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Interim Internal Purchasing Guidelines > 6 Contract Administration > 6.5 Contract Modifications
6.5.1.a Effective Dates
1. 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.
2. The effective date of a bilateral modification (such as a supplemental
agreement; see 6.5.1.c.1) 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).
3. 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.
4. 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.
6.5.1.b Authorization and Price
1. Except for certain mail transportation contracts (see 4.4.3), only
contracting officers are authorized to sign contract modifications for the
Postal Service. Other Postal Service personnel may not:
(a) Act in a manner that causes the supplier to believe they have
authority to bind the Postal Service; or
(b) Direct or encourage the supplier to perform work that should be
covered under a contract modification.
2. 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. See 2.3.2 for modifications
affecting Technical Data Packages.
6.5.1.c Types of Modifications. There are two types of contract modifications:
1. Bilateral modifications (supplemental agreements) that are signed by
both the supplier and the contracting officer. Examples of bilateral
modifications are modifications to:
(a) Make equitable adjustments under paragraph c of Clause 4-1;
Clause B-37, Changes (Construction); or other clauses providing
for equitable adjustment; or
(b) 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. Examples of unilateral modifications
would be modifications to:
(a) 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);
(b) Issue change orders;
(c) Make changes authorized by specific clauses or contract
provisions (such as exercising an option or suspending work);
and
(d) Issue termination notices.
6.5.1.d Notification of Contract Changes. Under paragraph c of Clause 4-1, or
Clause B-37, when a 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 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; or
3. Notify the supplier that no change is considered to have been ordered.
6.5.1.e Availability of Funds
1. 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 team and obtained a certification of funds availability,
except for modifications to contracts that:
(a) Are conditioned on availability of funds; or
(b) Contain a limitation of cost or funds clause.
2. 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.
6.5.1.f Exercise of Options
1. Before exercising an option, the purchase team must determine that:
(a) Funds are available;
(b) The Postal Service still needs the supplies or services covered by
the option; and
(c) Exercising the option is the most advantageous alternative, price
and other factors considered ("other factors" includes any need
for continuity of operations and the cost of disrupting operations).
2. The contracting officer must determine that the option price is the most
advantageous to the Postal Service, based on one of the following:
(a) Market research clearly indicates that a better price than that
offered by the option cannot be obtained;
(b) The time between the award of the contract containing the option
and the exercise of the option is so short that the option price is
probably the lowest obtainable, considering such factors as
market stability and usual duration of supply or service contracts;
or
(c) A new solicitation fails to produce a better price than that offered
by the option. (This method of testing the market should be used
only if neither of the other methods is satisfactory.)
3. If the contract provides for economic price adjustment, the effect of
such adjustment on prices under the option must be ascertained in
determining whether to exercise the option.
4. When an option is to be exercised, the contracting officer must, in
writing:
(a) Determine that the option may properly be exercised under
6.5.1.f.1 above;
(b) Notify the supplier within the time specified in the contract that the
option is being exercised; and
(c) Modify the contract as needed, citing the option clause as
authority.
6.5.1.g Correcting Mistakes
1. A contract may be modified to correct or mitigate the effect of a
mistake. Examples are:
(a) A mistake or ambiguity consisting of the failure to express, or
express clearly, in a written contract, the agreement as both
parties understood it.
(b) A supplier's mistake so obvious that it was or should have been
apparent to the contracting officer.
(c) A mutual mistake concerning a material fact (particularly,
mistakes concerning the promises the parties made to one
another under the contract).
2. A claim of mistake that is asserted after award, and a decision to deny
a claim of mistake asserted after award, in whole or in part, is handled
under the procedures of Clause B-9, Claims and Disputes (see 6.8.3).
6.5.2.a General
1. Paragraph c of Clause 4-1, and Clause B-37, 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.
2. 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.
6.5.2.b Accounting. The Postal Service uses the guidelines in Chapter 5 when
analyzing the price or cost of changed work.
6.5.2.c Administration
1. When change orders are not priced before performance, they usually
require two documents: the change order and 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.
2. 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.
3. 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.
4. To avoid controversies that may result from a supplemental agreement
making an equitable adjustment, the contracting officer should:
(a) Ensure that all elements of the equitable adjustment have been
presented and resolved; and
(b) Include a release of claims in the supplemental agreement.
6.5.3 Equitable Adjustments for Delays
6.5.3.a General. 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 incorporates by
reference each of these clauses.
6.5.3.b Excusable Delays
1. A supplier may be granted an extension of the delivery or performance
schedule for an excusable delay.
2. A supplier's failure to perform may be considered an excusable delay
when it arises out of either:
(a) Causes beyond the control and without the negligence of the
supplier - including acts of God or the public enemy; acts of the
government in its sovereign capacity or the Postal Service in its
contractual capacity; and fires, floods, epidemics, quarantine
restrictions, strikes, freight embargoes, and unusually severe
weather; or
(b) 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.
6.5.3.c Compensable Delays
1. A supplier may be granted an extension of the contract delivery or
performance schedule, a price adjustment, or both, as the purchase
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:
(a) Delay in issuing the notice to proceed;
(b) Delay in availability of the site;
(c) Differing site conditions;
(d) Actual or constructive changes or delays;
(e) Delay in providing funding;
(f) Delay in inspections;
(g) Delay in issuing changes;
(h) Delay in providing Postal Service-furnished equipment; and
(i) Failure to perform by other Postal Service suppliers.
2. The supplier has the burden of proof in establishing the basis for the
equitable adjustment required to overcome the delay.
6.5.3.d Concurrent Causes. 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. (But damages may not be
assessed against the supplier in these situations.)
6.5.3.e Acceleration
1. 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.
2. 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.
3. 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. Constructive
acceleration may result in a claim for a price increase.
6.5.4 Novation and Change-of-Name Agreements
6.5.4.a Definitions
1. Change-of-name agreements. Agreements signed by the supplier and
the Postal Service that recognize a legal change of the supplier's name
without otherwise altering the original contract.
2. Novation agreements. Agreements signed by the supplier (the
transferor), the successor in interest (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.
6.5.4.b General
1. The Postal Service generally prohibits contract novation (see paragraph
b of Clause 4-1, and Clause B-8, Assignment of Claims). 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:
(a) All the supplier's assets; or
(b) The entire portion of the assets involved in performing the
contract.
2. Situations in which novation may be permitted include but are not
limited to:
(a) Sale of the supplier's assets with a provision for assuming
liabilities;
(b) Transfer of assets as part of a merger or corporate consolidation;
and
(c) Incorporation of a proprietorship or partnership, or formation of a
partnership.
3. Before concurring in a contract novation, the contracting officer must
determine the capability (see 2.1.9.c) of the successor in interest.
4. When 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.
6.5.4.c Responsibility
1. The contracting officer is responsible for:
(a) Determining, in consultation with assigned counsel, whether to
permit contract novation; and
(b) Processing and signing novation and change-of-name
agreements.
2. When 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 or
change-of-name agreement.
6.5.4.d Change of Name. 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.
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