Few federal contracts end exactly as they were signed. Funding is added, periods are extended, requirements shift, clauses are updated. Each change is made through a contract modification, and the type of modification determines who must agree, what rights each party has and whether the change is even permissible. Understanding the basics protects contractors from doing unpaid work and from signing away claims they did not know they had.
Bilateral and unilateral
A bilateral modification is signed by both the contracting officer and the contractor. It reflects agreement, and it is used for negotiated changes to price, schedule or scope, for supplemental agreements and for settlements. A unilateral modification is signed only by the contracting officer. It is used for administrative changes that do not affect the parties’ substantive rights, such as correcting a payment office address, for exercising options the contract already provided, and for change orders issued under the changes clause. Both types are documented on Standard Form 30, the same form used for solicitation amendments.
The changes clause
Most federal contracts include a changes clause that allows the contracting officer to order changes within the general scope of the contract: to drawings and specifications, to the method of shipment, to the place of delivery or performance, and, in services contracts, to the description of services and the time and place of performance. The contractor must comply with a properly issued change order. In return, the clause entitles the contractor to an equitable adjustment in price, schedule or both, and sets a time limit for asserting the right. The clause is a trade: the government gets flexibility, the contractor gets paid for the change.
Why scope matters
The changes clause permits changes within the general scope of the contract. A change that goes beyond that, sometimes called a cardinal change, is in effect a new procurement, and it raises competition concerns because other firms never had the chance to bid on it. The test is whether the modified contract is materially different from what offerors could reasonably have anticipated when the original was competed. Contracting officers take this seriously because out-of-scope modifications can be protested by competitors. For contractors, the lesson is that a customer’s wish to add unrelated work is not always something the current contract can accommodate, however welcome the revenue would be.
Not every change arrives as a formal order, either. When the government’s conduct, such as an overly strict interpretation of a specification, a direction from a representative to do extra work or a failure to provide promised property on time, effectively requires the contractor to do more than the contract demands, the result may be a constructive change. Recovering for one usually requires prompt written notice to the contracting officer. Contractors who perform extra work for months without notice may find their claims barred or weakened.
Reading a modification before you sign
- Check the description of the change against your understanding of what was agreed
- Confirm the price and schedule adjustments and the funding obligated
- Look for release language; many bilateral modifications state that the adjustment settles all claims arising from the change, so make sure that is true before you sign
- Verify that the period of performance, clauses and other terms are stated correctly
- Note whether the modification updates clauses to newer versions, which can add obligations
The habits that protect you
Accept direction only from the contracting officer. When anyone else asks for a change, acknowledge the request and route it to the contracting officer in writing before acting. Keep a modification log with each number, date, type and effect. Price changes carefully, and document the basis. And read every modification as closely as you read the original contract, because it has the same legal force. A modification is a small contract in its own right, and it deserves the same attention.