Overview
FAR 43.204 outlines the administrative procedures for processing, documenting, and finalizing contract change orders. It emphasizes the timely "definitization" of unpriced changes and the use of formal release language to ensure equitable adjustments are complete and final.
Key Rules
- Documentation Requirements: If a change order is not forward-priced, it requires two documents: the initial change order and a subsequent supplemental agreement. Administrative or unilateral changes (like options) generally require only one document.
- Definitization Timeline: Contracting officers (COs) must negotiate equitable adjustments in the shortest practicable time. For construction contracts, agencies must specifically track the time elapsed from the receipt of an adequate proposal to the execution of the definitization modification.
- Funding and Cost Analysis: The CO must conduct a cost analysis and, crucially, must secure additional funds before making any formal adjustment to the contract price.
- Administrative Concurrence: Administrative Contracting Officers (ACOs) acting under delegated authority must obtain the primary CO’s concurrence before modifying contract delivery schedules.
- Finality and Releases: To prevent future disputes or "claims "ripple effects," supplemental agreements should include a specific "Contractor’s Statement of Release," stating that the adjustment constitutes full and final compensation for the change.
- Field Pricing Support: When requesting field pricing reviews, COs must provide a detailed chronology of contract events (award dates, proposal dates, actual vs. scheduled performance) to assist auditors in analyzing the request.
Practical Implications
- Avoidance of "UCA" Backlogs: The requirement for suspense systems and prompt negotiation prevents the accumulation of unpriced change orders, which can otherwise create significant financial risk and performance uncertainty for both parties.
- Sign-off Risks for Contractors: Contractors must be extremely diligent when signing supplemental agreements; once the "Statement of Release" is executed, it is difficult to later seek additional funds for "impact" costs or delays that were overlooked during initial negotiations.
- Fiscal Discipline: The rule requiring funds to be secured prior to the adjustment prevents "anti-deficiency" violations and ensures that the government does not commit to obligations it cannot pay.