FAR 41.402—Rate changes and regulatory intervention.
Plain-English Summary
FAR 41.402 explains how the Government handles changes to utility or other service rates and related terms and conditions when those services are provided under a federal contract. It covers four main topics: the agency’s duty to review proposed changes for reasonableness, justification, and nondiscrimination; when and how an agency should refer a matter to GSA for possible intervention before a regulatory body; how approved regulated-rate changes are incorporated into the contract and paid; and how rate changes for unregulated services are handled through negotiation and contract modification. The section exists to protect the Government’s consumer interests, ensure that rate changes are properly reviewed and documented, and keep contract pricing aligned with approved or negotiated service terms. In practice, it tells contracting personnel what to do when a utility or service provider proposes a new rate or changes service terms, and it tells contractors and suppliers how those changes become enforceable contract terms. It also connects to the clause at 52.241-7 for regulated services, the clause at 52.241-8 for unregulated services, and the agency payment/verification process in 41.401. The practical effect is that rate changes are not automatic just because a supplier proposes them; they must be reviewed, approved, incorporated into the contract, and paid in a timely way according to the applicable regulatory or negotiated process.
Key Rules
Prompt agency review
When a change is proposed to rates or to the terms and conditions of service for the Government, the agency must promptly decide whether the change is reasonable, justified, and not discriminatory. This is an immediate screening obligation, not a passive wait-and-see requirement.
Refer matters to GSA
If the proposed change may affect other Federal agencies and intervention before a regulatory body is warranted, the matter must be referred to GSA. The agency may also ask GSA for a delegation of authority to intervene on behalf of the consumer interests of the Federal executive agencies.
Regulated rate changes become contract terms
For regulated services covered by 52.241-7, once a regulatory body approves a rate change, the approved change must be incorporated into the contract by unilateral modification or another agency-approved documentation method. The approved rate takes effect on the date set by the regulatory body.
Prompt payment is required
After a regulated rate change is approved and effective, the resulting rates and charges must be paid promptly to avoid late-payment provisions. Agencies must also send copies of the modification to the paying office or the office that verifies billed amounts.
Unregulated services are modified by contract action
For unregulated services covered by 52.241-8, any rate change must be incorporated into the contract by contract modification because the rates and terms are subject to negotiation rather than regulatory approval. Copies of the modification must be sent to the paying or verification office.
Responsibilities
Agency
Promptly review proposed changes to determine whether they are reasonable, justified, and not discriminatory. If the change may interest other Federal agencies and intervention is appropriate, refer the matter to GSA. Ensure approved or negotiated changes are properly documented, transmitted to the paying/verification office, and paid in accordance with the effective date and applicable payment rules.
GSA
Receive referrals from agencies when a proposed rate or service-term change may affect multiple Federal agencies and intervention before a regulatory body is justified. Consider whether to intervene or whether to delegate authority to the requesting agency to intervene on behalf of Federal executive agencies' consumer interests.
Contracting Officer
Implement approved regulated-rate changes through unilateral modification or other authorized documentation, or implement negotiated changes for unregulated services through contract modification. Ensure the contract file reflects the change and that copies are sent to the appropriate paying or billing-verification office.
Regulatory Body
For regulated services, review and approve or disapprove proposed rate changes and establish the effective date of any approved change. The regulatory body’s decision controls when the new rate becomes effective under the contract.
Utility Supplier / Service Provider
Propose rate or term changes through the applicable regulatory or negotiated process and comply with the contract clause governing regulated or unregulated services. After approval, bill only at the effective rate and in accordance with the contract modification or documented change.
Paying Office / Billing Verification Office
Receive copies of the modification or documentation reflecting the approved or negotiated rate change and use that information to verify invoices and process payment correctly.
Practical Implications
Agencies cannot treat a proposed utility or service rate increase as automatically effective; they must review it and, for regulated services, wait for the regulatory body’s approval and effective date.
A common pitfall is failing to send the modification to the paying or invoice-verification office, which can cause billing errors, delayed payments, or late-payment charges.
For regulated services, the contract must be updated to match the approved rate, but the effective date comes from the regulator, not from when the contracting officer signs the modification.
For unregulated services, the key issue is negotiation and documentation: the rate change must be captured in a contract modification, not just accepted informally by email or invoice.
When a proposed change could affect multiple agencies, early coordination with GSA matters because intervention decisions are centralized and may affect the Government’s overall consumer position before the regulatory body.
Official Regulatory Text
(a) When a change is proposed to rates or terms and conditions of service to the Government, the agency shall promptly determine whether the proposed change is reasonable, justified, and not discriminatory. (b) If a change is proposed to rates or terms and conditions of service that may be of interest to other Federal agencies, and intervention before a regulatory body is considered justified, the matter shall be referred to GSA. The agency may request from GSA a delegation of authority for the agency to intervene on behalf of the consumer interests of the Federal executive agencies (see 41.301 ). (c) Pursuant to 52.241-7 , Change in Rates or Terms and Conditions of Service for Regulated Services, if a regulatory body approves a rate change, any rate change shall be made a part of the contract by unilateral contract modification or otherwise documented in accordance with agency procedures. The approved applicable rate shall be effective on the date determined by the regulatory body and resulting rates and charges shall be paid promptly to avoid late payment provisions. Copies of the modification containing the approved rate change shall be sent to the agency’s paying office or office responsible for verifying billed amounts (see 41.401 ). (d) If the utility supplier is not regulated and the rates, terms, and conditions of service are subject to negotiation pursuant to the clause at 52.241-8 , Change in Rates or Terms and Conditions of Service for Unregulated Services, any rate change shall be made a part of the contract by contract modification, with copies sent to the agency’s paying office or office responsible for verifying billed amounts.