can be recovered on an
equitable adjustment.

11. Written Change Orders
Consider Your Subcontractors
• If a change affects a subcontractor, you are expected to negotiate
an equitable adjustment with your sub and include that amount in
your proposal for an equitable adjustment to the Government.
Note: be sure your subcontract allows you to make a
deduction in your subcontractor’s price if a Government
change results in a reduction of the subcontractor’s work!

12. Written Change Orders
Submit a Request for Equitable Adjustment
• Right to adjustment must be asserted within 30 days of the
contractor’s receipt of the change order – this does not
necessarily require the submission of a fully-documented and
finalized request during this time period.
• Although the 30-day notice requirement is often not strictly
enforced, it is always better to submit timely notice, even if it
is relatively vague and supplemented later.
• All claims must be submitted before final payment is made or
they are waived.

13. Written Change Orders
Submit a Request for Equitable Adjustment
• Right to adjustment must be asserted within 30 days of the
contractor’s receipt of the request for change – this does not
necessarily require the submission of a fully-documented and
finalized request during this time period.
• Although the 30-day notice requirement is often not strictly
enforced, it is always better to submit timely notice, even if it
is relatively vague and supplemented later.
• All claims must be submitted before final payment is made or
they are waived.

14. Constructive Change Orders
Constructive Changes
• Definition: when the contract work is changed, but the
procedures of the Changes clause have not been followed.
• Typically, you think it is a change, but the Government does
not.

15. Constructive Change Orders
Constructive Changes (Examples)
• Disagreements between Government and contractor
over interpretations of contract requirements.
• Acceleration.
• Defective specifications.
• Failure of Government to cooperate during performance
– Overzealous inspections
– Failure to provide assistance when requested

16. Constructive Change Orders
Constructive Changes
• Same authority issues as written change orders
- Only the CO can direct a contractor to do work and bind the
Government to pay for it.
- Inspectors, Quality Assurance do not have authority to direct a
contractor to do additional work.
Make sure your employees are aware of this, since they will be the ones getting
directives from the Government on the job.

17. Constructive Change Orders
Constructive Changes
• Instruct employees to inform Project Manager of all work
requests by Government.
• Bring all directives to the attention of the CO. In writing.
• Where a constructive change results from an oral order, ask
the CO to put it in writing for you

18. Constructive Change Orders
Constructive Changes
• If the CO does notput it in writing, The contractor is required
to confirm the order in writing to the CO.
– Describe the work that has been requested, who made
request and when it was requested.
– State that you consider the work to be a constructive change
to the contract .
– State that you will perform the work but that you reserve the
right to seek an equitable adjustment to the contract.

19. Constructive Change Orders
Constructive Changes
• The 30-day notice requirement that applies to written
change orders applies to claims for constructive changes as
well, so DO NOT WAIT to raise these issues.
• For construction contracts, only costs incurred no more
than 20 days prior to notice to the Government can be
recovered (Excludes constructive changes based on
defective specifications).

20. The Claims Process
Elements of a Formal Claim
A claim must contain: (1) a written demand (2) seeking as a
matter of right (3) the payment of money in a sum certain
• “Sum certain” – “more than $50,000;” “about $50,000”
are NOT claims for a sum certain
• The amount claimed can be supplemented or
additional claims can be submitted later

21. The Claims Process
Elements of a Formal Claim
Must contain sufficient detail to allow the CO to give meaningful
consideration.
Must provide adequate supporting documentation.
Must request a Contracting Officer decision.
“Let’s meet to discuss” is not a request for a CO decision and thus is not a claim.

22. The Claims Process
Elements of a Formal Claim
Must be submitted to the CO.
If claim is for over $100k, must be “certified”.
• “I certify that the claim is made in good faith, that the supporting data are
accurate and complete to the best of my knowledge and belief, that the
amount requested accurately reflects the contract adjustment for which
the contractor believes the government is liable, and that I am duly
authorized to certify the claim on behalf of the contractor”.
Must be submitted within 6 years of accrual of claim and before
final payment under contract.

23. The Claims Process
The Contracting Officer’s Final Decision
• Claims under $100k: within 60 days of receipt of claim, CO
must issue final decision.
• Claims over $100k: within 60 days of receipt of claim, CO
must: (1) issue final decision or (2) notify the contractor
when a decision will be issued.
• The time for issuing a decision must be a date certain.
• The time must be “reasonable” – depends on the
complexity of the claim.

24. The Claims Process
The Contracting Officer’s Final Decision
• If the CO does not timely issue a final decision, the contractor
can treat the failure to issue a decision as a “deemed denial”
and appeal.
• If claim is less than $100k, you can treat lack of a final
decision as a “deemed denial” after the 60 days are up.
• If claim is more than $100k, you must wait a
“reasonable” time for the CO to issue the decision
(unless the CO gives no date certain for a decision)
• The final decision must be in writing and must state the
reasons for the decision.

25. The Claims Process
Litigating Claims
• After an adverse CO final decision, the decision can be
appealed to:
• Agency Board of Contract Appeals
– Armed Services Board of Contract Appeals or Civilian Board of
Contract Appeals.
– Must bring suit within 90 days of date of receipt of final
decision.
– Written notice of appeal delivered to the Board and the CO.
• OR Court of Federal Claims (must pick one or the other)
– Must bring suit within 1 year of date of receipt of final
decision.

26. The Claims Process
Litigating Claims
• Agency Board of Contract Appeals
• Expedited procedures for claims less than $50k (decision within 120
days); accelerated procedures for claims less than $100k (decision within
180 days)
• Discovery and trial-type hearings
• Trial held at location convenient to the parties
• Court of Federal Claims
• Much more formal procedures and thus generally more expensive
• Sometimes not as much deference given to the agencies
• There are differences in the decisions from the two forums –
this could be the determining factor

27. The Claims Process
What About Subcontractors?
• Subcontractors are not in “privity” with the Government and
therefore cannot pursue claims on their own
• Most subcontractor claims must be “sponsored” by the prime
contractor
• The prime can bring a claim on the sub’s behalf; or
• The prime can permit the sub to bring a claim in the prime’s name
* Note it is a good idea to address how subcontractor claims will be
handled in your subcontract agreement and (if you are the sub)
obligate the prime to sponsor your claims

28. The Claims Process
What About Subcontractors?
• A prime can sponsor a sub’s claim only if: (1) the prime has
reimbursed the sub for the sub’s damages, or (2) the prime
remains liable for such damages in the future
• If a subcontract contains a strong limitation of liability
clause such that the prime is not liable for the damages
at issue, the sub’s claim cannot be brought
• BUT, a subcontract can provide that the prime’s liability
to the sub is conditioned on the prime’s recovery from
the Government

29. Questions
?
Questions, Comments and Amusing Ponderences