MSBCA Addresses Whether Change in Law Justifies Equitable Adjustment

In Red Coats Inc., found here, the Maryland State Board of Contract Appeals addressed whether a change in state law that caused increased operating costs constitutes a change in the scope of work sufficient to warrant an equitable adjustment. The Board determined that because the work required under the IFB and contract did not change, the contractor was not entitled to an equitable adjustment. 

Red Coats entered into a contract with the state to provide, at a fixed price, uniformed, armed and unarmed guards at 15 facilities. After Red Coats contracted with the state, Maryland passed the Healthy Working Families Act, which required certain employers, including Red Coats, to provide paid sick and safe leave.  Not surprisingly, this increased Red Coats’ overhead costs. Red Coats consequently requested an equitable adjustment, arguing that the new law constituted a change in the scope of its work.

The procurement officer and MSBCA disagreed.  In doing so, they focused on two provisions of the contract. First, the contractor was required to comply with all local, state and federal laws. Second, the PO may change the work required under the general scope of work and such change is the only basis for an equitable adjustment. The MSBCA also noted that any equitable adjustment must derive from the procurement contract itself, and cannot arise from common law (such as equitable estoppel or quantum meruit).

Since the scope of work itself (i.e. the number of guards required by the state, number of sites, etc.) was not affected by the passage of the law, the PO properly denied Red Coats’ request for an equitable adjustment.