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  • Question

    What is the effective date of a contract? When the PCO signs or if bi-lateral when the Contractor signs?


    Answer

    The term "effective date" can cause confusion. Some equate it to the day that a legal contract is recognized by the courts, i.e., when one (unilateral action) or both (bilateral action) parties sign. In other cases it is viewed as the date that performance is scheduled to begin in accordance with the terms of a pre-existing signed contract, which may have been signed on an earlier date. The FAR uses it differently too. According to FAR 43.101, “Effective date” is--

    (1) For a solicitation amendment, change order, or administrative change, the effective date shall be the issue date of the amendment, change order, or administrative change.

    (2) For a supplemental agreement, the effective date shall be the date agreed upon by the contracting parties.
    However, the authoritative 48 U.S.C. 6 Chapter 18 defines contract effective date as "the date agreed upon by the parties for beginning the period of performance under the contract." (Side note: Some states use the term differently than in the federal government. For example, the State of Iowa defines "effective date" as "the first day of a month on which the contract shall become in force.")

    The effective date is not directly related to the date of signing. Signing has to do with the concept of contract "acceptance." This is supported by the instructions for the Standard Form 1449, which state that for Block 3, Award/Eff. Date, “this will be on or after (my emphasis) the date the Contracting Officer signs the contract or purchase order.” For a unilateral action such as exercise of an option, separate acceptance by the contractor is not required, as contractor acceptance occurred for the original contract. For a bilateral action such as a purchase order, acceptance occurs when the contractor either signs the P.O. or begins performance, after the Government has already signed.

     

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