COMMERCIAL ITEM CHANGES CLAUSE

It's time to revisit the commercial item changes clause.  That clause says changes only can be made by written agreement of the parties.  The government cannot make unilateral changes.  A unilateral change is a breach of contract, just as it is in the commercial world.  The clause does not mention the contracting officer and certainly does not give the contracting officer the authority to order unilateral changes.  In fact, the concept of constructive changes does not apply to commercial item contracts.

Prior to the Contract Disputes Act (CDA), the Boards did not have jurisdiction to hear breach of contract claims.  So, the Boards developed the theory that breaches of contract could be characterized as constructive changes under the standard Changes clause.  They took breach of the duty to provide a specification free of errors, conflicts and omissions and made it the constructive change called defective specifications.  They took other breaches such as the duties to cooperate and not interfere and made them constructive changes.   Thus, the Boards have had a long history of recognizing breaches of contract as constructive changes.

The CDA gave the Boards jurisdiction to hear breach of contract claims.  Commercial item contracting eliminated the unilateral right of the government to make changes by introducing the requirement that changes be made only by written agreement of the parties.  In breach cases such as defective specifications and the duty to cooperate and not interfere (based on the obligation of good faith and fair dealing), the Boards have recognized that a government employee writing a defective specification or an inspector interfering in the contractor’s performance can cause a breach of contract giving rise to a breach of contract claim.

 

The commercial item changes clause requires a written agreement of the parties to effect a change.  Thus, if the government wants a change, it must negotiate the change and enter into a bilateral agreement with the contractor.  Constructive changes, which are unilateral changes, are breaches of the contract entitling the contractor to damages which will be measured in the traditional way of actual costs plus profit on those costs.

 

bill@spriggsconsultingservices.com