What is the effect of the ‘changes’ clause?

UPDATED: Jul 18, 2023Fact Checked

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Jeffrey Johnson

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Jul 18, 2023

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UPDATED: Jul 18, 2023Fact Checked

Each Government contract contains a Changes clause. The Changes clause allows the Government contracting officer to make changes within the general scope of the contract. These changes generally may involve changes in the Government-furnished specifications, method of shipment or packing, place of delivery, or time of performance.

The contractor must assert its right to an “equitable adjustment” under the Changes clause within a certain time from the date that the change occurred. (An “equitable adjustment” is generally the amount required to cover the contractor’s increased (or decreased costs) plus an additional amount to account for profit.) If the Government change increases or decreases the cost of performance under the contract, the contracting officer must make an “equitable adjustment” in the contract price, delivery schedule, or both. If the contractor disagrees with the adjustment, it should submit a claim under the Contract Disputes Act. However, the contractor should continue with performance while the claim is pending.

Case Studies: Insurance Considerations in Government Contract Changes

Case Study 1: Contractor’s Professional Liability Insurance, BuildSure Insurance

BuildSure Insurance provided contractor’s professional liability insurance coverage to a construction company that was awarded a government contract. The contract included a Changes clause, allowing the government contracting officer to make changes within the scope of the contract.

During the course of the project, the government made several changes to the specifications and delivery schedule, resulting in increased costs for the construction company. The company asserted its right to an equitable adjustment under the Changes clause and filed a claim for additional compensation.

BuildSure Insurance supported the construction company throughout the claims process, providing legal representation and covering the associated costs. The contractor’s professional liability insurance coverage helped mitigate the financial risks and potential liabilities faced by the construction company in navigating the changes imposed by the government contract.

Case Study 2: Business Interruption Insurance, SecureGuard Insurance

SecureGuard Insurance provided business interruption insurance coverage to a manufacturing company that entered into a government contract with a Changes clause. As a result of changes made by the government contracting officer, the manufacturing company experienced delays in its production schedule and incurred additional expenses to adapt to the new specifications.

These changes significantly impacted the company’s operations and resulted in a loss of revenue. With the business interruption insurance coverage provided by SecureGuard Insurance, the manufacturing company was able to recover the financial losses resulting from the changes imposed by the government contract.

The coverage helped cover the increased costs of production, loss of revenue, and ongoing expenses during the period of interruption caused by the changes.

Case Study 3: Legal Expenses Insurance, LitigateShield Insurance

LitigateShield Insurance provided legal expenses insurance coverage to a consulting firm that entered into a government contract with a Changes clause. During the performance of the contract, the government made substantial changes to the project scope and specifications, resulting in disputes between the consulting firm and the government.

The firm asserted its right to an equitable adjustment and filed a claim for additional compensation. The claim led to a dispute resolution process, including negotiations and potential litigation.

LitigateShield Insurance supported the consulting firm throughout the dispute resolution process, providing legal representation and covering the associated legal expenses. The legal expenses insurance coverage helped protect the consulting firm from the financial burden of legal fees and costs involved in resolving the disputes arising from the changes imposed by the government contract.

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Jeffrey Johnson

Insurance Lawyer

Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

Insurance Lawyer

Mary Martin

Published Legal Expert

Mary Martin has been a legal writer and editor for over 20 years, responsible for ensuring that content is straightforward, correct, and helpful for the consumer. In addition, she worked on writing monthly newsletter columns for media, lawyers, and consumers. Ms. Martin also has experience with internal staff and HR operations. Mary was employed for almost 30 years by the nationwide legal publi...

Published Legal Expert

Editorial Guidelines: We are a free online resource for anyone interested in learning more about legal topics and insurance. Our goal is to be an objective, third-party resource for everything legal and insurance related. We update our site regularly, and all content is reviewed by experts.

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