FAR 52.243-6—Change Order Accounting.
Plain-English Summary
FAR 52.243-6, Change Order Accounting, gives the contracting officer a tool to require special accounting when a change or group of related changes is large enough to justify close cost tracking—specifically when the estimated cost exceeds $100,000. The clause addresses when the government may invoke change order accounting, what the contractor must track, how costs must be segregated, what kinds of costs are included or excluded, and how long the records must be maintained. In practice, it is designed to support fair and accurate equitable adjustments by making it easier to identify the direct costs caused by the change versus the costs of unchanged work. It is especially important on contracts where changes may affect labor, materials, subcontracting, or production flow in ways that are difficult to reconstruct later. The clause also ties the accounting requirement to the disputes process, meaning the contractor must keep the records until the parties settle the adjustment or the matter is finally resolved under the Disputes clause. For contractors, this means immediate and disciplined cost segregation; for contracting officers, it means a mechanism to protect the government’s and contractor’s ability to price and settle changes based on reliable data.
Key Rules
CO May Require Accounting
The contracting officer may require change order accounting whenever the estimated cost of a change or series of related changes exceeds $100,000. This is discretionary, not automatic, but the threshold identifies when the government may decide that special tracking is warranted.
Separate Cost Accounts Required
The contractor must maintain separate accounts for each change or related group of changes, using job order accounting or another suitable accounting procedure. The purpose is to isolate the costs attributable to the change from the rest of contract performance.
Track Segregable Direct Costs
The accounting must cover all incurred segregable direct costs allocable to the change, including costs of both changed and unchanged work that are attributable to the change. The contractor must also subtract allocable credits, so the records reflect net cost impact.
Applies to Related Changes
The clause allows accounting for a single change or a series of related changes. This prevents the contractor from treating connected modifications separately when they should be tracked together for an accurate adjustment.
Maintain Records Until Resolution
The contractor must keep the separate accounts until the parties agree on an equitable adjustment or the matter is conclusively resolved under the Disputes clause. The duty continues even if settlement takes time or the issue becomes contentious.
Supports Equitable Adjustment
The clause exists to support negotiation or dispute resolution of the price, schedule, or other impacts of a change. It does not itself set the adjustment amount; it provides the cost evidence needed to determine a fair adjustment.
Responsibilities
Contracting Officer
Decide whether to require change order accounting when the estimated cost of a change or related changes exceeds $100,000. If invoked, communicate the requirement clearly so the contractor knows to establish and maintain the necessary separate accounts.
Contractor
Set up and maintain separate accounts for each covered change or related group of changes, using job order accounting or another suitable method. Record all incurred segregable direct costs allocable to the change, including costs tied to unchanged work affected by the change, net of allocable credits, and keep the records until final settlement or final dispute resolution.
Government and Contractor
Use the accounting records to negotiate an equitable adjustment or, if needed, support resolution under the Disputes clause. Both parties should rely on the segregated cost data to evaluate the actual cost impact of the change.
Practical Implications
This clause is mainly a recordkeeping and cost-tracking requirement, but it can have major pricing consequences because poor segregation can weaken a contractor’s claim for an equitable adjustment.
Contractors should establish the accounting structure immediately after the change is ordered; waiting until the end of performance often makes it impossible to reconstruct costs accurately.
A common pitfall is failing to capture costs of unchanged work that are nevertheless caused by the change, such as disruption, resequencing, or inefficiency tied to the modification.
Another frequent issue is mixing change-related costs with general contract costs or overhead without a clear allocation method, which can lead to disputes over allowability and attribution.
Contracting officers should consider whether related changes should be grouped for accounting purposes, since fragmented tracking can obscure the true cost impact and complicate settlement.
Official Regulatory Text
As prescribed in 43.205 (f) , the contracting officer may insert a clause, substantially the same as follows: Change Order Accounting (Apr 1984) The Contracting Officer may require change order accounting whenever the estimated cost of a change or series of related changes exceeds $100,000. The Contractor, for each change or series of related changes, shall maintain separate accounts, by job order or other suitable accounting procedure, of all incurred segregable, direct costs (less allocable credits) of work, both changed and not changed, allocable to the change. The Contractor shall maintain such accounts until the parties agree to an equitable adjustment for the changes ordered by the Contracting Officer or the matter is conclusively disposed of in accordance with the Disputes clause. (End of clause)