As prescribed in 16.203-4(d)(2)(91) insert the following clause:
ECONOMIC PRICE ADJUSTMENT (EPA) OF THE ANNUAL MANAGEMENT FEE(S) AND ANNUAL MANAGEMENT COST(S) FOR THE OPTION YEARS (AUG 2009) - DLAD
(a)(1) The contractor warrants that the prices/costs and fees included in the Solicitation/Contract do not include allowances for any portion of the contingency covered by this clause. Any Management Fees and related Management Costs applicable to this contract (e.g., Inventory and/or Program) shall be calculated in accordance with (IAW) this clause. The type(s) of Management Fee(s) and related Management Cost(s) that apply are specified elsewhere in this contract.
(2) Adjustments under this clause are predicated upon the Government exercising one or more Option Year extensions. The Government, at its discretion may choose to exercise or not exercise an Option to extend the Contract.
(b) The economic indicator for the purpose of calculating the Management Fee(s) (expressed as a percentage) and Management Cost(s) for each Option Year except the initial Option Year* under this clause shall be the initial publication of the preliminary Producer Price Index for code number 4931104931101 entitled GENERAL WAREHOUSING AND STORAGE. This information is contained in the publication entitled "Producer Price Indexes", as published by the U.S. Department of Labor, Bureau of Labor Statistics. The preliminary index for a given month is available approximately two weeks into the following month. The index is also available through the Bureau of Labor Statistics web site at www.bls.gov. Click on “Get Detailed Statistics” and select “Series Report”. Enter Series ID pcu4931104931101, select number of years and format for output, and then select “Retrieve Data” at the bottom of the page. (*NOTE: The Base Index for the First Option Year will use the revised PPI).
(c) This clause authorizes only one calculation annually (see paragraph (d)) to determine the Management Fee(s) and Management Cost(s) applicable to the upcoming Option Year. (The Management Fee(s) and Management Cost(s) for the Base Contract Period are not subject to adjustment under this clause.) This calculation is as follows:
(1) A "Base" and "Adjusting" index shall be established for each Option Year (see paragraph (e) below).
(2) The percentage change (upward or downward) between the applicable "Base" Index and "Adjusting" Index shall be calculated.
(3) The Management Fee(s) for the contract year about to expire shall be increased or decreased based upon the percentage change in the indexes (see paragraph (h) for upward adjustments) in order to determine the Management Fee(s) for the upcoming Option Year. (However, for increases or decreases, Contractors may offer lower Management Fee(s) than those calculated IAW this formula).
(4) (A) The New Management Fee(s) for the upcoming Option Year shall be applied to one or more categories of Guaranteed Coverage (e.g., Contractor Inventory Material (CIM), Contractor Furnished Material (CFM), and Government Purchased Material (GPM)) as spelled out elsewhere in this contact.) The resultant subtotals represent the Management Cost(s) for each applicable category of Guaranteed coverage and are added together to get the total Management Cost(s) for the upcoming Option Year. For payment purposes, the total Management Cost(s) for the upcoming Option Year may be paid on a monthly, quarterly, or some other basis at the discretion of the Contracting Officer.
(B) Prior to applying the New or current Management Fee(s) to the Guaranteed Coverage, the value of each category of Guaranteed Coverage is updated yearly by the Contracting Officer. This is accomplished by applying the DAPA, FSS, ECAT, or DoD National Contract Price(s) (whichever is lower) in effect 60 days prior to the date the Option takes effect to the quantities in each category of Guaranteed Coverage for the upcoming Option Year. The resultant subtotals represent the new value for each applicable category of Guaranteed Coverage and added together, represents the Total Inventory Value for the upcoming Option Year.
(d)(1) Adjustment Requests and Notifications
(i) If the “Adjusting” index is higher than the “Base” index, the Contractor may request an increase IAW the terms of this clause in the Management Fee(s) applicable to the upcoming Option Year. This written request must be received by the Contracting officer within 30 days after the indexes used to calculate the Adjusting Index are available. The request may be generic or may include the specific calculations required by this clause to determine the revised Management Fee(s). When making the calculations, the 10% ceiling (paragraph (h) below) shall be taken into consideration. The contractor has the option of proposing a Management Fee based upon these calculations or a lower Management Fee(s).
(ii) If the “Adjusting” index is lower than the “Base” index, a decrease in the Management Fee(s) is mandated by this clause. As above, the Contractor shall notify the Contracting Officer in writing of this decrease. This notification must be received by the Contracting Officer within 30 days after the indexes used to calculate the Adjusting Index are available. The notification may be generic or may include the specific calculations required by this clause to determine the revised Management Fee(s). The Contractor has the option of proposing the Inventory Management Fee(s) based upon these calculations or a lower Management Fee(s).
(2) Upon receipt of a request for an upward adjustment or notification of a downward adjustment by the Contractor, the Contracting Officer shall review and validate the contractor’s submittal. If acceptable, the Contracting Officer will calculate the Management Fees, if necessary, and the Management Cost(s) for the upcoming Option Year in accordance with paragraph (c) (4) above. If no increase is requested and a mandated decrease is not warranted, the Contracting Officer shall use the current Management Fee(s) to calculate the Management Cost(s) applicable to the upcoming Option Year. In either case, the Management Fee(s), Management Cost(s), and the Total Inventory Value reserved for this contract for the upcoming Option Year shall be included in a contract modification.
If a request for an upward adjustment is received after the required 30-day timeframe, the Contracting Officer reserves the right to reject the request, as money may not available to fund the increase. If funds are available, the Contracting Officer shall have 30 days from the date the Contractor’s request is received to review the request, make the required calculations and issue an adjustment modification. The upward adjustment shall take effect on the same day the modification takes effect. If a notification of a downward adjustment is not submitted until after the required 30-day timeframe or the Contractor fails to notify the Contracting Officer of a decrease, the Contracting Officer shall unilaterally make the required adjustments IAW this clause. The effective date of the downward adjustment shall be retroactive to the date the new Option Year takes effect.
(e) Determining the "Base" and "Adjusting" Indexes.
(1) First Option Year:
(i) The Base Index shall be the arithmetic average of the revised indexes published for the month before and the month of the closing of the Final Proposal Revisions.
(ii) The Adjusting Index shall be the arithmetic average of the preliminary indexes published for the third and fourth month prior to the month the Base Period expires (e.g., if the Base Period expires in June, the Adjusting Index would be the average of the indexes published for February and March of the Base Period.)
(2) Subsequent Option Years:
(i) The Base Index for any upcoming Option Year shall be the previously established Adjusting Index (e.g., the Base Index for the upcoming 2nd Option Year shall be the Adjusting Index established for the first Option Year. NOTE: If no adjustment was made for Option Year 1, determine the Adjusting Index for that year anyway in order to establish the Base Index for upcoming 2nd Option Year. This applies to any time an adjustment is not made for a given year.)
(ii) The Adjusting Index for any upcoming Option Year shall be the arithmetic average of the preliminary indexes published for the third and fourth months prior to the month the current Option Year expires (e.g., if the first Option Year expires in June, the Adjusting Index for the upcoming second Option Year would be the average of the indexes published for February and March of the first Option Year.)
(f) Following is a hypothetical example of adjustment calculations to determine the Inventory Management Fee for Option Year III, and the associated Inventory Management Costs (The Base and Adjusting Indexes, the Inventory Management Fee for Option Year II, and the CIM and CFM Inventory Values for Option Year III are hypothetical and are used only to illustrate how the Inventory Management Fee and Inventory Management Costs are calculated. Any Management Fee(s) and Management Cost(s) that may apply would be calculated in the same manner.):
(1) Base Index: 102.05 Adjusting Index: 103.75
(2) Inventory Management Fee for Option Year II: 1.50%
(3) Inventory Value for Guaranteed Coverage (CIM & CFM) for Option Year III (There are only 2 categories of Guaranteed Coverage for this hypothetical example.):
CIM: $405,000 CFM: $300,000
(4) Calculate the Inventory Management Fee:
(i) Establish Base Index (use previously established Adjusting Index for the Option Year II which is the average of the preliminary indexes published for 3rd and 4th month prior to the month Option Year I expires. For example, if Option Year I expires in June, the Base index for Option Year III would be the average of the preliminary indexes for February and March of Option Year I.)
Feb Index: 101.10 Mar Index: 103.00 Base Index (Avg of Feb & Mar): 102.05
(ii) Establish Adjusting Index (average of preliminary indexes published for February and March of 2nd Option Year.)
Feb Index: 102.30 Mar Index: 105.20 Adjusting Index (Avg of Feb & Mar): 103.75
Adjusting Index: 103.75
Less Base Index: -102.05
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Increase to Index 1.70
Divide Increase to Index 1.70/102.05 = 0.016659 = Adjustment Factor (1.6659 %)
by Base Index
Inv. Man. Fee for Yr II x Adjustment Factor plus 1 = Inv. Man. Fee for Option
Option Year III 1.50% x 1.016659 = 1.52%
Ceiling Provision:
Max Fee for Option Year III cannot exceed 10% increase of Op Yr II fee Max Fee = 1.10 (ceiling) x .0150 (Inv Man Fee for Op Yr II expressed as a decimal ) = .0165 (1.65%) (Maximum allowable fee 1.65%) 1.52% adjusted fee is less than 1.65% maximum fee, therefore 1.52% is new fee
(5) Contracting Officer to calculate the following:
CIM Inventory Value for OP YR III: $405,000.00
Multiplied by 1.52% (converted to a decimal value) x .0152
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CIM Inventory Management Cost for OP YR III $6,156.00
CFM Inventory Value for OP YR III: $300,000.00
Multiplied by 1.52% (converted to a decimal value) x .0152
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CFM Inventory Management Cost for OP YR III $4,560.00
CIM Inventory Management Cost for OP YR III: $6,156.00
CFM Inventory Management Cost for OP YR III + $4,560.00
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Inventory Management Cost for OP YR III $10,716.00
(Total Inventory Value is $705,000, i.e., CIM Inventory Value plus CFM Inventory Value)
NOTE: Round all computations involving the PPIs to two decimal places.
Round adjustment factor to six decimal places.
Round Inventory Management Fees to two decimal places when expressed as a percentage and
four decimal places when expressed as a decimal.
Round all dollar figures to nearest cent.
(g) The adjusting contract modification will show all the calculations used to establish the Management Fee(s), Management Cost(s) and Total Inventory Value covering the new option year.
(h) Any request to increase the Management Fee(s) IAW the requirements of this clause for any upcoming Option Year shall be limited to 10% of the same Management Fee(s) for the previous contract year. If the Management Fee(s) increase exceeds 10% of the Management Fee(s) for the previous contract year, and the Contractor has requested an increase of 10% or more, the Contractor shall be limited to the 10% increase. There is no percentage limit on any decreases in the Management Fee(s) under this clause. Contractors can also propose lower Management Fee(s) than those calculated IAW the requirements of this clause.
(i) The Contractor shall include a statement on the final invoice for each Contract Year/Period that amounts invoiced under this contract reflect all decreases required by this clause.
(j) Payment on this contract shall be at the current Management Fee(s) and Management Cost(s) pending the issuance of the modification establishing the Management Fee(s), Management Cost(s), and Total Inventory Value for the applicable option year. The Management Fee(s) and Management Cost(s) will, if necessary, be retroactively adjusted if the applicable Price Adjustment is delayed by the Government. In this case, any retroactive adjustment shall cover performance only from when the adjustment should have taken effect but for the delay caused by the Government through the day that the EPA modification takes effect.
(k) In the event that the publication of the economic indicator is discontinued, its method of derivation is altered substantially, or the Contracting Officer determines that the Index consistently and substantially fails to reflect market conditions, the parties shall mutually agree upon an appropriate substitute method or adjustment mechanism to determine the Management Fee(s) and/or Management Cost(s). The contract shall be modified to specify the use of an appropriate substitute, which will be effective on the date the Index is no longer published, the derivation of the Index is substantially altered, or the Index begins to consistently and substantially fail to reflect marked conditions.
(l) Any pricing actions pursuant to FAR Clause 52.212-4, paragraph (c) entitled "Changes" (including any revisions by addendum thereto) or other provisions of the Contract shall be priced as though there were no provisions for Economic Price Adjustment.
(m) No adjustment shall be made under this EPA clause unless the total change in contract amount exceeds $500.00.
(End of clause)
