Part 43 - Contract Modifications

43.000 Scope of part.

Subpart 43.1 - General

43.101 Definitions.

43.102 Policy.

43.103 Types of contract modifications.

43.104 Notification of contract changes.

43.105 Availability of funds.

43.106 [Reserved]

43.107 Contract clause.

Subpart 43.2 - Change Orders

43.201 General.

43.202 Authority to issue change orders.

43.203 Change order accounting procedures.

43.204 Administration.

43.205 Contract clauses.

Subpart 43.3 - Forms

43.301 Use of forms.

Parent topic: Federal Acquisition Regulation

43.000 Scope of part.

This part prescribes policies and procedures for preparing and processing contract modifications for

all types of contracts including construction and architect-engineer contracts. It does not apply to-

(a) Orders for supplies or services not otherwise changing the terms of contracts or agreements

(e.g., delivery orders under indefinite-delivery contracts); or

(b) Modifications for extraordinary contractual relief (see subpart 50.1).
Subpart 43.1 - General

43.101 Definitions.

As used in this partAdministrative change means a unilateral (see 43.103(b)) contract change, in writing, that does not

affect the substantive rights of the parties (e.g.,a change in the paying office or the appropriation

data).

Effective date-

(1) For a solicitation amendment, change order, or administrative change, the effective date shall be

the issue date of the amendment, change order, or administrative change.

(2) For a supplemental agreement, the effective date shall be the date agreed upon by the

contracting parties.

(3) For a modification issued as a confirming notice of termination for the convenience of the

Government, the effective date of the confirming notice shall be the same as the effective date of the

initial notice.

(4) For a modification converting a termination for default to a termination for the convenience of

the Government, the effective date shall be the same as the effective date of the termination for

default.

(5) For a modification confirming the termination contracting officer’s previous letter determination

of the amount due in settlement of a contract termination for convenience, the effective date shall be

the same as the effective date of the previous letter determination.

43.102 Policy.

(a) Only contracting officers acting within the scope of their authority are empowered to execute

contract modifications on behalf of the Government. Other Government personnel shall not-

(1) Execute contract modifications;

(2) Act in such a manner as to cause the contractor to believe that they have authority to bind the

Government; or

(3) Direct or encourage the contractor to perform work that should be the subject of a contract

modification.

(b) Contract modifications, including changes that could be issued unilaterally, shall be priced

before their execution if this can be done without adversely affecting the interest of the Government.

If a significant cost increase could result from a contract modification and time does not permit

negotiation of a price, at least a ceiling price shall be negotiated unless impractical.
43.103 Types of contract modifications.

Contract modifications are of the following types:

(a) Bilateral. A bilateral modification (supplemental agreement) is a contract modification that is

signed by the contractor and the contracting officer. Bilateral modifications are used to-

(1) Make negotiated equitable adjustments resulting from the issuance of a change order;

(2) Definitize letter contracts; and

(3) Reflect other agreements of the parties modifying the terms of contracts.

(b) Unilateral. A unilateral modification is a contract modification that is signed only by the

contracting officer. Unilateral modifications are used, for example, to-

(1) Make administrative changes;

(2) Issue change orders;

(3) Make changes authorized by clauses other than a changes clause (e.g., Property clause, Options

clause, or Suspension of Work clause); and

(4) Issue termination notices.

43.104 Notification of contract changes.

(a) When a contractor considers that the Government has effected or may effect a change in the

contract that has not been identified as such in writing and signed by the contracting officer, it is

necessary that the contractor notify the Government in writing as soon as possible. This will permit

the Government to evaluate the alleged change and-

(1) Confirm that it is a change, direct the mode of further performance, and plan for its funding;

(2) Countermand the alleged change; or

(3) Notify the contractor that no change is considered to have occurred.

(b) The clause at 52.243-7, Notification of Changes, which is prescribed in 43.107-

(1) Incorporates the policy expressed in paragraph (a) of this section;

(2) Requires the contractor to notify the Government promptly of any Government conduct that the

contractor considers a change to the contract, and

(3) Specifies the responsibilities of the contractor and the Government with respect to such

notifications.

43.105 Availability of funds.
(a) The contracting officer shall not execute a contract modification that causes or will cause an

increase in funds without having first obtained a certification of fund availability, except for

modifications to contracts that-

(1) Are conditioned on availability of funds (see 32.703-2); or

(2) Contain a limitation of cost or funds clause (see 32.704).

(b) The certification required by paragraph (a) of this section shall be based on the negotiated price,

except that modifications executed before agreement on price may be based on the best available

estimate of cost.

(c) In accordance with 10 U.S.C. 983, do not provide funds by contract or contract modification, or

make contract payments, to an institution of higher education that has a policy or practice of

hindering Senior Reserve Officer Training Corps units or military recruiting on campus as described

at 9.110. The prohibition in this paragraph (c) does not apply to acquisitions at or below the

simplified acquisition threshold or to acquisitions of commercial products, including commercially

available off-the-shelf items, and commercial services.

43.106 [Reserved]

43.107 Contract clause.

The contracting officer may insert a clause substantially the same as the clause at 52.243-7,

Notification of Changes, in solicitations and contracts. The clause is available for use primarily in

negotiated research and development or supply contracts for the acquisition of major weapon

systems or principal subsystems. If the contract amount is expected to be less than $1,000,000, the

clause shall not be used, unless the contracting officer anticipates that situations will arise that may

result in a contractor alleging that the Government has effected changes other than those identified

as such in writing and signed by the contracting officer.

Subpart 43.2 - Change Orders

43.201 General.

(a) Generally, Government contracts contain a changes clause that permits the contracting officer to

make unilateral changes, in designated areas, within the general scope of the contract. These are

accomplished by issuing written change orders on Standard Form 30, Amendment of

Solicitation/Modification of Contract (SF 30), unless otherwise provided (see 43.301).

(b) The contractor must continue performance of the contract as changed, except that in costreimbursement or incrementally funded contracts the contractor is not obligated to continue

performance or incur costs beyond the limits established in the Limitation of Cost or Limitation of

Funds clause (see 32.706-2).

(c) The contracting officer may issue a change order by electronic means without a SF 30 under

unusual or urgent circumstances, provided that the message contains substantially the information
required by the SF 30 and immediate action is taken to issue the SF 30.

43.202 Authority to issue change orders.

Change orders shall be issued by the contracting officer except when authority is delegated to an

administrative contracting officer (see 42.202(c)).

43.203 Change order accounting procedures.

(a) Contractors’ accounting systems are seldom designed to segregate the costs of performing

changed work. Therefore, before prospective contractors submit offers, the contracting officer

should advise them of the possible need to revise their accounting procedures to comply with the

cost segregation requirements of the Change Order Accounting clause at 52.243-6.

(b) The following categories of direct costs normally are segregable and accountable under the

terms of the Change Order Accounting clause:

(1) Nonrecurring costs (e.g., engineering costs and costs of obsolete or reperformed work).

(2) Costs of added distinct work caused by the change order (e.g., new subcontract work, new

prototypes, or new retrofit or backfit kits).

(3) Costs of recurring work (e.g., labor and material costs).

43.204 Administration.

(a) Change order documentation. When change orders are not forward priced, they require two

documents: the change order and a supplemental agreement reflecting the resulting equitable

adjustment in contract terms. If an equitable adjustment in the contract price or delivery terms or

both can be agreed upon in advance, only a supplemental agreement need be issued, but

administrative changes and changes issued pursuant to a clause giving the Government a unilateral

right to make a change (e.g., an option clause) initially require only one document.

(b) Definitization.

(1)

(i) Contracting officers shall negotiate equitable adjustments resulting from change orders in the

shortest practicable time.

(ii) Agencies shall, in accordance with agency procedures, record and maintain data regarding the

time required to definitize equitable adjustments associated with change orders for construction.

The definitization of an equitable adjustment begins upon receipt of an adequate change order

definitization proposal by the contracting officer, and ends upon the contracting officer's execution

of a contractual action to definitize the change order. The contracting officer shall ensure the data is

recorded promptly in accordance with agency procedures. See 36.211(b).

(2) Administrative contracting officers negotiating equitable adjustments by delegation under
42.302(b)(1), shall obtain the contracting officer’s concurrence before adjusting the contract

delivery schedule.

(3) Contracting offices and contract administration offices, as appropriate, shall establish suspense

systems adequate to ensure accurate identification and prompt definitization of unpriced change

orders.

(4) The contracting officer shall ensure that a cost analysis is made, if appropriate, under

15.404-1(c) and shall consider the contractor’s segregable costs of the change, if available. If

additional funds are required as a result of the change, the contracting officer shall secure the funds

before making any adjustment to the contract.

(5) When the contracting officer requires a field pricing review of requests for equitable adjustment,

the contracting officer shall provide a list of any significant contract events which may aid in the

analysis of the request. This list should include-

(i) Date and dollar amount of contract award and/or modification;

(ii) Date of submission of initial contract proposal and dollar amount;

(iii) Date of alleged delays or disruptions;

(iv) Performance dates as scheduled at date of award and/or modification;

(v) Actual performance dates;

(vi) Date entitlement to an equitable adjustment was determined or contracting officer decision was

rendered if applicable;

(vii) Date of certification of the request for adjustment if certification is required; and

(viii) Dates of any pertinent Government actions or other key events during contract performance

which may have an impact on the contractor’s request for equitable adjustment.

(c) Complete and final equitable adjustments. To avoid subsequent controversies that may result

from a supplemental agreement containing an equitable adjustment as the result of a change order,

the contracting officer should-

(1) Ensure that all elements of the equitable adjustment have been presented and resolved; and

(2) Include, in the supplemental agreement, a release similar to the following:

Contractor’s Statement of Release

In consideration of the modification(s) agreed to herein as complete equitable adjustments for the

Contractor’s _______ (describe) _________ "proposal(s) for adjustment," the Contractor hereby

releases the Government from any and all liability under this contract for further equitable

adjustments attributable to such facts or circumstances giving rise to the "proposal(s) for

adjustment" (except for ____________).

43.205 Contract clauses.
(a)

(1) The contracting officer shall insert the clause at 52.243-1, Changes-Fixed-Price, in solicitations

and contracts when a fixed-price contract for supplies is contemplated.

(2) If the requirement is for services, other than architect-engineer or other professional services,

and no supplies are to be furnished, the contracting officer shall use the clause with its AlternateI.

(3) If the requirement is for services (other than architect-engineer services, transportation, or

research and development) and supplies are to be furnished, the contracting officer shall use the

clause with its AlternateII.

(4) If the requirement is for architect-engineer or other professional services, the contracting officer

shall use the clause with its AlternateIII.

(5) If the requirement is for transportation services, the contracting officer shall use the clause with

its AlternateIV.

(6) If it is desired to include the clause in solicitations and contracts when a research and

development contract is contemplated, the contracting officer shall use the clause with its Alternate

V.

(b)

(1) The contracting officer shall insert the clause at 52.243-2, Changes-Cost-Reimbursement, in

solicitations and contracts when a cost-reimbursement contract for supplies is contemplated.

(2) If the requirement is for services and no supplies are to be furnished, the contracting officer shall

use the clause with its AlternateI.

(3) If the requirement is for services and supplies are to be furnished, the contracting officer shall

use the clause with its AlternateII.

(4) If the requirement is for construction, the contracting officer shall use the clause with its

AlternateIII.

(5) [Reserved]

(6) If it is desired to include the clause in solicitations and contracts when a research and

development contract is contemplated, the contracting officer shall use the clause with its Alternate

V.

(c) Insert the clause at 52.243-3, Changes-Time-and-Materials or Labor-Hours, in solicitations and

contracts when a time-and-materials or labor-hour contract is contemplated. The contracting officer

may vary the 30-day period in paragraph (c) of the clause according to agency procedures.

(d) The contracting officer shall insert the clause at 52.243-4, Changes, in solicitations and contracts

for-

(1) Dismantling, demolition, or removal of improvements; and

(2) Construction, when a fixed-price contract is contemplated and the contract amount is expected to

exceed the simplified acquisition threshold.
(e) The contracting officer shall insert the clause at 52.243-5, Changes and Changed Conditions, in

solicitations and contracts for construction, when the contract amount is not expected to exceed the

simplified acquisition threshold.

(f) The contracting officer may insert a clause, substantially the same as the clause at 52.243-6,

Change Order Accounting, in solicitations and contracts for supply and research and development

contracts of significant technical complexity, if numerous changes are anticipated. The clause may

be included in solicitations and contracts for construction if deemed appropriate by the contracting

officer.

Subpart 43.3 - Forms

43.301 Use of forms.

(a)

(1) The Standard Form 30 (SF 30), Amendment of Solicitation/Modification of Contract, shall (except

for the options stated in 43.301(a)(2) or actions processed under part 15) be used for-

(i) Any amendment to a solicitation;

(ii) Change orders issued under the Changes clause of the contract;

(iii) Any other unilateral contract modification issued under a contract clause authorizing such

modification without the consent of the contractor;

(iv) Administrative changes such as the correction of typographical mistakes, changes in the paying

office, and changes in accounting and appropriation data;

(v) Supplemental agreements (see 43.103); and

(vi) Removal, reinstatement, or addition of funds to a contract.

(2) The SF 30 may be used for-

(i) Modifications that change the price of contracts for the acquisition of petroleum as a result of

economic price adjustment;

(ii) Termination notices; and

(iii) Purchase order modifications as specified in 13.302-3.

(3) If it is anticipated that a change will result in a price change, the estimated amount of the price

change shall not be shown on copies of SF 30 furnished to the contractor.

(b) The Optional Form 336 (OF 336), Continuation Sheet, or a blank sheet of paper, may be used as

a continuation sheet for a contract modification.