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Government Contract Changes and Modifications Webinar
Whitcomb, Selinsky, PC Staff : April 06, 2021
Whitcomb, Selinsky Law PC, presented small business strategies for avoiding litigation by effectively navigating contract changes and changes. The webinar emphasizes the importance of documenting changes and resolving them with the contracting officer to prevent disputes. The webinar provides a comprehensive overview and discuss three types of contract changes derived from the Federal Acquisition Regulation: directed, constructive, and cardinal. The webinar also explains the distinction between unilateral and bilateral changes and recommends that contractors pursue bilateral changes. The webinar stresses the significance of thorough documentation and negotiation when addressing a request for equitable change. The webinar also addresses subcontractors' rights and remedies against prime contractors, and recommends that small business subcontractors review contract terms and seek compensation through proper channels.
In the informative and succinct explanation, the webinar digs into the intricacies of unilateral and bilateral changes in government contracts. The webinar clarifies that unilateral changes, while generally uncontroversial, can be allowed by contracting officers. Bilateral changes require mutual agreement between the involved parties.
The webinar then delves into the changes clause, which holds relevance across various types of federal government contracts, especially for a small business. The webinar highlights the specific parts that fall under this clause, including drawings, designs, specifications, packaging, delivery requirements, and the interpretation of services. Recognizing the applicable change clause in a contract is imperative, as emphasized by the webinar.
The webinar recommends that federal government contractors actively communicate and pursue bilateral changes when faced with changes. In response to a query from an electrical subcontractor named Don, the webinar explains that the changes clause in the prime contract generally extends to subcontractors, affording them the same rights and remedies as the prime contractor.
When addressing the changes clause for fixed price contracts (52.243-1), the webinar points out that if this clause is absent from a prime government contract, the courts will invoke the Christian doctrine and incorporate it into the contract. This clause grants contractors the right to an equitable change in the event of increased costs or performance delays resulting from a change. However, the webinar cautions that contracting officers often dispute a change or question the contractor's justification of costs associated with the change.
To surmount these challenges, the webinar underscores the criticality of comprehensive documentation to substantiate a change and the corresponding costs incurred. Such meticulous documentation plays a pivotal role in establishing entitlement to an equitable change.
Unilateral versus bilateral changes
The webinar's extensive insights shine a light on the complexities surrounding unilateral and bilateral changes, the significance of the changes clause, and the indispensability of effective communication and thorough documentation in navigating these facets of government contracting.
The webinar emphasizes the role of federal government contracting officers in issuing equitable changes and the need for negotiation in response to a request for equitable change. A Small business government contractor should demonstrate a change in circumstances and resulting costs to claim an equitable change. The webinar also advises small business subcontractors to provide documentation for compensation and warns against incurring costs without proper direction and approval. Understanding contract terms is crucial to prevent disputes, and subcontractors should use common law mechanisms for resolving disputes without a changes clause. The webinar discusses deductive changes, distinguishes between changes under the changes clause and partial termination for convenience, and highlights the importance of comprehending the contract's scope and differentiating between minor and major changes. Any government contractor, but especially a small business government contractor, should evaluate costs and initiate discussions with the contracting officer. The webinar defines and explores constructive changes in government contracts, emphasizes the significance of contract interpretation and evaluating ambiguities, provides examples, and emphasizes the contractor's duty to seek clarification. It briefly touches on intellectual property and data rights issues.
The webinar urges small business government contractors to balance their right to compensation and their desire to have a positive relationship with the customer. The webinar highlights the potential risk of breach in cases of contract interpretation, emphasizing the importance of careful consideration and weighing the pros and cons before pressing for a change or accepting the contracting officer's interpretation. Finally, the webinar introduces the idea of a "cardinal change," which involves a material alteration to the contract beyond its original scope, underscoring that such changes are not covered by the contract changes clause and can be a breach of contract.
The webinar explores how a small business navigating contract changes, particularly when faced with an unreasonable interpretation by the contracting officer. It recommends carefully considering the pros and cons of pushing for a change or accepting the officer's interpretation. The webinar introduces the concept of a "cardinal change," which is a significant change falling outside the original agreement's scope and cannot be resolved through the contract changes clause. The webinar provides questions to identify cardinal changes and distinguishes them from minor "constructive changes." It also discusses the distinction between "sever services" and "non-sever services" and highlights the importance of adhering to notification requirements and the changes clause. The webinar addresses common challenges in different contracts and advises on the duration and cost-effectiveness of the court process. It emphasizes the importance of carefully weighing the costs and benefits of litigation and using the REA or CDA claim process before resorting to litigation. The webinar shares strategies to help contractors avoid litigation and addresses concerns about potential retaliation.
The webinar emphasizes contractors understanding their rights and entitlements to ensure compliance with regulations. It also discusses the importance of communication with the contracting officer to confirm authorized changes and highlights the value of documenting costs and capturing visual evidence. Contractors should establish effective systems to track costs and properly train employees. The webinar introduces the concept of a request for equitable change (REA) and recommends filing an REA before or during contract performance. This customer-friendly process promotes open communication and negotiation.
The webinar emphasizes the need for contractors to provide documentation, including pictures and evidence of costs, to support their REA. Contractors should stay vigilant and aware of any changes during contract performance. Timing is important when submitting an REA, as addressing multiple changes can be cumbersome. Contractors should consider whether to ask for a lump sum change or incremental changes. The webinar clarifies differences between an REA and a CDA claim, noting that the contracting officer has no specific timeline to respond to an REA. While service fees may be recoverable under an REA, interest is rarely recoverable. REAs and CDA claims share similarities in drafting, including legal arguments and supporting information. Contractors should make a business decision on which process to use based on the behavior of the contracting officer. Courts rarely compensate for lost opportunity costs in addition to direct costs.
restrictive contract language
The webinar explores clauses entitling contractors to changes and the importance of understanding their language. Certain clauses may restrict the ability to make claims, such as the suspension of work clause and government delay of work clause. An equitable change under the changes clause is not the only remedy available. Contractors should provide notice within the specified timeframe outlined in the applicable clause. A Request for Equitable Adjustment does not require certification unless it is a DoD contract. Contractors should provide a detailed factual narrative supported by relevant evidence, such as emails from the contracting officer. Making a strong legal argument is important to justify the request for change. Costs requested in an REA will be evaluated for reasonableness. Attorney and service fees may be recoverable to prepare an REA. Contractors should follow up with the contracting officer and carefully perform the contract while awaiting a response. In the event of an REA denial, filing a CDA claim is the next step. Accurately memorializing changes resulting from a successful REA is important, including proper accounting of costs and reflecting the negotiated terms. Contractors should not accept changes in the period of performance without corresponding changes in cost and should reserve the right to a change in contract price in the change order. Settlement and release language in a final change order should be tailored to the specific issue being resolved and not serve as a blanket waiver of future claims. Ambiguous release language should be avoided to prevent confusion.
The webinar also urges contractors to exercise caution when waiving unknown future claims, suggesting that they strike this language from the contract altogether. To emphasize this point, the webinar provides an example of a release that is overly broad and does not help the contractor. The webinar discusses the importance of tailoring release language specifically to the changes or changes at hand. While the webinar acknowledges that the government may not always agree to this approach, the webinar recommends that contractors strive for a middle ground. The webinar suggests crossing out any ambiguous language in the release and including specific exceptions to make sure the contractor is not granting carte blanche to the government. The webinar emphasizes the significance of showing to the government that the contractor is paying close attention to the change and will not simply accept any terms without question.
During the discussion, the webinar addresses a question regarding consulting fees and whether they include legal guidance or representation in a dispute. The webinar explains that under an REA (Request for Equitable Adjustment), a contractor may have the right to certain special service costs. However, the webinar clarifies that while a contractor can make a claim for legal guidance costs, representation in a dispute is a different matter. The webinar points out that filing a CBA (Collective Bargaining Agreement) claim does not fall under the same legal representation. The webinar also brings up the Equal Access to Justice Act, which may allow for the recovery of some costs.
The topic then shifts to representing clients in different states. The webinar notes that most government contracting practices have a national reach and can provide legal counseling to entities in various locations. However, the webinar highlights that if a lawyer wants to represent a contractor in court, they must be admitted to that court and licensed in the respective state. The webinar also mentions that for federal courts, a lawyer can be licensed in one state and admitted to the Court of Federal Claims and the Court of Appeals for the Federal Circuit. The webinar advises that the practice of law is subject to each state's rulesand there is no single answer to the question.
The webinar further emphasizes the importance of distinguishing between "guidance" and "representation" when dealing with contract changes and changes. The webinar urges contractors to exercise caution and consult state-specific rules and requirements before making any decisions. The webinar implores listeners not to interpret the comments as a blanket endorsement to act in any particular way, but rather to carefully consider the nuances of each situation. Additionally, the webinar underscores the significance of having attorneys with multiple state licenses to effectively represent clients in different jurisdictions. The webinar clarifies that "representation" can refer to both judicial and administrative actions.
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