Overview
Section 52.216 contains the solicitation provisions and contract clauses related to the "Type of Contract." It provides the legal framework for defining contract structures and establishes mechanisms for adjusting prices due to market fluctuations (Economic Price Adjustment) or actual cost experience (Price Redetermination).
Key Rules
- Contract Type Specification (52.216-1): The Contracting Officer must explicitly insert the specific type of contract (e.g., Firm-Fixed-Price, Incentive) intended for the award.
- Economic Price Adjustment (EPA) for Supplies (52.216-2, 52.216-3):
- Adjustments are based on "established prices" (catalog or market prices for commercial products).
- Contractors must notify the government of decreases immediately; increases must be requested by the contractor.
- Upward adjustments are generally capped at 10% of the original unit price.
- EPA for Labor and Material (52.216-4):
- Adjustments are negotiated based on increases or decreases in specific rates shown in the contract schedule.
- No adjustment is made unless the change results in a net change of at least 3% of the total contract price.
- Price Redetermination (52.216-5, 52.216-6):
- Prospective: Prices are periodically redetermined for future periods.
- Retroactive: Prices are redetermined after contract completion, staying within a pre-negotiated ceiling price.
- Requires the submission of detailed cost data in the format of FAR Table 15-1.
- Payment Suspensions: Under redetermination clauses, the government may suspend payments if the contractor fails to submit required cost data within the specified timeframes.
- Subcontracting Limit: Subcontracts placed under redetermination contracts cannot be on a cost-plus-a-percentage-of-cost basis.
Practical Implications
- Risk Management: These clauses allow contractors to mitigate the risk of inflation and volatile market conditions, while the government uses redetermination to ensure fair pricing when initial cost estimates are uncertain.
- Administrative Burden: Contractors must maintain rigorous accounting and market-monitoring systems to meet strict notification windows (e.g., 10 days for certain EPA requests) and complex data submission requirements to avoid payment delays or the forfeiture of price increases.