THE ILLUSORY CHANGES CLAUSE IN COMMERCIAL CONTRACTS

If you have a FAR Part 12 commercial item contract, you really don't have a changes clause in your contract.  The changes clause is illusory since changes can only be made bilaterally, there is no provision for unilateral changes and the language directing compliance subject to equitable adjustment in price and schedule is totally absent.  Changes may be made by mutual agreement only.

So what happens to the doctrine of constructive changes which contractors have used for over half a century to seek recovery for various government acts and omissions under government contracts? We need a little history lesson.

Early on, the Boards of Contract Appeals (BCA's) had no jurisdiction over breach of contract claims.  They only could decide cases involving claims "arising under" contract clauses.  So, they devised a way to remedy breach claims under the changes clause by calling the breaches constructive changes.  Pretty soon, all types of breaches became constructive changes.  In 1978, Congress remedied the situation by instituting the "all disputes" clause allowing the Boards to hear cases involving claims "relating to" the contracts.

In commercial item contracting, contractors may submit breach of contract claims notwithstanding the absence of a changes clause.  The same breach theories, previously parading as constructive changes, still exist.  For example, the government breaches the contract by:  failure to provide specifications free from errors, conflicts or omissions; failure to cooperate and communicate with the contractor and do everything reasonably necessary to enable the contractor to perform; failure to disclose information vital to performance, etc.

As a practical matter, you may wish to present your request for relief under FAR Part 12 commercial item contracts as a request for equitable adjustment, just as you would on a regular government contract.  However, you actually are seeking damages for breach of contract which may entitle you to incidental and consequential effects such as lost anticipated profits.

We'll discuss this more.  The BCA's have only recently begun dealing with these issues.

bill@spriggslawgroup.com   www.spriggsconsultingservices.com