Request for Equitable Adjustment (REA) on a Construction Project with a Fixed-Firm-Price contract

Projects often encounter unexpected changes that can impact the financial aspects of a contract. These changes can range from modifications in the project scope, schedule delays, material price fluctuations, to unforeseen site conditions. When contractors face such changes, they may need to request an equitable adjustment (REA) to seek fair and reasonable compensation for the additional costs or delays incurred. In this article, we will delve into the concept of an REA on a construction project with a fixed firm. We will discuss what an REA is, when it is appropriate to submit one, and how to effectively navigate the process.

Understanding Request for Equitable Adjustment (REA)

A Request for Equitable Adjustment (REA) is a formal document submitted by a contractor to request compensation for changes that have occurred on a construction project. It serves as a means for the contractor to recover costs that were not originally accounted for in the contract, ensuring that they are adequately compensated for their work. An REA is typically used when changes are made to the project scope, schedule, or specifications, resulting in additional costs or delays for the contractor.

To ensure a comprehensive understanding of an REA, let’s explore its purpose in more detail:

  1. Seeking Fair and Reasonable Compensation: The primary purpose of an REA is to seek fair and reasonable compensation for the impacts caused by the changes. It allows the contractor to recover costs that were not originally accounted for in the contract, ensuring that they are adequately compensated for their work.
  2. Accounting for Changes in Scope, Schedule, or Specifications: An REA is appropriate when changes occur in the project scope, schedule, or specifications that are beyond the contractor’s control. These changes may include added work, deleted work, significant changes in design, schedule delays due to external factors, material price fluctuations, or unforeseen site conditions. By submitting an REA, the contractor can account for the additional costs or delays caused by these changes.

When to Submit an REA

Submitting an REA is appropriate when changes to the project occur that are beyond the contractor’s control and result in additional costs or delays. It is crucial to identify the circumstances that warrant an REA to ensure its successful submission. Here are some common scenarios where an REA may be necessary:

  1. Changes in Project Scope: If the project scope is modified, such as added work, deleted work, or significant changes in design, an REA may be necessary to account for the additional costs incurred. It is important to thoroughly document the changes and their impact on the project.
  2. Schedule Delays: If the project schedule is extended due to factors outside the contractor’s control, such as weather conditions, unforeseen site conditions, or owner-directed changes, an REA can help recover costs associated with the delay. It is essential to provide detailed documentation of the causes and impact of the schedule delay.
  3. Material Price Fluctuations: If there are significant changes in material costs during the project that were not anticipated at the time of contract signing, an REA can help the contractor recover the additional expenses. It is important to track and document the fluctuations in material prices to support the request for compensation.
  4. Unforeseen Site Conditions: If during the construction process, unforeseen site conditions are encountered, such as encountering rock formations, hazardous materials, or other unexpected obstacles, an REA can help compensate for the additional work required to overcome these challenges. Thoroughly document the site conditions and their impact on the project to justify the need for an REA.

It is important to note that an REA should only be submitted when the changes are significant enough to warrant additional compensation. Minor changes that can be easily accommodated within the existing contract terms may not require an REA. Contractors should carefully assess the impact of the changes and consult legal or contractual experts if needed before proceeding with an REA submission.

Submitting an REA requires a thorough understanding of the process to ensure a successful outcome. By following these steps, contractors can effectively navigate the REA process:

  1. Document the Changes: The first step is to thoroughly document the changes that have occurred. This includes gathering any relevant documentation, such as change orders, correspondence, and other supporting evidence. The documentation should clearly outline the changes, their impact, and any related costs or delays.
  2. Quantify the Impact: Next, it is crucial to quantify the impact of the changes on the project. This involves identifying the additional costs incurred, such as labor, materials, equipment, and overhead expenses. It is important to provide detailed calculations and documentation to support the requested amount. Using cost tracking software or spreadsheets can help in accurately quantifying the impact.
  3. Prepare the REA: The REA should be prepared in a clear and concise manner, providing a comprehensive explanation of the changes, their impact, and the requested compensation. It should include a detailed breakdown of the costs, along with any supporting documentation. Providing a well-structured and organized REA enhances its effectiveness.
  4. Submit the REA: Once the REA is prepared, it should be submitted to the appropriate party as outlined in the contract. This may be the project owner, project manager, or any other designated individual. It is important to keep a record of the submission, including the date and method of delivery. Sending the REA through certified mail or other tracked methods can help ensure its receipt.
  5. Negotiate and Resolve: After the REA is submitted, it may go through a negotiation process where the parties involved discuss the requested compensation and any supporting evidence. It is important to be prepared to defend the requested amount and provide additional documentation if necessary. The goal is to reach a fair and equitable resolution that adequately compensates the contractor for the impacts experienced.
  6. Formalize the Agreement: Once an agreement is reached, it is important to formalize it in writing. This may involve signing a change order or an amendment to the original contract. It is crucial to ensure that the agreed-upon compensation is clearly outlined in the formal agreement. This provides legal protection and clarity for both parties involved.

By following these steps and maintaining open communication with all parties involved, contractors can navigate the REA process effectively and increase their chances of obtaining fair compensation for the changes encountered on a construction project.

Conclusion

When unexpected changes occur on a construction project with a fixed firm, contractors may find themselves needing to submit a Request for Equitable Adjustment (REA). An REA allows contractors to seek fair and reasonable compensation for additional costs or delays resulting from changes that were beyond their control.

To ensure a successful outcome during the REA process, it is essential to understand when it is appropriate to submit an REA, thoroughly document the changes and their impact, and effectively navigate the process. Contractors should approach the REA process with professionalism, providing detailed information and supporting documentation to justify the requested compensation.

Remember, an REA should only be submitted for significant changes that warrant additional compensation, and open communication with all parties involved is crucial for a successful resolution. Ultimately, the goal of an REA is to ensure that contractors are appropriately compensated for the impacts they experience during the course of a construction project.

Share this post

Author picture

Acumen Technical Project Services, LLC is your trusted partner in delivering excellence in project and construction management. Our proven strategies, innovative solutions, and unwavering commitment to quality set us apart in the industry. From project conception to completion, we navigate the complexities of every project with precision, ensuring client satisfaction every step of the way.

Stay Updated

Subscription Form

Submit Resume

Career Form