What characterizes a bilateral modification?

A bilateral modification is characterized by the requirement for negotiation and the necessity of signatures from both parties involved in the contract. This means that any changes to the contract require mutual consent, reflecting an agreement between the contractor and the government or contracting authority. Such modifications are typically used to amend terms such as pricing, delivery schedules, or other contract provisions where both parties need to agree and officially document the changes to ensure legal compliance and maintain a good working relationship.

Options that suggest a unilateral modification, where only one party can effect changes without the other's consent, are incorrect as they do not fit the nature of a bilateral modification. Similarly, the notion that a modification is unmodifiable once finalized contradicts the concept of bilateral modifications since these can be negotiated and changed again through further agreements. The requirement for external auditor approval is also irrelevant, as it does not pertain to the characteristics of how modifications are classified or executed in contracting scenarios.

Thus, understanding that bilateral modifications necessitate negotiation and signatures from both parties is crucial for managing contracts effectively.