Sunday, September 16, 2012

TEN CHANGES CLAUSE RULES TO REMEMBER

Changes come in many forms and sizes and often appear in disguise. By far the most popular disguise is in the form of a constructive change.  So we've put together 10 rules of the changes clause, constructive style, that everyone would do well to remember.

  1. Errors, conflicts or omissions discovered in the specifications are compensable changes unless they were obvious during proposal preparation, giving rise to the duty to inquire.
  2. Commercial impracticability of performance and actual impossibility are compensable changes also subject to the duty to inquire.
  3. The government's failure to provide information vital to performance may be a compensable change.
  4. The government's failure to cooperate with the contractor and do everything reasonably necessary to enable the contractor to perform is a compensable change.
  5. The government's interference in the contractor's performance is a compensable change.
  6. The government's failure to communicate with the contractor is a compensable change.
  7. The government's failure to recognize excusable causes of delay or nonperformance and its insistence on meeting the original schedule may be a compensable change.
  8. The government's insistence on a clearly erroneous interpretation of the contract is a compensable change.  Its insistence on an ambiguous interpretation may be a compensable change.
  9. There is no changes clause in commercial item contracts.  Changes may be made by mutual agreement only.  Unilateral changes of any kind are compensable breaches of the contract.
  10. The changes clause will be read into government prime contracts as a matter of law.  The clause may be read into subcontracts under government prime contracts as well depending on what law the judge applies.
The changes clause is unique to government contracts.  All unilateral changes in the commercial world are breaches of the contract.  To afford the government the flexibility it needs to achieve mission goals, it is allowed to unilaterally change the contract.  Most of these are formal and the equitable adjustment in price and schedule negotiated.  

The "constructive change" has an interesting history.  Originally, the Boards of Contract Appeals did not have jurisdiction over breach of contract claims.  So they developed the constructive changes doctrine according to which almost all breaches became constructive changes allowing the Boards to take jurisdiction of claims arising under the changes clause.  The distinction is not important today because the Boards have all disputes jurisdiction under the Contract Disputes Act (CDA).  

bill@spriggslawgroup.com            www.spriggslawgroup.com

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