DFARS Part 243: Contract Modifications

In plain English

DFARS Part 243 implements FAR Part 43 for DoD contracts, covering contract modifications such as change orders, requests for equitable adjustment, and unpriced change orders. It sets specific rules for definitization schedules, price ceilings, funding limitations, and profit on unpriced change orders over $5 million, and requires certification of requests for equitable adjustment above the simplified acquisition threshold. These rules affect how contractors propose, negotiate, and get paid for changes during performance.

Key rules

• For unpriced change orders over $5 million, the order must include a not-to-exceed price and a definitization schedule that requires definitization by the earlier of 180 days after issuance (extendable to 180 days after a qualifying proposal) or when obligations exceed 50% of the not-to-exceed price. (243.204-70-1, 243.204-70-2, 243.204-70-3)
• The Government cannot obligate more than 50% of the not-to-exceed price before definitization, but this limit may increase to 75% if the contractor submits a qualifying proposal before 50% is obligated. (243.204-70-4)
• If a contractor does not submit a timely qualifying proposal, the contracting officer may suspend or reduce progress payments or take other appropriate action. (243.204-70-3)
• When the final price of an unpriced change order is negotiated after substantial performance, the profit allowed must reflect reduced cost risk and the extent to which costs were incurred before definitization, and this must be documented in the price negotiation memorandum. (243.204-70-6)
• A request for equitable adjustment exceeding the simplified acquisition threshold cannot be paid unless the contractor certifies it in accordance with the clause at 252.243-7002. (243.204-71)
• The clause at 252.243-7001, Pricing of Contract Modifications, must be used in solicitations and contracts when anticipating a fixed-price contract. (243.205-70)
• The clause at 252.243-7002, Requests for Equitable Adjustment, must be used in solicitations and contracts estimated to exceed the simplified acquisition threshold, including those for commercial products and services. (243.205-71)
• For unpriced change orders over $5 million, departments and agencies must include planned actions in the Consolidated UCA Management Plan and report each such order in the Consolidated UCA Management Report. (243.204-70-7)

Who does what

In practice

• If you receive an unpriced change order over $5 million, you must submit a qualifying proposal by the definitization schedule to avoid progress payment suspension and to allow obligations to increase to 75%.
• For requests for equitable adjustment above the simplified acquisition threshold, you must certify the request; otherwise, it cannot be paid.
• When negotiating the final price of an unpriced change order after you have already incurred substantial costs, expect the profit to be adjusted downward to reflect reduced cost risk.

Common pitfalls

• Failing to submit a timely qualifying proposal can lead to suspended or reduced progress payments and may prevent the Government from obligating more than 50% of the not-to-exceed price.
• Not certifying a request for equitable adjustment that exceeds the simplified acquisition threshold will result in non-payment.
• Assuming that the certification for a request for equitable adjustment also converts it to a claim under the Contract Disputes statute; a separate certification is required.

Written by AI from this part's codified text (2026-10-04); cited sections are checked against the part. A guide, not legal advice: the regulation text, the solicitation and your contract rule.