Special guest speaker: Vince Padilla, Esq. Faculty, UCLA Extension. Gain viable insight and learn practical tips on how to take some of the pain out of government contract management. Watch the webinar here: http://www.bidsync.com/resources/webinar/2012-11-13-constructive-change-friend-or-foe/

1. CCoonnssttrruuccttiivvee CChhaannggee
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2. Guest Speaker: Vincent Padilla, Esq.
!! Arizona State Bar
!! BA, Law: University of Southern California
!! Boeing, Honeywell Counsel
!! Faculty Cal State Fullerton
!! UCLA Extension

3. AAggeennddaa
!! Changes
•! Buyer Directed vs. Constructive Change
!! Constructive Change Impacts
!! Best Practices to Control Constructive Change

4. CChhaannggeess
!! Contracting Officer directed Changes:
•! Change order issued by Contracting Officer
•! Contractor responds with a change proposal or notification of change
•! Parties negotiate a contract adjustment to price, schedule, etc.

5. CCoonnssttrruuccttiivvee CChhaannggeess
!! Any act or omission by Government or its representatives that impacts
Contractor’s performance
!! Begins with Contractor’s discovery of the change and notice to the
Contracting Officer of the change
•! Must show a part of the contract that was changed
•! Must show an act or omission by the Buyer that changes the contract
•! Must show an impact (higher cost, schedule impact, etc.)

6. Constructive Change Examples

7. Constructive Change Examples
!! Seller is designing a product according to contract
requirements. There are several potential technical solutions.
Buyer’s technical personnel disagree with Seller’s chosen
solution and direct that they use an alternate method.
Changing methods will affect both cost and schedule.

8. Constructive Change Examples
!! A construction company is responsible for excavating a site for
a building’s foundations. Buyer’s specification says that the
land is a sand/clay mixture. In fact, the land includes a large
layer of volcanic rock. This will impact the cost and time to
excavate.

9. Constructive Change Examples
!! The contract says that the Government will provide Seller
with on-base office space in order to perform the contract. On
the start date, Contractor’s personnel arrive to start work but
are told the space will be unavailable for another month.
Contractor will either incur costs with idle time or to transport
the team back and forth

10. IInn eeaacchh ccaassee,, BBuuyyeerr hhaass tthhee rriigghhtt
ttoo rreeqquueesstt aann eeqquuiittaabbllee
aaddjjuussttmmeenntt ffrroomm SSeelllleerr

11. CChhaannggeess:: PPrree--NNoottiifificcaattiioonn AAccttiioonnss

12. FFAARR 5522..224433--77 NNoottiiccee RReeqquuiirreemmeennttss
1.! Date, nature, and circumstances of the conduct regarded as a
change;
2.! Name, function and activity of each Government individual
and Contractor official or employee involved in or
knowledgeable about such conduct;
3.! The identification of any documents and the substance of
any oral communication involved in such conduct;

13. FFAARR 5522..224433--77 NNoottiiccee RReeqquuiirreemmeennttss
4.! The basis of acceleration of scheduled performance or delivery if this is the issue;
5.! What contractual elements are affected by the change:
I.! Contract lines items affected by the change;
II.! Labor and/or materials that have been added, deleted or wasted by the change;
III.! The delay, disruption and impact on the manner and sequence of previous and
continuing performance; and
IV.! The estimated adjustments to contract price, delivery schedule and other provisions
affected by the change
6.! Contractor’s estimate of a Government response deadline that will minimize cost, delay or
disruption of performance

14. CChhaannggeess:: PPoosstt--NNoottiifificcaattiioonn AAccttiioonnss

15. CCoonnssttrruuccttiivvee CChhaannggeess NNeeggaattiivveellyy
IImmppaacctt BBootthh GGoovveerrnnmmeenntt aanndd
CCoonnttrraaccttoorr

16. GGoovveerrnnmmeenntt
1.! May need to identify additional contract funding (May result in program de-scope
to remain within available funding)
2.! Suggests an inability of the Government to monitor actions of its personnel
3.! May demonstrate a Government failure to perform its contractual requirements
(late funding, deficient GFX)
4.! May demonstrate a lack of clarity in contract requirements
5.! Could result in dispute
6.! Damage to Government-Contractor working relationship

17. CCoonnttrraaccttoorr
!! Additional Government funding may not be available (May result in program de-
scope to remain within available funding)
!! Risk of cost allowability issues depending on where the costs for the change have
been charged
!! Suggests an inability to manage to the contract’s requirements
!! If Government disagrees that this is a constructive change, costs will be an overrun
!! Could result in a dispute, leading to legal costs, etc.
!! Damage to Government-Contractor working relationship

18. BBeesstt PPrraaccttiicceess TToo GGuuaarrdd AAggaaiinnsstt
CCoonnssttrruuccttiivvee CChhaannggee
1.! Avoiding unforeseen changes requires oversight by both parties

19. BBeesstt PPrraaccttiicceess TToo GGuuaarrdd AAggaaiinnsstt CCoonnssttrruuccttiivvee CChhaannggee
2.! Buyer should require that Seller has a robust change management process
o! This should include a change management board that manages the project’s
baselines:
•! Technical
•! Schedule
•! Cost
o! Contractor should make no changes (or incurs no costs) until the board
approves the changes
o! Ideally, Buyer should be advised of changes being considered at the change
management board or have non-voting participation

20. BBeesstt PPrraaccttiicceess TToo GGuuaarrdd AAggaaiinnsstt
CCoonnssttrruuccttiivvee CChhaannggee
3.! Contractor should segregate change costs or be prepared to
use company funds to avoid potential cost allowability issues

21. Government Cost Estimating &
Pricing Certificate
Government Contract
Management Certificate
Certificate in Information
Technology Management
Project Management
Certificate
UCLA Extension is a Project Management
Institute Registered Education Provider (R.E.P.)
Engineering & Technology
Supply Chain Management
www.uclaextension.edu

22. Q & A

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