REA or claim? Choosing the right path when a contract changes

When the government changes the work, delays performance or interprets the contract in a way that costs you money, you are entitled to an adjustment. The first decision is how to ask for it. Contractors usually choose between a request for equitable adjustment (REA) and a claim under the Contract Disputes Act (CDA), 41 U.S.C. §§ 7101–7109. The choice affects what you can recover and how quickly you can force a decision.

What an REA is

An REA is a request to negotiate. It invites the contracting officer to agree to a price or schedule adjustment, usually by modification. REAs keep the relationship cooperative and often resolve changes efficiently.

REAs have one financial advantage. Costs of preparing an REA, such as consultant and legal fees, may be allowable as contract administration costs when they are incurred to negotiate rather than to prosecute a claim. Courts and boards look at the purpose of the work, not just its label.

REAs also have limits. There is no deadline for the contracting officer to respond, and interest does not run.

What a CDA claim is

A claim is a written demand seeking, as a matter of right, payment of money, an adjustment of contract terms or other relief (FAR 2.101). It must be submitted to the contracting officer and ask for a final decision. A claim starts the formal disputes process:

• Certification. A claim over $100,000 must be certified, in the statutory language, by an authorized official (41 U.S.C. § 7103(b); FAR 33.207). A missing certification is fatal, though a defective one can usually be corrected.
• Decision deadline. For claims of $100,000 or less, the contracting officer must decide within 60 days if the contractor requests it. For larger claims, the contracting officer must decide within 60 days or say when a decision will issue. Failure to decide in time is treated as a denial, which lets the contractor appeal.
• Interest. Interest runs from the date the contracting officer receives the claim until payment.
• Appeal rights. A final decision can be appealed to the appropriate Board of Contract Appeals within 90 days or to the Court of Federal Claims within 12 months. These deadlines are strict.

The tradeoff is cost. Expenses of prosecuting a claim against the government are unallowable (FAR 31.205-47(f)(1)).

The six-year limit

Whichever path you start on, a claim must be submitted within six years after it accrues (41 U.S.C. § 7103(a)(4)(A)). An REA does not stop that clock. Contractors that negotiate an REA for years can find that the claim is time-barred.

Converting an REA into a claim

An REA can become a claim if it meets the claim requirements: a written demand for a sum certain, as a matter of right, with a request for a final decision and certification when required. Ambiguous submissions create disputes about when interest began and whether a deemed denial occurred. The safer approach is to state plainly when you are submitting a claim.

Practical steps

• Give written notice of changes promptly, as the contract’s changes clause requires.
• Track the costs of each change separately from the start.
• Begin with an REA when negotiation is realistic, and set an internal date to convert it.
• Calendar the six-year accrual date for every unresolved change.
• Have counsel review certification language before any claim over $100,000 is signed.

We help contractors price and present REAs, and we take claims through final decision and appeal when negotiation fails.

This article is general information, not legal advice.