52.216-2 Economic Price Adjustment-Standard Supplies
Source: FAR 52.216-2 on acquisition.gov
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.
As prescribed in 16.203-4(a), insert the following clause:
Economic Price Adjustment-Standard Supplies (Nov 2021)
(a) The Contractor warrants that the unit price stated in the Schedule for ____________ [offeror insert Schedule line item number] is not in excess of the Contractor’s applicable established price in effect on the contract date for like quantities of the same item. The term "unit price" excludes any part of the price directly resulting from requirements for preservation, packaging, or packing beyond standard commercial practice. The term "established price" means a price that-
(1) Is an established catalog or market price for a commercial product sold in substantial quantities to the general public; and
(2) Is the net price after applying any standard trade discounts offered by the Contractor.
(b) The Contractor shall promptly notify the Contracting Officer of the amount and effective date of each decrease in any applicable established price. Each corresponding contract unit price shall be decreased by the same percentage that the established price is decreased. The decrease shall apply to those items delivered on and after the effective date of the decrease in the Contractor’s established price, and this contract shall be modified accordingly.
(c) If the Contractor’s applicable established price is increased after the contract date, the corresponding contract unit price shall be increased, upon the Contractor’s written request to the Contracting Officer, by the same percentage that the established price is increased, and the contract shall be modified accordingly, subject to the following limitations:
(1) The aggregate of the increases in any contract unit price under this clause shall not exceed 10 percent of the original contract unit price.
(2) The increased contract unit price shall be effective-
(i) On the effective date of the increase in the applicable established price if the Contracting Officer receives the Contractor’s written request within 10 days thereafter; or
(ii) If the written request is received later, on the date the Contracting Officer receives the request.
(3) The increased contract unit price shall not apply to quantities scheduled under the contract for delivery before the effective date of the increased contract unit price, unless failure to deliver before that date results from causes beyond the control and without the fault or negligence of the Contractor, within the meaning of the Default clause.
(4) No modification increasing a contract unit price shall be executed under this paragraph (c) until the Contracting Officer verifies the increase in the applicable established price.
(5) Within 30 days after receipt of the Contractor’s written request, the Contracting Officer may cancel, without liability to either party, any undelivered portion of the contract items affected by the requested increase.
(d) During the time allowed for the cancellation provided for in paragraph (c)(5) of this clause, and thereafter if there is no cancellation, the Contractor shall continue deliveries according to the contract delivery schedule, and the Government shall pay for such deliveries at the contract unit price, increased to the extent provided by paragraph (c) of this clause.
(End of clause)