With the continuing changes due to COVID-19 Pandemic and the new vaccine mandates, it is a great time to review how contract changes will be implemented into your contract(s) so that you reserve your rights when the unknown impacts (cost and time) are unknown.
(1) Do not deviate from the defined procedures. Because the processes are mandated in the contracting regulations, the Contracting Office has limited options for a unilateral modification and will make every effort to obtain a bilateral agreement. Do not rely on fixing it later. The Government’s situation, workload, changes in policy or inattention to getting the work processed is not a reason for not following the correct procedures. With the new COVID mandates, the Government is pushing out hundreds of modifications and may not be able to help you with your contract. While they have hundreds of contracts, the one you have is important to you.
(2) Make sure that every proposal submitted reflects “sum” certain of all costs and time associated with a particular change. Any bilateral agreement is a negotiated action. Regarding the new COVID mandates, it is very likely you will not know how COVID is going to affect you in the future. If you don’t understand it, reach out and get some advice. Consider limiting or clarifying what you will accept at this point. Regardless, the process is clear. If you sign a bilateral modification, you will not get a second bite of the apple. Questions to consider:
- Will you experience staffing shortages that will impact your ability to deliver on your federal contract or subcontract?
- How will the new Covid protocols impact your costs?
(3) Document, document, document. Make sure all discussions are documented. This is a legal business agreement, and a hurried handshake is generally not in your best interest. Do not hesitate to reach and out and ask for advice.
WHAT TO LOOK FOR.
Contracting regulations stipulate the rights and remedies and responsibilities for the Government and the Contractor when changes are required. These regulations stipulate, and limit the Contracting Officer’s rights and delineates processes to issue changes, which they must cite in Block 13 of the modification. It is important that information here matches the terms cited on Page 2 defining the changes and to the party’s agreement. The authority under which the change is being issued is as important as the change itself. Be sure they are correct.
REQUIREMENT. FAR (43.103) identifies two types of contract modifications: (1) Bilateral, (or supplemental agreement) that is signed by both the contractor and the contracting officer; or (2) Unilateral, which is only signed only by the contracting officer. Each have specific requirements.
(1) BILATERAL MODIFICATION. Fairly straight forward. Both parties agree to the change and the terms of the modifications. Block A* or, more commonly, Block C^ is checked and edited to include a FAR clause that allows the change (and reason).
Block E will be checked that the Contractor is required to sign and return the modification.
Block 14 (usually continued on the Page 2 will describe the change, the agreed upon costs and time (if warranted) and to confirm the party’s agreement. Page 2 will include a waiver that states “Acceptance of this modification by the contractor constitutes an accord and satisfaction and represents payment in full for both time and money and for any and all costs, impact effect, and for delays and disruptions arising out of, or incidental to, the work as herein revised.”
^ The courts have been very, very clear once you sign “full accord and satisfaction” you do not get to change your mind. It is a declaration that both parties agree this issue is complete. Therefore, if you do not agree – you do not sign. The Government has other options available (unilateral modification as describe below) to make the change if we don’t agree. It may be more work for both parties, but the regulations are clear – for reason.
(2) UNILATERAL MODIFICATION. Unilateral modifications of course, are more complicated. Contracting Officers can issue unilateral modifications under four (4) conditions:
(1) Make an administrative change. Administrative change is defined (see 43.103(b)) a change that does not affect the substantive rights of the parties (e.g., a change in the paying office or the appropriation data). Bottom line . . . if it changes any other terms and conditions, it cannot be issued under the authority of Block 13 B. Modifications that change the terms and conditions including new or updated clauses cannot be issued under this authority.
(2) Issue a change order. Unilateral modifications under the Changes clause can be issued under two conditions.
First, the Contracting Officer can issue a unilateral modification if the parties are at an impasse in negotiations and if the Contracting Officer cannot determine that the price is fair and reasonable. The Contracting Officer may issue a “definitized” change order for the amount they believe is fair and reasonable. The modification must state the Contracting Officer has determined the adjustment, if any, is fair and reasonable and therefore any adjustment the Contractor believes they are entitled to must be pursued under the disputes act.
Second, the regulations require the parties to negotiate in advance the cost and time associated with all contract changes except in unusual circumstances where it is not possible (e.g., emergent or urgent situations). In such cases, the Contracting Officers issues a not-to-exceed (NTE), undefinitized, unilateral modification to get the work going. It is a two-step process. Issuance of the undefinitized modification, followed up with a definitized modification.
In both cases Block 13 D looks the same, with the distinction detailed in the description of the modification (definitized or undefinitized), including all follow-on instructions.
(3) Make changes authorized by other clauses or the terms of the contract. Unilateral modifications are issued for terms the parties have already agreed to (i.e., suspension of work clause, exercising options, assessing liquidated damages, etc.). Rather straight forward, unless the options are “outside” the window we agreed to.
(4) Issue termination notices. Rather straight forward – and one you hope to never have to deal with.