What is the COR's role in resolving constructive changes?
The COR must ensure that a technical analysis, sufficient to support the CO's final decision, is prepared for all constructive changes.
There are three steps in preparing an analysis of constructive changes:
1. Identifying the actual changes to the contract
2. Preparing the technical analysis and notifying the CO that a technical analysis has been prepared
3. Assisting the CO with negotiations.
Identifying the Actual Changes to the Contract
When a COR provides guidance (also known as technical direction) to the contractor under performance of the contract, he or she may go beyond his or her scope of responsibility, resulting in a change to the contract known as a constructive change.
Technical direction is technical guidance within the boundaries set by the statement of work. More technically complex contracts require direction from government officials, usually the COR. The need for and the ramifications of technical direction are different depending on whether the contract is fixed price or cost reimbursement. Work statements are normally more precise under fixed price contracts than under cost reimbursement contracts. When a work statement is precise, there is little or no need for technical direction.
A constructive change occurs when the CO, or his or her duly authorized representative (e.g., the COR), changes the contract without going through the required legal or regulatory formalities. A constructive change can result from either a specific action or a failure to act. Examples of constructive changes include:
Errors of interpretation
Issuance of changes outside the scope of the contract
Failure to issue a change to correct a defective specification
Acceleration of performance.
Preparing the Technical Analysis and Notifying the CO That a Technical Analysis Has Been Prepared
Although there is no set format for a technical analysis, it should be documented in writing and a copy provided to the CO. The technical analysis may be in the form of a:
Memorandum to the file
Any other format used to document meaningful communication.
Who may identify a potential constructive change?
Constructive changes may be identified by either the COR or the contractor. Because only the CO can change the contract, the CO should be notified if a possible constructive change is identified, and he or she will determine if a constructive change has occurred.
How should a COR notify the CO after identifying a potential constructive change?
There are no set rules for how a COR should notify the CO; notification can occur by telephone or mail, or as an action item in a report. It is essential only that the CO is notified that a constructive change may have been made to the contract. Notification should include sufficient information describing the events that led to the possible constructive change.
How and when does a contractor notify the CO of a potential constructive change?
A contractor can use any method it chooses to notify the CO of the possibility of a constructive change. Whether the CO is notified or not depends on whether the contract is a fixed price or cost reimbursement contract. A contractor is not likely to perform extra work under a fixed price contract without firm assurance of additional compensation from the CO. Such assurances are not needed under a cost reimbursement contract because the contract stipulates that the government will pay for the extra work. However, if the contract contains a clause requiring a notification of changes, the contractor must notify the CO using a notice of change.