Economic price adjustment
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.