DOD: EPAs may be OK for inflation

No adjustments to current firm fixed-price contracts

      For Defense Dept. contracts being developed or negotiated during this unusual period of inflation, an Economic Price Adjustment (EPA) clause in the contract “may be an appropriate tool to equitably balance the risk of inflation between the government and contractor,” according to recent DOD guidance.

      Adding an EPA clause to a contract may lower costs for DOD because contractors otherwise might raise their fixed prices based on worst case scenarios of future risks, the guidance said.

      However, current firm fixed-price contracts “generally must bear the risk of cost increases, including those due to inflation,” the guidance stated.

More information:
DoD/OUSD memo: https://bit.ly/3M8jJZv

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