What is equitable adjustment in government contracting?

• A. An adjustment to price, schedule, or both, to compensate the contractor for unavoidable changes caused by the government.
• B. A bonus for early completion.
• C. A reduction in contract scope due to performance issues.
• D. A court-approved settlement for contractor insolvency.

Answer: (A)

Equitable adjustment is a contractual remedy that compensates a contractor when the government changes the work or otherwise causes delays or disruptions outside the contractor’s control, affecting cost or schedule. When such government-initiated changes occur, a contract modification is issued to adjust the price, the delivery schedule, or both, so that the contract remains fair and balanced for both parties. It covers the additional costs and time needed to accommodate the government-caused change, not a reward or a penalty.

This isn’t about a bonus for finishing early, nor about cutting scope because of performance issues, nor about a court settlement for insolvency. Those represent different concepts: incentives tied to performance, re-scoping or termination issues, and separate legal resolutions, respectively.