52.216-3 Economic Price Adjustment-Semistandard Supplies
Source: FAR 52.216-3 on acquisition.gov
FAR 52.216-3 allows contract prices for semistandard supplies to be adjusted up or down in line with established commercial price changes, with strict notification, documentation, and percentage limits.
Overview
FAR 52.216-3, Economic Price Adjustment-Semistandard Supplies, provides a mechanism for adjusting contract prices for supplies with established commercial prices when those prices change during contract performance. This clause is used when the contract involves semistandard supplies—commercial items with established catalog or market prices sold in substantial quantities to the public. It ensures that contract prices reflect market realities while protecting both the Government and the contractor from significant price fluctuations beyond their control.
Key Rules
- Warranty of Established Price
- Contractors must warrant that the supplies have an established price, defined as a catalog or market price for commercial products sold in substantial quantities, net of standard trade discounts.
- Price Decreases
- Contractors must promptly notify the Contracting Officer of any decrease in established prices, and contract prices must be reduced by the same percentage for affected items delivered after the decrease.
- Price Increases
- Contractors may request a contract price increase if their established price rises, but increases are capped at 10% of the original unit price and require written request and verification by the Contracting Officer.
- Effective Dates and Delivery
- Price increases are effective based on when the request is received, and do not apply to items scheduled for delivery before the effective date unless delays are excusable.
- Government Cancellation Right
- The Contracting Officer may cancel undelivered items affected by a requested price increase within 30 days of the request, without liability.
Responsibilities
- Contracting Officers: Verify price changes, modify contracts accordingly, and may cancel undelivered items after a price increase request.
- Contractors: Notify of price decreases, request increases in writing, warrant established prices, and continue deliveries during review periods.
- Agencies: Oversee compliance and ensure contract modifications are properly executed.
Practical Implications
This clause balances risk between the Government and contractors for semistandard supplies, ensuring fair pricing as market conditions change. Contractors must closely monitor their commercial pricing and maintain timely communication with the Contracting Officer. Failure to comply with notification or documentation requirements can result in payment issues or contract cancellation.
As prescribed in 16.203-4(b), insert the following clause:
Economic Price Adjustment-Semistandard Supplies (Nov 2021)
(a) The Contractor warrants that the supplies identified as line items ____________ [offeror insert Schedule line item number] in the Schedule are, except for modifications required by the contract specifications, supplies for which it has an established price. 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. The Contractor further warrants that, as of the date of this contract, any difference between the unit prices stated in the contract for these line items and the Contractor’s established prices for like quantities of the nearest commercial equivalents are due to compliance with contract specifications and with any contract requirements for preservation, packaging, and packing beyond standard commercial practice.
(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 (exclusive of any part of the unit price that reflects modifications resulting from compliance with specifications or with requirements for preservation, packaging, and packing beyond standard commercial practice) 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 (exclusive of any part of the unit price resulting from compliance with specifications or with requirements for preservation, packaging, and packing beyond standard commercial practice) 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)