52.241-7 Change in Rates or Terms and Conditions of Service for Regulated Services
Source: FAR 52.241-7 on acquisition.gov
For regulated services, contractors must promptly disclose rate and service changes, honor the lowest comparable customer rates, and ensure approved changes are incorporated into the contract through proper modification.
Overview
- FAR 52.241-7 governs how regulated utility or similar service contracts handle changes in rates, tariffs, and service terms when those services are subject to oversight by a regulatory body.
- Its purpose is to ensure the Government receives timely notice of proposed and approved changes, pays only effective regulated rates, and formally incorporates those changes into the contract.
Key Rules
- Notice of proposed and pending changes
- The contractor must provide written notice when it files an application to change rates or service terms and must also disclose any changes already pending before the regulator at contract award. The notice must fully describe the proposed change.
- Approved changes and timing
- If the regulatory body approves a change, the contractor must send the Contracting Officer a copy within 15 days after the effective date. The contractor must continue service under the amended tariff, and the Government pays the higher or lower rate effective on the regulator’s effective date.
- Lowest available rate protection
- Throughout contract performance, the contractor’s published and unpublished rate schedules may not exceed the lowest rates available to other customers of the same class under similar conditions of use and service.
- Non-rate regulatory changes and contract modification
- The contractor must immediately provide regulations affecting the contract that concern matters other than rates. Changes to rates or service terms must be incorporated by contract modification unless the contract states otherwise.
Responsibilities
- Contracting Officers: review notices, evaluate regulatory changes for consistency with Federal law, and issue contract modifications to incorporate approved changes.
- Contractors: notify the Government of filings, pending matters, approved changes, and other relevant regulations; continue service under amended tariffs; and ensure rates do not exceed the lowest comparable customer rates.
- Agencies: pay adjusted regulated rates when effective and reject regulatory changes that conflict with Federal laws or regulations.
Practical Implications
- This clause exists to align regulated-service contracts with external utility regulation while preserving Federal contracting controls.
- It affects day-to-day administration by requiring prompt notice, tariff tracking, and timely contract modifications.
- Common pitfalls include late notice, failure to disclose pending rate cases, and charging rates above the lowest comparable schedule.
As prescribed in 41.501(d)(1), insert a clause substantially the same as the following:
Change in Rates or Terms and Conditions of Service for Regulated Services (Feb 1995)
(a) This clause applies to the extent services furnished under this contract are subject to regulation by a regulatory body. The Contractor agrees to give *________________ written notice of (1) the filing of an application for change in rates or terms and conditions of service concurrently with the filing of the application and (2) any changes pending with the regulatory body as of the date of contract award. Such notice shall fully describe the proposed change. If, during the term of this contract, the regulatory body having jurisdiction approves any changes, the Contractor shall forward to the Contracting Officer a copy of such changes within 15 days after the effective date thereof. The Contractor agrees to continue furnishing service under this contract in accordance with the amended tariff, and the Government agrees to pay for such service at the higher or lower rates as of the date when such rates are made effective.
(b) The Contractor agrees that throughout the life of this contract the applicable published and unpublished rate schedule(s) shall not be in excess of the lowest cost published and unpublished rate schedule(s) available to any other customers of the same class under similar conditions of use and service.
(c) In the event that the regulatory body promulgates any regulation concerning matters other than rates which affects this contract, the Contractor shall immediately provide a copy to the Contracting Officer. The Government shall not be bound to accept any new regulation inconsistent with Federal laws or regulations.
(d) Any changes to rates or terms and conditions of service shall be made a part of this contract by the issuance of a contract modification unless otherwise specified in the contract. The effective date of the change shall be the effective date by the regulatory body. Any factors not governed by the regulatory body will have an effective date as agreed to by the parties.
* Note: Insert language prescribed in 41.501(d)(1).
(End of clause)