FAR 52.241-4—Change in Class of Service.
Plain-English Summary
FAR 52.241-4, Change in Class of Service, is a pricing and billing clause used in certain utility-type service contracts when the class of service changes during performance. It addresses two main topics: first, the requirement that the contractor charge the Government the contractor’s lowest available rate schedule for the class of service actually furnished; and second, what happens when the contractor does not have approved rate schedules on file with the applicable regulatory body. In that situation, the clause preserves the parties’ ability to negotiate a rate schedule for the class of service provided, rather than forcing the contract to rely on an unavailable filed rate. Practically, the clause is meant to keep pricing aligned with the service class actually delivered and to avoid disputes when service classifications change or when regulated tariff schedules are not already established. It is important because a change in service class can materially affect price, billing method, and the contractor’s entitlement to payment, especially in regulated utility or similar service environments. The clause also limits the risk that contract language will block a negotiated solution where no filed rate exists.
Key Rules
Lowest available rate applies
If the class of service changes, the contractor must provide that service at its lowest available rate schedule applicable to the class of service furnished. The Government benefits from the most favorable rate the contractor has available for that service class.
Applies to actual service furnished
The controlling factor is the class of service actually provided, not the label originally used in the contract. If the service delivered falls into a different class, pricing must follow the rate schedule tied to that class.
Negotiation allowed without filed rates
If the contractor does not have approved rate schedules on file with the regulatory body for the services provided, the clause does not prevent the parties from negotiating a rate schedule. This preserves flexibility where no filed tariff exists.
No contract bar to negotiated rates
The clause expressly states that nothing in the contract may preclude negotiation of a rate schedule in the no-filed-rate situation. That means the contract cannot be used to block a mutually agreed pricing arrangement for the changed service class.
Regulatory filing context matters
The clause assumes a regulated-rate environment or similar setting where rate schedules may be approved by a regulatory body. Contracting parties must consider whether filed, approved, or otherwise recognized rate schedules exist before billing or negotiating prices.
Responsibilities
Contracting Officer
Ensure the clause is included when prescribed, confirm the contract reflects the correct service class and pricing approach, and address any need to negotiate or document a rate schedule when no approved filed rate exists.
Contractor
Bill the Government at the lowest available rate schedule for the class of service actually furnished, and if no approved rate schedule is on file, participate in good-faith negotiations over an appropriate rate schedule.
Agency/Customer
Monitor whether the service class has changed in performance, verify that billed rates match the applicable class of service, and coordinate with the contracting officer if a negotiated rate schedule is needed.
Regulatory Body
Where applicable, approve or maintain rate schedules on file that govern the contractor’s service classes, which may determine the rate structure used under the contract.
Practical Implications
This clause mainly affects billing after a service classification change, so contractors should verify that invoices match the actual class of service being furnished, not just the original contract description.
A common pitfall is assuming the original contract price continues to apply even after the service class changes; under this clause, the applicable rate schedule for the new class controls.
If no approved rate schedule exists, the parties should not wait for a dispute to arise—pricing should be negotiated and documented promptly to avoid payment delays.
Contracting officers should confirm whether the contractor has filed or approved rate schedules and whether the contract needs a negotiated rate schedule for the changed service class.
Because the clause references the contractor’s lowest available rate schedule, contractors should be prepared to justify which schedule is truly the lowest applicable one for the service furnished.
Official Regulatory Text
As prescribed in 41.501 (c)(3) , insert a clause substantially the same as the following: Change in Class of Service (Feb 1995) (a) In the event of a change in the class of service, such service shall be provided at the Contractor’s lowest available rate schedule applicable to the class of service furnished. (b) Where the Contractor does not have on file with the regulatory body approved rate schedules applicable to services provided, no clause in this contract shall preclude the parties from negotiating a rate schedule applicable to the class of service furnished. (End of clause)