If a contract is changed the contractor or the government are entitled to a price adjustment in the contract price. What constitutes a change and how to quantify the entitlement is subject to numerous decisions.

Constructive Change. A constructive change occurs when a contractor must perform work beyond the contract requirements without a formal "order." A contractor was entitled to an equitable adjustment as a constructive change when it was required to perform more and different work as a result of a government inspector’s misinterpretation of specifications (A&D Fire Protection ASBCA 53105). When a contractor intended to use material for forms required by the contract but an inspector prohibited its use it sought an equitable adjustment. The Board denied it saying the contractor must show the direction not to use the material came from the CO or one with authority to change the contract and the failure to notify the CO it considered the inspector’s direction a change (who did not have authority to change the contract) meant there was no compensable constructive change (Jerry Dodds, ASBCA 51682).

Government Interference and Delay. The contractor asserted it was impossible to complete a contract for playground installation because the government did not furnish proper equipment but the Board held the government’s failure did not provide an excuse for nonperformance, stating it did not take all reasonable steps to perform despite the absent equipment (Southeast Technical Svcs. ASBCA 52319). Claims based on delay of approving change orders were denied because the contractor used the wrong forms but claims for delays in the first article testing were sustained because the government’s comments rejecting the contractor’s first article inspections were untimely (Essex Electro Engrs ASBCA 49915).

Impossibility of Performance. Contractor claimed a radical change in the economy made it impossible to buy certain items at a reasonable price where the Board rejected the claim saying market fluctuations did not make performance impossible but only unprofitable. It said to demonstrate impossibility, it was not enough to show the contractor is incapable of performing but that no similarly situated contractor could have performed (Seaboard Lumber 308 F.3d 1283).

Defective Specifications. Design specs describe precise detail of materials to be used and the manner the work will be performed leaving no discretion to the contractor while performance specs set forth a standard to be achieved and the contractor is left to its own devices in how to achieve the standard (U.S. vs Spearin,U.S. 132). The Court rejected the Army’s contention that a contract clause requiring inspection of specs before bidding shifted the burden of design defects to the contractor because such a requirement did not alert the contractor to substantive flaws in the design and hence did not waive the government’s design warranty (White v. Edsall 96 F.3d 1081). If provision of older versions of specs and drawings did not result in an increase in costs the contractor was not entitled to a price adjustment (Franklin Pavkov vs. Roche , 279 F.3d 989). When a contractor followed the design specs for paint and material and subsequent soldering resulted in destruction of the paint finish the Board ruled for the contractor affirming that when the government specifies materials and procedures to be used to perform the contract an implied warranty arises that those materials and procedures are capable of meeting contract requirements (Jimenez, LBCA 02-2).

Superior Knowledge. In a claim based on the assertion the government had superior knowledge the contractor must demonstrate (1) it undertook to perform without vital knowledge of a fact affecting performance cost or duration (2) the government was aware the contactor had no knowledge of and no reason to obtain such knowledge (3) any spec supplied misled the contractor or did not put it on notice to inquire and (4) the government failed to provide the relevant information (Henry Norman vs. GSA, GSBCA 15070). Contractor failed in its superior knowledge claim where the agency did not intend to send half-size drawings but did so by mistake and the contractor did not establish the responsible procurement officials knew that half-size drawings were distributed (Staffco Contr. ASBCA 51754).

Liability for Subcontractors. Recent cases have lessened the incidents of when prime contractors are liable for their subcontractors’ actions. The government sought a price reduction when a subcontractor illegally used an Iranian carrier to transport supplies. The Court ruled the illegality did not per se render the contact unenforceable, stating a contractor is not strictly liable for all the acts and omissions of its subcontractors. Rather first a determination of whether the prime was responsible under the circumstances had to be made and then applying a balance test, whether the nature of the illegality was such as to warrant the forfeiture of compensation (Transfair Internationsl 54 Fed. Cl. 78). Where the government alleged a contactor’s claims were forfeited because its subcontractor’s fraud infected the entire contract, the Court held there must be an inquiry into the prime contractor’s knowledge or involvement with the fraud and that a subcontractor’s fraud, standing alone, is not tied to the prime contractor (N.R. Acquisition, 52 Fed. Cl. 490).

Poor Estimates of Contract Work Scope. The Board found the government had breached its requirements contract when it failed to exercise reasonable care in preparing estimates of orders to be placed in accordance with the FAR Part 16.5 requirement to include "a realistic estimated total quantity" based "on the most current information available." The Board stated while it need not be "clairvoyant to meet this standard" it is not "free to carelessly guess at its needs" (S.P.L. Spare Parts ASBCA 51acd118). Also when actual spare part orders were 12% of estimates the Court found the government negligently failed to consider unserviceable returns and spare parts on hand and was liable for any shortfall attributable to it negligence (Hi-Shear 53 Fed. Cl. 420). It is still not clear how to quantify damages a contractor is entitled to for poor estimates. A higher court overturned a ruling that provided a damage payment equal to what the government actually ordered and the total amount the ID/IQ contract obligated the government to order stating the contractor would have been in a better position with the government breaching the contract. Rather, it ruled the proper basis for damage should be the loss the contractor suffered as a result of the breach, not the total amount it would have received without the breach (White vs. Delta 285 F.3d 1040). But another Board ruled the minimum guaranteed price was the consideration for the contractor to be on call for the work so it was entitled to the total minimum amount of revenue minus what it had been paid (Mid-Eastern Industries, ASBCA 53016). However, a contractor’s recovery for negligent estimates should not include anticipated profits (Rumsfeld 318 F.3d 1317).

Software Rights. The Court established a stringent rule for those who submit unsolicited proposals containing proprietary information when it ruled a submitter’s failure to place a notice on each page relinquished its software rights pertaining to information in the unmarked pages even though it placed the required legend on the cover page (Xerxe Group 278 F.3d 1357). The Board rejected a claim for licensing fees because the contractor failed to mark the software with a "restricted rights legend" that complied with the DFARS and did not incorporate restrictions in a licensing agreement (General Atomics ASBCA 49196).

Quantifying the Equitable Adjustment. The government unilaterally eliminated a line item of the contract and sought a contract price reduction. The contractor asserted the government did not save "much of anything" for the deletion because it did not include "much of anything" for the deleted item from its original bid but the board ruled because there was no evidence of the amount the contractor had bid for the deleted work the government was entitled to a credit for the amount it would have cost (Fire Systems Security ASBCA 53498). Rather than quantifying the cost of the change the Board ruled that use of the total cost method of quantifying an equitable adjustment the contractor has the burden of establishing (1) the impracticality of proving losses directly (2) the reasonableness of its bid (3) reasonableness of its actual costs and (4) the lack of responsibility for the added costs (Propellex Corp. ASBCA 50203). The Board rejected contractor’s attempt to quantify its claim based on lost revenue stating the proper measurement is the difference between what the work would have cost but for the change and the actual cost to perform the work (Schleicher Community Corrections DOTBCA 3046). The Court denied a claim for standby costs applying the Eichleay formula for recovering G&A and overhead costs because the contractor failed to demonstrate there was suspended work, idle time or uncertain period of delay (Pete Varcari, 53 Fed. Cl 357). The Eichleay based claimed costs for standby costs was also rejected where the contractor performed extensive work during the alleged suspension period (Charles G. Williams Construction ASBCA 49775). Where it was confirmed that many contracts severely limit recovery of field and home office overhead and profit on changes due to delays it may be advantageous to classify change claims as suspensions of work rather than delays. Four tests were put forth to meet the "Suspension of Work" conditions: (1) there must be a delay of unreasonable length extending the completion date (2) the delay must be caused by the agency (3) the delay must result in some injury and (4) there was no delay concurrent with the suspension that was the fault of the contractor (Bay Construction Co. VABCA 5594).

Accrual of Interest. In spite of submitting several revisions following its initial claim submission in 1997, the Appeals Board ruled there was no evidence the contractor intended to withdraw and resubmit its earlier claim but rather wanted to modify it and hence the interest clock started in 1997 (Lockheed Martin Corp., ASBCA 53226).

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