Avoid Costly Pitfalls With Your Request for Equitable Adjustment (REA) Under FAR 52.243 in Government Contracts
In government contracts, the FAR definition of equitable adjustment refers to an adjustment that pays you for work that is directed by the agency. When companies choose this route for compensation, there may be a statutory confusion between the requirements for a Contract Disputes Act (CDA) claim and the process for the agency to follow in an REA claim. If you do not properly process each, then litigation can be costly without even getting to the merits of the requested adjustment. Specifically, parties spend tens of thousands of dollars litigating the differences between an REA and a CDA claim.
It also applies to work that ultimately increases the cost of the original contract. The Contracting Officer (CO) should be the only person authorizing the work – no one else.
- Be aware of COR directing you to perform additional work
- Courts are not sympathetic to contractors who cannot show clear direction from the contracting officer.
The FAR Adjustment definition in government contracts can also mean a reduction in the overall contract price. Often times, end-users and contracting officer representatives instruct you to do additional work or change the terms and conditions of the Performance Work Statement (PWS). When this occurs you should always seek the permission of the Contracting Officer before proceeding.
FAR Meaning and Definition of Equitable Adjustment
What is equitable adjustment in federal procurement? In government contracting, the contracting officer complies with the “equitable definition” and meaning by adjusting the contract requirements or price in accordance with the changes clause. The goal is to make the contractor whole and to compensate it for profit allowances if any. See Government Contracts & Mandatory FAR Flow Down Clauses to Subcontractors The FAR does not define a Request for Equitable Adjustment (REA) Acquisition Regulation but only references it. REAs include a contractor’s request for additional compensation or additional time based on relevant contract clauses. An example of an REA occurs under the Changes clause of the contract or FAR clause for the Differing Site Conditions.
FAR Change Order Format & Allowances for Profit: Under the meaning of request for equitable adjustment FAR change order clause allows for payments for profit. If it does not, it should not be considered “equitable adjustment.”
There should be an agreement between you and the government. You always want to try to establish your changed cost upfront because it can put you in a vicarious position at the end where you then have to negotiate with the contracting officer. Find out more about CPARS Ratings, Fapiis Past Performance and Contractor Integrity Data – What Every Federal Government Contractor Needs to Know.
Get buy-in from the contracting officer: By using a “bilateral modification”, both you and the contracting officer should agree to the price upfront.
- The format should describe why the new work is different from the original contract;
- FAR 52.243 the format should also address why the additional work could not have been contemplated;
- Show a causal connection between the scope of work change and the damages you seek;
- Provide as much support as you can.
Is Your REA Under FAR 52.243 Formatted as a Claim Under the CDA?
This is a question that many government contractors and even attorneys struggle with. The first line of analysis starts with whether there is a dispute. There is an argument to be made that by asking the agency to adjust the contract up or down, then the definition of a claim under the Contract Disputes Act is not met. See FAR Cure Notice Response & Show Cause Letter Tips. However, the question remains whether the contractor can submit and REA with the elements of the Contract Disputes Act still included. The case of Tri-County Contractors, Inc., ASBCA No. 58167 (Nov. 2012) addresses similar issues where the ASBCA found that a request for equitable adjustment addressed to Contracting Officer and seeking “written response,” accompanied by CDA certification, constituted CDA claim)
Submitting an REA does not automatically constitute a claim under the Contract Disputes Act until such time as the parties reach an impasse (firm disagreement). This is a factual basis that a lawyer should be able to help you with.
Formatting your REA. Given the Tri-County Contractors, Inc decisions, you may want to consider a habit of submitting your equitable adjustment formatted as the same for a traditional CDA claim. This can be done by enclosing the certification language required under the FAR 52.243.
Avoid these costly mistakes made by government contractors. You should ensure that you are asking for a specific sum of money and state the factual basis for the equitable adjustment. Lastly, you want to ask for a contracting officer’s final decision.
Need help? If your company needs help with the legal definition of request equitable adjustment FAR 52.243 in government contracts, Contact a government contracts attorney for a FREE INITIAL Consultation at 1-866-601-5518.