FAR Subpart 43.1 - General: Analysis & Summary

Overview

FAR Subpart 43.1 establishes the foundational policies and procedures for modifying government contracts, emphasizing that only authorized Contracting Officers may legally bind the government. It defines the types of modifications—bilateral and unilateral—and sets strict requirements for pricing, funding certification, and the notification of changes to prevent unauthorized "constructive changes."

Key Rules

• Effective Dates: The effective date for unilateral modifications (change orders, administrative changes) is the issue date. For bilateral supplemental agreements, it is the date agreed upon by both parties.
• Pricing Requirements: Contract modifications should be priced before execution whenever possible. If a significant cost increase is expected and time is limited, a "ceiling price" must be negotiated before performance begins.
• Types of Modifications:
  • Bilateral (Supplemental Agreements): Requires signatures from both the Contractor and the Contracting Officer; used for negotiated equitable adjustments and definitizing letter contracts.
  • Unilateral: Signed only by the Contracting Officer; used for administrative changes (e.g., changing a paying office), issuing change orders, exercising options, or issuing termination notices.
• Funds Availability: A Contracting Officer cannot execute a modification increasing funds without first obtaining a certification of fund availability, unless specific "Limitation of Cost/Funds" clauses apply.
• Institutional Restrictions: Under 10 U.S.C. 983, funds cannot be provided to institutions of higher education that prohibit Senior ROTC units or military recruiting (excluding commercial items or acquisitions below the simplified acquisition threshold).

Responsibilities

• Contracting Officers (CO):
  • Solely responsible for executing contract modifications.
  • Must ensure modifications are within the scope of their authority.
  • Must obtain funding certification before increasing contract value.
  • Responsible for negotiating prices or ceiling prices before execution.
• Non-Contracting Personnel (Program Managers, CORs, Engineers):
  • Prohibited from executing modifications or acting in a way that leads a contractor to believe they have the authority to bind the government.
  • Prohibited from directing or encouraging contractors to perform work that requires a formal modification.
• Contractors:
  • Must notify the government in writing "as soon as possible" if they believe a change has been directed by someone other than the CO (to avoid "constructive changes").
  • Responsible for complying with the notification requirements of clause 52.243-7 if included in the contract.

Practical Implications

• Preventing Constructive Changes: This subpart acts as a safeguard against "constructive changes," where a contractor performs extra work based on informal direction from technical personnel. Contractors who perform such work without a written modification from the CO risk non-payment.
• Administrative Efficiency: The use of unilateral modifications allows the government to make non-substantive updates (like changing an accounting code) without the administrative burden of seeking a bilateral signature.
• Financial Risk Management: The requirement for a "ceiling price" on unpriced modifications protects the government from "blank check" scenarios where costs could spiral out of control before a final price is negotiated.
• Audit Trail: By standardizing "Effective Dates," the FAR ensures a clear chronological record for performance periods, prompt payment interest, and claim windows.