FAR 43.204—Administration.
Plain-English Summary
FAR 43.204 explains how contracting officers and contract administration personnel should administer contract changes after a change order is issued, especially when the change is not yet fully priced. It covers change order documentation, when one document versus two documents are required, how and how quickly equitable adjustments must be definitized, agency tracking of definitization time for construction changes, the need for contracting officer concurrence before an administrative contracting officer adjusts delivery schedules, suspense systems for unpriced change orders, cost analysis and consideration of segregable costs, funding before contract adjustment, field pricing support for requests for equitable adjustment, and the use of complete-and-final settlements with release language. In practice, this section is about turning a directed change into a properly documented contract modification without losing control of schedule, price, funding, or entitlement issues. It is designed to prevent open-ended disputes, ensure timely negotiation, and create a clear administrative record. For contractors, it signals the importance of submitting adequate proposals, segregating costs, and watching for release language that may waive later claims. For contracting officers, it establishes a disciplined process for definitizing changes, coordinating with finance and pricing staff, and closing out change-related issues cleanly.
Key Rules
Two documents for unpriced changes
When a change order is not forward priced, the Government normally issues the change order and later a supplemental agreement that captures the equitable adjustment. If price and/or delivery terms can be agreed in advance, a single supplemental agreement may be enough.
Administrative changes need one document
Administrative changes and changes made under a clause that gives the Government a unilateral right to change the contract initially require only one document. The key distinction is that these changes do not follow the same two-step documentation process used for unpriced change orders.
Definitize quickly
Contracting officers must negotiate equitable adjustments from change orders in the shortest practicable time. For construction, agencies must track and record the time from receipt of an adequate definitization proposal until the contracting officer signs the definitizing action.
ACO schedule changes need concurrence
When an administrative contracting officer is negotiating an equitable adjustment by delegation, the ACO must obtain the contracting officer’s concurrence before changing the contract delivery schedule. This protects the contracting officer’s control over schedule commitments.
Use suspense systems
Contracting offices and contract administration offices must maintain suspense systems that accurately identify and promptly definitize unpriced change orders. The purpose is to prevent changes from remaining unresolved for too long.
Analyze costs and secure funds
The contracting officer must ensure cost analysis is performed when appropriate and consider the contractor’s segregable costs if available. If the change requires additional funds, the contracting officer must secure those funds before making the contract adjustment.
Support field pricing reviews
If a field pricing review is required for a request for equitable adjustment, the contracting officer must provide significant contract events that may help analyze the request, such as award dates, proposal dates, delay dates, performance dates, entitlement dates, certification dates, and other key Government actions.
Close out with release language
For complete and final equitable adjustments, the contracting officer should make sure all elements of the adjustment are resolved and include a release in the supplemental agreement. The release should waive further liability for the facts or circumstances underlying the adjustment, except for any specifically reserved items.
Responsibilities
Contracting Officer
Issue and administer change documentation, negotiate equitable adjustments promptly, ensure cost analysis is performed when appropriate, consider segregable costs, secure additional funds before adjusting the contract, provide event information for field pricing reviews, ensure all adjustment elements are resolved, and include release language when settling complete and final equitable adjustments.
Administrative Contracting Officer (ACO)
When delegated authority to negotiate equitable adjustments, obtain the contracting officer’s concurrence before adjusting the delivery schedule and help definitize unpriced change orders within required timeframes.
Agency
Establish procedures to record and maintain definitization timing data for construction change orders and ensure those data are recorded promptly by the contracting officer in accordance with agency procedures.
Contracting Office / Contract Administration Office
Maintain suspense systems that identify unpriced change orders and drive prompt definitization so changes do not remain open indefinitely.
Contractor
Submit adequate change order definitization proposals and, when seeking an equitable adjustment, provide segregable cost information and any required certification so the contracting officer can evaluate the request.
Field Pricing Personnel / Pricing Support Staff
Use the contracting officer’s list of significant contract events to analyze requests for equitable adjustment and support the negotiation of fair and timely settlements.
Practical Implications
Unpriced change orders should not linger; the longer definitization takes, the greater the risk of disputes, funding problems, and schedule confusion.
Contractors should segregate change-related costs as they occur, because the contracting officer may rely on those costs during negotiation and cost analysis.
A supplemental agreement with release language can close out a change cleanly, but it can also waive later claims if the contractor does not reserve exceptions carefully.
Before any price adjustment is signed, the contracting officer must confirm funding is available; otherwise the modification should not be executed.
For construction, agencies must track definitization timing, so poor internal tracking can create compliance issues even if the underlying change is eventually settled.
Official Regulatory Text
(a) Change order documentation. When change orders are not forward priced, they require two documents: the change order and a supplemental agreement reflecting the resulting equitable adjustment in contract terms. If an equitable adjustment in the contract price or delivery terms or both can be agreed upon in advance, only a supplemental agreement need be issued, but administrative changes and changes issued pursuant to a clause giving the Government a unilateral right to make a change ( e.g., an option clause) initially require only one document. (b) Definitization. (1) (i) Contracting officers shall negotiate equitable adjustments resulting from change orders in the shortest practicable time. (ii) Agencies shall, in accordance with agency procedures, record and maintain data regarding the time required to definitize equitable adjustments associated with change orders for construction. The definitization of an equitable adjustment begins upon receipt of an adequate change order definitization proposal by the contracting officer, and ends upon the contracting officer's execution of a contractual action to definitize the change order. The contracting officer shall ensure the data is recorded promptly in accordance with agency procedures. See 36.211 (b). (2) Administrative contracting officers negotiating equitable adjustments by delegation under 42.302 (b)(1), shall obtain the contracting officer’s concurrence before adjusting the contract delivery schedule. (3) Contracting offices and contract administration offices, as appropriate, shall establish suspense systems adequate to ensure accurate identification and prompt definitization of unpriced change orders. (4) The contracting officer shall ensure that a cost analysis is made, if appropriate, under 15.404-1 (c) and shall consider the contractor’s segregable costs of the change, if available. If additional funds are required as a result of the change, the contracting officer shall secure the funds before making any adjustment to the contract. (5) When the contracting officer requires a field pricing review of requests for equitable adjustment, the contracting officer shall provide a list of any significant contract events which may aid in the analysis of the request. This list should include- (i) Date and dollar amount of contract award and/or modification; (ii) Date of submission of initial contract proposal and dollar amount; (iii) Date of alleged delays or disruptions; (iv) Performance dates as scheduled at date of award and/or modification; (v) Actual performance dates; (vi) Date entitlement to an equitable adjustment was determined or contracting officer decision was rendered if applicable; (vii) Date of certification of the request for adjustment if certification is required; and (viii) Dates of any pertinent Government actions or other key events during contract performance which may have an impact on the contractor’s request for equitable adjustment. (c) Complete and final equitable adjustments. To avoid subsequent controversies that may result from a supplemental agreement containing an equitable adjustment as the result of a change order, the contracting officer should- (1) Ensure that all elements of the equitable adjustment have been presented and resolved; and (2) Include, in the supplemental agreement, a release similar to the following: Contractor’s Statement of Release In consideration of the modification(s) agreed to herein as complete equitable adjustments for the Contractor’s _______ (describe) _________ "proposal(s) for adjustment," the Contractor hereby releases the Government from any and all liability under this contract for further equitable adjustments attributable to such facts or circumstances giving rise to the "proposal(s) for adjustment" (except for ____________).