In determining the amount of the price reduction, reasonable overhead, G&A and profit must be applied to the contractor’s direct costs. As with other costs, the focus is not on what rates were originally included in the bid. To maintain consistency, the courts have stated the same rates used for additive changes should be used for deductive changes. The focus, especially for manufacturing firms, should not be on actual rates after the deletion but on actual rates had the deletion not occurred. This will allow the contractor to use the lower overhead rates. When a deductive change is made to a contract on which the contractor is experiencing a loss, the courts have ruled no profit should be added to the costs based on the rationale that a price adjustment under a loss contract should not add to the loss the contractor would have experienced if there had been no change.

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