How Long Does it Take for the Government to Process Change Orders?

Last fiscal year (2018), federal agencies spent $36 billion on construction contracts. Almost half of that went to small businesses. Most construction projects involve some degree of change as the project progresses and small businesses have been complaining that delays in processing contract changes and making payments have created financial difficulties. With the 2019 NDAA (National Defense Authorization Act), agencies are now required to report information related to how quickly they finalize contract changes.

GAO performed a review to assess construction contract change processes and time-frames to (i) identify factors that affect the time it takes to finalize contract changes and (ii) assess the extent to which agencies monitor those time frames. Its review focused on GSA and the Army Corps of Engineers, two Agencies with large amounts of obligations on construction.

The GAO found that multiple factors affect the time it takes to finalize a construction contract change. For example, preparing cost estimates was time consuming. The Government needs adequate cost data to inform negotiations. The GAO found examples of miscommunication during the change process which led to unauthorized work to be undertaken.

Based on the data collected, about 55 percent of contract changes at the Corps of Engineers were finalized in 60 days or less. About 10 percent of changes however took more than six months to process - some took more than a year. GSA did not have comparable data.

GAO recommended that both GSA and Corps of Engineers develop a strategy to routinely collect information on and monitor time frames for contract changes at the headquarters level. Without such data, contracting officials are unaware of any existing or potential problems, such as long process times that may affect project schedules. Both Agencies concurred with the GAO recommendation.

The full GAO report can be accessed here.

Can the Government Unilaterally Change the Terms of Your Contract?

There are several types of formal contract changes available under Government contracts. Some of them can be issued unilaterally by the Government but unilateral changes cannot be made for anything that affects the substantive rights of the contractor. Following is a brief description of the formal contract changes available to the Government and the contractor.

Administrative changes. Administrative changes are almost always unilateral changes and do not affect the substantive rights of the parties. Administrative changes are defined in FAR 43.101 and might include a change in the "paying office", appropriation codes, or a new telephone number for an agency point of contact. Administrative modification numbers usually begin with the letter "A".

Change orders. A change order is a unilateral, written order, signed by the contracting officer, directing the contractor to make a change that the "changes clause" authorizes, with or without consent. Examples would be exercising options, suspending work, or terminating the contract. Some change orders lead to equitable adjustments which ultimately become bilateral modifications.

Bilateral modifications. Bilateral modifications, sometimes referred to as supplemental agreements, are contract modifications signed by the contracting officer and the contractor. According to FAR 43.103(a), bilateral modifications are used for negotiating equitable adjustments that result from the issuance of a change order, definitizing a letter contract, or reflecting other agreements of the parties affecting the terms of a contract.

Administrative changes are typically benign but other type of changes can result in adverse financial impact for contractors either because expenses will increase or reduction in scope that leads to higher indirect costs on other contracts. In such cases, contractors have recourse. Contractors can submit REAs (Requests for Equitable Adjustments) or file a claim under the Contract Disputes Act.