(Editor’s Note. When the government reduces the scope of work on a contract it usually seeks a price reduction in the contract price. Whereas many contractors have mastered the essentials of a change that adds work and earns an increase in the contract price, fewer understand deductive changes in spite of the fact they are likely to face one. We often see this unfamiliarity with the rules result in the contractor paying or crediting the government more than they need to so we have also focused on how to quantify the deduction. We have relied on a July 2001 Briefing Papers article by John Person of the law firm of Person & Craver LLP.)

The way a scope reduction is characterized directly affects the amount of the price adjustment. Contractors usually have considerable flexibility in how to characterize the reduction. A reduction in contract scope can be a (a)"change" (covered by FAR 52.243-1 through 4)(b) "termination for the convenience (T of C) of the government" (FAR 52.242-2) or (c) "variation in estimated quantity" – "VEQ" – (FAR 52.211-18). The choice depends on how the scope reduction is characterized and the right choice will affect how well you come out.

 

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