14.408-4 Economic price adjustment
Source: FAR 14.408-4 on acquisition.gov
Bids with economic price adjustment clauses must strictly follow solicitation requirements, including ceilings and adjustment provisions, or risk rejection as nonresponsive.
Overview
FAR 14.408-4 addresses how economic price adjustment (EPA) provisions are handled in sealed bidding. It provides guidance for evaluating bids when either the bidder or the government proposes an EPA clause, ensuring fair and consistent treatment of price adjustments due to market fluctuations. The section outlines procedures for evaluating bids with EPA clauses, including when ceilings are present or absent, and specifies when bids must be rejected as nonresponsive.
Key Rules
- Bidder Proposes EPA Clause
- If a bidder includes an EPA clause with a ceiling in a bid where the solicitation does not, the bid is evaluated at the maximum possible price. If eligible for award, the contracting officer seeks agreement to an approved EPA clause. Bids with unlimited EPA clauses are rejected unless a clear evaluation basis exists.
- Government Proposes EPA Clause
- If the solicitation includes an EPA clause and bidders do not object, bids are evaluated at quoted prices. Bids increasing the maximum EPA percentage, limiting downward adjustments, or deleting the EPA clause are rejected as nonresponsive. Bids decreasing the maximum EPA percentage are evaluated at the base price, but the award reflects the lower ceiling if selected.
Responsibilities
- Contracting Officers: Must evaluate bids per EPA provisions, seek bidder agreement to approved clauses, and reject nonresponsive bids as required.
- Contractors: Must ensure EPA proposals comply with solicitation terms, include ceilings if proposing EPA, and avoid limiting downward adjustments or deleting EPA clauses.
- Agencies: Oversee compliance with EPA evaluation and award procedures.
Practical Implications
This section ensures price fairness and risk management in sealed bidding by standardizing how EPA clauses are handled. Contractors must carefully structure EPA proposals to avoid bid rejection, and contracting officers must rigorously apply evaluation and award rules. Common pitfalls include proposing unlimited EPA clauses or altering government EPA terms, both of which can lead to nonresponsive bids.
(a) Bidder proposes economic price adjustment.
(1) When a solicitation does not contain an economic price adjustment clause but a bidder proposes one with a ceiling that the price will not exceed, the bid shall be evaluated on the basis of the maximum possible economic price adjustment of the quoted base price.
(2) If the bid is eligible for award, the contracting officer shall request the bidder to agree to the inclusion in the award of an approved economic price adjustment clause (see 16.203) that is subject to the same ceiling. If the bidder will not agree to an approved clause, the award may be made on the basis of the bid as originally submitted.
(3) Bids that contain economic price adjustments with no ceiling shall be rejected unless a clear basis for evaluation exists.
(b) Government proposes economic price adjustment.
(1) When an invitation contains an economic price adjustment clause and no bidder takes exception to the provisions, bids shall be evaluated on the basis of the quoted prices without the allowable economic price adjustment being added.
(2) When a bidder increases the maximum percentage of economic price adjustment stipulated in the invitation or limits the downward economic price adjustment provisions of the invitation, the bid shall be rejected as nonresponsive.
(3) When a bid indicates deletion of the economic price adjustment clause, the bid shall be rejected as nonresponsive since the downward economic price adjustment provisions are thereby limited.
(4) When a bidder decreases the maximum percentage of economic price adjustment stipulated in the invitation, the bid shall be evaluated at the base price on an equal basis with bids that do not reduce the stipulated ceiling. However, after evaluation, if the bidder offering the lower ceiling is in a position to receive the award, the award shall reflect the lower ceiling.