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Equitable-Adjustment Theory: This is a rule that says when there is a problem with a contract between the government and a company, the person in charge of the contract should make things fair for both sides. They should do this quickly so that the company doesn't have to wait too long to pay the people they owe money to.
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.