52.216-5
Price Redetermination-Prospective
FAR 52.216-5 requires contractors to periodically submit detailed cost data and negotiate new prices to ensure fair and reasonable contract pricing throughout performance.
Overview
FAR 52.216-5, Price Redetermination-Prospective, establishes the procedures for periodically redetermining contract prices during the performance of certain fixed-price contracts. The clause ensures that prices remain fair and reasonable over time by requiring contractors to submit detailed cost data and negotiate new prices for future performance periods. It sets out the timing, data submission requirements, negotiation process, billing adjustments, and limitations on payments, as well as procedures for disagreements and contract termination.
Key Rules
- Price Redetermination Periods
- Contract performance is divided into periods, with prices redetermined at the start of each new period based on submitted cost data.
- Data Submission Requirements
- Contractors must submit proposed prices, cost estimates, supporting data, and explanations of variances before each redetermination period.
- Negotiation and Modification
- The Contracting Officer and contractor negotiate new prices, which are formalized via contract modification.
- Billing and Payment Adjustments
- Billing continues at current prices until new prices are agreed; adjustments are made retroactively if necessary.
- Quarterly Limitation on Payments
- Contractors must submit quarterly statements showing costs, profits, and payments for periods without firm prices.
- Subcontracting Restrictions
- Subcontracts cannot be cost-plus-a-percentage-of-cost.
- Dispute Resolution
- If agreement on prices cannot be reached, the Contracting Officer issues a decision per the Disputes clause.
Responsibilities
- Contracting Officers: Review submitted data, negotiate redetermined prices, issue contract modifications, and enforce compliance.
- Contractors: Submit timely and accurate cost data, quarterly statements, and comply with billing and refund requirements.
- Agencies: Oversee compliance, review quarterly statements, and ensure proper contract administration.
Practical Implications
- This clause protects both parties from significant cost fluctuations and ensures ongoing price fairness.
- Contractors must maintain robust cost accounting and timely reporting systems to comply.
- Failure to submit required data or statements can result in payment suspension, interest charges, or required refunds to the government.