As prescribed in 16.203-4-90(d), use the following clause when the contractor will propose a material index for use in the economic price adjustment clause; complete in accordance with the following guidance:
a. Paragraph (b)(1): Enter the appropriate Producer Price Index (PPI) code number identification and title.
b. Paragraph (c)(1): Enter the number of price adjustments per contract year.
c. Paragraph (d): Enter the appropriate percentage price increase ceiling, considering the length of contract performance, index volatility, and ratio of the cost covered by this clause to the total contract price. Any percentage over 10 percent requires approval by the Chief of the Contracting Office .
d. Paragraph (f)(2): Enter the minimal dollar amount for an adjustment to be made for retroactive price changes. The default is $500.
52.216-9030 ECONOMIC PRICE ADJUSTMENT - DEPARTMENT OF LABOR PRICE INDEX (FEB 2009)
(a) WARRANTIES. The Contractor warrants that-
(1) The base unit prices set forth in the Schedule do not include allowances for any portion of the contingency covered by this clause; and
(2) The prices to be invoiced shall be computed in accordance with the provisions of this clause.
(b) DEFINITIONS. As used throughout this clause-
(1) "Price Index" for the purpose of price adjustment under this clause shall be the revised version of the Producer Price Index(es) reported in the monthly publication entitled, “Producer Price Indexes”, published by the U.S. Department of Labor, Bureau of Labor Statistics for the following code number(s) and title(s):
_______________________________________________________________________
(2) "Base price index" for the first contract year shall be the three-month arithmetic average of the final index values for the month preceding, the month of, and the month following the closing date for receipt of proposals (final proposal revisions, if discussions were held). For a contract year other than the first contract year, the “base price index” shall be the final adjusting price index (see (3) below) from the immediately preceding contract year.
(3) "Adjusting price index" shall be the two month arithmetic average of the indexes published for the latest two months preceding the month in which the adjusting contract modification is effective.
(4) "Base unit price" for the first contract year is the unit price applicable to a quantity of a contract line item established at contract award, exclusive of any price adjustment pursuant to this clause. For subsequent contract years, the base unit price is the final contract unit price applicable to a quantity of a contract line item at the end of the immediately preceding contract year, which may include adjustments pursuant to this clause.
(5) “Adjustment period” is the period during which a particular adjustment to the unit price under this clause (calculated at the beginning of the adjustment period) will be applicable. The length of each adjustment period in months shall be calculated by dividing 12 by the number of adjustments allowed per year in (c)(1) below.
(c) ADJUSTMENTS. Promptly following the end of each adjustment period, the Contracting Officer shall calculate the adjusting index and any adjusted contract unit price(s) for the new adjustment period, and modify the contract accordingly. Price adjustments pursuant to this clause shall be made by contract modification, issued by the contracting officer and will show the base price index, the adjusting price index, the base unit price, and the mathematical calculations. The price adjustment shall be applicable only to deliveries occurring after the effective date of the contract modification establishing the unit price for the adjustment period in which the deliveries occur. The adjustment for each adjustment period will be based on the percentage change between the base price index and the adjusting price index for the adjustment period, as applied to the base unit price for that period.
(1) The Government shall be entitled to a price decrease in any particular adjustment period if the adjusting price index is less than the base price index. There shall be _______ price adjustments per contract year.
(2) Example of adjustment calculation:
Base Price Index - 109.88*
Adjusting Price Index - 112.72*
Less Base Price Index - 109.88
Change to Index - 2.84
Divide Change to Index
By Base Price Index - 2.84 / 109.88 = .02585 (2.585%)**
Multiply by the
Base Unit Price - $50.00 x .02585 = $1.29*** = Unit Price Adjustment
* In computing the base and adjusting price indexes, the resulting figure shall be rounded to the second decimal place.
** This figure shall be rounded to the fifth decimal place.
*** All dollar figures shall be rounded to the nearest cent.
(d) UPWARD CEILING ON ECONOMIC PRICE ADJUSTMENT. The Contractor agrees that the aggregate of the increases in any contract unit price under this clause shall not exceed ___% (percent) of the original base unit price, except as provided hereafter.
(i) If at any time the Contractor has reason to believe that within the near future a price adjustment under the provisions of this clause will be required that will exceed the adjustment ceiling for any item, the Contractor shall promptly notify the Contracting Officer in writing of the expected increase. The notification shall include a revised ceiling the Contractor believes is sufficient to permit completion of remaining contract performance, along with appropriate explanation and documentation as required by the Contracting Officer.
(ii) If an actual increase in the price index would raise a contract unit price for an item above the current ceiling, the Contracting Officer may issue a contract modification to raise the ceiling. If the contract ceiling will not be raised, the Contracting Officer shall so promptly notify the Contractor in writing.
(e) INVOICES. The prices payable under this contract will be based on the latest adjusted unit price incorporated into the contract as of the date of delivery.
(f) RETROACTIVE ADJUSTMENT. The contractor may request an equitable adjustment for deliveries made during an adjustment period for which payment has already been made, based on the difference between a higher final revised index applicable to an adjustment period and the index values used in calculating the unit price for that adjustment period, and subject to the adjustment ceiling in (d) above and the following conditions:
(1) The request for equitable adjustment clearly establishes that the unit price adjustment for the adjustment period would have been higher if the final revised index had been used, and identifies all invoices and payments to which it is applicable, cites the specific index differences relating to the requested adjustment, and provides a calculation of the total net price adjustment for items delivered during that adjustment period.
(2) No retroactive equitable adjustment shall be made under this clause unless the total change in the contract amount is $______ ($500.00 unless otherwise stated) or more for the applicable adjustment period. Total change in the contract amount is applied at the contract level.
(3) The contractor’s written request must be received by the Contracting Officer within 240 days following the contract delivery date(s) of the items for which the equitable adjustment is requested.
The Government shall be entitled to an equitable adjustment based on the difference between a lower final revised index applicable to an adjustment period and the index values used in calculating the unit price for that adjustment period, without limitation. An equitable adjustment under this provision in favor of either the contractor or the Government will not increase or decrease the unit prices of the items that are the subject of the equitable adjustment and will not provide a basis for an equitable adjustment in the amounts paid in adjustment periods subsequent to the adjustment period to which the equitable adjustment is applicable.
(g) FAILURE TO DELIVER. Notwithstanding any other provisions of this clause, no upward adjustment shall apply to product scheduled under the contract to be delivered before the effective date of the adjustment, unless the Contractor’s failure to deliver according to the delivery schedule results from causes beyond the Contractor’s control and without its fault or negligence, within the meaning of the Default clause of this contract.
(h) REVISION OF PRICE INDEX. In the event -
(i) Any applicable price index is discontinued or its method of derivation is altered substantially; or
(ii) The Contracting Officer determines that the price index consistently and substantially fails to reflect market conditions,
the parties shall mutually agree upon an appropriate and comparable substitute and the contract shall be modified to reflect such substitute effective on the date the price index was discontinued, altered, or began to consistently and substantially fail to reflect market conditions.
(i) FINAL INVOICE. The Contractor shall include a statement on the final invoice that the amounts invoiced hereunder have applied all decreases required by this clause.
(j) DISPUTES. Any dispute arising under this clause shall be determined in accordance with and subject to the “Disputes” clause of the contract.
(End of Clause)
