Don’t be fooled: the Government can constructively change any contract–not just ones for construction.

Schoonover & Moriarty LLC
Contact

In the legal biz, we encounter an array of odd linguistic quirks (which we’re trying to quell but their hold is tenacious!). Lawyers often “deem” something to exist or to be true, when normal people would use only the verb “to be”–e.g., the contract was deemed executed versus the contract was executed. We use silly words like “axiomatic.” (I’m probably guilty of using that one before, and I can only hang my head in shame.) And then, we define words differently from their normal usage. Example: enjoining someone in regular English means to strongly urge or encourage; in the law, it means prohibiting a person from taking a certain action. Go figure.

Our topic today–constructive changes–also shows an idiosyncrasy of legal language. Despite their name, these changes don’t relate to construction, though they can pop up in construction contracts. Nor is the change beneficial or positive, like “constructive criticism” is often intended. Instead, it has a nuanced legal meaning: a change implied by the law.

Formal contract changes

Normally, if a contracting officer wants to change a Government contract, she formally issues the change in writing through FAR 52.243-1 or another appropriate Changes clause. If that formal directive increases the contractor’s costs, the contracting officer issues an equitable adjustment. If necessary, she extends the performance period too. The process is defined and clean.

How is a constructive change different?

Less definition and formality attend a constructive change. With a constructive change, there are two important characteristics. First, the contractor performs work beyond the contract’s requirements. And second, the Government orders the contractor to perform, or the change is caused by Government fault. But note: with a constructive change, the Government order is not a formal written one. While is can be in writing, oftentimes it is oral. And sometimes the order isn’t even express–it’s just implied.

Be aware, however, that not all Government commands are equal. Even in the constructive change context, the official making the change–whether by words or conduct–must be authorized to bind the contractor (think contracting officer). Put differently, if the contractor undertakes a change on Joe Shmoe’s say-so, it runs the risk of volunteering extra work. In that case, you can forget about asking the Government for more cheddar.

When do constructive changes show up?

We see constructive changes arise in multiple contexts.

For example, a frequent situation is a disagreement over the contract’s scope. The Government contends that a contract requires XYZ, while the contractor reads the contract to include only XY. With the scepter of its interpretation, the Government commands the contractor to also perform Z.

Constructive changes also arise where the contractual specifications are faulty, and the Government tells the contractor to adapt to the on-the-ground reality, which (you guessed it) generates more work.

Government fault is also a driver of constructive changes: the Government fails to cooperate with the contractor, and unanticipated work creeps up like a weird brother-in-law at a family gathering (i.e., not something you really wanted to encounter).

Damages

So, what about damages? Like formal contract changes, a constructive change entitles a contractor to an equitable adjustment to make it whole. This includes all the costs flowing from the change. This might include burdened labor rates, materials, other direct costs, and G&A. And it even includes a reasonable profit on those costs.

Don’t forgot that performance extension either. If a change necessitates a longer performance period, then that too is a remedy.

Formalizing a constructive change

Ultimately, every constructive change–if a contractor wants a recovery in money and/or time–must be formalized through a contractual modification implementing an equitable adjustment. So, if you encounter a constructive change, it’s time to start talking to the contracting officer. That might mean using a soft voice and submitting a request for equitable adjustment. Or it might mean, if the Government balks, clearing your throat and using the more stern voice of a claim. In any event, the contractor must channel its inner Oliver Twist and ask for more; the Government doesn’t tend to ladle out more on its own.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Schoonover & Moriarty LLC | Attorney Advertising

Written by:

Schoonover & Moriarty LLC
Contact
more
less

Schoonover & Moriarty LLC on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.