Legal Definitions - equitable-adjustment theory

The equitable-adjustment theory is a principle used in resolving disputes related to federal contracts. According to this theory, the contracting officer should make a fair adjustment within a reasonable time before the contractor has to settle with its subcontractors, suppliers, and other creditors.

For example, let's say a contractor is working on a federal project and encounters unexpected delays due to unforeseen circumstances. As a result, the contractor incurs additional costs and seeks compensation from the government. Under the equitable-adjustment theory, the contracting officer would review the contractor's claim and make a fair adjustment to compensate for the additional costs incurred.

The equitable-adjustment theory ensures that contractors are not unfairly burdened with additional costs due to circumstances beyond their control. By making a fair adjustment, the contracting officer can help the contractor avoid financial difficulties and maintain a positive relationship with subcontractors, suppliers, and other creditors.