U.S. Department of Transportation
Federal Highway Administration
1200 New Jersey Avenue, SE
Washington, DC 20590

Skip to content U.S. Department of Transportation/Federal Highway AdministrationU.S. Department of Transportation/Federal Highway Administration



Construction Program Guide

Contract Claims

The FHWA's policy for Federal-aid participation in construction contract claims requires a examination of the specific facts of the claim and the contract basis for payment. Federal-aid participation is not automatic in any claim.

Authority/Legal Basis

  1. Laws
    • Title 23 U.S.C. 315 provides very broad authority for the Secretary of Transportation to prescribe regulations to carry out the Federal-aid highway program. However, there are no specific statutes dealing with construction contract modifications other than the required use of standardized changed conditions clauses as required by 23 USC 112(e).
  2. Regulations
    • Title 23 C.F.R. 635.102 - Definitions
    • Title 23 C.F.R. 635.109 - Standardized changed condition clauses prescribes the standardized contract clauses mandated by the 1987 Surface Transportation and Uniform Relocation Assistance Act. These contract clauses include the following:
      • Differing Site Conditions,
      • Suspensions of work ordered by the engineer, and
      • Significant changes in the character of work
    • Title 23 C.F.R. 635.109(c) address the unique use of changed condition clauses for design-build contracts. The FHWA encourages but does not require the use of such clauses in design-build contracts.
    • Title 23 C.F.R. 635.120 - Changes and extra work describes the FHWA approval procedures for the review and approval of change orders and extra work. Paragraph (c) discusses the need to address contract time impacts when developing a contract change document.
    • Title 23 C.F.R. 635.121 - Contract Time and contract time extensions describes the FHWA approval procedures for the review and approval of time extensions.
    • Title 23 C.F.R. 635.124 - Participation in contract claim awards and settlements describes the basis for determining Federal-aid participation on any claim.

    The above regulations provide the FHWA's regulatory policy regarding construction contract modifications. However, please note that these regulations were last updated on August 2, 1991 and do not include revised stewardship, oversight, and applicability requirements resulting from the 1991 ISTEA and the 1998 TEA-21. See the discussion in the FHWA Contract Administration Core Curriculum Manual for a summary of current FHWA policy).

  3. Orders
    • None
  4. Policy
    • The FHWA Contract Administration Core Curriculum Manual summarizes policy and provides general guidance concerning contract claims. Please refer to the following sections of the manual for more specific guidance:
    • Policy Memoranda
      • Headquarters memorandum dated June 1, 1964, Subject: Eligibility for Federal-aid participation of claim awards made by States to Federal-aid contractors when based upon arbitration board awards or State court judgments provides guidance for the basis of Federal-aid participation in any claim must be drawn from the contract provisions, specifications and requirements.
      • Headquarters memorandum dated March 9, 1967, Subject: Federal liability on Federal-aid contract claims provides details of a Federal court case which established that since FHWA is not a party to the contract between the STA and the contractor, FHWA is not liable for damages claimed by the contractor.
      • Headquarters memorandum dated October 23, 1985, Subject: Participation in Contract Claim Awards and Settlements provides a synopsis of the final rule establishing 23 CFR 635.124.
      • Headquarters letter dated December 15, 1988, Subject: Home Office Overhead Cost Formulas discusses FHWA policy on participation in home office overhead as part of a construction contract claim.
      • Headquarters memorandum dated December 16, 1992, Subject: Alternative Disputes Resolution states that while FHWA encourages the use of ADR to resolve claims, doing so will not automatically result in Federal-aid participation in any claim payments.


  1. General Information
  2. Training
    • NHI 134037A - Managing Highway Contract Claims: Analysis and Avoidance
    • NHI 134049 - Use of Critical Path Method (CPM) for Estimating, Scheduling, and Timely Completion
    • NHI 134060 - Partnering: A Key Tool for Improving Project Delivery in the Field
    • FHWA Contract Administration Core Curriculum (Course Description (.pdf))
PDF files can be viewed with the Acrobat® Reader®
Updated: 02/17/2016
Federal Highway Administration | 1200 New Jersey Avenue, SE | Washington, DC 20590 | 202-366-4000