Equitable Adjustment in Contracts: Proof, Notice, and Calculation

An equitable adjustment in contracts is a change to a federal contract’s price, schedule, or both that puts the contractor back in roughly the financial and time position they would have held if the government had not directed a change or caused a disruption. It exists almost exclusively in federal government contracting, where specific Federal Acquisition Regulation clauses create the right. Similar provisions appear in some private construction agreements, but if your contract is not with a federal agency, the mechanism described here probably does not apply to you.

Getting one is less about the law, which is fairly settled, and more about execution: identifying the right clause, giving written notice inside a short window, and documenting costs the way the regulation requires.

Events That Give Rise to an Adjustment

You do not get an equitable adjustment because a job turned out harder or more expensive than you planned. The right flows from specific contract clauses, and the event has to fit one of them.

The Changes clause is the broadest. It lets the contracting officer unilaterally modify drawings, specifications, shipping methods, delivery location, and similar terms within the general scope of the contract. If a directed change raises your cost or extends your time, the contracting officer must adjust the price, the schedule, or both.¹

The Differing Site Conditions clause covers construction surprises. Two kinds qualify: subsurface or hidden physical conditions that differ materially from what the contract documents indicated, and unknown conditions of an unusual nature that differ from what a reasonable contractor would expect. Unexpected bedrock during excavation is the textbook example.²

A constructive change is a change the government never formally ordered. Informal direction from the contracting officer, defective specifications, failure to disclose critical information, or interference that forces work beyond the original requirement all count. The entitlement is the same as a written change order, but you carry a heavier burden of proof: additional work performed, government causation, and timely notice.

Constructive acceleration arises when you are entitled to a time extension but the government denies it or sits on the request, and you then speed up to hit the original deadline. Overtime, extra crews, and additional equipment become recoverable. To preserve the claim you need to have requested the extension, protested the denial or inaction in writing, explained that the situation was forcing you to accelerate, and actually tried in good faith to meet the unextended deadline.

A stop-work order can halt all or part of performance for up to 90 days. If the order is later canceled and the stoppage cost you money or time, the contracting officer must adjust the contract.³ The separate Suspension of Work clause covers unreasonable delays caused by the contracting officer’s action or inaction, and allows recovery of the increased cost of performance. Important limitation: suspension adjustments exclude profit, and no cost incurred more than 20 days before you give written notice is recoverable.⁴

Late delivery of government-furnished property also triggers an adjustment, following the same procedures as the Changes clause. The government’s exposure is limited to equitable relief and does not extend to breach-of-contract damages for the delivery delay itself.⁵

What You Have to Prove

Every request, no matter which clause it rides on, stands or falls on three elements.

Entitlement means the event fits a specific contract clause that authorizes an adjustment. Discovering contaminated soil is only relevant if your contract contains the Differing Site Conditions clause. A verbal instruction from a contracting officer is only relevant if you can frame it as a constructive change under the Changes clause. The legal right must connect to contract language.

Causation is the link between the triggering event and the dollars or days you are claiming. Most weak requests fail here. If you hit unexpected rock but your excavation subcontractor was already behind for unrelated reasons, the government will argue the rock did not actually cause the delay you are blaming on it. Daily logs, photos, and schedule data created at the time are what carry this element.

Quantum is the number itself. Lump-sum estimates do not survive scrutiny. The government expects a detailed, verifiable cost breakdown that follows your firm’s normal accounting practices.

Notice Deadlines by Clause

Timely written notice is the single most common place contractors forfeit money they would otherwise recover. The windows differ by clause, and confusing them is expensive.

Under the fixed-price Changes clause, you must assert the right to an adjustment within 30 days of receiving the written change order. A contracting officer can accept a late proposal when the facts justify it, but relying on that is a bad plan.¹
Under the general Changes clause used in construction and similar contracts, no costs incurred more than 20 days before you give written notice are recoverable.⁶
The Suspension of Work clause carries the same 20-day lookback.⁴
Under the Differing Site Conditions clause, you must notify the contracting officer promptly and before the conditions are disturbed. Dig through the problem and you destroy the evidence.²
After a stop-work order, you have 30 days from the end of the work stoppage to assert the right to an adjustment.³

Write the notice. Put it in writing even if you have already discussed the issue by phone or in a meeting. Date it.

How the Adjustment Is Calculated

Your proposal must break costs into specific categories. For GSA contracts, the regulation lists what belongs in it: direct costs, markups, and any change to the completion schedule.⁷

Direct costs are the expenses tied to the changed work: materials by supplier, quantity, and unit price; labor by trade, hours, and burdened hourly rate; equipment; shop drawing revisions; delivery; and anything else directly traceable. You identify each item of added and deleted work separately, including unchanged work that was affected by the change.⁷

Not every incurred cost is recoverable. Under the FAR cost principles, a cost must be reasonable, allocable to the contract, consistent with applicable accounting standards or GAAP, permitted by the contract, and not prohibited by the cost disallowance rules in FAR Part 31. Entertainment, lobbying, and costs from fraud proceedings are categorically unallowable.⁸

Profit is generally allowed on equitable adjustments. When the modification involves the same type of work as the base contract and the amount is relatively small, the contracting officer can start from the base contract’s profit rate.⁹ The exception already mentioned bears repeating: adjustments under the Suspension of Work clause exclude profit entirely.⁴

Request for Equitable Adjustment vs. Certified Claim

These look alike and are not alike, and the difference is money.

A Request for Equitable Adjustment (REA) is a negotiation proposal. It asks the contracting officer to modify the contract and the parties try to work out a number. No certification is required regardless of amount, no formal decision is triggered, and no interest accrues.

A formal claim under the Contract Disputes Act is a written demand for a contracting officer’s final decision as a matter of right. For amounts over $100,000, the claim must be certified before it qualifies as a claim at all. The certification states that the claim is made in good faith, the supporting data are accurate and complete to the certifier’s knowledge, the amount requested accurately reflects what the contractor believes the government owes, and the certifier has authority to sign on behalf of the contractor.¹⁰¹¹

The practical point: a certified claim earns interest from the date of certification. An REA earns nothing. On large adjustments that drag on for months or years, that difference is substantial. A common pattern is to open with an REA to preserve the working relationship and convert to a certified claim if talks stall. A routine payment request that is not in dispute when submitted is not a claim, but it can become one by meeting the submission and certification requirements if the government disputes it or fails to act within a reasonable time.¹⁰

If the Contracting Officer Says No

Once a formal claim is in, the contracting officer has to respond. For claims of $100,000 or less, the contracting officer must issue a decision within 60 days if the contractor requests one in writing. For certified claims over $100,000, the contracting officer has 60 days either to decide or to tell the contractor when the decision will issue.¹⁰

If the decision denies the claim, you have two paths:

Appeal to the relevant agency board of contract appeals (such as the Armed Services Board or the Civilian Board) within 90 days of receiving the contracting officer’s decision.¹²
Sue in the U.S. Court of Federal Claims within 12 months of the decision. The case proceeds as a fresh trial rather than a review of the contracting officer’s record.¹²

All claims have an outer limit of six years from accrual. Miss that and the right is gone no matter how strong the merits are.¹⁰

Where Contractors Lose These

Late notice is the leading cause of death. The clause then bars recovery for costs incurred before the notification date, which can gut an otherwise valid request.

Lump-sum cost estimates are the second. Without detailed breakdowns that follow your normal accounting practices, the contracting officer has an easy reason to reject or heavily discount the proposal.

The third is failing to isolate the government-caused impact from everything else going on. If a project is behind for multiple reasons, the adjustment covers only the portion attributable to the government. A contractor who cannot pull that portion out with schedule analysis and contemporaneous records recovers far less than they spent, or nothing.

And the one that quietly costs the most: treating every dispute as an REA when it should have been a certified claim. If negotiations are not moving and the amount is significant, converting to a formal claim starts the interest clock while discussions continue.

1
Acquisition.GOV. 48 CFR 52.243-1 – Changes-Fixed-Price
2
Acquisition.GOV. 48 CFR 52.236-2 – Differing Site Conditions
3
Acquisition.GOV. 48 CFR 52.242-15 – Stop-Work Order
4
Acquisition.GOV. 48 CFR 52.242-14 – Suspension of Work
5
Acquisition.GOV. 48 CFR 52.245-1 – Government Property
6
Acquisition.GOV. 48 CFR 52.243-4 – Changes
7
Acquisition.GOV. 48 CFR 552.243-71 – Equitable Adjustments
8
Acquisition.GOV. FAR Part 31 – Contract Cost Principles and Procedures
9
Acquisition.GOV. 48 CFR 15.404-4 – Profit
10
eCFR. 48 CFR 52.233-1 – Disputes
11
Office of the Law Revision Counsel. 41 USC 7103 – Decision by Contracting Officer
12
Office of the Law Revision Counsel. 41 USC 7104 – Contractor’s Right of Appeal From Decision by Contracting Officer