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Government not approving change order

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2 hours ago, ji20874 said:

Neither FAR 52.212-4(c) nor the Changes clauses at FAR 52.243-x allow, authorize, or otherwise countenance constructive changes.  Constructive changes arise wholly outside the Changes clause.

The second sentence does not follow from the first.  Consider the following from Irwin Newman, "Constructive Changes," 9 National Contract Management Journal 44, 45 (Winter 1975-76), citing J. Bell v. United States, 404 F.2d 975 (Ct. Cl. 1968):

Quote

Its [the constructive change doctrine's] effect is to give greater credence to substance than to form.  It embodies the equitable theory that treats "what should have been done as done"; it transmutes an informal directive into a formal order.

In the context of the above quote, what "should have been done" was a change under the Changes clause  If the Government cannot issue a "formal order" why should the court or boards give effect to an "informal directive"?  Surely there is a point where the Government's breach requires that the Contractor refuse to perform.

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You’re still looking for something in the contract that gives permission for a constructive change.  There is none.  

The Changes clause neither gives permission for a constructive change nor provides a remedy for a constructive change.  In a contract for commercial items, the Government cannot make a unilateral change under FAR 52.212-4(c).  Neither can the Government order a constructive change nor provide an equitable adjustment for such order under FAR 52.212-4(c).

A constructive change, if allowed to occur through sloppy contract administration, is formalized and remedied under the Disputes clause.  At least, that’s how I approach it.  

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4 minutes ago, ji20874 said:

The Changes clause neither gives permission for a constructive change nor provides a remedy for a constructive change.

Outside of the context of commercial item acquisition, the Changes clause is PRECISELY where courts and boards look in determining the remedy for constructive changes.  The doctrine, which has it origin before the Contract Disputes Act, allowed the boards to retain jurisdiction.  To quote again from the Newman article referenced above, "By treating the constructive change claim as arising under the Changes clause, the Boards can ignore the breach and settle the claim administratively, an approach that had been approved by the courts."

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I understand where you’re coming from.  But the only way the matter gets to the Boards (or the courts) is through the Disputes clause.  
 

1 hour ago, ji20874 said:

The Changes clause neither gives permission for a constructive change nor provides a remedy for a constructive change. 

This remains a true statement.  If a Dispute is raised, the Boards may reasonably look to the Changes clause to help fashion a remedy (although they need not be limited by the Changes clause) — but I cannot allow myself to declare that the Changes clause gives the Government permission to unilaterally order a constructive change and that it gives the contractor a right to equitable adjustment for a constructive change.

If I were administering a contract for commercial items and a constructive change occurred, and I later came to terms with the contractor for settlement, my settlement modification would cite the Disputes clause as the authority for the agreement.  That’s my practice.

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@ji20874, the history of the doctrine shows it is underpinned by the Changes clause.  Consider Nash & Feldman, Government Contract Changes (3d Ed.), at § 10:6:

Quote

Nonetheless, although the appeals boards and the courts may now employ common law breach of contract theories to provide the contractor a remedy under the Disputes Act, they continue to employ the constructive change doctrine.

One explanation for this outcome is a belief that it is more appropriate to grant a remedy called for by the contract terms than to look for a remedy outside of the contract (such as breach of contract).  As the ASBCA has remarked, "The constructive change doctrine is, perhaps, the foremost example of our commitment to providing reflief under the contract whenever it is possible to do so." ...

However, the constructive change doctrine will not be applied if the contract is not required to and does not include a Changes clause.  In Robert W. Patterson, [ASBCA 36823, 89-3 BCA ¶ 22101] the ASBCA denied compensation for extra work at least partially on the basis that there could be no constructive change because the contract lacked a Changes clause. ...

The above passage from Robert W. Patterson also raises questions on whether the constructive change doctrine applies to commercial item contracts under FAR Part 12.  As explained in § 2:14, commercial item contracts have a standard Changes clause, with the distinction that the Government has no right to issue a unilateral change order.  The parties must agree to the change.  Because the constructive change doctrine is premised on the existence of a contract clause reflecting a unilateral Government right to issue change orders, as stated in Robert W. Patterson, and no commercial item contract clause explicitly gives the contractor the right to assert this theory, it could easily be concluded that a contractor may not assert a constructive change (or constructive delay) claim on a commercial item contract.

A 2001 ASBCA case has allowed the contractor to assert such claims under a commercial item contract, although the board did not explain the basis for its decision.  Apparently, the rationale for the decision is the Disputes paragraph of the FAR 52.212-4...clause. …  Thus, if one is willing to assume that constructive changes are the equivalent of breaches of contract--and the ASBCA evidently made this assumption--then the "Disputes" paragraph provides the same relief that would have been provided under the standard clauses providing for price adjustments.

The "2001 ASBCA case" is SAWADI Corp., ASBCA 53073, 01-1 BCA ¶ 31357.

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1 hour ago, ji20874 said:

Re:  The 2001 ASBCA case (SAWADI).

Good.  The ASBCA and I are taking the same stand.

There is a surprising similarity in the depth of analysis. 

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Outside of commercial item contracting, the Government has the flexibility to include the "Notification of Changes" clause at FAR 52.243-7, which, I suspect even @ji20874 would admit is written with constructive changes in mind.  If a commercial item solicitation contained this clause, a potential offeror could easily object that it is inconsistent with customary market practices for the commercial item being acquired AND THAT OBJECTION WOULD LIKELY BE FACTUALLY CORRECT.  Yet that same contractor likely wouldn't hesitate to take advantage of the apparent willingness of at least one panel of the ASBCA to ignore that commercial item procedures are INTENTIONALLY different from traditional Government contracting procedures, and submit a claim and appeal grounded on constructive change.

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Yes, I am a big fan of the notification of changes clause!  It is written to avoid constructive changes.  I have even used it in some contracts for commercial items under FAR 12.301(e).

But, dropping that clause for a moment, when a constructive change seems to be arising in a contract for commercial items, the contractor can

  • (1) assert that no changes are allowed by insisting on fidelity to 52.212-4(c) and not starting the work;
  • (2) insist on a written change as required by 52.212-4(c) before starting the work; or
  • (3) keep quiet, start the work, and make its claim for more money later (after the opportunity for a timely mutually-beneficial negotiation has passed).  

We seem to be talking about (3), where a Government official erred in making what the contractor saw as a change, and the contractor did not elect (1) or (2).  We would be better served if more contractors would choose (1) or (2).  But, when (3) is the reality, the Disputes clause is there to facilitate the contractor's remedy (if the facts call for a remedy).

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19 minutes ago, ji20874 said:

Yes, I am a big fan of the notification of changes clause!  It is written to avoid constructive changes.  I have even used it in some contracts for commercial items under FAR 12.301(e).

But, dropping that clause for a moment, when a constructive change seems to be arising in a contract for commercial items, the contractor can

  • (1) assert that no changes are allowed by insisting on fidelity to 52.212-4(c) and not starting the work;
  • (2) insist on a written change as required by 52.212-4(c) before starting the work; or
  • (3) keep quiet, start the work, and make its claim for more money later (after the opportunity for a timely mutually-beneficial negotiation has passed).  

We seem to be talking about (3), where a Government official erred in making what the contractor saw as a change, and the contractor did not elect (1) or (2).  We would be better served if more contractors would choose (1) or (2).  But, when (3) is the reality, the Disputes clause is there to facilitate the contractor's remedy (if the facts call for a remedy).

Paragraph (d) of the clause at FAR 52.212-4 provides:

Quote

Disputes. This contract is subject to 41 U.S.C. chapter 71, Contract Disputes. Failure of the parties to this contract to reach agreement on any request for equitable adjustment, claim, appeal or action arising under or relating to this contract shall be a dispute to be resolved in accordance with the clause at FAR 52.233-1, Disputes, which is incorporated herein by reference. The Contractor shall proceed diligently with performance of this contract, pending final resolution of any dispute arising under the contract.

I have been treating the contractor's obligation to "proceed diligently" as only applying to a dispute that 'arises under the contract,' not a dispute relating to the contract.  If the contractor has a duty to proceed even in the face of a dispute 'relating to this contract,' then I could see why your item 3 above is the correct course of conduct.  But, if that is true, and the contractor has a duty to proceed diligently regardless of whether the potential dispute is grounded on a relief-granting clause or something else, then I doubt your items 1 or 2 are truly available to the contractor, as the contractor's REFUSAL to start work would violate the terms of the contract (specifically, the last sentence of paragraph (d) of the clause at FAR 52.212-4).

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On 12/1/2019 at 1:04 PM, Retreadfed said:

When did you find out that the weight of the item as represented by the government was inaccurate?  I'm not interested in when you found out the actual weight, just when you found out that the weight the government old you was inaccurate.  Was it before you submitted your proposal, after proposal submission but before award, or after award?

I found out that the weight was likely inaccurate about 2 weeks after the project began.  We were literally working on the project when the error was discovered.

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On 12/1/2019 at 2:38 PM, joel hoffman said:

Commercial services contract then.  I wonder how this contract qualifies as pricing as a commercial services contract.

I’m assuming that you priced the contract based upon the description of dismantling and removing a “commercial item” (a floating station)  and pics provided as well as answers to the pre-bid questions and answers provided. 

if it is a service for “a commercial item” there should have been a way to determine what was in the floating station and their weights. 

Regardless, if this is considered a “change”,  then 52.212-4 (c) Changes clause requires bilateral, written agreement...

“(c) Changes in the terms and conditions of this contract may be made only by written agreement of the parties.“

The gov approved a change order for an amount that was roughly half of what we requested, based upon the estimate for crane and time.  However, the project is now complete and the crane time was slightly greater than anticipated and the amount of my company time (on site and administrative) has not been compensated at all.

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Guest PepeTheFrog
3 minutes ago, PD216ohio said:

On a related topic, are any of the participants of this thread an attorney who specializes in these matters?

Every one of the participants is a certified Internet Expert. 

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49 minutes ago, PD216ohio said:

The gov approved a change order for an amount that was roughly half of what we requested, based upon the estimate for crane and time.  However, the project is now complete and the crane time was slightly greater than anticipated and the amount of my company time (on site and administrative) has not been compensated at all.

Did you agree with the “approved amount”?  Or was that amount an interim amount to allow you to proceed, subject to subsequent settlement and agreement? 

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9 minutes ago, joel hoffman said:

Did you agree with the “approved amount”?  Or was that amount an interim amount to allow you to proceed, subject to subsequent settlement and agreement? 

It was an interim amount and was tied to the NTP and crane plan approval.  It states simply that it was for "mobilization of a crane to site".

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As noted in the extract posted by Jacques, the ASBCA did not explain its reasoning for the decision reached in SAWADI.  There the contractor asserted several claims and prevailed on one.  Here is what the Board said in regard to that claim:

To recover for performance of changed work, appellant generally must prove liability, causation, and resultant injury. Servidone Const. Corp. v. United States, 931 F.2d 860, 861 (Fed. Cir. 1991).  The COR suggested that the appellant remove a fence and brush and trees that were located outside the area to be cleared under DO 5. That action by the COR caused appellant to incur extra labor hours and any resultant costs. The CO ratified the COR’s actions and the agreement with SAWADI to remove the six-foot fence and clear the entangled brush and trees. (Findings 9-11) SAWADI is entitled to recover at the contract rate for removing the fence and the entangled brush and trees.

While the Board cites Servidone, here is the actual language from that decision:  "To receive an equitable adjustment from the Government, a contractor must show three necessary elements--liability, causation, and resultant injury."

From the language the Board used in SAWADI, it is impossible to tell what its reasoning was in regard to the decision it reached.  Further, the SAWADI decision has not been cited in any other case.  Therefore, you would be skating on thin ice to base an argument one way or the other concerning constructive changes on contracts for commercial items on that decision.

I am in general agreement with Jacques that a contractor's obligation to continue performance under 212-4(d) only applies to disputes arising under the contract.  As stated in FAR 33.213, "A claim arising under a contract is a claim that can be resolved under a contract clause, other than the clause at 52.233-1, Disputes, that provides for the relief sought by the claimant."  On the other hand, 33.213 states:  "A claim relating to a contract is a claim that cannot be resolved under a contract clause other than the clause at 52.233-1.) "  Thus, if a constructive change is not a change governed by a Changes clause, but is governed by the Disputes clause, (a point that I disagree with) a contractor has no obligation to continue performance until a dispute concerning that constructive change is resolved.

Constructive changes are a legal fiction designed to avoid contracting parties and the appeals boards and courts having to deal with potential material breaches of contracts.  Under this legal fiction, a constructive change is considered to be a within scope change to a contract entitling the contractor to an equitable adjustment as described in the various Changes clauses instead of breach of contract damages.

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Im not at home but Nash and Cibinic covered the evolution of pricing government changes, constructive changes, impacts on uncharged work and the changes clause language very well in two books “Government Contract Changes” and “Administration of Government Contracts”. I don’t remember whether the caselaw developed before or after the clauses were modified to specifically address constructive changes and impact on the unchanged work. What was first - the Chicken or the egg?  The construction contract changes clause does now address those issues. The Commercial Items clause doesn’t.

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On 12/3/2019 at 12:45 PM, PD216ohio said:

It was an interim amount and was tied to the NTP and crane plan approval.  It states simply that it was for "mobilization of a crane to site".

Sorry, Ohio. I missed your response to my question. So, it appears that this is an undefinitized change and that the government recognizes it as an in-scope “change” to the contracted work.

I think that, under the contract terms,  the Government needs to definitize the change through bilateral agreement, if that is possible.

The boards and courts have recognized merit in claims for delays to completion for work which extended the contractors time on site, even if it is within the completion. However, the cases that I have read are under construction contract changes clause or other clauses providing similar relief. Those clauses specifically provide for equitable adjustments or adjustments for increase or decrease to the contractor’s cost or time due to the change. The changes clause also covers  other impacts on the unchanged work.

I don’t know how a board would rule on a commercial services contract claim, that doesn’t contain the standard clauses for this type of work. 

Bottom line is what to do if the KO won’t agree that you were impacted and you can prove the “but for...we would have been done earlier...and this is specifically how I can show the cost impacts for additional labor and... “? 

 I think that you’d need some legal assistance. Such assistance isn’t an allowable cost in preparation or prosecution of a claim. Cost of Legal advice in the form of case law research to confirm that impact of the change on labor costs and the progress is compensable might be allowable for a pre-dispute effort to facilitate contract administration. It might not be in dispute yet. 

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On 12/6/2019 at 10:44 AM, joel hoffman said:

Sorry, Ohio. I missed your response to my question. So, it appears that this is an undefinitized change and that the government recognizes it as an in-scope “change” to the contracted work.

I think that, under the contract terms,  the Government needs to definitize the change through bilateral agreement, if that is possible.

The boards and courts have recognized merit in claims for delays to completion for work which extended the contractors time on site, even if it is within the completion. However, the cases that I have read are under construction contract changes clause or other clauses providing similar relief. Those clauses specifically provide for equitable adjustments or adjustments for increase or decrease to the contractor’s cost or time due to the change. The changes clause also covers  other impacts on the unchanged work.

I don’t know how a board would rule on a commercial services contract claim, that doesn’t contain the standard clauses for this type of work. 

Bottom line is what to do if the KO won’t agree that you were impacted and you can prove the “but for...we would have been done earlier...and this is specifically how I can show the cost impacts for additional labor and... “? 

 I think that you’d need some legal assistance. Such assistance isn’t an allowable cost in preparation or prosecution of a claim. Cost of Legal advice in the form of case law research to confirm that impact of the change on labor costs and the progress is compensable might be allowable for a pre-dispute effort to facilitate contract administration. It might not be in dispute yet. 

I think I have a valid claim... but getting the CO to agree to that fact and authorize additional monies is an entirely different thing.  I did contact an experienced firm and they feel this is pretty cut and dry in my favor.  I suppose I have time to compose a well written and researched letter and request for equitable adjustment that might help me get to my goal here.  Thank you for your help along the way.

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33 minutes ago, PD216ohio said:

I think I have a valid claim... but getting the CO to agree to that fact and authorize additional monies is an entirely different thing.  I did contact an experienced firm and they feel this is pretty cut and dry in my favor.  I suppose I have time to compose a well written and researched letter and request for equitable adjustment that might help me get to my goal here.  Thank you for your help along the way.

Good luck, Ohio. 

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