16.205-4
Contract clause
Contracting officers must include the 52.216-5 clause in negotiated fixed-price contracts with prospective price redetermination when specified conditions are met.
Overview
FAR 16.205-4 requires contracting officers to include the clause at 52.216-5, Price Redetermination-Prospective, in solicitations and contracts when using fixed-price contracts with prospective price redetermination, provided the conditions in 16.205-2 and 16.205-3(a)-(d) are met. This ensures that contracts allow for future price adjustments based on actual costs and other relevant factors, promoting fairness and flexibility in long-term or uncertain pricing environments.
Key Rules
- Mandatory Clause Inclusion
- The clause at 52.216-5 must be inserted in applicable solicitations and contracts.
- Applicability Conditions
- The clause is only required when the contract meets the criteria outlined in 16.205-2 and 16.205-3(a)-(d), typically involving negotiated, fixed-price contracts where future price redetermination is appropriate.
Responsibilities
- Contracting Officers: Must ensure the correct clause is included in relevant contracts and solicitations.
- Contractors: Should review solicitations and contracts for the inclusion of the clause and understand its implications for future price adjustments.
- Agencies: Should oversee compliance with clause inclusion and proper contract structuring.
Practical Implications
- This section ensures that contracts with uncertain pricing over time have a mechanism for fair price adjustment.
- Failure to include the required clause can lead to compliance issues and disputes over contract pricing.
- Contractors should be aware of the clause's presence and understand how it may affect contract performance and compensation.