Unilateral Modification

A unilateral modification is a written contract change executed solely by the contracting officer without requiring the contractor's signature, used when the government has the contractual right to make the change unilaterally, such as issuing a change order or exercising an option.

What is a Unilateral Modification?

Unilateral modifications are authorized by FAR 43.103(b) and are used when the government has an existing contractual right to change the contract without the contractor's agreement. The right to make unilateral changes comes from specific FAR clauses incorporated into the contract.

Common uses of unilateral modifications:

• Change orders: issued under the Changes clause (FAR 52.243-1), directing the contractor to perform changed work. The contractor must perform the change immediately; price is negotiated through a subsequent bilateral modification.
• Option exercises: government exercises a contract option year. The contractor agreed to option terms at award and cannot refuse a properly exercised option.
• Administrative changes: updating the contracting officer's name, adding an authorized representative, correcting clerical errors, updating funding accounting codes. These do not affect the contractor's rights or obligations.
• Suspension of work: under the Suspension of Work clause, the contracting officer can issue a unilateral modification directing the contractor to stop all or part of performance.
• Termination notices: the government may issue a notice of termination for convenience or default through a unilateral modification.
• Obligation and deobligation of funds: adjusting the funded amount on the contract.

The critical point about unilateral change orders: the contractor must perform immediately (they cannot refuse or delay because price has not been agreed). After performance, the contractor negotiates a bilateral modification to settle the equitable adjustment. If the government directs a change but the contracting officer refuses to issue a formal modification (a "constructive change"), the contractor can still claim an equitable adjustment.

Why Unilateral Modifications matter for government contractors

Unilateral modifications, especially change orders, represent both risk and opportunity. The risk: performing changed work without agreeing on price first can result in performing work for less than it costs if negotiations later go poorly. The opportunity: changed work generates revenue beyond the original contract value. Best practices for contractors receiving unilateral change orders include: immediately notifying the contracting officer of cost and schedule impacts in writing, tracking all costs separately using a unique charge code from the first day of changed work, and aggressively pursuing bilateral definitization within 90 days. Delay in definitization is the contractor's enemy, costs become harder to reconstruct, and the government uses passage of time to pressure lower settlement numbers.

Example

The government issues a unilateral change order (Modification P00006) directing the IT contractor to implement additional cybersecurity monitoring tools not in the original PWS, effective immediately. The contractor begins implementation the next day, using a separate charge code (P00006-CYBER) to track all costs. The contractor submits a REA within 15 days documenting projected costs of $85,000 and a 21-day schedule extension. The government takes 45 days to review and proposes $72,000. After negotiation, the parties agree on $79,000 and execute a bilateral modification (P00007) definitizing the change. The contractor's separate cost tracking from day one made the documentation of actual costs straightforward and helped defend the $79,000 settlement.

Frequently Asked Questions

Can a contractor refuse to comply with a unilateral change order?

No, in general. Under the Changes clause, the contractor must proceed with the directed change immediately. Refusal to comply with a valid change order can constitute a material breach of contract. The contractor's recourse is to perform and simultaneously seek an equitable adjustment through the administrative claims process.

What makes a change order invalid?

A change order can be invalid if: it is issued by someone without contracting officer authority, it directs work so far outside the contract scope that it represents an out-of-scope sole-source acquisition, or it violates a statutory requirement. An invalid change order need not be performed, but the contractor should consult legal counsel before refusing.

What is the difference between a "directed" change and a "constructive" change?

A directed change is when the contracting officer formally issues a change order. A constructive change occurs when government actions, an overly strict interpretation of specifications, a COR's informal direction, a government-caused delay, have the effect of requiring the contractor to do more work without a formal change order being issued. Both entitle the contractor to an equitable adjustment, but constructive changes require more documentation and legal argument to prove.

How quickly must the contracting officer definitize a change order?

FAR 43.204 encourages prompt definitization, generally within 180 days of the change order. For undefinitized contract actions (UCAs) in DoD, DFARS imposes stricter deadlines. Agencies that routinely delay definitization risk GAO audit findings and contractor dissatisfaction that can affect future performance.