Requests for Equitable Adjustment (REAs) serve as an important mechanism for contractors when government actions change the scope, timing, or conditions of performance. At the heart of an REA lies a specific entitlement clause, which provides the legal foundation for requesting adjustments in cost or schedule.
The Changes clause within the Federal Acquisition Regulation (FAR) is typically the starting point, although other contract provisions may apply depending on the specific circumstances. Comprehending which clause applies sets the stage for a stronger submission and supports stronger compliance with Department of Defense requirements when applicable.
The Central Role of the FAR Changes Clause
The foundation of most REAs can be traced directly to the Federal Acquisition Regulation’s Changes clause, which exists in multiple forms depending on contract type.
FAR 52.243-1 applies to fixed-price contracts, FAR 52.243-2 to cost-reimbursement contracts, FAR 52.243-3 to time-and-materials or labor-hour contracts, and FAR 52.243-4 to construction contracts. These provisions authorize an equitable adjustment whenever the government modifies the work formally or causes a constructive change that alters performance obligations.
Without such entitlement language, contractors would have no clear basis to request financial or schedule relief, making the Changes clause the primary driver of REAs across the government contracting sector.
Additional Contract Clauses That Provide Entitlement
Although the Changes clause is most often cited, other provisions can also serve as the legal basis for adjustments when specific circumstances arise. For construction and architect-engineer contracts, FAR 52.242-14, Suspension of Work, creates a right to compensation if government-directed suspensions delay progress.
In supply contracts outside the commercial item framework, FAR 52.242-17, Government Delay of Work, applies when delays imposed by the government extend performance timelines. For construction projects encountering unexpected conditions, FAR 52.236-2, Differing Site Conditions, permits adjustments when subsurface or latent conditions differ from those anticipated.
FAR 52.243-5, Changes and Changed Conditions, addresses entitlement in certain transportation contracts. Boards of Contract Appeals consistently evaluate REAs against the proper entitlement clause, and history shows that relying on the wrong provision can result in denial of recovery.
DOD Requirements Attached to REAs
Within the Department of Defense contracting environment, REAs must also comply with DFARS 252.243-7002, a mandatory clause in contracts above the simplified acquisition threshold, including those awarded under FAR Part 12 for commercial items.
It prescribes a certification that the request is made in good faith, requires disclosure of all relevant facts, and may demand certified cost or pricing data under FAR 15.403-4 when thresholds are exceeded. In other cases, data other than certified may be required under FAR 15.403-3 or -5.
Importantly, DFARS directs that increases and decreases be combined using absolute values when determining whether the certification threshold applies, which can create obligations even when the net adjustment is minor.
Another important DFARS clause is 252.243-7001, Pricing of Contract Modifications, which ties adjustments to FAR Part 31 and DFARS Part 231 cost principles. Any adjustment hinges not just on entitlement but also on compliance with cost allowability, allocability, and reasonableness rules.
FAR Part 43 supplements these requirements by obligating the government to negotiate equitable adjustments promptly and setting expectations for definitization of change orders.
Distinguishing an REA From a CDA Claim
Although REAs and Contract Disputes Act (CDA) claims seek financial or schedule relief, they differ in procedure, certification, and legal standing.
n REA represents a request to modify the contract based on an entitlement clause and, within the DOD, is governed by DFARS 252.243-7002 when above the simplified acquisition threshold. A CDA claim, on the other hand, falls under FAR Part 33 and the Disputes clause at FAR 52.233-1.
When a claim exceeds $100,000, it must carry a specific certification, and a contracting officer must issue a decision within established timeframes. REAs may convert into claims if rejected or not acted upon, but initially they function as requests for adjustment rather than formal disputes.
The Defense Contract Audit Agency emphasizes that contractors should distinguish between these two submissions, since each is evaluated under different authorities and with different procedural outcomes.
Accounting and Documentation Expectations
Proper handling of REAs requires more than citing the correct clause; it demands disciplined accounting and documentation. FAR 52.243-6, Change Order Accounting, gives contracting officers the authority to require segregation of costs for each change when the estimated cost exceeds $100,000.
FAR 43.203 outlines the types of direct cost categories typically separated, which may include labor, materials, subcontract costs, and related expenses. Establishing clear cost-tracking practices makes it far easier to demonstrate the impact of a change and supports compliance with audit standards.
Pricing of adjustments is always subject to FAR Part 31 cost principles. Contractors should expect scrutiny of items such as legal or consulting fees under FAR 31.205-47 and a wide range of other selected costs. To meet expectations, the file supporting the REA should be built to withstand audit review, demonstrating allowability, allocability, and reasonableness throughout.
Certification rules are another central requirement. DFARS 252.243-7002 requires certification for REAs exceeding the simplified acquisition threshold, and the submission must affirm that the request is prepared in good faith with accurate supporting data.
Depending on contract circumstances, certified cost or pricing data may be required under FAR 15.403-4, or data other than certified may be requested by the contracting officer. DFARS also mandates that upward and downward adjustments be considered when testing thresholds, requiring contractors to maintain reconciliations that display the complete picture of increases and decreases.
Auditors reviewing REAs will expect detailed records linking claimed costs to entitlement clauses. The Defense Contract Audit Agency’s Contract Audit Manual highlights methods used to evaluate REAs, including time-impact analyses, verification of labor hours, and confirmation of rate structures.
An audit-ready file must clearly demonstrate the connection between government-directed actions and the costs or schedule impacts presented in the request.
Building Stronger Outcomes Through the Right Foundation
Knowing which contract clause establishes entitlement is fundamental for a well-supported Request for Equitable Adjustment, and careful accounting practices make the difference between a smooth negotiation and an audit challenge.
At Diener & Associates, decades of experience serving government contractors have shown how important it is to connect entitlement provisions with accurate financial data, presented in compliance with FAR and DFARS requirements.
Schedule a consultation online or contact us at 1-(703)-386-7864 to work with the professional CPAs at Diener & Associates for customized consulting and accounting services that strengthen compliance and support lasting success.