This chapter considers what happens when the government wants to change its policy in a way which will make a government contract impossible, or more expensive, for the contractor to perform. It explores how a balance might be struck between flexibility for the government and appropriate protection for contractors. The courts have a limited role to play when changes are brought about through primary legislation. However, where they occur through executive discretion, the rule against the fettering of discretion enables the courts to scrutinise the government's decisions. A more developed public law framework would also give the courts power to award compensation to the contractor in certain circumstances. The chapter also considers the use of variation and termination clauses in government contracts, and the developing role of judicial review in regulating the government's decisions under these clauses.
Keywords: fettering of discretion, policy changes, judicial review, variation