Sunday, July 1, 2012


What needs to be included in the request for equitable adjustment (REA) is one thing (see our previous blog posting).  Understanding the theories of recovery is quite another.  We are talking here about "constructive" changes, that is acts or omissions of the government which are breaches of the contract, but which are called constructive changes where a unilateral changes clause is included in the contract (that's in all government contracts except commercial item contracts -- and it will be read into the contract by operation of law if its not included).

Constructive changes are not formal changes.  If you receive a formal change or are entitled to an equitable adjustment under another clause such as the stop work order clause, you do not need to concern yourself with these theories of recovery.

The four main categories of constructive changes are:  1) contract interpretation; 2) breach of warranty of the specifications; 3) breach of the duties of noninterference, cooperation, communication and disclosure of vital information (known as superior knowledge); and acceleration.

Most disputes arise over differing contract language interpretations.  We've written in other blog postings about the rules of contract interpretation (our most popular blogs so far).  The contractor may submit its REA if it believes its interpretation is the only reasonable one or even if the language is not obviously ambiguous (if it was obvious, the contractor has assumed the risk).

The government warrants that its specifications will be free from errors, conflicts, omissions and that they will not be commercially or practicably impossible to perform.  If the contractor encounters a problem with the specifications which was not obvious at time of bidding, it may seek relief.  Impossibility is almost impossible to prove.  More on that later.

The REA also can be based on the government's interference with and failure to cooperate and communicate with the contractor and its failure to disclose information vital to performance (also known popularly as "superior knowledge"). There is an implied obligation in every contract, read into the contract by operation of law, that the government will do "whatever is reasonably necessary on its part to enable the contract to perform."

An acceleration occurs if the contractor 1) encounters an excusable cause of delay or nonperformance, 2) provides timely and complete notice to the government of the excusable cause of delay and 3) the government either actually or constructively orders the contractor to meet the original schedule notwithstanding the excusable cause of delay.  An excusable cause of delay is anything covered by the default termination clause including acts or omissions of the government in its contractual capacity (other constructive changes).

Although the facts about what the contract required and how those requirements were changed come first, placing those facts in the proper context of a theory of recovery comes second.

Postscript:  In the new age of LPTA, we expect to see contractors trying to use the changes clause to increase the low prices they have to bid to get the job.

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