|
Supplying Principles and Practices > USPS Supplying Practices Process Process Step 5: Measure and Manage Supply > Contract Modifications
Contract Modifications
There are two types of contract modifications:
1. Bilateral modifications (supplemental agreements) that are signed by
both the Supplier and the Contracting Officer. Bilateral modifications
include modifications to:
- Make equitable adjustments under Paragraph C of
Clause 4-1: General Terms and Conditions, Clause B-37:
Changes (Construction), or other clauses providing for
equitable adjustment
- Reflect other agreements of the parties modifying contract
terms
2. Unilateral modifications are signed only by the Contracting Officer in
accordance with a contract clause. Unilateral modifications include
modifications to:
- Make administrative changes (unilateral changes, in writing,
that do not affect the substantive rights of the parties, such
as a change in the paying office)
- Issue change orders
- Make changes authorized by specific clauses or contract
provisions (such as exercising an option or suspending
work)
- Issue termination notices
Except for certain mail transportation contracts, only Contracting Officers are
authorized to sign contract modifications for the Postal Service. Other Postal
Service personnel may not:
• Act in a manner that causes the Supplier to believe they have
authority to bind the Postal Service
• Direct or encourage the Supplier to perform work that should be
covered under a contract modification
Contract modifications, including changes that can be issued unilaterally,
must be priced before they are signed if it can be done without adversely
affecting the interest of the Postal Service. If a significant cost increase could
result from a contract modification and time does not permit negotiating a
price, at least a maximum price must be negotiated whenever practicable.
The effective date of an administrative change, change order, or other
unilateral modification issued by the Postal Service is any effective date
established in the contract or, if none, the date of the modification. The
effective date of a bilateral modification (such as a supplemental agreement)
is any effective date established in the contract or, if none, the date
agreement is reached (usually the date signed by the last agreeing party).
Modifications issued in connection with previous directions or agreements,
such as settlements of the cost of changes, confirmations of terminations, or
conversions of terminations for default to terminations for convenience,
ordinarily take the effective date of the underlying action. For modifications
converting a termination for default to a termination for convenience, the
effective date will be the same as the effective date of the termination for
default.
Under Paragraph C of Clause 4-1, or Clause B-37, Changes (Construction),
when the Supplier considers that any written or oral order (including a
direction, an interpretation, an instruction, or a determination) from the
Contracting Officer causes a change in the contract, the Supplier must notify
the Contracting Officer in writing that the Supplier regards the order as a
change order. The Contracting Officer must then evaluate the order, notify the
Purchase/SCM Team of the findings, and:
1. Confirm that it is a change, direct further performance, and plan for its
funding
2. Countermand the alleged change
3. Notify the Supplier that no change is considered to have been ordered
The Contracting Officer may not execute a contract modification that causes
or will cause an increase in funds without having first met with the
Purchase/SCM Team and obtained a certification of funds availability, except
for modifications to contracts that:
1. Are conditioned on availability of funds
2. Contain a limitation of cost or funds clause
The certification of funds availability should be based on the negotiated price.
Modifications signed before there is price agreement may be based on the
best available estimate.
The exercise of options and associated thoughts, considerations, and
concerns are discussed in detail in the Consider of Use of Renewals and
Options topic of the Develop Sourcing Strategy task of Process Step 2:
Evaluate Sources, as well as in Decide to Renew a Contract or Exercise
Options topic of the Manage Delivery and Contract Performance task of
Process Step 5: Measure and Manage Supply.
A contract may be modified to correct or mitigate the effect of a mistake.
Examples are:
• A mistake or ambiguity consisting of the failure to express, or
express clearly, in a written contract, the agreement as both
parties understood it
• A Supplier's mistake so obvious that it was or should have been
apparent to the Contracting Officer
• A mutual mistake concerning a material fact (particularly,
mistakes concerning the promises the parties made to one
another under the contract)
• A claim of mistake that is asserted after contract award, and a
decision to deny a claim of mistake asserted after contract award,
in whole or in part, is handled under the procedures of Clause
B-9: Claims and Disputes.
Paragraph C of Clause 4-1: General Terms and Conditions and Clause B-37:
Changes (Construction) allow the Contracting Officer to make unilateral
changes, as specified in the clause, within the general scope of the contract.
These changes are accomplished by issuing written change orders.
The Supplier must continue performing under the contract as changed,
except under contracts that are not fixed-price or incrementally funded where
the Supplier is not obligated to continue or incur costs beyond the limits
established in Clause 2-31: Limitation of Cost, or Clause 2-32: Limitation of
Funds.
The Postal Service uses the established accounting procedures when
analyzing the price or cost of changed work.
When change orders are not priced before performance, they usually require
two documents: (1) the change order and (2) a supplemental agreement
reflecting an equitable adjustment for the change order. If an equitable
adjustment in the contract price or delivery terms, or both, can be agreed
upon in advance, only a supplemental agreement need be issued. If the
change order has no effect on price or delivery, no equitable adjustment or
supplemental agreement is needed. Administrative changes and changes
issued under a clause giving the Postal Service a unilateral right to make a
change (such as an option clause) require only one document.
Contracting Officers must promptly negotiate equitable adjustments resulting
from change orders, and must follow up when claims for equitable adjustment
are not received within 30 days after the order. Before negotiating an
equitable adjustment, the Contracting Officer must ensure that price and cost
analyses, as appropriate, are made and must consider the Supplier's
segregable costs of the change, if available. If additional funds are required
as a result of the change, the funds must be available before the
supplemental agreement is signed.
To avoid controversies that may result from a supplemental agreement
making an equitable adjustment, the Contracting Officer should:
• Ensure that all elements of the equitable adjustment have been
presented and resolved
• Include a release of claims in the supplemental agreement
In determining the consequences of events that delay performance, the
United States Court of Federal Claims and the Postal Service Board of
Contract Appeals have applied general risk-allocation principles. These have
been supplemented by standard contract clauses under which the time and
cost effect of delays are dealt with separately. Clause B-19: Excusable
Delays deals with the types of events that protect the Supplier from sanctions
for late performance. Other clauses, such as Clause B-16: Suspensions and
Delays, cover the recovery of costs associated with delays. The Supplier
bears the risk of schedule and cost effects for delays it causes or for delays
within its control. Generally, the Supplier is excused from nonperformance
due to delays caused by factors for which neither the Supplier nor the Postal
Service is responsible. However, the Supplier must bear the cost impact of
such delays. The Postal Service is responsible for the schedule and cost
effects of delays it causes, delays that are under its control, or delays for
which it has agreed to compensate the Supplier. Clause B-15: Notice of
Delay requires the Supplier to notify the Contracting Officer of problems that
might delay performance. Paragraph S of Clause 4-1: General Terms and
Conditions incorporates by reference each of these clauses.
A Supplier may be granted an extension of the delivery or performance
schedule for an excusable delay.
A Supplier's failure to perform may be considered an excusable delay when it
arises out of either:
• Causes beyond the control and without the negligence of the
Supplier - including the following:
- Acts of God or the public enemy
- Acts of the government in its sovereign capacity or the
Postal Service in its contractual capacity
- Fires, floods, epidemics, quarantine restrictions, strikes,
freight embargoes, and unusually severe weather
• A subcontractor default due to causes beyond the control and
without the fault or negligence of both the Supplier and the
subcontractor, unless the supplies or services were obtainable
from another source in time to permit the Supplier to meet the
delivery schedule
A Supplier may be granted an extension of the contract delivery or
performance schedule, a price adjustment, or both, as the Purchase/SCM
Team, represented by the Contracting Officer, deems appropriate, when an
unreasonable delay in performance is caused by the Postal Service or is
under its control, or when it has agreed to pay the Supplier for the delay.
Situations that may entitle the Supplier to an equitable adjustment (schedule,
cost, or both) include:
• Delay in issuing the notice to proceed
• Delay in availability of the site
• Differing site conditions
• Actual or constructive changes or delays
• Delay in providing funding
• Delay in inspections
• Delay in issuing changes
• Delay in providing Postal Service-furnished equipment
• Failure to perform by other Postal Service suppliers
The Supplier has the burden of proof in establishing the basis for the
equitable adjustment required to overcome the delay. When a delay is
attributable to both the Postal Service and the Supplier, a contract delivery or
performance schedule adjustment should not normally be granted for a
period of delay caused at least in part by actions or failures on the part of the
Supplier. However, damages may not be assessed against the Supplier in
these situations.
The Postal Service has the right to require accelerated performance under
Paragraph C of Clause 4-1. This right should be exercised only when
required to maintain the operational capability of the Postal Service.
Contracting Officers must document the specific facts that require
acceleration of performance and the estimated impact on contract price.
Whenever possible, the Contracting Officer must negotiate acceleration
actions in advance. Contracting Officers should be alert to constructive
acceleration situations. Constructive acceleration occurs when the Postal
Service does not agree to a delivery or performance schedule extension to
which the Supplier is entitled (or is later determined to be entitled), causing
the Supplier to accelerate performance. It is important to note that
constructive acceleration may result in a claim for a price increase.
Novation agreements are agreements signed by the Supplier (the
"transferor"), the successor in interest (the "transferee"), and the Postal
Service, by which, among other things, the transferor guarantees
performance of the contract, the transferee assumes all obligations under the
contract, and the Postal Service recognizes the transfer of the contract and
related assets. The Postal Service generally prohibits contract novation (see
Paragraph B of Clause 4-1). However, the Postal Service may recognize a
third party as the successor in interest when that party's interest arises out of
the transfer of:
• All the Supplier's assets
• The entire portion of the assets involved in performing the
contract
Situations in which novation may be permitted include, but are not limited to
the following:
• Sale of the Supplier's assets with a provision for assuming
liabilities
• Transfer of assets as part of a merger or corporate consolidation
• Incorporation of a proprietorship or partnership, or formation of a
partnership
The Contracting Officer is responsible for determining, in consultation with
Legal Counsel, whether to permit contract novation. Before concurring in a
contract novation, the Contracting Officer must determine the capability of the
successor in interest. If it is not in the Postal Service's interest to concur in a
contract novation, the "original supplier" remains responsible for
performance, and the contract may be terminated for default for failure to
perform. In the case that multiple contracts of one supplier, or transfers from
several transferors to one transferee are involved, the Contracting Officer
responsible for the largest unsettled (unbilled plus billed-but-unpaid) contract
dollar balance is responsible for executing the novation agreement.
The Supplier may assign money that will be due under a Postal Service
contract to a single bank or other financial institution, with the approval of the
Contracting Officer (see Paragraph B of Clause 4-1). Any other attempted
assignment may be treated as a breach of contract. Contracting Officers may
approve any authorized assignment that does not jeopardize contract
performance. The assignment of claims discussed in this topic does not
pertain to assignments ordered by a court or law. The Contracting Officer
should consult with Legal Counsel in such cases.
Change-of-name agreements are agreements signed by the Supplier and the
Postal Service that recognize a legal change of the Supplier without
otherwise altering the original contract. A change-of-name agreement is
appropriate when only a change of the Supplier's name is involved, and the
rights and obligations of the parties remain unaffected. The agreement must
be signed by the Contracting Officer and the Supplier modifying all existing
contracts between the parties to reflect the name change.
Consider of Use of Renewals and Options topic, Develop Sourcing Strategy
task, Process Step 2: Evaluate Sources,
Decide to Renew a Contract or Exercise Options topic, Manage Delivery and
Contract Performance task, Process Step 5: Measure and Manage Supply
Clause B-9: Claims and Disputes
Clause B-15: Notice of Delay
Clause B-16: Suspensions and Delays
Clause B-19: Excusable Delays
Clause B-37: Changes (Construction)
Clause 2-31: Limitation of Cost
Clause 2-32: Limitation of Funds.
Clause 4-1: General Terms and Conditions (specifically Paragraphs B, C,
and S)
|
