New Laws May Not Impact Your Existing Contract

Government contractors trying to cope with the current flood of new laws, executive orders, and regulations need to remember that these changes generally do not re-write their existing government contracts. Although the President may sign new Executive Orders and federal agencies may adopt new regulations, the terms and conditions of an existing contract do not automatically change. A “deal is a deal” even with the government.

This stability may seem strange to contractors familiar with the various FAR Changes clauses that allow the government to make unilateral changes to existing contracts. Those clauses, however, do not allow the government to unilaterally re-write a government contract. The standard FAR Changes clause in a non-commercial item contract typically allows unilateral changes to the contract’s drawings and specifications but the terms and conditions are generally considered not part of the contract’s “specifications” subject to the Changes clause. New FAR clauses can, of course, be inserted into non-commercial item contracts if the contractor receives consideration.

Nor can the government unilaterally change the terms and conditions of a commercial-item contract. The standard Changes clause in those contracts requires both the government and the contractor to agree to any changes.  Again, new FAR clauses can be inserted into commercial item contracts if the contractor receives consideration.

What are the rules for FAR clauses in a pending solicitation? According to FAR, new FAR regulations generally apply only “to solicitations issued on or after the effective date of the change.” FAR 1.108(d)(1). New FAR provisions, however, can apply to a solicitation if they were in a solicitation issued before that effective date and the contract was awarded after that effective date.

This “effective date” rule is also followed by the SBA. The SBA regulations in effect on the date the government issues the solicitation are the applicable SBA regulations according to the SBA’s Office of Hearings and Appeals. Size Appeal of VMD-MT Security, LLC, SBA No. SIZ-5380 (2012).

Finally, the Executive Orders issued over the past several years also focus on the date a solicitation was issued. For example, Executive Order 13658, Establishing a Minimum Wage for Contractors applies to contracts for which the solicitation was issued on or after January 1, 2015.

Bottom line: although you have to pay close attention to this deluge of changes because they affect your future contract opportunities, retroactivity should not be a concern. The deal you have already made with the government stays unchanged.  

Terrence O'Connor is the Director of Government Contracts for Berenzweig Leonard, LLP, a business law firm in the D.C. region. Terry can be reached at toconnor@berenzweiglaw.com.

Do Not Read All FAR Clauses Literally

A literal reading of some FAR clauses can cost you money. One such clause is the Changes clause (FAR 52.243-4) requiring the contractor to give the contracting officer written notice of suspected government changes within 30 days. Although a contracting officer or COTR might want to demand strict compliance with the clause, all government contractors need to know that courts do not require strict compliance. A contractor may be entitled to an equitable adjustment for a contract change even though the contractor notifies a government employee other than the contracting officer of a suspected change long after 30 days have passed and even if the notice is oral. A recent court decision shows how broadly courts construe the Changes clause notice provision.

A construction contractor claimed that it was entitled to an equitable adjustment for design changes that the government imposed in the comments it made to the contractor’s design plans. But the first time the contractor raised the issue was in court pleadings three years after the government had made its design comments and long after the building was built. The contractor should have given the contracting officer notice of its disagreement immediately after receiving the government comments.  

Although the court concluded that this contractor’s notice was too late, its decision discusses precedents that established the defining issue in “notice” disputes. It is not whether 30 days have passed, nor whether the notice was oral, or even whether the contracting officer was the government employee who got notice. The issue is what harm has the government suffered by a contractor’s failure to give 30 days written notice? In this recent case, the harm was that timely notice would have given the parties a chance to resolve the issue years ago, making litigation unnecessary.

But in many situations, the lack of 30 days written notice to the contracting officer may not harm the government. For example, the contractor had complained orally to the COTR immediately after being told to do extra work.

Of course, the best policy is to rigidly follow the rules in the clause. However, a government contractor needs to know that all FAR clauses should not be taken literally. Nor should a government contractor be deterred from filing a request for an equitable adjustment by a contracting officer’s rigid interpretation of a notice provision.

If you believe the government has made costly change to your contract without modifying it to add money, let the Government Contracts Team at Berenzweig Leonard help you make sure you give the government proper notice. A small investment in legal advice can have a large return for you.


Terrence M. O'Connor is the Director of Government Contracts at Berenzweig Leonard LLP. He can be reached at TOConnor@BerenzweigLaw.com.