Requests for Equitable Adjustment: The Federal Contract Mechanism That Recovers Cost of Government-Caused Changes
Federal construction contracts operate under unique dispute resolution framework. When the government causes changes, delays, or disruption affecting contract cost or schedule, contractors seek Requests for Equitable Adjustment (REAs) under the Changes clause. REAs are distinct from formal claims under the Contract Disputes Act (CDA) in important ways. Understanding the REA mechanism and the transition to formal claim is essential for federal contractors.
REAs are the first-line mechanism for federal contract cost recovery beyond change orders. They precede formal claims, offer lower proof burden, and enable negotiated resolution. Poorly-understood REAs often produce weak cost recovery; well-understood REAs support effective federal contract administration. This post covers REA framework.
FAR 52.243 Changes clauses authorize REAs:
Changes clause basis
- FAR 52.243-4 (standard construction changes clause)
- Government may order changes unilaterally
- Changes "cause an increase or decrease in contractor's cost"
- Contractor entitled to equitable adjustment
- Written notice required typically 30 days
- Supported by cost data
- Contracting officer may grant or deny
Changes clause authorizes both directed changes (contracting officer issues change order) and constructive changes (government action effectively changes scope). REA recovers equitable adjustment for either.
REA is distinct from CDA claim:
REA vs CDA claim
- REA is negotiation tool; claim invokes formal process
- REA no interest; claim entitles interest from submission
- REA no certification required; claim over $100K requires certification
- REA contracting officer may negotiate; claim must issue final decision
- REA failure leads to claim conversion
- Claim final decision triggers appeal rights
REA and claim serve different purposes. REA is informal negotiation. Claim is formal dispute. Most cost recovery starts as REA; unresolved REAs convert to claims. Understanding both tracks enables strategic choice.
Equitable adjustment restores status quo:
Equitable adjustment components
- Direct cost of changed work (labor, materials, equipment)
- Indirect cost (field overhead, home office overhead)
- Reasonable profit
- Schedule impact (time extension)
- Impact on unchanged work (if caused)
- Documented and supported
Equitable adjustment is comprehensive cost recovery for changes. Direct cost is the changed work; indirect cost allocates overhead; profit is reasonable margin; time extension handles schedule. All elements may be sought in REA.
Notice requirements matter:
REA notice
- Within specified period (often 30 days)
- Identifies basis for adjustment
- Preserves rights
- Late notice may weaken claim
- Notice separate from full REA submission
- Follow-up with detailed submission when prepared
Notice timely preserves rights. Missed notice can weaken or defeat REA. Notice is typically brief — identifies the issue — followed by detailed REA submission when cost development is complete.
REA cost proposal supports the request:
REA cost proposal elements
- Narrative explaining basis
- Labor by trade and hour with rates
- Materials with pricing support
- Equipment cost
- Subcontractor impacts
- Indirect cost allocation
- Profit at reasonable rate
- Schedule impact analysis
REA support documents entitle evaluation. Contracting officers evaluate the cost buildup and support. Well-supported REAs with clear cost development and legitimate entitlement are easier to resolve. Poorly-supported REAs draw challenges.
REAs over threshold may be audited:
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DCAA audit
- Defense Contract Audit Agency for DoD contracts
- Audits REA cost proposals
- Verifies cost basis
- Challenges unsupported or unreasonable items
- Report informs contracting officer
- Contractor responds to findings
DCAA audit is not automatic rejection — it's verification. Contractors with compliant accounting systems, good documentation, and reasonable costs clear audit. Contractors without face challenges that weaken REA.
REAs and claims are both available — the difference often comes down to whether contractor wants interest. Interest under CDA accrues from claim submission, at Treasury rate. Protracted disputes accumulate significant interest. Converting aging REA to formal claim may make sense when negotiation isn't resolving the matter.
Claims over threshold require certification:
CDA certification
- Claims over $100,000
- Officer or employee with authority
- Claim made in good faith
- Supporting data accurate
- Reflects adjustments to which entitled
- Certifier is accurate to their knowledge
- False certification is False Claims Act risk
Certification is serious. False certification is federal crime. Certifiers should verify accuracy before signing. Some contractors certify reluctantly; others develop processes ensuring certifications are defensible.
Unresolved REAs convert to claims:
REA to claim conversion
- Add 'claim' label to submission
- Certify per CDA requirements
- Demand final decision
- 60-day deadline for CO decision
- Decision can be appealed to BCA or Court of Federal Claims
- Interest accrues from claim submission
Conversion is straightforward — adding certification and demanding decision. Contracting officer must respond within 60 days (or longer if substantial). Denial or deemed denial triggers appeal rights. Converting to claim shifts to formal track.
Claims can be appealed:
Claim appeal venues
- Boards of Contract Appeals (ASBCA for DoD, CBCA for civilian)
- Court of Federal Claims
- Election between venues typically
- Different procedural rules and timelines
- Discovery, hearing, appeals process
- Can take 2-5 years
Appeal process is formal litigation. Significant investment in time and money. Most REAs resolve at contracting officer level; appeal reserved for major, unresolvable disputes. Understanding appeal availability shapes negotiation leverage.
REAs are federal contractors' primary mechanism for recovering cost of government-caused changes, delays, and disruption. Changes clause authorizes equitable adjustment covering direct cost, indirect cost, profit, and schedule. REAs differ from CDA claims — no interest, no certification, no final decision required. Timely notice preserves rights. Cost proposal with supporting documentation drives evaluation. DCAA audit may occur on larger REAs. Certification required for claims over $100K. Unresolved REAs convert to claims, triggering interest and formal appeal track. Most matters resolve as REAs; some proceed as claims. Federal contractors benefit from understanding both tracks and the strategic choice between them. Good REA administration substantially affects federal contract profitability and risk.
Written by
Jordan Patel
Compliance & Legal
Former corporate counsel specializing in construction contracts and tax compliance. Writes about the documentation layer — COIs, W-8/W-9, certified payroll, notice-to-owner deadlines — and the legal backbone behind audit-ready AP.
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