Contracts & Legal

Request for Equitable Adjustment (REA)

A Request for Equitable Adjustment (REA) is an official request from a contractor to a contracting officer asking for an equitable change to the contract price based on a change to the contract requirements. An REA typically occurs when the contractor finds that an unexpected issue has arisen that wasn’t anticipated during the development of the original contract. The contractor will submit a proposal to the contracting officer outlining the issue and the justification of the equitable adjustment. Most contracts will submit an REA before submitting an official “Claim.” If the contracting officer agrees with the adjustment, the contract is modified.

Definition: A Request for Equitable Adjustment (REA) refers to a formal document submitted by a party, usually a contractor or subcontractor, to seek compensation or modification of the terms of a contract due to unforeseen changes or circumstances that have impacted the performance of the contract.

Difference Between Request for Equitable Adjustment (REA) and Claim

REAs and claims can be used in similar terms only if referred to from a financial (non-legal) standpoint. For instance, both are used to adjust a contract in terms of money, time or another appropriate aspect of the contract. However, the terms are different from a legal standpoint (allowable costs, court jurisdiction, etc.). Claims involve legal implications and thus can significantly affect the outcome of a contract. [1]

Common Causes for a Request for Equitable Adjustment (REA)

Some common causes or reasons that lead to a REA are:

  • Official request to do more or less work that isn’t covered by the contract
  • Order to stop or put off work
  • Not-quite-right specifications, drawings, or work directions that were used to build the project
  • Site conditions that were not what was expected at the time of contract signing
  • Work delays or speeds up because of what the government does or doesn’t do
  • Partially ending a deal for convenience

Request for Equitable Adjustment (REA) Process

DoD contracting personnel shall follow this “general” process if they receive an REA, claim, or any other non-routine written request asking for an adjustment to a contract:

  • First, determine if the request meets the definition and standards of a claim in accordance with FAR 52.233-1, regardless of what it’s referred to in the document.
  • If it meets the standards of a claim, then you must process it as a claim regardless.
  • If it does not meet the standards of a claim found in FAR 52.233-1:
    • If the contractor has called it a “claim” (or there is some other reason to believe the contractor intends it to be a claim under FAR 52.233-1), reply immediately to the contractor pointing out the item(s) preventing it from being considered a claim, and work with them for further resolution, encouraging non-legal recourse if possible.
    • If the contractor has called it by some other name (e.g., “request for adjustment”, “request for consideration”, etc.), it is more than likely an REA and should be treated as such.

Contract Change Clauses

When initially developing a contract, the contracting offer should insert a “Change Clause” to address any changes that might arise during the execution of the contract. This clause will allow for a REA and is prescribed in the following:

  • Fixed Price: 48 C.F.R. 52.243-1
  • Cost Reimbursement: 48 C.F.R. 52.243-2
  • Time and Materials: 48 C.F.R. 52.243-3

Difference Between a “Routine” and a “Non-Routine” Request for Equitable Adjustment (REA)

Requests for Equitable Adjustment are not typical payment requests, so they need to be examined and analyzed to determine what makes them different from “routine” and “non-routine” payment requests.

  • Routine Request: “Billing of the contract price for items delivered or services performed, billing for progress payments, and submitting a voucher for allowable costs or fees under a cost-reimbursement contract” are all examples of common ways to ask for payment. Every other request is out of the ordinary.
  • Non-Routine Request: All requests for price adjustments called for by contract clauses are non-routine. This includes a request for equitable adjustment for a constructive change, a request for equitable adjustment for ordered changes, a request for an equitable adjustment for a recognized different site condition, a claim for lost revenue, and a request for a contract rate adjustment to reflect wage and fringe benefit changes made by a contractor following a wage determination.

DFARS 252.243-7002 Requests for Equitable Adjustment (REA)

(a) The amount of any request for equitable adjustment to contract terms shall accurately reflect the contract adjustment for which the Contractor believes the Government is liable. The request shall include only costs for performing the change and shall not include any costs that already have been reimbursed or that have been separately claimed. All indirect costs included in the request shall be properly allocable to the change in accordance with applicable acquisition regulations.

(b) In accordance with 10 U.S.C. 2410(a), any request for equitable adjustment to contract terms that exceeds the simplified acquisition threshold shall bear, at the time of submission, the following certificate executed by an individual authorized to certify the request on behalf of the Contractor:

(c) The certification in paragraph (b) of this clause requires full disclosure of all relevant facts, including—

(1) Certified cost or pricing data, if required, in accordance with subsection 15.403-4 of the Federal Acquisition Regulation (FAR); and

(2) Data other than certified cost or pricing data, in accordance with subsection 215.403-5 of the FAR, including actual cost data and data to support any estimated costs, even if certified cost or pricing data are not required.

(d) The certification requirement in paragraph (b) of this clause does not apply to—

(1) Requests for routine contract payments; for example, requests for payment for accepted supplies and services, routine vouchers under a cost-reimbursement type contract, or progress payment invoices; or

(2) Final adjustments under an incentive provision of the contract.

Tips for Processing a Request for Equitable Adjustment (REA)

Remember, each REA is unique, and it is crucial to approach each request with diligence, fairness, and a focus on achieving equitable and reasonable outcomes for all parties involved. When dealing with a Request for Equitable Adjustment (REA), contracting offices can follow these tips to manage the process effectively:

  1. Familiarize yourself with the contract: Thoroughly review the original contract, including all provisions, specifications, and any relevant amendments or modifications. Understanding the original agreement will help you assess the impact of the requested adjustments and evaluate the contractor’s claims.
  2. Establish a clear process: Develop a well-defined process for handling REAs, including specific procedures, timelines, and documentation requirements. Communicate this process to both contractors and internal stakeholders to ensure consistency and transparency.
  3. Request supporting documentation: Ask the contractor to provide detailed documentation to support their claims, such as cost breakdowns, schedules, and any relevant correspondence. This information will help you assess the validity and reasonableness of the requested adjustments.
  4. Conduct a thorough review: Evaluate the contractor’s request diligently, considering all relevant factors, such as the contractual obligations, the nature of the changes, the impact on costs and schedule, and any concurrent delays or events. Carefully assess the causal link between the changes and the additional costs or delays.
  5. Communicate effectively: Maintain open and transparent communication with the contractor throughout the process. Clearly explain the requirements for submitting a complete and well-supported REA, and promptly address any questions or concerns they may have. Regularly update the contractor on the status of their request.
  6. Seek input from subject matter experts: Consult with technical, legal, and financial experts within your organization, as needed, to ensure a comprehensive evaluation of the REA. Their expertise can help you assess the technical validity, legal implications, and financial impact of the requested adjustments.
  7. Document decisions and justifications: Keep detailed records of all communications, evaluations, and decisions related to the REA. Document the rationale behind your determinations, including any findings of fact or legal interpretations. This documentation will serve as a valuable reference in case of future disputes or audits.
  8. Negotiate in good faith: If the REA is deemed valid, engage in fair and constructive negotiations with the contractor to reach a mutually agreeable resolution. Consider alternative solutions that can address the contractor’s concerns while balancing the interests of the government.
  9. Ensure compliance with regulations and procedures: Adhere to all applicable laws, regulations, and internal procedures when processing and resolving REAs. Seek legal guidance, if necessary, to ensure compliance with the relevant statutes and regulations governing equitable adjustments.
  10. Maintain accurate and up-to-date records: Keep a well-organized file of all documents related to the REA, including the original contract, modifications, correspondence, and evaluation records. These records will be essential for future reference, audit purposes, and to establish a clear audit trail of the decision-making process.

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Updated: 2/14/2024

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