There is an old saying that the only thing constant is change. While true in a broad sense, it is especially true in federal contracting. At some point a federal contractor will find itself facing a change to its contract or performance, costing it money or time. Inevitably, that leads to the question of whether an REA should be pursued, or if a claim should filed. One of the most common responses to that question is actually another question: what’s the difference between an REA and a claim? Let’s answer that question here.
The answer to what’s the difference between an REA and a claim really goes back to the procedure for each. While both actions pursue compensation from the agency related to a contract, an REA is less formal than a claim, while a claim triggers formal legal rights and appeals possibilities. But that only scratches the surface.
An REA . . .
REA is short for “Request for Equitable Adjustment.” An equitable adjustment, despite its common usage within the FAR, is not defined specifically in the FAR. Courts have defined it as “. . . a remedy payable only when unforeseen or unintended circumstances, such as government modification of the contract, differing site conditions, defective or late-delivered government property or issuance of a stop work order, cause an increase in contract performance costs.” Reflectone, Inc. v. Dalton, 60 F.3d 1572, 1577 (Fed. Cir. 1995). So, at the most basic level, an REA is used to simply ask the agency to compensate you for a change to the contract, performance, timing, or other issue present in the contract.
The FAR recognizes the opportunity for an REA in multiple situations, but the most common situations are when there is a change or partial termination of a contract. For example, the oft-used FAR 52.243-4 Changes provision mentions “equitable adjustment,” and sets forth the following standard in part of section (d):
“If any change under this clause causes an increase or decrease in the Contractor’s cost of, or the time required for, the performance of any part of the work under this contract, whether or not changed by any such order, the Contracting Officer shall make an equitable adjustment and modify the contract in writing.”
There is a similar clause in the Fixed Price Contract changes FAR Provision and even the DFARS has a section dedicated to REAs. The concept of REAs is found in many federal regulations, but to boil it down: if there was a change in the contract, there is the possibility for the contractor to ask the agency for an equitable adjustment to the contract so they may be compensated under the contract due to the effects of that change. (For a good run down on why one should file an REA, check out our entry in our Why File series on REAs). Note that we state they can “ask.” A hallmark of REAs are that they represent more of a negotiation or discussion with the agency. While the FAR says the CO “shall” make an equitable adjustment based on an increase (or decrease) in costs, it really depends on what changed, and what costs the contractor puts forth for compensation and negotiation. As REAs are seen as a negotiation, this also allows for the possibility of requesting attorneys fees related to the REA under FAR 31.205-33.
In general, REAs are less adversarial. While REAs do have certain varying deadlines for the contractor to meet to request an equitable adjustment (such as the FAR provisions discussing partial contract termination), REAs are not as rigid as a claim. However, this flexibility can also be a downside, as agencies could delay responses to an REA or be less cooperative in the REA process, as compared to a claim, despite many of the FAR provisions stating an equitable adjustment “shall” be conducted.
. . . Versus a Claim
So, what is a claim? A claim is dictated by FAR 52.233-1 and is defined under this disputes clause as:
“. . . a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to this contract.”
Right away, it is clear this is a much more formal process than an REA. Note that it is a “written demand” that is asserting a right, where an REA is more of a back and forth request for review.
Claims must be in writing, and generally must be submitted within 6 years after the “accrual of the claim” occurs. In contrast, some REA deadlines that are spelled out in FAR clauses, are often measured in days. Once a claim is filed with the CO, it starts the clock on a required response from the CO which is typically 60 days, while REAs don’t have a required response deadline for the agency. Once the CO makes a decision on a claim, it is the final decision of the CO. There is no negotiation or back and forth at that point. If the contractor is not satisfied with that final decision of the CO, it can then be appealed to a board of contract appeals or the United States Court of Federal Claims. An agency is not required to respond to an REA. And, if denied, an REA has no direct appeal process. Of course, something that is initially submitted as an REA could subsequently be turned into a formal claim, as claims typically have a 6 year window. Claims also could require certain certifications of costs.
Both an REA and claim focus on payment or compensation under a contract due to some issue under the contract, but claims are more formal, even containing deadlines for the agency’s response. Both REAs and claims could be sent to ADR under FAR 33.214 and contractors are expected to continue diligently with performance while the REA or claim is processed.
REAs and claims, while potentially seeking the same compensation, vary in their procedure, formality, and underlying FAR provisions. Therefore, a quick answer to the FAQ of “what’s the difference between an REA and a claim” is: REAs are less formal negotiations for compensation under a change in the contract, while claims are formal demands for payment that could result in appeals in front of a court or tribunal. As shown, there is much more to that answer, but in general, both have their advantages and disadvantages.
Often REAs will precede a formal claim, but REAs and claims are distinctly different avenues for contractors to pursue compensation due to changes in their contracts with the government. Of course, the decision of which one to pursue, or if these are even possibilities under the contract, is something that is fact specific and should be discussed with a federal government contracts attorney. If you find yourself still scratching your head on which avenue may be best, or even wanting to discuss more of the nuanced differences between an REA and claim, reach out to a federal government contracts attorney, such as the attorney-authors at SmallGovCon.
Questions about this post? Email us. Need legal assistance? Call at 785-200-8919.
Looking for the latest government contracting legal news? Sign up here for our free monthly newsletter, and follow us on LinkedIn, Twitter and Facebook.