jc04sti

This is helpful, Vern. One other point of discussion has been the fact that the parties never agreed on a specific quantity of services, only a maximum quantity under the Order Limitations clause. If the original negotiated price was deemed fair and reasonable for any qty ranging from zero to the maximum, and the mod did not push quantities outside that original range, could the original price still be considered fair and reasonable?

At first, it was unrestricted choice. The mod basically says in certain circumstances end-users can only use Service B.

Yes - The change was issued under the authority of the Changes - Fixed Price clause. Yes. Agree. I did not explain that well. The theory is that the Contractor now has more quantities of Service B to spread its fixed costs over, thus making Service B more profitable. Same for Service A, less quantities to cover fixed costs and less profitable. Must the Government require the Contractor to provide data to show if this is actually the case and if so, must the Government and Contractor negotiate an equitable adjustment of unit prices (either way) to account for the new spread of fixed costs? Just to be clear, if quantities were changing on their own (if you will) and not affected by a change order, I understand that the spread of fixed costs over a higher or lower quantity within estimated/maximum quantities is not an REA matter and the Contractor "owns" the outcome either way under indefinite quantities. The crux is that a mod is in play and does that even matter?

Consider a competitively-awarded, Requirements Contract (FAR 16.503) for a Contractor to provide indefinite quantities of Service A and Service B to the Government. It allows Government end-users to choose between Services A or B (each with its own fixed price) depending on their particular needs. Midway through the contract, the Government issues a change order requiring Government end-users to use Service B, instead of Service A, in certain circumstances. In theory, the total volume of Services A and B doesn’t change as a result of the change order but the mod effectively decreases orders of Service A and increases orders of Service B. There was some implementation effort to help communicate this change to Government end-users and ensure the right service was being used but the actual services provided are unchanged. Recognizing the mod changed the quantities of services to be ordered (and not some other normal reasonably expected qty fluctuation), can and should the Government require the Contractor to provide cost or pricing data in order to assess whether the unit prices of Services A and B should be adjusted (i.e., re-priced)? Theoretically, the price of Service B goes down because of increased qty and vice versa for Service A. If the answer is yes, must the Contractor provide all cost or pricing data to “prove” the buildup of the new Service A and B prices? Or is that prohibited by 15.403-1 Prohibition on obtaining certified cost or pricing data? Thanks for reading!

Thanks for your quick reply. Your answer aligns with the way I think it ought to work. I guess the concept of out-year impact didn't jump out at me in the FAR clause. In this example, the 5 year option contract is over. My predecessor did submit an adjustment for the new WDs in OP2 but did not propose anything beyond that. I suppose its up to the KO whether he will consider a proposal for the OP3-OP5 impact? Also, let's say I submitted the adjustment proposal for OP2-OP5 right after the start of OP2. Would the Government pay for the OP3-OP5 adjustments even though they've not been exercised? I'd be surprised if so. Thanks again.

I work for a contractor and I'm doing my first SCA Price Adjustment. Fundamentally, I'm wondering if price adjustments are based on the delta between the "new" WD and the "old" WD from the previous period or the "old" WD that the contractor used in its proposal (assuming it was not escalated). Example: Contractor used an un-escalated WD of $10/hr in its proposal for a contract with 5 option periods. In OP1, the contractor paid employees exactly $10/hour. In OP2, there was a new WD of $11/hr. Assuming this WD stays in place for OP3 through OP5, shouldn't the contractor be entitled to a $1/hr adjustment for every hour in OP2, OP3, OP4 and OP5? Everything I've read in the FAR and the Navy SCA Price Adjustment Guide suggests the adjustment is based on the delta between the old period and the new period WDs. In the example above, is the contractor only entitled to a $1/hr adjustment for the hours in OP2? When OP3 is exercised, the WD is the same as OP2, so is the contractor not entitled to an adjustment? If so, I struggle with this because it seems that the contractor is having to pay employees more than what it planned for the remainder of the contract as a direct result of the new WD in OP2. If not, can someone kindly cite a portion of the regulation that allows an adjustment covering all periods? Any insight is most appreciated. Jon