Overview
FAR Subpart 43.2 prescribes the policies and procedures for preparing and processing change orders under the "Changes" clause of government contracts. It establishes the Government's authority to make unilateral modifications within the general scope of a contract while providing a mechanism for "equitable adjustments" to price, delivery, or other terms.
Key Rules
- Unilateral Authority: The Government may issue unilateral change orders within the general scope of the contract using Standard Form 30 (SF 30).
- Duty to Proceed: Contractors are generally required to continue performance of the contract as changed; however, in cost-reimbursement or incrementally funded contracts, they are not required to exceed the limits set by "Limitation of Cost" or "Limitation of Funds" clauses.
- Equitable Adjustments: If a change order causes an increase or decrease in the cost of or time required for performance, the Contracting Officer must negotiate an equitable adjustment (definitization) in the shortest practicable time.
- Cost Segregation: For complex projects, contractors may be required to segregate costs related to the change (nonrecurring, added distinct work, and recurring costs) to ensure accurate pricing of the adjustment.
- Funding Requirement: Contracting officers must secure additional funds before making any adjustment to the contract price resulting from a change order.
- Release of Claims: To ensure finality, supplemental agreements for equitable adjustments should include a "Statement of Release," where the contractor waives future claims related to the specific change.
Responsibilities
- Contracting Officer (CO):
- Responsible for issuing change orders and negotiating equitable adjustments.
- Must ensure cost analyses are performed and funds are secured.
- Must maintain a "suspense system" to track and promptly definitize unpriced change orders.
- Must advise contractors on accounting requirements for changes (Clause 52.243-6).
- Administrative Contracting Officer (ACO):
- Issues change orders only when specifically delegated by the CO.
- Must obtain CO concurrence before adjusting contract delivery schedules.
- Contractor:
- Must continue performance despite the change (subject to funding limits).
- Must maintain accounting systems capable of segregating change-related costs if required.
- Must submit timely and adequate proposals for definitization of change orders.
Practical Implications
- Scope Protection: The "within the general scope" requirement is critical; changes that fall outside the original scope (Cardinal Changes) cannot be handled via a simple change order and may require a new procurement or a Justification and Approval (J&A).
- Financial Risk: Contractors face significant financial risk when performing unpriced change orders. If the definitization process is delayed, the contractor may incur substantial costs before the final price is agreed upon.
- Administrative Burden: For construction and high-tech R&D, the requirement to track and record "definitization time" means agencies are under pressure to resolve equitable adjustments quickly to meet performance metrics.
- Documentation is Paramount: Because the CO must include a Statement of Release, contractors must be extremely careful to ensure all "hidden" costs (such as delay or disruption impacts) are included in their initial proposal for adjustment, as they will likely be barred from claiming them later.