Q&A:Entitled to an Increased Adjustment to Contracted Price
(Editor’s Note. We recently received a question about entitlement for a price adjustment based on a spec change and we sent the following Q&A because it was relevant to the issue. We found the original discussion so interesting we decided to repeat it here.)
Q. Contractor won a fixed-price contract to produce 4,370 two-way radios at $404.00 per unit. The price included a subcontract price for the same sized battery cases used in a prior contract. The average quote received for the case was $13.92 and the offered price in the proposal was $12.48 with the expectation of negotiating a lower price. After contract award but before award of a subcontract, Contractor sent out the specifications identified in the new contract and received a $7.52 quote at which time it learned that the contract specs called for a larger case than it had previously used. When the Army learned the large case would not fit, it issued a change order to make smaller battery cases and Contractor negotiated a unit price of $11.63. Is Contractor entitled to an increased adjustment to its contracted price and if so, how much?
A. Yes, $4.11, based on the difference between $11.63 for the case as changed and the quote of $7.52 as previously specified. In the decision on which the question is based (Admiral Corp., ASBCA 8634), the appeals board stated the $4.11 is consistent with the rule that a “proper equitable adjustment derives from the difference between what it would have reasonably cost to perform as originally required ($7.52) and the reasonable cost to perform the contract as changed ($11.63)” (parenthesis added). Admiral would have been able to get the cases for $7.52 if the Army had not changed the contract while the change increased the cost to $11.63.
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