I am working on a multiple award FFP with EPA IDIQ solicitation. I plan on using a published weighted average for the raw material as the index for the EPA adjustments. My EPA formula is: “(current index/base index) X awarded unit price”.
My agency would like to have their software program accomplish all the EPA adjustments by entering a single variable. However, the software is unable to apply a percentage change to all the unit prices, requiring the entry of all delivery orders manually using the adjusted prices. The software can specify a dollar change to one of the components in the adjustment formula so the same dollar increase can be accomplished to the unit prices under every awarded contract.
Therefore, it has been suggested to me that I should use the formula: “weighted average of raw material + the contractor’s price to process raw material into a finished product and transportation”. By using the weighted average of raw material, the Government would pay the contractor for the cost of the raw material at current market prices with his processing and transportation costs being FFP. The contractor would only propose pricing for the second part of the formula to which the weighted average could be added to determine the awarded price.
I have the following reservations about this approach:
I’m not sure if the suggested method complies with the EPA alternatives listed under FAR 16.203-1.
2. FAR 16.203-1(a)(1) indicates that the adjustment is from an agreed upon level – does this mean that we have to use a percentage or can we use the actual published weighted average to adjust the pricing?
3. A portion of the awarded price will be determined using the published weighted average. Are there any problems associated with this approach?
4. Since the weighted average will increase against a constant representing processing and transportation, the percentage increase (if calculated) will differ from one contract to another (for example one contract could realize a 2% increase and another could realize a 3% increase). Is this OK?
Any thoughts you have on this issue would be greatly appreciated.