Guide on the Use of the Changes Clause:: What Modifications Trigger Competition?

Guide on the Use of the Changes Clause:

What Modifications Trigger Competition?

An Additional Help for ADS Chapter 302

New Edition Date: 03/29/2021

Responsible Office: M/OAA/E

File Name: 302sax_032921

Guide on the Use of the Changes Clause: What Modifications Trigger

Competition?

A Justification and Approval (J&A) is required for an existing award when a proposed

action triggers competition. Competition is not triggered by any action taken specifically

in accordance with a term and condition of the award. Competition may be required for

modifications of existing contracts that exceed the scope of the original contract by

adding new work through an increase to the total estimated cost (TEC) of the award, a

change to the Statement of Work (SOW), or an extension of the period of performance

(POP).

Every contract is unique. Each situation must be analyzed on its own facts and

circumstances, considering the magnitude and type of changes ordered within the

scope of the contract and their cumulative effect upon the contract as a whole.

Exercise of a priced option or an equitable price adjustment are examples of contract

actions that do not trigger competition. Other examples of the types of contract

modifications that generally do not trigger competition include the following:

● Cost overrun - An increase in the TEC of a cost reimbursable contract in order

to allow the contractor to complete work already specified in the contract that

costs more than originally anticipated;

● Delay - An extension to the POP granting the contractor additional time to

complete the deliverables specified in the existing SOW (Delays can be

“Excusable,” “Government-caused,” or “Contractor-caused,” or “concurrent,”

each of which have different contractual implications);

● Changes - Changes within the general scope of the contract subject to the

applicable changes clause, FAR 52.243-1 through -5, that could have been

reasonably anticipated by the offerors; or

● Any combination of these.

a. Cost Overruns

The contractor requires additional funding in order to complete the contract. Do I

need a J&A to increase the TEC?

If the CO needs to increase the TEC of a contract to allow the contractor to incur

additional costs not originally anticipated to complete work already within the scope of

the contract, the contract has a cost overrun. The CO has discretion to fund or not

fund an overrun.

In a Cost-Plus-Fixed-Fee (CPFF) completion type contract, FAR 16.306 states that “in

the event the work cannot be completed within the estimated cost, the Government

may require more effort without increase in fee, provided the Government increases

the estimated cost.” Under a CPFF term type contract, a cost overrun may generally

occur if the cost of labor exceeds what was anticipated and/or indirect costs are higher

than anticipated.

Funding a cost overrun does not require a J&A. Cost overruns are sometimes an

unavoidable risk of the cost-reimbursement type contract. While overruns are

occasionally caused by contractor waste or inefficiency, often they are due to the

unavoidable lack of certainty in contract requirements. Given the nature of the work

acquired by cost-reimbursement contracts, contractor performance often evolves in

ways neither the contractor nor the Government foresaw at the time of award.

Cost Overrun Examples:

1) A CPFF completion type contract is issued for a construction project for the

building of a road overseas. The host country government had promised to

facilitate the contractor in obtaining the necessary permits. The host

government experienced difficulty in its engagement with the local government

authorities. The contractor had to hire a local law firm to facilitate the permitting,

resulting in additional unanticipated costs.

Determination: The increased costs under this contract are not the result of new

work being added to it, so competition requirements are not triggered. In

accordance with FAR part 16.306(d)(1), in the event the work cannot be

completed within the estimated cost, the Government may require more effort

without increase in fee, provided the Government increases the estimated cost.

2) By year three of a CPFF term type contract, the contractor’s overhead rates had

increased by 20%. Additionally, the exchange rate changed from when the

contract was executed, costing significantly more money to perform the contract.

Determination: The increased costs under this contract are not the result of new

work being added to it, so unless the contract’s terms and conditions contained

a different agreement on exchange rate fluctuations or a ceiling on indirect

costs, competition requirements are not triggered. If the CO elects to increase

the TEC of the contract with no additional fee authorized, this action would not

require a J&A.

3) A 5-year CPFF completion contract for technical assistance to support the

Mission’s eight Government to Government (G2G) agreements required the

contractor to help manage the Mission’s portfolio of G2G awards and provide

capacity building services to the host country implementers. By the end of year

4, the G2G portfolio had grown to twelve agreements and the COR has directed

the contractor to take action with respect to all of them. The contractor informs

the CO that it will run out of funds in two months, but the contract period of

performance does not end for 10 months.

Determination: The addition of four new G2G agreements that the contractor

must provide oversight for, as well as the new host country partners, has

resulted in a cost increase. Although the contractor was performing essentially

the same work, the cost increase was a direct result of the additional

agreements it was required to help manage. This is not a cost overrun because

the additional cost resulted from work not contemplated in the original award.

b. Delays

Can my contract period of performance be extended due to a delay without a J&A?

If you need to extend the period of performance to allow the contractor to complete

work that is already specified in the contract, then you may not need a J&A. It is

important to understand the specific contract type and cause of the delay in order to

determine the appropriate action.

Excusable delays are defined as delays beyond the control of the contractor and

without the fault or negligence of the contractor. The Excusable Delay clause allows

the government to either revise the delivery schedule/period of performance or

terminate the contract for convenience.

● Under a cost plus fixed-fee (CPFF) completion type contract, the contractor may

be given additional time to complete the deliverables specified in the existing

SOW. If there was an "excusable delay," then the authority to extend the period

of performance would be the excusable delay clause, FAR 52.249-14. If there

was no excusable or government caused delay, then the CO can terminate for

default or give the contractor additional time to complete the work in return for

some consideration.

● Under a CPFF Term contract, the contract ends when the contractor provides

the agreed upon level of effort (LOE). The Excusable Delays clause would

allow for extension of the period of performance to allow the contractor to

provide the LOE included in the contract, but this clause does not allow for

additional LOE to be added to the contract.

Government-caused delays. If the government was the cause of the delay, it may be

required to extend the time for completion.

Contractor-caused delays. A delay the government has not authorized and for which

the contractor is at fault. The CO should negotiate consideration for the government

allowing performance to continue. The delay should be reflected in the contractor’s

Contractor Performance Assessment Reporting System (CPARS).

Concurrent delays. It is possible to have a delay, elements of which were caused by

both the contractor and the government.

Excusable Delays Example:

1) The completion of a CPFF completion contract was delayed due to security

incidents that occurred in the districts of the host country where the contract

activities were being implemented. The host country government restricted

access to the region while addressing the incidents. The contractor was

delayed in their performance because they were unable to access the region as

planned.

Determination: These delays were outside of the Contractor’s control. In this

case the FAR clause 52.249-14 Excusable Delays authorizes the CO to extend

the contract. The CO may extend the contract to adjust the period of

performance after analyzing the impact the delay had on the contract schedule.

2) A CPFF term contract called for the contractor to provide 5,000 days of labor

under the local technical assistance line item. During the last year of

performance, a global pandemic struck. Based on a contractor request, the

technical office asks the CO to use the excusable delay clause to extend the

contract and add LOE since performance was delayed and there are sufficient

funds on the contract.

Determination: The term form describes the scope of work in general terms and

obligates the contractor to devote a specified level of effort for a stated time

period. Under this form, if the performance is considered satisfactory by the

Government, the fixed fee is payable at the expiration of the agreed-upon

period, upon contractor statement that the level of effort specified in the contract

has been expended in performing the contract work. In accordance with FAR

16.306, “Renewal for further periods of performance is a new acquisition that

involves new cost and fee arrangements.” FAR 52.249-14, Excusable Delays,

which is to be included in all cost-reimbursement contracts, provides in

paragraph (c) that the relief granted to the contractor in this scenario is revision

to the "delivery schedule," not additional LOE. The CO may extend the period of

performance to allow the contractor to provide the LOE under contract, but may

not add additional LOE to the contract without a J&A.

Excusable Delays - Indefinite Delivery/Indefinite Quantity (IDIQs) and Task Orders

1) A Task Order's (TO’s) work is delayed when much of their staff are on ordered

departure or quarantined due to issues associated with the COVID-19 outbreak

in 2020. As a result, the CO wants to use the Excusable Delays clause to

extend the task order long enough to allow the contractor to complete the work.

Determination: The Excusable Delays clause can be used to extend a Task

Order. However, in addition to the requirements normally applicable to a stand-

alone contract, the CO must examine the IDIQ as well. The CO must confirm

that extending the task order will not cause the TO to go beyond the IDIQ's

period of performance (POP). If the extension does go beyond the POP end

date, then the IDIQ must also be extended. The IDIQ CO can also use the

Excusable Delays clause to extend the IDIQ's POP and then the Task Order CO

can extend the TO's POP.

2) An IDIQ's ordering period is expiring soon. Due to the COVID-19 outbreak in

2020, multiple orders were delayed because of shutdowns in operations,

quarantine actions, authorized departures, redesigning programs based on new

operating parameters as a result of the outbreak, and the need to calculate

increased costs associated with new operating measures (PPE, virtual

workspace, etc.). Can we use the Excusable Delays clause to extend the

ordering period?

Determination: No. Under an IDIQ, there is not any guarantee that the full order

amount (TEC) will be ordered collectively by the government. IDIQs create an

opportunity for COs to place orders in an expedited manner. The excusable

delays clause authorizes contractual remedies when a failure to perform was

outside of the control of the contractor. In this scenario, there is no existing

work on contract that requires additional time for performance. In most cases,

to extend the ordering period of an IDIQ, a CO will need to execute a J&A.

Please remember to submit that J&A to the justificationsanda@usaid.gov

mailbox for clearance by the ACA.

c. Changes

Are there any situations other than cost overruns and excusable delays in which the

CO can make non-administrative changes to the contract without triggering

competition?

There is a difference between a prospective out-of-scope contract modification

(cardinal change) that requires a J&A and a within-scope contract modification that

does not trigger the need to document use of noncompetitive authority. Generally, all

modifications must be within the overall scope of the contract. This principle applies in

the context of both competitive and non-competitive acquisitions.

In certain circumstances, changes to elements of a contract may be necessary to

achieve the results or deliverables of the contract. Changes that are within the general

scope of the contract can be made pursuant to the applicable Changes clause (FAR

52.243-1 through -5).

How does the CO determine whether a proposed change falls within the scope of the

Changes clause?

When considering whether a change is authorized under the Changes clause, each

case must be analyzed on its own facts and in light of its own circumstances. First, the

change must relate to one of the elements described in the clause itself (e.g., the

following elements are described in FAR 52.243-2 Changes-Cost-Reimbursement,

Alternate I for services):

(1) Description of services to be performed.

(2) Time of performance (i.e., hours of the day, days of the week, etc.).

(3) Place of performance of the services.

(4) Drawings, designs, or specifications when the supplies to be furnished are to be

specially manufactured for the Government in accordance with the drawings, designs,

or specifications.

(5) Method of shipment or packing of supplies.

(6) Place of delivery.

The CO must consider the magnitude and quality of the changes ordered and their

cumulative effect upon the contract as a whole. Contract modifications cannot

materially depart from the scope of the original procurement without a J&A. The

analysis with respect to scope is an objective one viewed from the perspective of

potential offerors for the original procurement, so the CO must examine the scope of

the proposed contract modification in comparison to the original solicitation.

The courts and GAO determine whether a change is within the scope of the contract by

examining if offerors should have reasonably anticipated this type of contract change

based upon the information that was available in the solicitation. If an offeror would not

have anticipated that type of change, then the modification would represent a cardinal

change and a J&A is required because the modification would prevent potential

offerors from participating in what should be a new procurement.

Changes Clause Examples:

1) A contract was awarded for civil society engagement in governance in a fragile

state. The solicitation had put offerors on notice that should armed conflict arise

in the target regions, the contractor may be required to identify new regions in

the country in which to focus their effort. As performance begins, insurgents

start a takeover of one of the regions in which the contractor is performing. The

CO directs the contractor to pull out of this region, to provide analysis on other

potential regions to target, and then has the contractor restart the interventions

in this new identified region.

Determination: Both the change in the additional place of performance as well

as the costs associated with the shutdown in one region (and set up in another),

can be included in the contract using the Changes Clause because these

changes are within the general scope of the contract, change in the place of

performance is covered by the clause, and the language in the solicitation put

offerors on notice that they should expect such a change.

2) The solicitation of an education contract included a line item for upgrade of the

educational facilities. After the award, less funding was received for the

program and so the contract was descoped to remove the upgrade of five

schools. Funding priorities subsequently changed and a modification was

proposed to rescope the contract and add the funding for the five schools back

into the contract.

Determination: The Changes Clause included in the contract can be properly

cited in the proposed modification, rescoping the contract (and adding back the

funds that were removed as part of the descoping) because the work was

included in the original solicitation.

3) A malaria program includes a combination of bed nets, spraying, etc. During

implementation of the program, a new mosquito spray that was previously

unavailable was approved for use in the country for the particular challenge. In

order to use the new technology, the CO modifies the contract to make the

necessary changes and cover the associated costs involved with the changes.

Determination: The Changes Clause can be properly cited for modification to

the contract since the original nature and purpose of the contract has not been

changed. The spray identified in the solicitation and contract was the only

spray in use at the time and offerors were not evaluated on the spray mixture.

The change in spray composition did not prejudice any of the offerors, all of

whom should have reasonably understood that if the approved spray in the host

county changed, the contract would need to be modified in order to achieve its

original purpose.

4) The Goat Sellers Activity was competitively awarded by a USAID Mission for five

years with a TEC of $11,880,000. The activity was designed to identify

interventions in goat products export supply chain from farm to dock. These

interventions were designed to improve the overall export of goat products by 10

percent from 2016 export levels. After award, the European Union (EU)

announced new certification requirements for all goat product imports. The EU

is the host country’s single largest goat product market. There are no certifying

officials in the host country, therefore, once the certification becomes

mandatory, the host country will be denied its most significant goat product

market if it cannot comply.

The best solution to meet the goals of the award is that the contractor begins

implementation of a train-the-trainers program at the host country’s College of

Agriculture to create a cadre of trainers for future certifying officials. Since the

activity is already embedded in the College of Agriculture, the ‘training of

trainers’ program can fit seamlessly into ongoing programming. In addition, the

contractor will provide enough certifying officials in the form of Short Term

Technical Assistance to allow for the continued export of goat products to the

EU for a 120-day period. Afterwards, sufficient local certifying staff will be

available having completed the College of Agriculture’s training program.

USAID estimates that the total increase in cost will be $915,000, which will be

added to the TEC in addition to these certification objectives.

Determination: The CO reviewed the solicitation and noted that as part of

increasing goat product exports, it stated the need to identify export market

requirements. Once identified, the contractor was expected to assist goat

product producers to introduce processes into the supply chain where needed to

meet those requirements. The CO determined that a reasonable person could

expect those requirements to apply to both existing and new markets. Also

requirements in an existing market might vary depending on the targeted market

area, i.e., animal, person, organic, grass fed, etc. It is reasonable to expect that

requirements might be fluid at times as regulatory changes take place. This is a

change that an offeror/contractor could reasonably have expected.

5) The Mission has a CPFF contract in place to provide access to technical

services, training, and capacity-building related to improving urban and local

governance. The technical team is seeking to modify the contract's scope of

work to make explicit the installation of street signs, lighting, and light

landscaping for municipal streets and city parks. The proposed activities are

estimated to cost approximately $600,000 over the remaining period of

performance (three years) of a $30 million contract. The activities fit very closely

with the sub-purposes of the SOW: improved service delivery, increased

responsiveness to citizens' priorities, and enhanced capacity to promote

community resilience. For instance, the installation of street lighting would have

a direct, immediate, and visible impact on improving the service delivery of

municipalities. Additionally, the contractor has conducted numerous surveys and

needs assessments of the municipalities for which it is providing technical

assistance: these activities have been identified as a priority of the citizens.

Will the CO add these activities to the SOW and include the required

construction clauses in the contract using the changes clause?

Determination: Despite the relatively small increase to the TEC that would

result from this action and the benefits it would provide to the program’s

objectives; this action would likely trigger competition requirements. It is clear

that the original solicitation and contract did not anticipate construction activities

under the award, since this is a technical assistance contract that did not

anticipate construction, as demonstrated by the SOW and the lack of any

construction clauses. Offerors would not have reasonably expected this

change.

Documenting the determination:

ADS 302.3.4.5(c) requires that the CO make a written determination that the change

does not trigger competition. This determination can be incorporated into the

modification negotiation memorandum or documented in a “stand-alone” specific

determination memorandum. A sample Determination Memo is located on the

M/OAA templates page.

The CO should consider the issues below in making and documenting the

determination:

● Does the original contract, as modified, call for essentially the same

performance?

● Does the solicitation or the initially awarded contract contain information that

would lead an offeror or contractor to reasonably anticipate the need for a

change of this nature?

● Does the modification substantially change the type of product or service being

delivered or performed, the quantity of the product or service, the performance

period, and/or the cost between the original contract and modified contract?

● Does the modification include additional time spent on performance of the

contract when such time is extended to add significantly more quantity or new

requirements to the contract?

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