Is It Time to Submit a Request for Equitable Adjustment?

Dealing with unexpected cost increases on your contract

What Is a Request for Equitable Adjustment? 

A Request for Equitable Adjustment (REA) is a written request to the US government for payment when unforeseen and unintended circumstances cause an increase in contract performance costs. An REA is not a claim or lawsuit and can occur during the life of a contract. The purpose of an REA is for the government and contractor to work toward and negotiate a satisfactory settlement to both parties. 

When is an REA necessary? 

REAs are used to remedy the time when scope or deliverables are modified or increased or there is an “unforeseen or unintended change” in the contract. The following examples may result in an REA: 

  • Government-driven contract modification 
  • Changed worksite conditions due to uncontrollable circumstances: weather, war, political turmoil, worker strikes, etc. 
  • Defective, or delays in, government property delivery 
  • Issuance of a stop work order 
  • Material costs impacted by inflation 

Is my cost to submit an REA allowable? 

Costs incurred by a contractor, including costs for outside subject-matter experts (legal and accounting consultants), to prepare an REA are allowable and recoverable. The goal in submitting an REA is for the contractor and government to work collaboratively toward a satisfactory outcome.  

Costs to prepare a certified claim in accordance with the Contracts Dispute Act are unallowable and not recoverable. Further, submitting a certified claim formalizes a dispute with the government and may result in time-consuming and costly litigation. It is important to note that an REA does not require a formal certification as seen in a claim in FAR 52.233-1. 

BRG’s role 

BRG can collaborate with contractors to efficiently prepare REA submissions. BRG is familiar with the types of questions and concerns typically raised by the government and can help shape the REA submission accordingly. BRG will work with those seeking reimbursement to ensure: 

  • A narrative is prepared to tell the story and outline why reimbursement is appropriate. 
  • Costs are supported with clear and accurate documentation (relevant invoices, receipts, payment support, job cost reports, paystubs, any other applicable evidence). 
  • Government questions or concerns regarding the REA submission are responded to promptly and completely. 
  • Compensation for revenue loss due to contract changes or other factors as mentioned. 

Typically, the costs for preparing an REA are allowable and recoverable as part of the cost of the equitable adjustment. If the parties cannot reach an equitable adjustment and move to claim submission, the costs for pursuing a claim are unallowable/unrecoverable on government contracts. Hence, careful early preparation and involvement of knowledgeable experts is advised. If you have questions about REA preparation, process, and effort to accomplish, please reach out to BRG to see how our team can help you achieve maximum cost recovery. 

Government Contracts

Find out more about BRG’s Government Contracts Advisory Services.