FAR 52.250-5—SAFETY ActEquitable Adjustment.
Plain-English Summary
FAR 52.250-5, SAFETY Act–Equitable Adjustment, addresses how contract pricing and performance are handled when a contract item was priced on the assumption that the Department of Homeland Security (DHS) would issue a SAFETY Act designation or SAFETY Act certification, but DHS later denies that application. The clause defines key SAFETY Act terms, including act of terrorism, Qualified Anti-Terrorism Technology (QATT), block designation, block certification, SAFETY Act designation, and SAFETY Act certification, so the parties know exactly what kind of technology and DHS determination are involved. It applies to items covered by a pre-qualification designation notice, block designation, or block certification and states that the contract price was established based on the expectation of DHS approval. The clause requires the contractor to pursue the designation/certification and the insurance amount DHS requires in good faith, and it gives the contractor a limited time to request an equitable adjustment if DHS denies the application. It also gives the contracting officer discretion either to adjust the contract price or other terms and conditions, or to terminate the contract for convenience instead of granting an adjustment. Finally, it preserves the contractor’s duty to continue performance while the adjustment is being worked out and routes unresolved disagreements into the contract’s Disputes clause. In practice, this clause is important because it allocates the financial risk of SAFETY Act denial, sets a process for seeking relief, and protects the Government’s ability to continue or exit performance if the underlying DHS approval does not materialize.
Key Rules
Key SAFETY Act definitions
The clause defines the SAFETY Act terms that control its application, including act of terrorism, QATT, block designation, block certification, SAFETY Act designation, and SAFETY Act certification. These definitions matter because the adjustment rights only arise when the contract item falls within the SAFETY Act framework described in the clause.
Pricing assumed DHS approval
The clause states that the contract prices for covered items were established on the assumption that DHS would issue a SAFETY Act designation or certification. This means the contract price reflects the expected cost structure associated with obtaining that approval, including required insurance.
Good-faith pursuit required
To qualify for an equitable adjustment, the contractor must in good faith pursue both the SAFETY Act designation or certification and the amount of insurance DHS requires for that approval. A contractor that does not actively and honestly pursue the DHS process risks losing the right to relief under the clause.
Thirty-day request deadline
If DHS denies the application, the contractor must submit a request for equitable adjustment within 30 days after DHS notifies it of the denial. Missing this deadline can jeopardize the contractor’s ability to obtain relief under the clause.
Government may adjust or terminate
After a denial, the contracting officer must either make an equitable adjustment to the contract price or other terms and conditions based on the cost impact of the denial, or, at the Government’s sole option, terminate the contract for convenience instead of granting an adjustment. The clause gives the Government flexibility to choose the remedy that best fits the situation.
Disputes clause applies
If the parties cannot agree on the amount or terms of the equitable adjustment, the disagreement is treated as a dispute under the contract’s Disputes clause. This means the issue follows the normal contract dispute resolution process rather than being resolved informally only.
Performance continues unless terminated
Unless the contract is first terminated, the contractor must keep performing while the equitable adjustment is being established. The denial of SAFETY Act approval does not automatically excuse performance or stop work.
Responsibilities
Contractor
Pursue SAFETY Act designation or certification in good faith, including seeking the DHS-required insurance amount. If DHS denies the application, submit any request for equitable adjustment within 30 days of the denial notice and continue contract performance unless the Government terminates the contract.
Contracting Officer
Review the contractor’s request after a DHS denial and decide whether to provide an equitable adjustment to price or other contract terms, or instead exercise the Government’s option to terminate for convenience. If the parties disagree on the adjustment, process the matter under the Disputes clause.
Department of Homeland Security (DHS)
Evaluate the SAFETY Act application and issue or deny the designation or certification. DHS’s approval or denial is the trigger for the clause’s adjustment process.
Government
Choose whether to continue the contract with an equitable adjustment or terminate for convenience when DHS denies the SAFETY Act application. The Government also bears responsibility for resolving disputes through the contract’s dispute procedures if agreement is not reached.
Practical Implications
This clause shifts a specific risk: if the contract price assumed SAFETY Act approval but DHS denies it, the contractor may seek relief, but only if it acted in good faith and met the 30-day deadline.
Contractors should document their DHS application efforts, insurance requests, and cost impacts carefully, because the equitable adjustment is based on evidence of increased or decreased costs.
The clause does not guarantee a price increase; the contracting officer may also reduce the price if the denial lowers costs, or may terminate the contract for convenience instead.
Performance generally must continue during the adjustment process, so contractors should plan for cash flow, staffing, and schedule impacts while the issue is being resolved.
A common pitfall is assuming that DHS denial automatically excuses performance or automatically entitles the contractor to a full price increase; the clause requires a formal request, evidence, and a Government decision.
Official Regulatory Text
As prescribed in 50.206 (d) , insert the following clause: SAFETY Act-Equitable Adjustment (Feb 2009) (a) Definitions . As used in this clause- Act of terrorism means any act determined to have met the following requirements or such other requirements as defined and specified by the Secretary of Homeland Security: (1) Is unlawful. (2) Causes harm, including financial harm, to a person, property, or entity, in the United States, or in the case of a domestic United States air carrier or a United States-flag vessel (or a vessel based principally in the United States on which United States income tax is paid and whose insurance coverage is subject to regulation in the United States), in or outside the United States. (3) Uses or attempts to use instrumentalities, weapons or other methods designed or intended to cause mass destruction, injury or other loss to citizens or institutions of the United States. Block certification means SAFETY Act certification of a technology class that the Department of Homeland Security (DHS) has determined to be an approved class of approved products for homeland security. Block designation means SAFETY Act designation of a technology class that the DHS has determined to be a Qualified Anti-Terrorism Technology (QATT). Qualified Anti-Terrorism Technology (QATT) means any technology designed, developed, modified, procured, or sold for the purpose of preventing, detecting, identifying, or deterring acts of terrorism or limiting the harm such acts might otherwise cause, for which a SAFETY Act designation has been issued. For purposes of defining a QATT, technology means any product, equipment, service (including support services), device, or technology (including information technology) or any combination of the foregoing. Design services, consulting services, engineering services, software development services, software integration services, threat assessments, vulnerability studies, and other analyses relevant to homeland security may be deemed a technology. SAFETY Act certification means a determination by DHS pursuant to 6 U.S.C. 442(d) , as further delineated in 6 CFR 25.9 , that a QATT for which a SAFETY Act designation has been issued is an approved product for homeland security, i.e. , it will perform as intended, conforms to the seller's specifications, and is safe for use as intended. SAFETY Act designation means a determination by DHS pursuant to 6 U.S.C. 441(b) and 6 U.S.C. 443(a) , as further delineated in 6 CFR 25.4 , that a particular Anti-Terrorism Technology constitutes a QATT under the SAFETY Act. (b) Prices for the items covered by the pre-qualification designation notice, block designation, or block certification in the contract were established presuming DHS will issue a SAFETY Act designation (or SAFETY Act certification) for those items. (c) In order to qualify for an equitable adjustment in accordance with paragraph (d) of this clause the Contractor shall in good faith pursue obtaining- (1) SAFETY Act designation (or SAFETY Act certification); and (2) The amount of insurance DHS requires for issuing any SAFETY Act designation (or SAFETY Act certification). (d) (1) If DHS denies the Contractor’s SAFETY Act designation (or certification) application, the Contractor may submit a request for an equitable adjustment within 30 days of DHS’s notification of denial. (2) The Contracting Officer shall either- (i) Make an equitable adjustment to the contract price based on evidence of the resulting increase or decrease in the Contractor’s costs and/or an equitable adjustment to other terms and conditions based on lack of SAFETY Act designation (or certification); or (ii) At the sole option of the Government, terminate this contract for the convenience of the Government in place of an equitable adjustment. (3) A failure of the parties to agree on the equitable adjustment will be considered to be a dispute in accordance with the "Disputes" clause of this contract. (4) Unless first terminated, the Contractor shall continue contract performance during establishment of any equitable adjustment. (End of clause)