Change Order

A change order is a formal written document issued by the contracting officer that directs the contractor to make specific changes to the contract's scope, specifications, methods, or schedule, changes that the contractor must comply with even if the price adjustment has not yet been agreed upon.

What is a Change Order?

Change orders are authorized by the Changes clause in federal contracts (FAR 52.243-1 through 52.243-7, depending on contract type). This clause grants the contracting officer unilateral authority to direct specific types of changes within the "general scope" of the contract, modifications to specifications, delivery schedules, place of delivery, amount of government-furnished property, and other defined elements, without requiring the contractor's agreement to the change before it is implemented.

This is a unique feature of government contracts: in commercial contracting, both parties must agree before a change is made; in government contracts, the contracting officer can issue a unilateral change order and the contractor must comply while preserving its right to seek an equitable adjustment. The contractor proceeds with the changed work and then negotiates or litigates the price impact afterward.

There are two types of contract modifications: bilateral modifications (contract modifications signed by both the contracting officer and contractor, used when both parties agree to the change and the price) and unilateral modifications (signed by the contracting officer alone, used for administrative changes, exercise of options, and change orders within the scope of the Changes clause). A change order may begin as a unilateral modification and be converted to a bilateral modification once the price adjustment is negotiated.

Changes must be within the "general scope" of the contract to be valid under the Changes clause. A change that falls outside the original scope may constitute an unauthorized commitment or cardinal change, which can expose the government to liability without the normal procedural safeguards.

Why Change Orders matter for government contractors

Change orders represent one of the most significant financial management issues in government contracting. Contractors who track change orders poorly, failing to document the actual cost impact, failing to submit timely REAs, or accepting unilateral change orders without reserving rights to additional compensation, regularly absorb millions of dollars in legitimate costs. Every change order should trigger an immediate assessment of cost, schedule, and risk impact.

Example

The Army Corps of Engineers issues a unilateral change order on a construction contract directing the contractor to use a different grade of reinforced steel on all foundation columns, a specification change that increases material costs by approximately $180,000 and requires additional structural engineering review. The change order is issued under FAR 52.243-4 (the construction Changes clause) and directs compliance within 30 days. The contractor complies immediately while submitting a timely REA for $225,000 (materials increase plus engineering review costs plus 15% overhead allocation). After negotiations, the contracting officer issues a bilateral modification for $198,000 and a 2-week schedule extension.

Frequently Asked Questions

Does a contractor have to comply with a change order it believes is improper?

Yes. A contractor must comply with a valid change order issued under the Changes clause, even if it disputes the order or its scope, because unilateral compliance and preserve-my-rights is the correct government contracting posture. The contractor's remedy is to comply with the change, submit an REA for the additional costs, and if necessary, convert the REA to a certified CDA claim and appeal. Refusing to comply is a default risk.

What is a "bilateral" versus "unilateral" change order?

A unilateral change order is issued by the contracting officer alone, pursuant to the Changes clause, requiring contractor compliance without agreement. A bilateral modification is signed by both parties and typically documents a negotiated agreement, including the price adjustment, for a change. Many change orders begin as unilateral and are converted to bilateral once price is agreed.

Can any government employee issue a change order?

No. Only the contracting officer, or someone with properly delegated contracting officer authority, can issue binding change orders. Changes directed by a COR, program manager, or other government personnel who lack contracting authority are "unauthorized commitments" that may or may not be ratified by the contracting officer. These can also be the basis for constructive change claims.

What is the time limit for submitting an REA after receiving a change order?

The Changes clause (FAR 52.243-1) requires the contractor to assert its right to an equitable adjustment within 30 days of receiving the change order. Courts have allowed contractors to preserve rights by submitting timely notice within 30 days even if detailed pricing is submitted later. The 30-day window applies to formal change orders; constructive changes have different timing rules tied to when the contractor knew or should have known of the government's direction.