Contract modifications (“mods”) are common actions for many contracting professionals. These changes may be related to contract cost, delivery schedule, schedule, fee, terms and conditions, and personnel. In addition, changing technologies, funding, and mission requirements may create the need for changes to a contract. The complexity of contracts—which can involve numerous people from different functional areas on both the Government and contractor teams — can lead to misinterpretations and miscommunications of requirements and administrative issues that do not become evident until the contract is under way. Whenever the Government wants something different than was originally envisioned for the original contract or something unforeseen occurs, a modification may become necessary. The need for some modifications may be anticipated from the moment the Government’s requirement is identified, such as for periodic price revisions due to the use of an economic price adjustment clause in an upcoming contract.
Commercial Item Contracts. When using FAR Part 12 procedures for the acquisition of commercial items, the Government does not have authority to unilaterally require changes. The commercial item clause at FAR 52.212-4 , Contract Terms and Conditions — Commercial Items, requires that both parties agree to changes in the terms and conditions of a contract. When this occurs, a supplemental agreement has been created.
Non-Commercial Item Contracts. The Changes Clause is the cornerstone of the Government’s ability to modify a contract for non-commercial items. It provides the Government with authority that is unmatched in private-sector contracting. This clause allows the Government to unilaterally make changes in the contract without requiring the contractor’s concurrence. Commonly used Changes clauses are:
- 52.243-1 — Changes — Fixed-Price.
- 52.243-2 — Changes — Cost-Reimbursement
- 52.243-3 — Changes — Time-and-Materials or Labor-Hours
- 52.243-4 — Changes
- 52.243-5 — Changes and Changed Conditions
Contracts for non-commercial items may be modified by use of a change order, which is a unilateral order signed by the contracting officer directing the contractor to make changes using the authority of the various Changes clauses. If the change order causes an increase or decrease in the cost of, or time required for, performance of any part of the work under the contract, the contracting officer must make an equitable adjustment in the contract price, the delivery schedule, or both.
Administrative changes are unilateral changes that do not affect the substantive rights of the parties. They are used to make changes such as change in the paying office or name of the contracting officer.
A contracting officer may need to issue an out-of-scope modification. This can occur if the Government requires an increase or decrease in the scope of work beyond what is contained in the statement of work, and which will result in a change to the cost of the contract. In such cases, the modification is considered “bilateral” and must be agreed to and signed by both the Government and the contractor. Further, the contracting officer must justify the use of a sole source (FAR 6.302-1) and follow the synopsis requirements of FAR 5.201. An example of a form used to issue modifications is the Standard Form (SF) 30.