Legal Minute

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Apr
10
2017

What Every Contractor Should Know About Requests for Equitable Adjustment

By Michelle Litteken

Government contractors quickly learn to expect the unexpected. While working on a construction contract, a contractor may encounter undisclosed utility lines 15 feet underground. Or, an information technology support contractor may be asked to comply with heightened security requirements without being given a contract modification. These changes increase the cost of performance and can put a small business in a precarious position. In situations like this, many contractors file a request for equitable adjustment (“REA”), seeking additional compensation and/or time. Before preparing and submitting an REA, there are several important things of which contractors should be aware. 

  1. An REA must rely on at least one contract provision. Although the “E” stands for equitable, and an REA is intended to make a contractor whole, the claim must be based on a contract or Federal Acquisition Regulation (“FAR”) provision. Commonly used provisions include:  FAR 52.243-1 Changes - Fixed-Price; FAR 52.236-2 Differing Site Conditions; 52.222-44 Fair Labor Standards Act and Service Contract Labor Standards - Price Adjustment. The appropriate FAR provision depends on the specific facts of the situation presented. 
     
  2. Provide as much detail as possible. An REA that contains a detailed explanation of the facts providing the basis for the REA is more likely to be granted. The writer should not assume the reader is aware of the circumstances. 
     
  3. Including exhibits or attachments can strengthen the REA. The exhibits should support the statements made in the REA. For example, an email can show that the contracting officer directed the contractor to perform additional work. Exhibits can be particularly helpful if the issue has persisted for an extended period of time or a number of agency personnel have been involved with the situation. 
     
  4. Timing matters when submitting an REA. In most cases, a contractor should assert an REA within 30 days of the change giving rise to the REA. And, an REA cannot be submitted after contract closeout. 
     
  5. Be mindful of releases. Contract modifications often contain releases, which may prevent a contractor from recovering on an REA. Always review a contract modification before signing it, and consult counsel if there is any uncertainty. 
     
  6. Keep track of preparation time. The time a contractor spends preparing an REA may be recoverable as part of the REA. These costs are treated as contract administration costs.
     
  7. Consider retaining counsel because retaining counsel to prepare an REA often results in a more persuasive REA, and legal fees may be recoverable. Under FAR 31.205-33, if a contractor incurs legal costs to prepare an REA to further the negotiation process with the agency, the legal costs are allowable as contract administration costs. The associated legal fees may be included as a line item within the REA. 
     
  8. Use experts and consultants when appropriate. The amounts claimed in an REA must be calculated based on reliable principles and methods, and experts can assist in that effort. Experts and consultants can also help with complex issues, such as scheduling or engineering. Like attorney’s fees, these costs may be allowable and recovered as part of the REA. 

For many contractors, preparing and submitting REAs has become a routine part of working with the Government. The process can become frustrating if the agency fails to respond, there are multiple requests for additional information, or the REA is denied. By keeping in mind the concepts listed above, a contractor can produce a stronger REA and increase the likelihood of success. Retaining counsel is one step contractors can take towards that end, and the attorneys at PilieroMazza are available to assist you in preparing an REA.

About the author: Michelle Litteken is an associate with PilieroMazza in the Government Contracting and Litigation law groups. She may be reached at mlitteken@pilieromazza.com.



 
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