52.216-2
Economic Price Adjustment-Standard Supplies
FAR 52.216-2 allows contract prices for standard supplies to be adjusted up or down based on verified changes in the contractor’s established market prices, with strict notification and documentation requirements.
Overview
FAR 52.216-2, Economic Price Adjustment-Standard Supplies, provides a mechanism for adjusting contract unit prices for standard supplies based on changes in the contractor’s established catalog or market prices. This clause is used to ensure fairness when market prices fluctuate after contract award, protecting both the government and the contractor from significant price changes outside their control. It sets clear procedures for both price increases and decreases, including notification requirements, limits on allowable increases, and conditions for contract modification or cancellation.
Key Rules
- Warranty of Unit Price
- Contractors must warrant that the contract unit price does not exceed their established price for similar quantities as of the contract date, excluding extra packaging or preservation costs.
- Price Decreases
- Contractors must promptly notify the Contracting Officer of any decrease in their established price, and contract prices must be reduced by the same percentage for applicable deliveries.
- Price Increases
- Contractors may request a price increase if their established price rises, but increases are capped at 10% of the original unit price and require written notice and verification by the Contracting Officer.
- Effective Dates and Delivery
- Price increases apply based on when the request is received and do not affect items scheduled for delivery before the effective date, unless delays are excusable.
- Contract Cancellation
- The Contracting Officer may cancel undelivered items within 30 days of a price increase request, with no liability to either party.
Responsibilities
- Contracting Officers: Verify price changes, modify contracts, and may cancel undelivered items after a price increase request.
- Contractors: Notify of price decreases, request increases in writing, warrant prices, and continue deliveries per schedule.
- Agencies: Ensure compliance with price adjustment procedures and maintain oversight of contract modifications.
Practical Implications
- This clause protects both parties from market volatility and ensures contract prices remain fair and competitive. Contractors must closely monitor their pricing and communicate changes promptly. Failure to follow notification or documentation requirements can result in non-compliance, delayed payments, or contract cancellation.