As prescribed in 16.203-4(d)(2)(92) insert the following clause:
ECONOMIC PRICE ADJUSTMENT (EPA) OF THE ANNUAL INVENTORY HOLDING FEE AND ANNUAL INVENTORY HOLDING COST FOR THE OPTION YEARS (AUG 2009) - DLAD
(a) 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. 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 Inventory Holding Fee (expressed as a percentage) and Inventory Holding Cost for each Option Year under this clause, shall be the Prime Rate, as published Monday through Friday in the Wall Street Journal.
(c) This clause authorizes only one calculation annually (see paragraph d) to determine the Inventory Holding Fee and Inventory Holding Cost applicable to the upcoming Option Year. (The Inventory Holding Fee and Inventory Holding Cost for the Base Contract Period are not subject to adjustment under this clause.) This calculation is as follows:
(1) A "Base" and "Adjusting" Prime Rate shall be established for each Option Year (see paragraph (e) below).
(2) Determine the change in points (upward or downward) between the Base Prime Rate and Adjusting Prime Rate for the twelve-month period* which ends 60 days prior to the upcoming Option Year for which the new Inventory Holding Fee and Inventory Holding Cost will be calculated. (*NOTE: The period for the adjustment for Option Year I may be longer or shorter than twelve months.)
(3)(i) Increases. The actual change in points up to the maximum allowed in accordance with paragraph (h) shall be added to the Inventory Holding Fee for the contract year/period about to expire to determine the Inventory Holding Fee for the upcoming Option Year. Upward adjustments shall not exceed 1.50 points.
(ii) Decreases. The actual change in points shall be subtracted from the Inventory Holding Fee for the contract year/period about to expire to determine the Inventory Holding fee for the upcoming Option Year.
(iii) For increases or decreases, Contractors may offer lower Inventory Holding Fees than those calculated IAW the above.
(4) To determine the Inventory Holding Cost for the upcoming Option Year, the Contracting Officer will apply the new Inventory Holding Fee to the value of Contractor Furnished Material inventory reserved for this contract (hereafter referred to as the CFM inventory) for the upcoming Option Year (i.e., the Value of the CFM Inventory for the upcoming Option Year x New Inventory Holding Fee expressed as a decimal to four decimal places = new Inventory Holding Cost for the upcoming Option Year). The Contracting Officer will update the value of the CFM Inventory for each contract year by applying the current DAPA, FSS, ECAT, or DoD National Contract prices (whichever is lower) to the CFM Inventory Coverage for the upcoming contract year. For payment purposes, the Inventory Holding Cost for the upcoming Option Year may be paid on a monthly, quarterly, or some other basis at the discretion of the Contracting Officer.
(d)(1) Adjustment Requests and Notifications:
(i) If the Adjusting Prime Rate is higher than the Base Prime Rate, the Contractor may request an increase in accordance with (IAW) the terms of this clause in the Inventory Holding Fee applicable to the upcoming Option Year. This written request must be received by the Contracting Officer within 30 days after the Adjusting Prime Rate is published and may be generic or may include the specific calculations required by this clause to determine the revised Inventory Holding Fee. The ceiling provision (paragraph (h) below) must also be considered when making the calculations. The Contractor has the option of proposing an Inventory Holding Fee based upon these calculations or a lower Inventory Holding fee.
(ii) If the Adjusting Prime Rate is lower than the Base Prime Rate, a decrease in the Inventory Holding Fee is mandated by this clause. Accordingly, 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 Adjusting Prime Rate is published and may be generic or may include the specific calculations required by this clause to determine the revised Inventory Holding Fee. The Contractor has the option of proposing the Inventory Holding Fee based upon these calculations or a lower Inventory Holding Fee.
(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 Inventory Holding Fee, if necessary, and the Inventory Holding Cost 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 Inventory Holding Fee to calculate the Inventory Holding Cost for the upcoming Option Year. In either case, the Inventory Holding Fee, Inventory Holding Cost, and the value of the CFM Inventory for the upcoming Option Year shall be included in a contract modification.
(3) 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 and validate 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) The Base Prime Rate used to calculate the Inventory Holding Fee and Inventory Holding Cost covering Option Year I under this clause shall be the Prime Rate, as published on the date of closing of the Final Proposal Revision. The Base Prime Rate used to calculate the Inventory Holding Fee and Inventory Holding Cost for each subsequent Option Year shall be the Prime Rate, as published 60 days prior to the effective date of each previous Option Year (e.g., the Base Prime Rate for Option Year III will be the Prime Rate published 60 days prior to the effective date of Option Year II.)
(2) The Adjusting Prime Rate used to calculate the Inventory Holding Fee and Inventory Holding Cost for each Option Year shall be the Prime Rate, as published 60 days prior to the effective date of each Option Year (e.g., the Adjusting Prime Rate for Option Year III will be the Prime Rate published 60 days prior to the effective date of Option Year III).
(f) Following is a hypothetical example of adjustment calculations to determine the Inventory Holding Fee for Option Year III and the associated Inventory Holding Cost. (The base and adjusting prime rates, the Inventory Holding Fee for Option Year II and the Value of the CFM Inventory for Option Year III are hypothetical and are used only to illustrate how the Inventory Holding Fee and Inventory Holding Cost are calculated):
(1) Base Prime Rate (in effect 60 days prior to effective date of Option Year II): 4.00
(2) Adjusting Prime Rate (in effect 60 days prior to effective date of Option Year III): 5.75
(3) Current Contract Inventory Holding Fee for Option Year II: 3.75
(4) Calculate the Inventory Holding Fee:
Adjusting Prime Rate: 5.75
Base Prime Rate: -4.00
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Change in (Prime Rate) Points: (-Increase-) 1.75
Maximum Increase Allowed is 1.50 points: Clause ceiling of 1.50 is less than 1.75 calculated; therefore the allowable increase is 1.50 points.
Inventory Holding Fee for Option Year II: 3.75
Maximum Increase in Prime Rate Allowed: + 1.50
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Inventory Holding Fee for Option Year III: 5.25
(5) Contracting Officer to calculate the Inventory Holding Cost:
Value of CFM Inventory as adjusted for Option Year III: $20,000,000.00
$20,000,000.00 x .0525 = $1,050,000 (Annual Inventory Holding Cost for Option Year III)
(g) The Adjusting Contract Modification will show all the calculations used to establish the Inventory Holding Fee, Inventory Holding Cost, and the value of the CFM Inventory covering the new Option Year.
(h) Any request to increase the Inventory Holding Fee IAW the requirements of this clause for any upcoming Option Year shall be limited to the point increase (in increments of 0.25) in the Prime Rate, up to, but not exceeding 1.50 points. This will be determined when calculating the change in points in the Prime Rate using the Base and Adjusting Prime Rates described in paragraph (c)(2) and (c)(3)(i) and illustrated in paragraph (f). If the Prime Rate increase exceeds 1.50 points and the contractor has requested an increase of 1.50 points or more, the contractor shall be given the 1.50 point increase. There are no limitations on downward adjustments under this clause. Contractors can also propose lower Inventory Holding Fees than those calculated IAW with 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 Inventory Holding Fee and Inventory Holding Cost pending the issuance of the Modification establishing the new Inventory Holding Fee, Inventory Holding Cost, and value of the CFM Inventory for the applicable Option Year. The Inventory Holding Fee and Inventory Holding Cost 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 Prime Rate is discontinued, its method of derivation is altered substantially, or the Contracting Officer determines that the Prime Rate consistently and substantially fails to reflect market conditions, the parties shall mutually agree upon an appropriate substitute method or adjustment mechanism to determine the annual Inventory Holding Fee and/or Inventory Holding Cost. The Contract shall be modified to specify the use of an appropriate substitute, which will be effective on the date the Prime Rate is no longer published, the derivation of the Prime Rate is substantially altered, or the Prime Rate begins to consistently and substantially fail to reflect market conditions. If the base or adjusting prime rates established in paragraph (e) above fall on a day the Prime Rate is not published, use the next day the prime rate is published.
(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)
