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Extraordinary Contractual Relief

Public Law 85-804 provides a means by which a contractor can receive additional compensation, or other forms of relief, in instances where the government has no legal obligation, and where relief may otherwise be prohibited by law. Granting of such equitable relief is purely discretionary and consideration of a contractor's request for relief is by a Contract Adjustment Board (CAB) appointed by the head of an agency. This equitable relief has been available, in one form or another, since World War II.

Since recovery under 85-804 is intended for situations where there is no other legal basis for relief, a contractor normally must first exhaust any administrative remedy which may be available. In situations where the relief requested may be related to a constructive change, a contractor must pursue relief under the Disputes clause of its contract, including an appeal to the agency's Board of Contract Appeals, before a CAB will address an 85-804 claim. However, because the regulations only require the contractor to exhaust its administrative remedies, a contractor can normally pursue an 85-804 claim even though the contractor could pursue a breach of contract action before a court, or pursue a mistake correction before the Comptroller General. No matter what the situation, however, a contractor must submit an 85-804 request before the government discharges all of its obligations under the contract, i.e., makes final payment.

Part 50 of the Federal Acquisition Regulations governs agency administration of 85-804 requests for relief. Concerning increases in contract compensation, the FAR provides three types of relief, 1) amendments without consideration, 2) correction of mistakes, and 3) formalization of informal commitments. In keeping with the equitable and discretionary nature of P.L. 85-804, the regulations do not limit the bases for relief, and the examples identified by the regulations are not intended to exclude other situations where a CAB determines that circumstances warrant action. FAR 50-301.

An amendment without consideration is normally predicated upon the basis of "essentiality." To establish essentiality, a contractor must establish the following: 1) the contractor is essential to the national defense, 2) there is an actual loss under the contract, and 3) the loss impairs the contractor's "productive ability."

An amendment without consideration can also be used to compensate a contractor for a situation where a government action, usually in situations where the government acts as a "sovereign," interferes in some manner with a contractor's performance. To recover, a contractor usually needs to establish that 1) it suffered an actual loss, 2) the loss resulted from some government action, and 3) the action was "unfair."

P.L. 85-804 also provides monetary relief for mistakes. The regulations provide for compensation for three types of mistakes: 1) a mistake or ambiguity in a contract so that the contract fails to clearly express the intention of the parties, 2) an obvious unilateral mistake by the contractor, and 3) a mutual mistake as to a material fact.

The third situation, formalization of an informal commitment, provides for compensation in instances where a contractor acts in response to a government official's instructions where the official did not have the authority to bind the government. In such situations, the contractor is often considered to have acted as a "volunteer." The regulations, however, require 1) that any such request for relief be made within six months, and 2) that, at the time the contractor acted that it was "impractical" to use normal procurement procedures.

See P.L. 85-804