Jump to content
The Wifcon Forums and Blogs

jc04sti

Cumulative Effect of SCA Price Adjustements?

Recommended Posts

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

Share this post


Link to post
Share on other sites

If a contractor receives a new wage determination at the end of Option Period 1 and the start of Option Period 2, and that wage determination by itself results in an increase in the wages or fringe benefits paid to covered employees, then the contractor's notice  (para. ( d ) of the clause at FAR 52.222-43 or para. ( e ) of the clause at FAR 52.222-44) should propose an adjustment for the contract prices for Option Period 2, Option Period 3, Option Period 4, and Option Period 5 (or in other words, the rest of the contract, including unexercised option CLINs).  The contractor errs whose notice and requested adjustment only covers Option Period 2.

Share this post


Link to post
Share on other sites

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.

Share this post


Link to post
Share on other sites

Of course the Government will pay nothing for an option that is never exercised.  But if the contract price for an unexercised option needs to change because of the operation of a contract clause, then the parties can negotiate the price for the unexercised option.

If you never submitted a notice for OP3, OP4, or OP5, then the Government is not under obligation to increase the prices for OP3, OP4, and OP5.  But if OP3, OP4, and OP5 were never exercised, what does it matter?

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.

×