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Understanding requests for equitable adjustment

Requests for Equitable Adjustment (REA) are formal requests submitted by a contractor to a project owner—typically in government contracting—to modify the terms of an existing contract. These adjustments are generally pursued due to changes in conditions, unexpected events or new regulations that affect the original scope and associated costs of the project in question. 

An REA is not the same as a claim for damages or a standard contract modification. Instead, it is a request based on principles of fairness, aiming to restore the contractor to the financial position they would have occupied had the circumstances necessitating the adjustment not occurred. This is a particularly common occurrence in large-scale or long-term projects where unforeseen circumstances can significantly impact a contractor’s performance and financial health.

Pursuing an REA

The process of submitting an REA begins when an event occurs that changes the fundamental conditions under which an original contract was awarded. This could include unexpected environmental conditions, changes in law or unanticipated technical challenges. A contractor must then document how these changes affect their ability to complete the work as originally agreed, specifying the additional resources required to meet the contract’s terms.

The documentation included in an REA must be thorough. It typically encompasses detailed descriptions of the changed conditions, a chronological account of events and a precise calculation of additional costs incurred. A contractor must also demonstrate that the adjustments requested are reasonable, justifiable and directly related to the changes impacting the project.

Once submitted, an REA is reviewed by the project owner or an authorized government agency. The review process involves an examination of the justifications provided and an assessment of the legitimacy and accuracy of the additional costs claimed. If the REA is approved, the contract is adjusted accordingly to accommodate the equitable changes. This might include modifications to the contract price, schedule, or scope of work.

For contractors, understanding when and how to properly prepare an REA can be consequential when it comes to maintaining financial stability and ensuring project success. Conversely, for the owners, particularly in public sector contracts, a well-managed REA process can help maintain project timelines and budgets while upholding fair treatment for all parties.