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Unpriced Change Orders


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When I was a Forest Service contracting officer in Alaska, I got a call at home on a Friday evening that a landslide had covered a Forest Service road that serves as the only connection between two towns.  Working with the engineering staff at the ranger district, that same night I did an oral unpriced purchase order with a company from one town to work on the south side of the landslide, and the same with another company from the other town to work on the north side.  They met on Sunday and re-opened the road, and did final clean-up  and drainage work on Monday, and I issued the paper purchase order finalizing the price on Tuesday. 

I was able to do it because I was able to keep myself in FAR part 13, Simplified Acquisition Procedures, which allows for unpriced purchase orders.  Some contracting officers and/or their policy experts would say that FAR 16.603, Letter Contracts, and/or DFARS subpart 217.74, Undefinitized Contractual Actions, apply to unpriced purchase orders, but I would disagree.

The above talks about an unpriced purchase order.

An unpriced change order is different.  I've done several of these in my career, both construction and non-construction, and I'll try to answer any specific question you might ask.  No contracting officer should issue a within-scope change order (by definition, a change order is always unpriced and is always within-scope, right?) without carefully reading that contract's applicable Changes clause.  Many contracting officers and/or their policy experts err in supposing that FAR 16.603, Letter Contracts, and/or DFARS subpart 217.74, Undefinitized Contractual Actions, apply to change orders and they make things too hard by erringly self-imposing these inapplicable requirements.  

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13 hours ago, maninblack008 said:

I am doing a senior project for my internship. I am looking for stories or experiences utilizing unpriced contract actions, especially unpriced change orders. Any help would be greatly appreciated.

MIB008, unpriced change orders are not “unpriced contract actions”. By “stories or experiences”, are you looking for information on how to issue and definitize UCA’s and change orders? Or are you seeking information on how well or not so well the experience is or was? Lessons learned? SOP’s and management controls? Government and/or contractor perspectives?

There has been recent industry input to Congress to require agencies to be accountable for timeliness of definitization due to complaints that government agencies are taking too long to settle, pay and determine equitable adjustments for time, cost and impacts to the schedule and the unchanged work.

Thanks in advance for clarifications. This is an extensive and complex topic. 

 

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On 10/3/2020 at 2:03 AM, joel hoffman said:

By “stories or experiences”, are you looking for information on how to issue and definitize UCA’s and change orders? Or are you seeking information on how well or not so well the experience is or was? Lessons learned? SOP’s and management controls? Government and/or contractor perspectives?

Essentially, all of the above. I'm in charge of creating a process to utilize Unpriced Change Orders more often. I would like to know the ins and outs of other agencies' processes so I can tailor to my agency. I need to be cognizant of the issues others have had with their process so I can avoid them in this project. Thank you for responding!

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On 10/2/2020 at 2:04 PM, ji20874 said:

by definition, a change order is always unpriced and is always within-scope, right?

maninblack008, you say you want to create a process to use unpriced change orders more often. Before you invest too much time into the effort, I suggest you read and reflect on ji20874's words, quoted above. 

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@ji20874, that's a good example. How did you verify availability of funds before issuing the orders?

On 10/2/2020 at 2:04 PM, ji20874 said:

(by definition, a change order is always unpriced and is always within-scope, right?)

No, a change order can be forward priced. FAR 43.204(a) contemplates such a thing by starting "When change orders are not forward priced..."

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8 minutes ago, Don Mansfield said:

No, a change order can be forward priced. FAR 43.204(a) contemplates such a thing by starting "When change orders are not forward priced..."

Don, can you give me an example of when a change order would be forward-priced, other than a Value Engineering ECP that I believe would be addressed by FAR Part 48?

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@here_2_help

I don't have any real world examples. 

I can imagine a situation where the parties contemplate the possibility of a future change order based on the occurrence of Event A. There's a 50% chance that Event A will occur. If Event A occurs, it will increase the cost of performance by an amount than can be easily estimated from currently known conditions. As such, the parties agree to the amount of the price adjustment in anticipation of a future change order.

 

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3 hours ago, Don Mansfield said:

How did you verify availability of funds before issuing the orders?

Fair question, considering FAR 32.702(a).  Our process provided a pool of funds for immediate response needs, and I would rely on that pool until such time as more appropriate funds could be channeled through the system.  

 

3 hours ago, Retreadfed said:

...see the policy at 43.102(b)...

In my practice, a change order is always unpriced -- by definition, a change order is a unilateral order by the contracting officer, followed by an opportunity for equitable adjustment.  If the parties agree on the price and everything else before bilaterally effecting the change, that would be a supplemental agreement rather than a change order.  I haven't had the situation of forward pricing a change order, but Don is right that it is theoretically possible.  I guess my point is this:  If it is out-of-scope work, don't call it a change order -- it isn't a change order.  And, if it is a bilateral agreement that includes whatever contract adjustment is appropriate, don't call it a change order -- it isn't a change order.

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1 hour ago, Retreadfed said:

H2H, see the policy at 43.102(b).

I'm unclear as to how "changes that could be issued unilaterally" differ from options. Would somebody please elucidate?

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2 hours ago, here_2_help said:

I'm unclear as to how "changes that could be issued unilaterally" differ from options. Would somebody please elucidate?

Both a change order and an option exercise are changes that can be issued unilaterally. However, an option is for purchasing additional supplies and services or extending the contract term (see definition of "option" at FAR 2.101). A change order is not for the same purpose, although the corresponding adjustment could result in an extension to the contract term.

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5 hours ago, maninblack008 said:

Essentially, all of the above. I'm in charge of creating a process to utilize Unpriced Change Orders more often. I would like to know the ins and outs of other agencies' processes so I can tailor to my agency. I need to be cognizant of the issues others have had with their process so I can avoid them in this project. Thank you for responding!

MIB008, are you in a DOD organization? 

FAR 43.2, DFARS/PGI  243.2 and subordinate FAR Supplements cover change orders. 

Here is US Army Corps of Engineers acquisition instruction coverage for construction contracts: “SUBPART 43.1 — GENERAL
43.102-100 Policy.
(b)The policy and procedures at DFARS 217.74 shall be used to the maximum extent practicable for contract modifications within the scope of the contract that are not "undefinitized contract actions" (UCAs) as defined by DFARS 217.7401(d) (e.g., unpriced change orders (UCOs)). A D&F, signed by the PCO prior to issuance of any such modification, shall contain, as a minimum, the following:
(1) The reason normal contract modification procedures and lead times are not practicable;

(2) The date the requirement was first identified;
(3) The consequences of missing the required delivery date;
(4) The definitization schedule for the contract modification;
(5) An explanation for any deviation from the definitization schedule;
(6) The percentage of contract modification work completed by the contractor priorto definitization;
(7) The Not To Exceed price.
(c) The DCC/CCC and Chief of Construction shall establish management controls for monitoring definitization schedules, receipt of contractor proposals, and completion of negotiations/execution of the definitization modification, when UCOs are issued.“

In addition, USACE South Atlantic Division Manual SADM 1110-1-1 Contract Administration Manual and the Mobile District Supplement SAMDM 1110-1-1 provide SOP’s for Unpriced Change Orders for construction contracts, including Design-Build construction contracts.

The policy has always been to try to pre-price, bilaterally, if possible, contract changes and other mods. USACE Policy also requires a not to exceed price, which might represent a percentage of a government estimate or a percentage of rough order of magnitude estimate. We were encouraged to obtain contractor agreement on NTE where practicable and would often ask for a ROM estimate if time allowed.

Change orders should be issued by modification or in writing followed by a mod ASAP, if no time for an initial mod. I believe that is still covered in the above references.

Timely Definitization of modifications has always been an issue with contractors and government policy. I believe that Congress recently passed legislation requiring agencies to track and report on long it take them to definitize unpriced mods. Don’t have time to research that today. It was probably in FY 2019 or so DoD Authorization Act or Appropriation Act.

Unpriced Changes or other Unpriced Mods covers a very broad subject area. 

 

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I transferred within USACE to be Chief of Contract Administration Division in the Chemical Weapons Demilitarization Directorate of a Division Level organization back in 1997. Our organization was responsible for design and construction phases of Systems Contracts for Chemical Weapons Disposal Plants at seven US chemical weapons depot sites and one in Russia. Our Contracting Officer (KO)  had many years of experience in all but construction contracting. He made it clear that he would not support issuing any unpriced changes. That lasted until the first major ECP for design revisions was issued at the first Demil plant site, followed up at two other sites with almost the same design for the plants. That first Design Revision ECP contained something like 1000 pages of revised drawings  and massive spec changes - which of course also affected the schedules... The KO soon learned that change orders had to be issued and issued often in order to avoid massive impacts and delays to the program. I have often chuckled over his naive policy decree. 

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I work for the DoD. I am with NAVFAC in a Construction FEAD. Like I said, I am an intern, and apparently UCOs are something we should have been using but never really had a process to complete them. The CCO and Policy Director here are adamant about creating a standardized process for us, like apparently every other DoD agency has. 

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21 minutes ago, maninblack008 said:

I work for the DoD. I am with NAVFAC in a Construction FEAD. Like I said, I am an intern, and apparently UCOs are something we should have been using but never really had a process to complete them. The CCO and Policy Director here are adamant about creating a standardized process for us, like apparently every other DoD agency has. 

NAVFAC has come a long way since I attended USACE Contract Admin courses with some of their folks in the early 1980’s. Back then, all mods were issued in DC and there were no warranted “resident contracting officers” (=ACO post 1984 in the FAR) in NAVFAC.

At any rate you could read FAR, DoD and USACE policy and see the SOP’s for one Division and one of its District Offices. I wrote most of the SOP’s for change orders around 1990 for the Mobile District CAB Manual. 

South Atlantic Division later used that CAB Manual in developing its CAB Manual to standardize SOP’s across the Division. 

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7 hours ago, here_2_help said:

I'm unclear as to how "changes that could be issued unilaterally" differ from options. Would somebody please elucidate?

Pretty basic.  The last part of 43.102(b) is important regarding change orders.   A ceiling price is key. The lack of establishing a precise one is the basis of many disputes.  

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2 hours ago, formerfed said:

Pretty basic.  The last part of 43.102(b) is important regarding change orders.   A ceiling price is key. The lack of establishing a precise one is the basis of many disputes.  

Yes, and as I said try to mutually agree on an NTE ceiling price if possible. 

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15 hours ago, joel hoffman said:

NAVFAC has come a long way since I attended USACE Contract Admin courses with some of their folks in the early 1980’s. Back then, all mods were issued in DC and there were no warranted “resident contracting officers” (=ACO post 1984 in the FAR) in NAVFAC.

At any rate you could read FAR, DoD and USACE policy and see the SOP’s for one Division and one of its District Offices. I wrote most of the SOP’s for change orders around 1990 for the Mobile District CAB Manual. 

South Atlantic Division later used that CAB Manual in developing its CAB Manual to standardize SOP’s across the Division. 

That's amazing! What does CAB stand for, and is it available on the Acquisition.gov site? 

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I should have said “CA” (CAB = Contract Admin Branch. An inside term, dating back many decades). I’ll provide you some links. I’m at a volleyball match. 

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13 hours ago, joel hoffman said:

I should have said “CA” (CAB = Contract Admin Branch. An inside term). I’ll provide you some links. I’m at a volleyball match. 


Both the South Atlantic Division and Mobile District Contract Admin Manuals should be available on the Whole Building Design Guide (unless they revamped the WBDG site). I couldn’t find the links. 
Look for SADDM 1110-1-1 and SAMDM 1110-1-1.
 “DM” stands for “Division Manual” and “District Manual” respectively.

“SAD” is South Atlantic Division. Mobile Is a District under SAD.  Thus, SAM is an acronym for “South Atlantic Mobile”.

Savannah (SAS), Charleston (SAC), Jacksonville (SAJ) and Mobile (SAM) are all sister Districts under SAD.

I’m retired, so I don’t access all the Manuals, Regulations, Engineering and Construction Bulletins, and Contracting policies but once in a Blue Moon.

However, there are some good SOP’s and other policy and procedural guidance out there for the various Contracting and Contract Admin activities. The ECB’s (Engineering and Construction Bulletins) cover various activities, including preparation of solicitations and ACO activities after award. 

Edit: These are SOP’s under Engineering and Construction Proponency, not Contracting, as they were written for contract admin purposes, including mods. They are vetted with Contracting.  

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On 10/7/2020 at 5:00 AM, joel hoffman said:


Both the South Atlantic Division and Mobile District Contract Admin Manuals should be available on the Whole Building Design Guide (unless they revamped the WBDG site). I couldn’t find the links. 
Look for SADDM 1110-1-1 and SAMDM 1110-1-1.
 “DM” stands for “Division Manual” and “District Manual” respectively.

“SAD” is South Atlantic Division. Mobile Is a District under SAD.  Thus, SAM is an acronym for “South Atlantic Mobile”.

Savannah (SAS), Charleston (SAC), Jacksonville (SAJ) and Mobile (SAM) are all sister Districts under SAD.

I’m retired, so I don’t access all the Manuals, Regulations, Engineering and Construction Bulletins, and Contracting policies but once in a Blue Moon.

However, there are some good SOP’s and other policy and procedural guidance out there for the various Contracting and Contract Admin activities. The ECB’s (Engineering and Construction Bulletins) cover various activities, including preparation of solicitations and ACO activities after award. 

Edit: These are SOP’s under Engineering and Construction Proponency, not Contracting, as they were written for contract admin purposes, including mods. They are vetted with Contracting.  

Thank you! This is amazing and definitely gives me something to work with.  

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21 hours ago, maninblack008 said:

Thank you! This is amazing and definitely gives me something to work with.  

I did find some general coverage of unilateral change orders in Chapter 7 of USACE Pamphlet EP 415-1-260 “Area/Resident Engineer Management Guide at:  
https://www.publications.usace.army.mil/Portals/76/Publications/EngineerPamphlets/EP_415-1-260.pdf

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Just remember that DFARS subpart 217.74, Undefinitized Contract Actions, by its own words, does not apply to unpriced change orders within the Defense Department -- some DoD organizations or individuals may require compliance for change orders even though the DFARS does not it, but you should be able to tell the difference and understand the correct principle.

And also bear in mind that DFARS 243.204-70, Definitization of Change Orders, by its own words, only applies to unpriced change orders with an estimated value over $5 Million within the Defense Department -- some DoD organizations or individuals may require compliance for lower-dollar change orders even though the DFARS does not it, but you should be able to tell the difference and understand the correct principle.

Some former DoD persons who transfer to civilian agencies may bring some of this baggage with them.  

Read the FAR.  Read your current agency's regulations.  Then, do what they say.  

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