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Posted on Monday, September 10, 2012

Does a Previous Equitable Adjustment Guarantee Another Under Similar Circumstances?

Although the government can be flexible and agree to pay an equitable adjustment for extra work on a fixed-price government contract instead of fighting a claim, doing so just once does not create a “course of dealing” that guarantees the government must always do so in the future.

In a recent decision, although the IRS had paid a snow removal contractor an extra $109,000 for removing 3 times the expected snowfall at its Ogden, Utah office during the 2007-2008 winter, a different Contracting Officer refused to pay extra for an equally-heavy snow removal effort by the same contractor the next winter. The Civilian Board of Contract Appeals (CBCA) agreed with the new Contracting Officer’s refusal to pay. Although precedent held that, for example, the government could not refuse to make an exception on the 8th time after agreeing to do so for 7 previous times, a single transaction cannot create a course of dealing.

As the decision shows, contractors cannot assume that the government will continue to pay for extras unless it has done so numerous times before. This is especially true because, over the course of a multi-year contract, the Contracting Officers will very likely change.  Therefore, it is critical that contractors get written confirmation before performing additional work and keep good records to demonstrate that costs for a future equitable adjustment are similar to expenses  previously covered by the government.

Author Terrence O’Connor is the Director of Government Contracts for the Washington, DC regional business law firm of Berenzweig Leonard,LLP.  He can be reached at  toconnor@BerenzweigLaw.com.