While working on a construction contract, a contractor may encounter undisclosed pipes 6 feet underground. Perhaps an information technology support contractor may be asked to comply with new cybersecurity requirements without being given a contract modification. These changes increase the cost of performance and can put a small business in a precarious position. In situations like this, it may be necessary for a contractor to file a request for equitable adjustment (“REA”), seeking additional compensation and/or time. The appropriate FAR provision depends on the specific facts of the situation presented.
Before preparing and submitting an REA, review this tips:
- An REA must rely on at least one contract provision to support the request for compensation and/or time. Commonly cited provisions include: FAR 52.243-1 Changes – Fixed-Price; FAR 52.236-2 Differing Site Conditions; 52.222-44 Fair Labor Standards Act and Service Contract Labor Standards – Price Adjustment.
- Provide as much detail as possible. An REA that contains a detailed explanation of the facts providing the basis for the REA is more likely to be granted. The contracting officer reviewing the REA may not be intimately involved in the project and may not be aware of the circumstances.
- Including exhibits or attachments can strengthen the REA. The exhibits should support the statements made in the REA. For example, an email can show that the contracting officer directed the contractor to perform additional work. This tip also suggests you should document in writing, at least by email, any situation that may be a change to the contract.
- Timing matters when submitting an REA. In most cases, a contractor should assert an REA within 30 days of the change giving rise to the REA. And, an REA cannot be submitted after contract closeout.
- Be mindful of releases. Contract modifications often contain releases, which may prevent a contractor from recovering on an REA. Always review a contract modification before signing it, and consult counsel if there is any uncertainty.
- Keep track of preparation time. The time a contractor spends preparing an REA may be recoverable as part of the REA. These costs are treated as contract administration costs.
- Consider retaining counsel because retaining counsel to prepare an REA often results in a more persuasive REA, and legal fees may be recoverable. Under FAR 31.205-33, if a contractor incurs legal costs to prepare an REA to further the negotiation process with the agency, the legal costs are allowable as contract administration costs. The associated legal fees may be included as a line item within the REA.
- Use experts and consultants when appropriate. The amounts claimed in an REA must be calculated based on reliable principles and methods, and experts can assist in that effort. Experts and consultants can also help with complex issues, such as scheduling or engineering. Like attorney’s fees, these costs may be allowable and recovered as part of the REA.