Overview
FAR 17.109 prescribes the mandatory and optional contract clauses for multi-year acquisitions, focusing on cancellation procedures and mechanisms for economic price adjustments over long-term performance periods.
Key Rules
- Mandatory Cancellation Clause: The Contracting Officer (CO) must include FAR 52.217-2, Cancellation Under Multi-year Contracts, in any solicitation or contract where a multi-year arrangement is planned.
- Economic Price Adjustments (EPA): COs are encouraged to use EPA clauses (per FAR 16.203) when long production periods likely involve labor and material cost contingencies.
- Service Contract Requirements:
- If a service contract includes FAR 52.222-41 (Service Contract Labor Standards), the CO must include FAR 52.222-43 to handle price adjustments related to the Fair Labor Standards Act.
- The CO has the authority to modify clause 52.222-43 for overseas contracts to comply with international agreements or local laws.
- Standard EPA clauses may be used in conjunction with service labor adjustments to cover risks not addressed by FAR 52.222-43.
Practical Implications
- Risk Mitigation: These clauses allow contractors to bid more competitive prices by removing the need to include large "cushions" or contingencies for inflation and mandatory wage increases over several years.
- Funding Protection: The mandatory cancellation clause provides a clear framework for the government’s liability and the contractor's protection if the government fails to provide funding for subsequent program years.