GAO Report: Agencies Need to Improve Data on Construction Contract Changes

Many federal construction contractors know that contract changes can be frustrating business. Changes can be unilateral or bilateral. They can stress a contractor’s finances. They can delay the overall project. And they can result in animosity between the agency and a contractor.

Fortunately, GAO has shined some light on the problems in the contract change process. Indeed, in a recent report, GAO concluded that agencies, particularly the Army Corps of Engineers and GSA, need to develop better systems to collect data about changes in construction contracts.

GAO conducted its investigation against the backdrop of multiple considerations. For one, most federal construction projects typically involve some sort of change as the project unfolds. In addition, federal contractors have complained that the Government’s process for managing construction contract changes causes problems–e.g., delays in payment and negative impacts on contractor cash flow, especially for small businesses. Also, Section 855 of the 2019 National Defense Authorization Act generally requires agencies (beginning in August 2019) to include, in certain solicitations, time frames for finalizing contract changes.

In the report, GAO outlined various factors that affect the time frame for processing a contract change, including consideration of whether a change is needed, creating a cost estimate, identifying funds, negotiating with the contractor, completing reviews, and processing the change.

During GAO’s investigation, the Army Corps of Engineers advised GAO that obtaining a complete proposal from the contractor–with sufficient information on cost and schedule changes to begin negotiations–is a significant factor affecting contract change time frames. In addition, both agencies advised GAO that unauthorized work undertaken by the contractor is another factor that typically extends change process timelines.

Using the agencies’ data, GAO found that, for Army Corp of Engineers, most contract changes (from 2013-2018) were finalized within 60 days; but nearly 45 percent took more than 60 days. And a little more than 3 percent took more than a year to finalize. Unfortunately, GSA’s data was not robust enough to track time frames for contract changes.

Overall, GAO found that neither the Army Corps of Engineers nor GSA regularly monitors contract change time frames. Nor has either agency established controls over the contract change process at the headquarters level. As a result, the Army Corps of Engineers and GSA “cannot centrally identify emerging problems with contract change time frames or monitor compliance with existing Department of Defense . . . and GSA requirements.”

Given its findings, GAO reached multiple conclusions.

First, “[r]outine, central data collection on the construction change process can help agencies understand the scope of any problems encountered.”

Second, “[w]ithout regular collection and review of information on the contract change process, contracting officials may be unable to spot potential problems–such as long process times that may affect project schedules–as they occur and respond accordingly.”

And lastly, the Army Corps of Engineers and GSA can take preliminary steps to comply with new legislative requirements applicable to certain construction contracts starting in 2019, such as identifying which systems may need to be updated and which groups of individuals should be involved.

Based on its conclusions, GAO made two predictable recommendations: (1) GSA should develop “a strategy that outlines the steps needed to routinely collect information on and monitor the time frames for finalizing construction contract changes at the headquarters level,” and (2) the Army Corps of Engineers should develop a “strategy to expand on existing data systems to routinely collect information on and monitor the time frames for finalizing construction contract changes at the headquarters level.”

This report is welcome news to construction contractors which have experienced troublingly prolonged contract change periods that have negatively impacted their projects and business generally. Hopefully, this report will spur agencies–not just the Army Corps of Engineers and GSA–to implement better information collection processes that ultimately will improve the contract change process.