FAR 43.204, titled “Administration,” tells contracting officers what to do after a contract modification is in motion: negotiate any equitable adjustment in the shortest practicable time, run a cost analysis when appropriate, secure additional funds before increasing the contract price, keep retroactive effective dates within narrow bounds, and close out the change with a release of claims in the supplemental agreement.1Acquisition.GOV. FAR 43.204 – Administration It is the section that turns the authority to change a contract into a disciplined process.
What FAR 43.204 Covers
Section 43.204 sits inside FAR Part 43, which prescribes policies for preparing and processing contract modifications generally.2Acquisition.GOV. FAR Part 43 – Contract Modifications Where other parts of Part 43 identify the types of modifications and the authority to issue them, 43.204 addresses the follow-through: documenting the change order, pricing it, funding it, dating it, and releasing claims tied to it. The obligations fall on the contracting officer, and in some cases on an administrative contracting officer (ACO) working under a delegation.
ACO Delegation and Delivery Schedules
An ACO can be delegated authority to negotiate an equitable adjustment. When that happens, 43.204 requires the ACO to obtain the contracting officer’s concurrence before adjusting the contract delivery schedule.1Acquisition.GOV. FAR 43.204 – Administration Price is one matter; the schedule is another, and the section treats schedule changes as reserved to the contracting officer’s judgment.
Documenting a Change Order
How a change order gets papered depends on whether the price is settled up front. If the contracting officer and contractor agree on the equitable adjustment before work begins, a single supplemental agreement handles both the change and its price. If the change order is issued without an agreed price, the file needs two documents: the initial change order directing the work, followed by a supplemental agreement memorializing the final equitable adjustment.1Acquisition.GOV. FAR 43.204 – Administration
Administrative changes and modifications made under clauses that give the government a unilateral right, such as an option clause, need only one document. There is no price to negotiate.
Definitizing the Equitable Adjustment
Once an unpriced change order is on the street, the clock starts. FAR 43.204 directs the contracting officer to negotiate the equitable adjustment in the shortest practicable time. There is no fixed deadline in days, but both contracting offices and contract administration offices must maintain suspense systems that identify unpriced change orders and push them toward prompt definitization.1Acquisition.GOV. FAR 43.204 – Administration
Delay is not a neutral state. The contractor carries financial uncertainty about what it will ultimately be paid, and the government carries the risk of cost growth as facts age and positions harden.
Construction Contracts
For construction contracts, agencies must record the time it takes to definitize each change order, measured from the date the contracting officer receives an adequate proposal to the date the equitable adjustment is executed.1Acquisition.GOV. FAR 43.204 – Administration The tracking requirement exists because construction change orders are especially prone to drawn-out negotiations.
Field Pricing Reviews
When the contracting officer sends an equitable adjustment proposal out for a field pricing review, 43.204 requires a list of significant contract events to accompany the request so auditors and analysts can place the claim in context. That list includes the original contract award date and price, the dates of any alleged delays or disruptions, scheduled versus actual performance dates, and any government actions during performance that bear on the adjustment.1Acquisition.GOV. FAR 43.204 – Administration Providing an incomplete timeline is a common reason field pricing reviews take longer than they should.
Cost Analysis and Securing Funds
Before finalizing an equitable adjustment that increases the contract price, the contracting officer performs a cost analysis when appropriate and considers the contractor’s segregable costs of the change when those are available. And then, before executing the price increase, the officer must secure additional funds.1Acquisition.GOV. FAR 43.204 – Administration
The funding step is not a formality. It is backed by the Anti-Deficiency Act, which prohibits any federal employee from making or authorizing an obligation that exceeds available appropriations, or committing the government to pay before funds have been appropriated.3Office of the Law Revision Counsel. 31 USC 1341 – Limitations on Expending and Obligating Amounts Before executing any contract action, the contracting officer must obtain written assurance from the fiscal authority that adequate funds are available, or expressly condition the action on fund availability.4Acquisition.GOV. FAR 32.702 – Policy
Violations carry real consequences. Employees who create unauthorized obligations face administrative discipline up to removal from office, along with potential criminal fines and imprisonment, and the agency head must report the violation to the President and Congress with a full accounting of the facts and any corrective actions.5U.S. Government Accountability Office. Antideficiency Act
Effective Dates and Retroactive Dates
Effective dates matter in administration because they fix when the change legally takes hold. For a unilateral action like a change order or an administrative change, the effective date is the issue date of the modification. For a bilateral supplemental agreement, the effective date is whatever the parties agree upon.2Acquisition.GOV. FAR Part 43 – Contract Modifications That flexibility matters when a supplemental agreement is being written weeks or months after a change order first directed the work.
Backdating is available only in narrow situations. When a modification confirms a prior termination for convenience, its effective date must match the effective date of the original termination notice. When a modification converts a termination for default into one for convenience, the effective date must match the original default termination date, not the date the government decided to convert it.2Acquisition.GOV. FAR Part 43 – Contract Modifications Both rules keep the paper trail aligned with what actually happened.
Administrative changes that correct clerical errors or update internal government data can carry retroactive dates because, by definition, they do not alter the substantive rights of either party. A “correction” that changes what someone owes or is owed is no longer administrative.2Acquisition.GOV. FAR Part 43 – Contract Modifications Supplemental agreements can also carry a past effective date when the parties agree, which is common when formalizing an equitable adjustment for work already performed under a change order.
Pre-Contract Costs
Separate from the effective date question, pre-contract costs can reach back before the modification date. Costs the contractor incurred in anticipation of the award, when early spending was necessary to meet a proposed delivery schedule, are allowable to the extent they would have been allowable if incurred after the contract date.6Acquisition.GOV. FAR 31.205-32 – Precontract Costs The rule does not shift the effective date; it opens a limited path to reimbursement under cost-reimbursement contracts.
Release of Claims
When a supplemental agreement formalizes an equitable adjustment stemming from a change order, 43.204 directs the contracting officer to include a release of claims. The FAR supplies model language in which the contractor acknowledges the modification as a “complete equitable adjustment” and releases the government from further liability attributable to the underlying change, with space to carve out any specific exceptions the parties want to preserve.1Acquisition.GOV. FAR 43.204 – Administration
The release only works if it comes after every element of the equitable adjustment has been presented and resolved. Executing a release before the contractor has surfaced all of its costs invites a dispute later over whatever was missed. The point of the release is finality, and finality depends on everything being on the table first.
Where Administration Ends
Section 43.204 covers the contracting officer’s administration duties on the government side of a modification. It does not set the contractor’s timing to assert an equitable adjustment, which lives in the applicable Changes clause, and it does not govern how an unauthorized commitment by someone other than a contracting officer gets cured; that is the ratification process under FAR 1.602-3.7Acquisition.GOV. FAR 1.602-3 – Ratification of Unauthorized Commitments Reading 43.204 as the whole picture will leave gaps; reading it as the administration playbook, sitting between authority on one side and the contractor’s rights on the other, is what it is built to be.