17.109 Contract clauses
Source: FAR 17.109 on acquisition.gov
FAR 17.109 mandates specific cancellation and economic price adjustment clauses in multi-year contracts to manage risk and ensure compliance with labor standards.
Overview
FAR 17.109 outlines the required and recommended contract clauses for multi-year contracts, focusing on cancellation and economic price adjustment provisions. It mandates the inclusion of specific clauses to address the unique risks and contingencies associated with multi-year contracting, such as potential cancellation and fluctuating labor or material costs. The section also provides guidance on adapting economic price adjustment clauses for service contracts, especially when labor standards or overseas wage requirements apply.
Key Rules
- Cancellation Clause Requirement
- The clause at 52.217-2 must be included in all solicitations and contracts when a multi-year contract is planned, ensuring clear terms for contract cancellation.
- Economic Price Adjustment Clauses
- Economic price adjustment clauses should be used when production periods may see labor or material cost changes. For service contracts, the clause at 52.222-43 is required if 52.222-41 is present, and may be modified for overseas contracts or replaced with another authorized clause if needed.
Responsibilities
- Contracting Officers: Must ensure the correct clauses are inserted based on contract type, duration, and location, and modify clauses as necessary for overseas contracts.
- Contractors: Must comply with the terms of the inserted clauses, including any requirements for price adjustments and labor standards.
- Agencies: Should oversee clause usage and ensure compliance with FAR requirements for multi-year contracts.
Practical Implications
This section ensures that multi-year contracts are structured to address cancellation risks and cost fluctuations, protecting both the government and contractors. Failure to include the correct clauses can lead to compliance issues, disputes, or financial risk. Contracting professionals must be diligent in clause selection and modification, especially for service and overseas contracts.
(a) The contracting officer shall insert the clause at 52.217-2, Cancellation Under Multi-year Contracts, in solicitations and contracts when a multi-year contract is contemplated.
(b) Economic price adjustment clauses. Economic price adjustment clauses are adaptable to multi-year contracting needs. When the period of production is likely to warrant a labor and material costs contingency in the contract price, the contracting officer should normally use an economic price adjustment clause (see 16.203). When contracting for services, the contracting officer-
(1) Shall add the clause at 52.222-43, Fair Labor Standards Act and Service Contract Labor Standards- Price Adjustment (Multiple Year and Option Contracts), when the contract includes the clause at 52.222-41, Service Contract Labor Standards;
(2) May modify the clause at 52.222-43 in overseas contracts when laws, regulations, or international agreements require contractors to pay higher wage rates; or
(3) May use an economic price adjustment clause authorized by 16.203, when potential fluctuations require coverage and are not included in cost contingencies provided for by the clause at 52.222-43.