Key Ingredients for a Successful Request for Equitable Adjustment
By Howard W. Roth on June 1, 2017 | Posted in Claims and Disputes
A Request for Equitable Adjustment (REA) is not defined by the Federal Acquisition Regulation (FAR), but is only referenced therein. What then, is an REA?
REAs are requests for additional monies or time based on contract clauses that provide for such relief, for instance the Changes clause of the contract or the Differing Site Conditions clause. Historically, no less an authority than the Supreme Court has explained an REA is equal to a breach of contract:
With respect to claims arising under the typical government contract, the contractor has agreed in effect to convert what otherwise might be claims for breach of contract into claims for equitable adjustment.
Thus, an REA is a means for a contractor to get paid for additional costs as well as obtain a time extension to the contract. A successful REA requires a clear factual narrative supported by documents, and a legal theory tying those facts to a basis of recovery.
REA vs. CDA claim
The Contract Disputes Act of 1978 (CDA), 41 U.S.C. 7101 – 7109, does not define a claim. The only official definition is in FAR 2.101, which defines “claim” as follows:
“Claim” means a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract. However, a written demand or written assertion by the contractor seeking the payment of money exceeding $100,000 is not a claim under the Contract Disputes Act of 1978 until certified as required by the Act. A voucher, invoice, or other routine request for payment that is not in dispute when submitted is not a claim. The submission may be converted to a claim, by written notice to the contracting officer as provided in 33.206(a), if it is disputed either as to liability or amount or is not acted upon in a reasonable time.
An REA is not a “claim” under the CDA due to the form required by FAR 2.101, but in substance both documents ask for the same relief – money and time. A CDA claim, however, allows for jurisdiction and litigation of a dispute before the applicable board of contract appeals or U.S. Court of Federal Claims. A claim also starts interest running from the time it is submitted to the contracting officer. Since a claim opens the door to litigation, many contractors choose to submit an REA to show they want to negotiate and not litigate. Importantly, a contractor may recover the costs of legal or consultant advice and services in drafting an REA, but not for drafting a claim. If negotiations after the filing of an REA unsuccessful, then a contractor may convert the REA into a claim, and the legal and consultant costs are then an allowable part of the claim.
Makeup of a Successful REA
There is no set form for an REA, but generally a good REA will check the following boxes:
- The facts of what the government did or did not do under the relevant a contract clause (i.e., Changes clause) that led to increased costs or delay. These facts should include a description of the scope of work under the contract and pertinent specifications, drawings, and other contract correspondence evidencing the contract requirements, as well as a description of the anticipated performance under the contract.
- A detailed description of what the government did to delay the contract work or increase the contract costs.
- The reasonable relationship between the cause and effect the Government’s actions or inactions is provided in detail and a description of the exact additional costs or why the delay impacted the critical path and completion of the project.
- A legal section linking the facts to the law that establishes why the government should pay the increased costs or grant a time extension.
- Key documents referenced in the REA (such as specifications, correspondence, delay and disruption charts, and expert opinions) should be attached to the REA and submitted therewith.
While there is no definition of an REA, the key elements of a successful REA are facts supported by cites to documents or other evidence and contract provisions, and a straightforward explanation of the law that makes these facts a recognized basis for payment of by the contracting office of money or for a contract time extension.
Image courtesy of flickr (licensed) by Rebeca Anchondo