As you mentioned, the FAR does state that the changes clause can be used in the circumstances you identified which may make it an appropriate authority to use. However, since I don't know all the specifics to your contract and your KO does, it seems based on your scenario that the KO has determined that it is not appropriate or there is a more appropriate authority.

FAR 1.602-1(b) states that the KO is responsible for ensuring "that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met." FAR 1.602-2 further states "in order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment." Unless the authority the KO is proposing to use is not allowed by law, executive order or regulations and/or they have not obtained all the clearances and approvals required, based on the scenario you provided and without knowing all the specifics, I am left to make some assumptions. If the KO has met the requirements of FAR 1.602 that I mentioned above, then the KO is permitted to make the decision of which authority to use and should document the file appropriately. If they have not than I would recommend discussing the issues with them.

Hopefully this answer helps clarify some of the responsibilities of the KO.