A somewhat disconcerting trend from several state and local agencies is to attempt to unilaterally reduce existing contract prices is apparently not acceptable to the federal government.
A few agencies have sent letters to their consultants that effectively state “due to budget constraints we are going to reduce the price of all contracts by X%, and there will no changes in either scope or schedule”.
While we have sympathy with agencies in the current economic crunch on their available funds, this is clearly a unilateral change in a single contract term (price) being imposed by one party to the contract.
FHWA has advised one state DOT in a letter dated October 21st, that this process does not comply with applicable laws and regulations. FHWA states that any change in a contract term requires a renegotiation of all terms of the contract, including reducing scope if price is reduced. In other words a unilateral decision by one party in the contract is not a valid contracting approach.
We believe this advisory letter may discourage other agencies that are thinking of using this approach to reduce their expenses. We also believe this is a fair approach by FHWA, since basic contract law does not permit unilateral contract changes such as were being sought by the government.
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment