FAR 52.241-7—Change in Rates or Terms and Conditions of Service for Regulated Services.
Plain-English Summary
FAR 52.241-7 addresses how a contract handles changes to rates and other terms and conditions of service for regulated services, such as utility or transportation services subject to oversight by a regulatory body. It covers when the clause applies, the contractor’s duty to notify the Government of rate filings and pending changes, the duty to provide copies of approved changes, the obligation to continue service under amended tariffs, the Government’s obligation to pay the adjusted rates when they become effective, and the requirement that the contractor maintain the lowest available published and unpublished rates for comparable customers. It also covers non-rate regulatory changes, requiring immediate notice to the Contracting Officer and preserving the Government’s right not to accept regulations that conflict with Federal law or regulation. Finally, it explains how approved changes become part of the contract through modification and how effective dates are determined. In practice, this clause is designed to keep the Government informed and protected when a regulated service provider changes its tariff or service terms during contract performance, while ensuring the contractor can implement lawful regulatory changes without renegotiating the entire contract each time. It is especially important in contracts where prices and service conditions are controlled by an external regulator rather than solely by the parties’ agreement.
Key Rules
Applies to regulated services
The clause applies only to the extent the contracted services are subject to regulation by a regulatory body. If the service is not regulated, the clause has no practical effect for that portion of the contract.
Advance notice of rate filings
The contractor must give the Government written notice when it files an application for a change in rates or terms and conditions of service, and must do so at the same time it files the application. The notice must fully describe the proposed change.
Notice of pending changes at award
The contractor must also notify the Contracting Officer of any changes that are already pending before the regulatory body as of the contract award date. This prevents the Government from being surprised by near-term rate or service changes.
Provide approved changes promptly
If the regulatory body approves changes during the contract term, the contractor must send the Contracting Officer a copy within 15 days after the effective date. This ensures the contract file reflects the controlling tariff or service terms.
Continue service under amended tariff
Once the regulatory body approves a change, the contractor must keep furnishing service under the amended tariff, and the Government must pay the higher or lower rates starting on the effective date set by the regulator.
Lowest available comparable rates
Throughout the contract, the contractor’s applicable published and unpublished rate schedules may not exceed the lowest cost schedules available to any other customers of the same class under similar conditions of use and service. This protects the Government from discriminatory pricing.
Immediate notice of non-rate regulations
If the regulatory body issues a regulation affecting matters other than rates, the contractor must immediately provide a copy to the Contracting Officer. The Government is not required to accept any new regulation that conflicts with Federal laws or regulations.
Contract modification and effective dates
Changes to rates or service terms become part of the contract through a contract modification unless the contract says otherwise. The effective date is the regulatory body’s effective date for regulated factors, while any non-regulated factors take effect on a date agreed to by the parties.
Responsibilities
Contractor
Monitor regulatory proceedings, give timely written notice of rate filings and pending changes, provide copies of approved changes within 15 days, continue service under amended tariffs, maintain the lowest applicable comparable rates, and immediately transmit non-rate regulatory changes to the Contracting Officer.
Contracting Officer
Review notices and regulatory changes, ensure the contract file is updated, issue contract modifications when required, and determine or negotiate effective dates for any contract factors not controlled by the regulatory body.
Government
Pay the adjusted rates when they become effective under the regulatory body’s approval, and evaluate whether any new non-rate regulation is inconsistent with Federal law or regulation before accepting it.
Regulatory Body
Approve or promulgate changes to rates and other service conditions within its jurisdiction, with the effective date of those changes controlling the regulated aspects of contract performance.
Practical Implications
Contractors must track regulatory filings closely; missing the concurrent notice requirement can create compliance issues even if the rate change itself is lawful.
Contracting officers should ask whether any rate case or tariff change is already pending at award, because those changes can affect pricing soon after contract start.
The clause helps prevent discriminatory pricing, so contractors should be prepared to show that the Government is receiving the lowest comparable published or unpublished rate available under similar conditions.
Non-rate regulatory changes can affect service obligations, billing practices, or operating rules; these should be reviewed quickly for consistency with Federal requirements before they are treated as binding on the Government.
A formal contract modification is usually needed to document the change, so parties should not rely on the regulatory approval alone to update the contract record or payment terms.
Official Regulatory Text
As prescribed in 41.501 (d)(1) , insert a clause substantially the same as the following: Change in Rates or Terms and Conditions of Service for Regulated Services (Feb 1995) (a) This clause applies to the extent services furnished under this contract are subject to regulation by a regulatory body. The Contractor agrees to give * ________________ written notice of (1) the filing of an application for change in rates or terms and conditions of service concurrently with the filing of the application and (2) any changes pending with the regulatory body as of the date of contract award. Such notice shall fully describe the proposed change. If, during the term of this contract, the regulatory body having jurisdiction approves any changes, the Contractor shall forward to the Contracting Officer a copy of such changes within 15 days after the effective date thereof. The Contractor agrees to continue furnishing service under this contract in accordance with the amended tariff, and the Government agrees to pay for such service at the higher or lower rates as of the date when such rates are made effective. (b) The Contractor agrees that throughout the life of this contract the applicable published and unpublished rate schedule(s) shall not be in excess of the lowest cost published and unpublished rate schedule(s) available to any other customers of the same class under similar conditions of use and service. (c) In the event that the regulatory body promulgates any regulation concerning matters other than rates which affects this contract, the Contractor shall immediately provide a copy to the Contracting Officer. The Government shall not be bound to accept any new regulation inconsistent with Federal laws or regulations. (d) Any changes to rates or terms and conditions of service shall be made a part of this contract by the issuance of a contract modification unless otherwise specified in the contract. The effective date of the change shall be the effective date by the regulatory body. Any factors not governed by the regulatory body will have an effective date as agreed to by the parties. * Note: Insert language prescribed in 41.501 (d)(1). (End of clause)