Contractors working with federal agencies are governed by the Federal Acquisition Regulation (“FAR”), which has its own body of case law that controls recovery for legal disputes separate from traditional theories. When projects shift, delays mount, or directives change, the claims process becomes critical to protecting a contractor’s rights and entitlement to additional costs. This post provides a practical overview of common government contract claims, how they arise, and how to position your company for successful resolution. While every contract and agency has its nuances, the core concepts below will help you recognize issues early and build a clean, well-supported record.
Changes and Equitable Adjustments
The most frequent claims in government contracting stem from changes—directed or constructive—that alter the scope, cost, or time for performance. Under the FAR, the Contracting Officer can issue formal change orders to modify specifications, drawings, or performance requirements, and to direct specific action by the Contractor. When a formal change is made, the FAR requires the Contracting Officer to make an equitable adjustment for the additional time and cost associated with the change. However, constructive changes arise when informal government actions (or inactions) require work beyond the contract as written, such as design clarifications that materially increase effort, inspections that impose more stringent criteria than specified, directives for specific performance, and contract interpretations that differ from the Contractor’s view of what is required.
A contractor’s remedy in this situation is to assert that a change has occurred and claim entitlement to an equitable adjustment for price, schedule, or both. It is highly recommended to preserve your rights by: (a) promptly providing written notice of the change; (b) segregating and tracking changed work costs; and (c) maintaining contemporaneous schedules and records of communication showing time impacts. Do not proceed with what you consider additional work without documenting your belief in writing that the work is a change to the Contracting Officer; doing so risks later disputes about authorization, at-risk work, and cost entitlement.
Delays, Disruptions, Suspensions, and Stop Work Orders
Delays caused by the government, such as late access, untimely approvals, or design revisions, may entitle you to a time extension and, depending on contract terms and causation, compensation for extended performance costs. Compensable delay typically requires a showing that the Government caused the delay, the delay impacted the critical path, and the contractor was not responsible for concurrent delay during the delay period. Excusable delay requires that the contractor show that the delay resulted from unforeseeable causes beyond the control of and without the fault or negligence of the contractor, and that the unforeseeable cause delayed the overall contract completion by impacting the critical path. Excusable delays entitle a contractor to time only and not additional costs.
Disruption claims address lost productivity even when the critical path does not slip, often due to resequencing, out-of-sequence work, or interference. Suspensions and stop work orders arise when the government halts work in whole or in part, and the FAR provides direct relief in these scenarios.
For these claims, robust scheduling and cost records are decisive. Maintain an accurate baseline schedule, regularly update it, and identify the critical path. When impacts occur, issue timely written notices, quantify delays with schedule analyses, and segregate extended field and home office costs. Avoid commingling government-caused impacts with your own inefficiencies. Apportionment and concurrency can reduce or eliminate recovery if not cleanly documented.
Defective Specifications
When the government provides design specifications that prescribe how to perform the work, it generally warrants that if the specifications are followed, a satisfactory result will occur. If you build to those specifications, and the result is defective, you may have a claim for the additional costs incurred to correct or complete the work. Importantly, the defective specification theory generally cannot be used for performance specifications where only a goal is stated and the method to achieve that goal is left up to the Contractor. The key is proving adherence to the specifications or an inability to perform according to the specifications, identifying the defect, showing causation, and showing resulting damages. Keep clear records showing compliance, raise RFIs promptly when ambiguities surface, and avoid offering substitutions without formal approval that the substitution is a change, which can shift risk back to you, as the government may claim it was voluntary or at-risk work.
Termination: Convenience and Default
Government contracts can be terminated for convenience, permitting the agency to end work without contractor fault and without cause. In such cases, you are typically entitled to recover the costs of work completed prior to the termination, reasonable settlement expenses, and a reasonable profit on work performed. The type of recovery depends on the termination for convenience clause itself. For convenience terminations, move quickly to inventory work in process, close out subcontracts, and prepare a structured settlement proposal with supporting cost records in accordance with your applicable termination clause.
A termination for default, by contrast, alleges contractor breach and can have severe consequences not only for your current contract but for your ability to compete for future work. If confronted with potential default, immediately assess and respond to cure notices or show cause notices, gather evidence of excusable delay or government-caused impacts, and preserve your rights to pursue a claim. If you are terminated for default, you can appeal that decision within a defined period of time and argue for a conversion to a termination for convenience.
Conclusion
It is important to understand common claim categories to ensure you protect your rights and that you are not taken advantage of. Always give timely notice if you believe the Government is requesting work beyond the requirements of the Contract, maintain thorough records, calculate and track out-of-scope costs, and present clear evidence from those records. A strong record built in real time is the best predictor of a successful claim outcome. Always remember that negotiation and open communication with your Contracting Officer are the best ways to avoid prolonged litigation. Understanding the concepts above and supporting a claim under these theories at the outset can lead to a quick resolution.
Visit Parts 1, 2, and 3 in our series, and visit this link to view our recent webinar recording to learn more about the Fundamentals of Contract Administration Disputes. Should you have questions regarding REAs, claims, appeals, or any other government contract dispute, please contact Lauren Brier, Jon Neri, Ryan Boonstra, or another member of PilieroMazza’s REAs, Claims, and Appeals or Government Contracts practice groups.
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If you’re seeking practical insights to gain a competitive edge by understanding the government’s compliance requirements, tune into PilieroMazza’s podcasts: GovCon Live!, Clocking in with PilieroMazza, and Ex Rel. Radio.
