Contract Amendments: Limits on Changing a Contract’s Term, Price, and Scope

This page is a translation of the original Portuguese text, provided for convenience. It deals with Brazilian law. If there is any discrepancy, the Portuguese version prevails. Read the original in Portuguese

The government can change the contracts it signs, but that power is not unlimited. Law 14.133/2021 sets out when changes are allowed, caps them at maximum percentages, and includes safeguards that protect the contractor from changes that distort the subject matter of the contract or upset its financial balance.

The Power to Change a Public Contract

A public contract has a feature that sets it apart from private contracts: exorbitant clauses, which are special prerogatives that place the government in a privileged position. One of them is the ability to modify the agreement to serve the public interest, in certain situations even without the private party’s consent. This is a prerogative typical of public law, and it does not exist in relationships governed solely by private law.

This power flows from the supremacy of the public interest over private interests. The public need that justified the contract may change while the work is under way, calling for adjustments to the scope, the quantity, or the manner of performance. A contract is not a rigid instrument; it keeps pace with the changing reality of providing a service or carrying out a construction project.

Law 14.133/2021, which governs public procurement and government contracts, organizes this power into two broad groups: unilateral changes, imposed by the government, and changes made by agreement between the parties. Each type has its own basis and limits, and understanding these rules is essential for public managers and contractors alike.

Unilateral Changes and Changes by Agreement

Unilateral changes occur when the government modifies the contract without needing the contractor’s consent. They are justified in two main situations: when the design or specifications must be modified to improve technical suitability, and when the quantity of the contracted work or goods must be increased or reduced within the legal limits. These are known as qualitative and quantitative changes.

Changes by agreement between the parties, on the other hand, require consensus. They include replacing the performance bond, changing the performance method or the manner of delivery, altering the payment terms because of a supervening circumstance, and restoring the contract’s economic and financial balance in cases of force majeure, unforeseeable events, or fato do príncipe (a government act that disrupts the economics of the contract).

The distinction matters because, with a unilateral change, the contractor must accept the change imposed, as long as the legal limits are respected. With changes by agreement, neither party can impose its will on the other; the parties must negotiate and document the change in a contract amendment. Overlooking this distinction is a frequent source of disputes between the government and contractors.

This is a prerogative typical of public law, and it does not exist in relationships governed solely by private law.

Maximum Percentages for Increases and Reductions

The most sensitive aspect of quantitative changes is the percentage limits. Law 14.133/2021 provides that the contractor must accept increases or reductions of up to twenty-five percent of the contract’s updated initial value when the contract is for construction, services, or purchases.

For the specific case of renovating a building or equipment, the limit on increases rises to as much as fifty percent. This more flexible rule recognizes that renovations often uncover unforeseen needs, which appear only once the physical work is under way and exposes problems that were previously hidden.

These percentages operate as a ceiling on what the contractor is required to accept. Within them, the contractor must comply with the government’s order. Beyond the limit, the change can happen only by agreement, never by unilateral imposition. Reductions that exceed the legal threshold also require consent, precisely to preserve the economic basis of the contract.

Note that increases and reductions are calculated separately and are not offset against each other. The government cannot combine a reduction with an increase to artificially widen its margin for modification. Each change must respect its own limit, or it will amount to evading the law. Courts of accounts have repeatedly rejected attempts at offsetting that disguise changes beyond what is allowed.

Changes That Distort the Contracted Subject Matter

There is one boundary that no change may cross: a change that turns the contracted subject matter into something substantially different from what was put out to bid. A modification is meant to adjust the contract, not to create a new agreement through the back door and sidestep the duty to run a bidding process.

When a change alters the nature of the subject matter, it defeats the purpose of the bidding process. The process selects the most advantageous proposal for a specific subject matter defined in the bidding notice. Allowing that subject matter to be distorted afterward would undermine competition and violate the equal treatment of the bidders who competed in that process.

The contractor should watch this limit closely. Accepting changes that go beyond the essence of the subject matter can leave the contractor in a legally vulnerable position, especially if oversight bodies later challenge the performance. Prudence calls for putting reservations on record and documenting the circumstances in which the change was requested, noting in writing the technical justifications the government gave and the date of each request received.

The Contractor’s Rights When Changes Are Imposed

The fact that a contractor must submit to unilateral changes does not mean it is left without protection. The legal system guarantees that the contract’s economic and financial balance will be maintained. This principle preserves the original relationship between the contractor’s burdens and the payment it receives.

Any change that affects cost or workload must be accompanied by a revision of the amounts. If the government increases the quantity, the corresponding payment increases with it. If it modifies specifications in ways that make performance more expensive, the prices must be readjusted. This right has a constitutional basis and derives from the actual terms of the winning bid.

The contractor is also entitled to have the change documented in a contract amendment, the instrument that records the change, its grounds, and its financial effects. Verbal or informal modifications have no valid effect and expose both parties to disputes. Putting the change in writing protects the private party and makes the government’s act transparent.

When a change exceeds the legal limits or distorts the subject matter, the contractor may refuse it. Faced with abusive demands, the contractor may seek relief from the government itself and, if necessary, from the courts, in order to preserve the original terms of the agreement or obtain fair readjustment. Technical and legal support from the very first change request reduces risk and strengthens the contractor’s position, making it possible to respond on solid grounds to each demand the government makes during performance.

Frequently Asked Questions

Can the government increase a contract’s value without limit?

No. The contractor must accept increases of up to twenty-five percent of the updated initial value in construction, services, and purchases, and up to fifty percent in the case of renovating a building or equipment. Above those percentages, the change can occur only by agreement between the parties, never by unilateral imposition.

Can the contractor refuse a change imposed by the government?

Within the legal limits, and as long as the nature of the subject matter is respected, a unilateral change is mandatory. However, the contractor may refuse changes that exceed the maximum percentages, that distort the subject matter put out to bid, or that upset the financial balance without proper readjustment of the amounts.

What happens if a change completely alters the subject matter of the contract?

A change that distorts the subject matter is considered irregular, because it defeats the purpose of the bidding process and violates the equal treatment of competitors. In such cases, the modification may be annulled, and the responsible manager may be held liable. The correct path would be to enter into a new contract following the appropriate bidding process.

As informações deste artigo são de caráter informativo e não substituem consulta jurídica individualizada. Cada caso possui particularidades que exigem análise específica.