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When is a proposed change considered to be within the scope of the contract?

A proposed contract change that falls within the scope of the contract is usually characterized by the following qualities:

1. The function of the items or services being procured has not changed.

2. The basic contract purpose has not changed.

3. The dollar magnitude of the change is proportionate to the price of the original contract. This is a difficult determination to make, as what is considered acceptable can vary significantly from situation to situation. It is essential to determine how much the price of the change increases the overall price of the contract and whether that increase is proportionate or reasonable (i.e., can a price increase of 30 percent, 50 percent, or more be justified?[1]). Such determinations will be made at the discretion of the CO, relying heavily on technical input from the COR, and will have to be based on the particular circumstances involved.

4. The competitive factors of the original solicitation are unchanged. For example, suppose the original contract was awarded based on a sole source justification and the proposed change is based on that same sole source determination. In this case, the change would be determined to be within the scope of the contract and there would be no competition issues involved. On the other hand, the change may be considered to be an entirely different requirement (i.e., not within the scope of the sole source determination) and therefore would have to be competed. These determinations must be made by the CO with input from the COR.

5. Specification changes or statement of work changes are not extensive.

What should be considered when determining if a change is outside the scope of the contract?

Questions to consider when deciding if a change is outside the scope of the contract include the following:

Does the changed work represent what both parties reasonably contemplated at the time of award?

Is the changed work essentially the same as the work agreed to in the original contract?

Is the nature of the requirement altered by the change?

Would this type of change normally be expected for this kind of requirement?

Was the specification deficient, requiring extensive redesign?

What is the COR's role in providing information on the effect of a contract change on cost or price? How can contract changes be classified?

Although regulations make the CO the person ultimately responsible for all decisions on contract modifications, as stated earlier, the CO relies heavily on the COR and other support personnel for the technical and pricing decisions related to any modification.

Changes to basic contract requirements can be classified in three ways, according to the effect the change will have on the contract requirements and the resulting price adjustment. Usually, a single change will embody elements of more than one type of change. The three categories of changes are:

Additive changes. Work is added to the contract, so the contractor is paid more for its work.

Deductive changes. Work a contractor has not yet performed is deleted from the contract, resulting in a reduction of the contract price.

Substitution changes. Added (new) work is substituted for deleted (old) work (e.g., obsolete technology is replaced with current technology). Conceivably, such changes could result in no change to the contract price, but this would be coincidental. Usually, the net change in contract price must be negotiated based on the value of the old work versus the value of the new work. Substitution changes are more difficult to make than additive or deductive changes, in terms of technically defining the change and establishing the monetary value of the old and new workespecially the old work. The old work may not have been separately priced in the original contract; trying to establish its current value can cause disagreement between the government and the contractor.

Keep in mind that when the government is negotiating a modification with the contractor, the contractor is in a sole source position and therefore has some advantage in the negotiation. This is another significant reason for the COR to provide the CO with the best technical information possible in such circumstances.

The effects of the change on the original contract pricing and the original technical proposal should be considered and addressed. When the CO and COR, working together, determine pricing for a modified contract, they should consider:

Pricing history for similar requirements, if available

Current market prices.

When the dollar amount of a change (or changes) is $700,000 or more, a contractor may be required to submit to the CO cost or pricing data as a part of its proposal for negotiation of the contract modification. The CO may ask for the COR's assistance in evaluating the data.

Assisting the CO in Negotiating the Modification

What assistance may the COR be asked to provide in preparation for, and during negotiation of, a contract change?

The CO will often solicit assistance from the COR in researching information, preparing the pre-negotiation position, developing negotiation strategies, and conducting the negotiation for changing the contract. Assistance may be provided to the CO through:

Meetings

Telephone conferences

Correspondence.

A COR can assist the CO in evaluating the contractor's proposal for a contract change by:

Providing advice concerning safety and performance

Providing guidance on whether acceptance of the supplies or services would be in the government's best interest after repair, correction, or price adjustments are made

Providing supporting rationale for rejecting or accepting the contractor's proposal

Attending any negotiations to respond to the contractor's position.

CONTRACT CHANGES

What the COR should do:

What the COR should not do:

Identify what needs to be changed to meet the government's requirements

Direct the contractor to make a modification

Act in a way that leads the

Prepare a SOW for the modification

contractor to believe that the COR is authorized to direct

Estimate the funding required for the contractor to implement the modification

a contract modification

Encourage the contractor to do work beyond the scope of the contract.

Determine the availability of funds

Coordinate with the CO

Review the contractor's cost proposal and prepare a technical evaluation.

  • [1] Consider the case of Axel Electronics, Inc., Armed Services Board of Contract Appeals (ASBCA) case 18990, 74-1 BCA (1974), where no changes were found to be beyond the contract scope in a situation in which the contractor was claiming equitable adjustments of 170 percent of the contract price because of alleged over-interpretation of the specifications.
 
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