Change In Your Scope of Work (SOW)? Know What Costs You Can Seek in Your Request for Equitable Adjustment (REA)

Contractors for the United States Government (USG) sometimes encounter unforeseen circumstances that cause major obstructions and/or costs associated with their projects.  For example, maybe you have contracted for USG construction work, and half way through laying the foundation on the building, the Contracting Officer changes the type of cement he wants you to use. Or, maybe the Contracting Office suddenly shut down your access to the site for a month, leaving you and your subcontractors and vendors on standby and your materials on the site deteriorating beyond use. Or, maybe, you are starting to clear an area for a parking lot for the building, and you discover the site has landmines that neither you or the USG knew about.

Such incidents cause a contractor much concern because they create additional work that will cost you more money and delay your project delivery schedule.

If you find yourself in such a situation with a USG contract, you do not need to just accept the additional work and cost. Instead, you can ask for more money and/or time to complete the new or additional work. The process for asking for this additional money or time is called a Request for Equitable Adjustment (REA).  If you ask the USG Contracting Officer for an REA, the USG may agree to modify the contract to give you more time to do the work and to pay you more money for the additional cost related to the new or additional work.

You may or may not see language in your contract itself that refers to an REA.  Your right to request an equitable adjustment, though, is contained in the Federal Acquisition Regulation (FAR) under the various provisions dealing with acts that affect a contract’s scope of work (SOW), e.g. changes,  differing site conditions, work suspensions, etc. Equitable adjustments downward also are made when work is eliminated, e.g. terminations of work, etc.

While many USG contractors are familiar with their right to submit an REA, many contractors are not aware of what costs they can include in their REA.  For example, in addition to the more obvious direct costs related to materials and labor, did you know a contractor might be able to seek the following types of costs as part of their REA?

  • The cost of preparing the REA either internal to your company or through external assistance, such as through consultants, accountants and lawyers;
  • Unabsorbed company overhead due to government-ordered work suspensions;
  • Additional or increased rental rates for equipment or facilities such as when due to work suspensions or a prolonged work schedule;
  • Recruitment costs if you need to hire additional employees to handle the work, including travel and employment agency costs;
  • Certain federal, state or local taxes; and
  • Profit or fees.

If you want to learn more about your REA rights or how to write an effective REA to maximize recoupment of all your costs associated with changes to your scope of work, please feel free to contact the blog’s attorney authors to learn more.  You can contact the blog-author attorney Vonda K. Vandaveer at vonda@vkvlaw.com or +1-202-340-1215. There is no fee for initial communication about your matter.

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