Administering the Contract

This chapter continues coverage of seven specific contract administration functions that will require significant involvement by the COR. The COR will first need to ensure that the CO is notified immediately of the need for action related to these functions; any delay in notifying the CO could greatly endanger the rights and remedies of the government. Next, the COR will need to provide thorough and competent technical support in determining the best course of action when issues relating to these functions arise. Finally, it is essential that the COR understand that these contract administration functions all have their foundation in technical considerations that rely heavily on the expertise of the COR.

The seven specific contract administration functions with which the COR will be involved are:

Contract modifications. Most contracts will require modifications for numerous reasons. The COR must identify the need to change the contract and must provide technical support as requested by the CO.

Options. An option is the unilateral right of the government to purchase additional supplies or services, as provided in the contract. The COR must provide technical assistance to ensure proper exercise of an option

by the CO.

Delays. The COR will need to inform the CO of potential or actual delays and provide technical documentation regarding the delay.

Stop work orders. The COR has primary responsibility for identifying situations in which the CO should issue a stop work order to minimize government risk and avoid unnecessary costs.

Claims. The COR must notify the CO of potential disputes and assist the CO in resolving those disputes and processing formal claims, if needed.

Remedies. In the event of a breach in the contract, the COR must notify the CO, suggest an appropriate remedy for the breach, and assist in evaluating the contractor's response to the suggested remedy.

Payment. The COR will have responsibility for processing payment documents, assisting the CO in determining the amount properly payable, and authorizing payment.


What is the COR's role in the contract modification process?

The COR plays a key role in the contract modification process. He or she reviews and recommends contract modification requests and prepares a technical analysis to support the determination of whether a requested modification falls within the scope of the contract.

What key terms does the COR need to be familiar with regarding modifications?

Key terms relate to contract modification and value engineering.

Contract modification is used to describe any written change in the terms of the contract. There are two types of contract modifications:

Unilateral modification. Unilateral modifications are changes to a contract that are signed only by the CO. This type of modification is used to:

Make administrative changes that are minor in nature and that do not materially affect contract performance

Issue change orders, which are actual issuances of changes authorized by the changes clause in the original contract

Make changes authorized by other contract clauses, which may include:

- Issuance of a stop-work order

- Issuance of a termination notice

- Exercise of an option.

Bilateral modification. Bilateral modifications, or supplemental agreements, are contract modifications accomplished by mutual action of the involved parties. Both the contractor and the CO sign these changes. CORs may be required to provide advice to the CO on the technical aspects of the proposed change. Bilateral modifications are used to:

Make negotiated equitable adjustments[1] resulting from the issuance of a change order

Approve changes, such as economic price adjustments, required by the terms of the contract

Reflect other agreements of the parties that modify the contract's terms.

Most bilateral or supplemental agreements involve the negotiation of price, cost, and other terms. These agreements usually entail tasks that are similar to those involved in the award of a basic contract (e.g., analyzing the contractor's proposed labor and material costs related to the modification).

Value engineering is the formal channel through which contractors may voluntarily suggest methods for performing more economically (and share in any resulting savings), or by which contractors may be required to establish a program to identify and submit to the government methods for performing more economically. Value engineering is a program that attempts to eliminate, without impairing essential functions or characteristics, any factor that increases acquisition, operation, or support costs.

  • [1] When the CO issues a change order, equitable adjustments to price, estimated cost, delivery schedules, or other areas impacted by the change must be reflected in a supplemental agreement, known as a bilateral modification. The term equitable refers to both parties remaining contractually or legally whole as a result of the adjustment (i.e., neither party should gain an advantage or suffer a loss).
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