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(a) Article. "Article" means an article or clause as these terms are used in the various standard contract forms used to designate separate and distinct contract provisions.

(b) Contract modification. The meaning of "contract modification" is as defined in FPR 1-1.219.

(c) Equitable adjustment or adjustment. "Equitable adjustment or adjustment" means a determination or agreement that no change in contract price or performance time is to be made as well as that an increase or decrease is made in one or both of these factors.

(d) Supplemental agreement. "Supplemental agreement" means a negotiated, bilateral modification of a contract effecting changes in the general scope of work or other contract terms and conditions.

99-1.5004 Change orders and other unilaterial-type modifications

within the general contract scope.

89-1.5004-1 Change orders.

(a) Use of change orders. (1) A change order shall be used to direct an addition to or variation or omission from the work within the general scope of a contract in accordance with the contract provisions and to effect an equitable adjustment in contract price and performance time.

(2) A change order shall not be used to effect additions, alterations, or deletions of work which involve a change in the general scope of a contract or to change any of the substantive provisions of a contract, such as time of commencement, methods of payment, and refund of retained percentages.

(b) Obligation of contractor. Under the terms of standard fixed-price contract forms the contractor agrees in advance to perform such changes in the work as are within the general scope of the contract. A written order to the contractor making such a change is binding upon him whether or not the order contains adjustments of price and time, and he is obligated to proceed with the work as changed pending determination of equitable adjustments. If the order contains unilateral adjustments of price and time with which the contractor cannot agree, he has the right to protest or appeal from such determination in accordance with the language of the particular contract article under which the order was issued, but he must comply with the requirements of such article in order for his protest or appeal to be effective.

(c) Method of issuance.

(1) Whenever possible, prior agreement should be reached with the contractor regarding any price and time adjustments and a complete one-part change order should be issued prior to commencement of the changed work. If agreement cannot be reached within available time, the directive portion of the change order should be issued in any case prior to commencement of the changed work.

(2) When failure to reach mutual agreement on equitable adjustments prior to issuance of a change order is due to inability to obtain adequate proposals from the contractor or to reaching an impasse in negotiations, rather than to lack of available time, a complete one-part change order should be issued as a unilateral action with price and time adjustments based on the Government estimate.

(3) A two-part change order should be used when a complete one-part change order has not been issued under either subparagraph (1) or (2) above. The first part should set forth the details of the change and contain a statement that price and time ad justments will be settled by the parties at an early date. The second part should contain the adjustments in price and time. Where appropriate, the first part of a two-part change order may establish an interim price as a basis for such partial payments as can be thoroughly substantiated by cost estimates; the interim price should not include profit or items which might be controversial. Every effort should be made by the parties to reach agreement on part two of the two-part change order as expeditiously as possible. When the parties fail to reach agreement as to equitable adjustments due to inability to obtain adequate proposals from the contractor, the reaching of an impasse in negotiations, or for any other proper reason, the second part of a two-part change order should be issued as a unilateral action with price and time adjustments based on the Government estimate.

(4) In all cases where agreement is reached with the contractor on equitable price and time ad justments, the contractor's acceptance shall be indicated by his signature on the change order to establish that mutual agreement has been reached.

(5) According to the circumstances of the particular case, the contractor's protest or "appeal" from unilateral adjustments of price and time in a change order should be treated (i) as a claim for consideration and decision, based on findings of fact by the contracting officer, subject to further appeal, or (ii) as an appeal from the contracting officer's decision. The latter alternative should apply only when the unilateral adjustments were preceded by a full consideration of the details of the contractor's claim, a thorough effort to resolve differences by negotiation, and a decision by the contracting officer based upon formal findings of fact. See "Rules of Procedures in Contract Appeals," 10 CFR Part 703.

(d) Adjustment of price or time. Any equitable adjustment in price or time must be determined as of the date the change is directed. Estimated increased costs of performing the contract as changed, which are a direct result of the change order, are proper for consideration in an equitable adjustment in price. Ascertainment of costs which may be properly included in any equitable adjustment depends upon all of the facts surrounding a particular change. The following procedures shall be followed in establishing price and time adjustments for change orders:

(1) Contractor's proposal. The contractor shall be furnished details of the change and be requested to submit a statement that the directed change will not require a change in contract price or time or, if an increase or decrease in contract price or time will result, an estimate of cost, broken down as appropriate between features of work and into elements of cost and the change in time for completion,

if any.

(2) Government estimate. An independent Government estimate of the cost of the changed work shall be prepared on the basis, as applicable, of the costs of labor, materials, equipment, construction equipment, taxes, bonds, and insurance (direct costs) on which appropriate allowances for profit and overhead should be made. The change in the time of performance, if any, should also be estimated.

(3) Use of actual costs. Costs actually incurred may be considered, to the extent that they are determined to be both necessary and reasonable, in determining price ad justments for changes that have been completed, but they are not to be used as the basis for price adjustments since the price adjustment must be determined as of the date the change was directed..

$9-1.5004-2 Unilateral-type contract modifications

other than change orders.

Fixed-price contracts often include provisions other than Changes articles which contemplate, as a result of specified happenings or actions, unilateral equitable adjustments in the contract price or performance time in the event of failure to reach mutual agreement. To the extent applicable, the procedures for the handling of change order equitable adjustments specified in <9-1.5004-1 shall be followed in the treatment of such other equitable adjustments. Such other ad justments include:

(a) Adjustments in price and time resulting from differences in physical conditions as described in the "Changed Conditions" article which appears in Standard Form 23-A: General Provisions (Construction Contract) and other contracts.

(b) Certain time extensions as covered by provisions of contract articles dealing with default terminations, delays, and time extensions.

(c) Time or price ad justments resulting from suspension, delay, or interruption of work covered by applicable contract articles.

(d) Adjustments in price and time resulting from removing or tearing out of construction work which subsequently is found to meet contract requirements as covered by inspection articles.

99-1.5005

Changes outside the general contract scope.

(a) Use of supplemental agreements.

(1) A supplemental agreement is used to modify a contract when a substantive change is necessary, such as a change in the general scope of the contract, changes in basic contract articles, or a deletion or addition of contract articles.

(2) A supplemental agreement shall not be used for work additions unless the added work is so closely related to work under the existing contract, or for other reasons, that it is impracticable to accomplish the new work under a separate fixed-price contract awarded as a result of formal advertising or invited proposal procedures. The use of a supplemental agreement for additional work shall be fully justified as being in the best interest of the Government and shall satisfy ERDA requirements for procurement by negotiation.

(3) Whenever time will permit, a supplemental agreement shall be issued and signed by both parties prior to the commencement of any work covered by the modification. When construction must be started before a supplemental agreement can be completed, prior agreement shall be confirmed by letter or a letter-type supplemental agreement should be issued to authorize the start of work.

(b) Negotiation. Because a supplemental agreement concerns a change in contract terms or in work which is not within the general scope of the contract, any price and time adjustment must be acceptable to the contractor and the supplemental agreement must be effected by negotiation with the contractor. The following procedures shall be used:

(1) Contractor's proposal. The contractor shall be furnished a description of the change, together with any applicable revised plans and specifications, and be requested to submit a proposal for the changed work, including a detailed estimate of any change in price or time involved in the performance of the work.

(2) Government estimate. An independent Government estimate shall be prepared in accordance with applicable provisions of $9-1. 5004-1(d)(2).

(3) Agreement on price or time ad justment. In the event negotiation with the contractor does not result in reasonable reconciliation between the contractoros estimate and the Government estimate, the contracting officer must determine whether, under the circumstances, contracting with others for the work involved would better serve the interest of the Government.

$9-1.5006 Surety bonds.

Additional performance bond protection in connection with and consent of surety to change orders and supplemental agreements to fixed-price contracts shall be obtained when they are determined to be appropriate on the basis of Part 9-10.

Subpart 9-1.51 Considerations in Selecting Award

Instrument - Contract or Grant

$9.1.5101 Scope.

• (a) ERDA accomplishes its missions to some extent through direct in-house activities but predominately through non-Federal organizations, using either contract or grant instruments as the means for defining the terms and conditions, and the nature of the agreement between ERDA and the recipient. The two instruments are intended to be different in purpose, application, content, and/or nature, when properly employed, and create different relationships between the parties.

(b) Because of these differences, the choice between using a contract or a grant in any given circumstances must be made carefully. The purpose of this subpart is to provide general guidance on the considerations which are relevant to such choices. The guidance is provided in terms of the Federal objectives and Federal role as manifested in the degree of control sought by ERDA program officials, not the characteristics intrinsic in the project itself.

$9-1.5102 Applicability.

This subpart applies to all programs in which the amount of the award, the decision to make the award, and the choice between using a contract or a grant, as the award instrument are not specified by law, and are, therefore, within the administrative discretion of the ERDA.

$9-1.5103 Selection criteria.

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