Request for Equitable Adjustment (REA), in government contracting addresses a contract adjustment driven by the changes clause, to compensate you due to expenses incurred because of government actions, or to compensate the Government for contract reductions. When there is a FAR change order in effect, a request for equitable adjustment does include an allowance for profit.
Difference Between Claim and Request for Equitable Adjustment
What is Contract Claim? The Contract Disputes Act, 41 U.S.C. 7101 – 7109, does not define claim. FAR 2.101, which defines “claim” as: ” a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.” The written demand by the contractor seeking the payment of money exceeding $100,000 is not a claim under the Contract Disputes Act of 1978 unless the certification language is included.
- Invoices or routine requests for payment that is not in dispute are not claims.
What is an REA?
The Contract Disputes Act does not discuss requests for equitable adjustment. A “Request for equitable adjustment” simply means: (a ) a request ( b ) for an equitable adjustment to one or more contract terms. REAs are discussed in the “Changes” clauses, FAR 52.243-1 through – 5; the “Differing Site Conditions” clause, FAR 52.236-2; and the “Government Property” clause, FAR 52.245-1.
DOD Contractors submitting non-claim REAs valued at more than the simplified acquisition threshold must certify them as required by DFARS 243.204-71 and 252.243-7002.
Instead, it is simply a request to adjust the contract. There are certain things up front that you can do in order to minimize costly litigation on the issue. Only when there is an impasse (disagreement) is your request for equitable adjustment viewed as a Contract Disputes Act claim.
- Interest starts to accrue at this point.
Proof of Damages
Just like any request to the federal government, your Request for Equitable Adjustment must have some level of support for the amount sought. The Court of Federal Claims ruled that the burden of establishing the amount of the equitable adjustment rest with the party claiming it.
In other words, when you submit a request for equitable adjustment, You MUST show:
- the reasonableness of the cost claimed and
- A causal connection to the event on which the claim is based.
Dawco Constr., Inc. v. United States, 930 F.2d 872, 878 (Fed.Cir.1991), the Federal Circuit Court ruled “A contractor and the government contracting agency must already be in dispute over the amount requested.” Dawco also states “The [CDA] and its implementing regulation require that a ‘claim’ arise from a request for payment that is ‘in dispute.’ ” Id. Dawco requires that the parties be in dispute over the amount requested.
Relectone, Inc. v. Dalton, Secretary of the Navy, 60 F.3d 1572, 1577 (Fed. Cir, 1995) Because we conclude that FAR 33.201 (1988), which alone defines “claim” for purposes of the CDA, does not require a pre-existing dispute as to either amount or liability when, as here, a contractor submits a non-routine “written demand ․ seeking, as a matter of right, the payment of money in a sum certain,” FAR 33.201, we hold that Reflectone’s REA was a CDA “claim”
FAR Change Order? How Do You Increase Your Chances of Timely Payment?
For Your Request for Equitable Adjustment? When your documentation is not in order, Agency’s tend to suspend or delay payment. Oftentimes, the Contracting Officer does not issue a FAR change order or amendment. To increase the opportunity for timely payment, you want to always make sure that you provide detailed explanations as to why your company is entitled to an adjustment. See information about documentation of requests for equitable adjustment format.
Tip: You want to also show why the REA scope does not fall within the original scope of the contract.
- Keep records of all changes to a government contract.
- Track all hours spent, materials bought that are directly attributable to the changed work.
Tip: To avoid delay, you must also articulate changes and modifications. Each REA must be necessitated by some modification of the contract effort.
For additional questions about the request for equitable adjustment format or preparing your REA, call a Request for Equitable Adjustment lawyer for a Free Initial Consultation. Call 1-866-601-5518.