Government Contracting

Under a federal government contract for a construction project, the person directing the work is often not the one with authority to pay for it. Take, for example, a government contractor tasked with building a low-observable aircraft hangar for the B-21 Raider stealth bomber; a government engineer asks for a revised door-seal system, an upgraded specialty coating, or a change in the sequence of the hangar’s environmental controls; the direction sounds reasonable, the specifications are demanding, and the schedule is tight. But then appropriations lapse, the contracting office slows to a crawl, and the modification never arrives—going ahead with the requested changes seems like the responsible choice, right? Wrong; under well-settled government contract law, doing so can shift the entire cost of the change onto the contractor, even when the government caused the delay and made going ahead feel necessary.

Only the Contracting Officer or a Properly Authorized Delegate Can Change the Contract

The Changes clause in most government construction contracts, FAR 52.243-4, gives the contracting officer (CO) the power to change the work “by written order designated or indicated to be a change order.” The regulation is explicit: only contracting officers acting within the scope of their authority may execute contract modifications on behalf of the federal government.

That said, the primary CO may not always be the only official who matters. A CO may delegate some authority to designated representatives who act on the government’s behalf during contract administration, most commonly an administrative contracting officer (ACO) or contracting officer’s representative (COR). The scope of any such delegation is determined by the contract and the written designation, not by the official’s title or role on the project. ACOs are warranted contracting officers, but the functions assigned to them may or may not include issuing change orders. CORs, by contrast, typically receive authority for technical oversight and inspection—not authority to change the contract—and on defense contracts, the CO generally cannot delegate authority to make changes affecting price, quality, quantity, delivery, or other terms.

These delegations are typically transmitted around the time of contract award through its authority and government-representative clauses, designation letters, or the notice to proceed. In one Court of Federal Claims decision, for example, the contract permitted a resident engineer to make changes “by written direction,” but only after the contractor was “advised of the extent of such authority prior to execution of any work under the contract.” Contractors dealing with anyone other than the primary CO should, therefore, verify the scope and limits of that official’s authority before acting on his or her direction. And if a delegation letter is unclear or, worse, does not exist, the safe assumption is that the official lacks authority to change the contract.

Winter v. Cath-dr/Balti Joint Venture is a leading case on this issue. 497 F.3d 1339, 1344 (Fed. Cir. 2007). There, the U.S. Navy’s resident officer in charge of construction (ROICC)—not the CO—directed changes during a renovation project. The Armed Services Board of Contract Appeals (ASBCA) allowed the contractor to recover its additional costs, reasoning that the ROICC was the key government official on the job when quick action was needed. The Federal Circuit, however, disagreed and reversed because the contract expressly reserved modification authority to the CO; thus, the ROICC had no actual authority—express or implied—to commit the government to compensable changes. The contractor was out of luck, and boards have applied Winter strictly ever since. In States Roofing Corp., ASBCA No. 55500 (2008), for example, the ASBCA held that a ROICC could not require a full-time safety officer because only the CO had that power.

The practical lesson here is blunt: a contractor that performs changes on the word of someone without authority, e.g., someone other than the CO, “assumes the risk of possible non-payment,” which is quite a gamble.

Why Government Shutdowns Make This Worse

A government shutdown changes who is available; it does not change who has authority. Thus, when contracting offices are thinly staffed, contractors often hear from whoever remains on site—project engineers, inspectors, or CORs—who are often the officials least likely to hold authority to change a government contract. And on a complex, high-specification project such as a B-21 stealth bomber hangar, the pressure to keep specialty trades working is intense, which is precisely when following an unauthorized direction is most tempting and, unfortunately, most costly.

The irony here is that waiting for a CO’s direction often gives a contractor a stronger claim. A contractor must show “that the government was responsible” for a delay to recover such costs, and a change the government directed but cannot formalize during a shutdown can make a strong case for clearing that hurdle. And by the same logic, as illustrated above, proceeding with construction based on unauthorized direction weakens a contractor’s position; the contractor trades a clear delay claim—compensable or not— for a disputed authority claim that runs straight into Winter. The contractor may also absorb the very delay it could have claimed, and the duty to keep working does not require this choice. In short, the Disputes clause, FAR 52.233-1, requires performance as directed by the contracting officer; it does not require compliance with field staff who lack authority.

A Few Practical Takeaways

First, do not wait to contact a government contracts lawyer in the event of questionable directed changes, especially when millions of dollars can turn on narrow issues and discrete facts. Second, at award and mobilization, collect and review every document that sets out government authority, including the contract’s authority clauses, any ACO and COR designation letters, and the notice to proceed. Confirm in writing who has authority to modify the contract and the limits of any delegation, and train field leaders to understand that a project engineer’s or COR’s direction is not a change order unless a written delegation clearly says otherwise. Third, provide the CO with written notice for every directed change, naming who gave the direction and reserving your rights. And finally, during a shutdown, hold off on changed work until you have written direction from a CO or a properly authorized delegate whose authority you have verified.