Part 4 Contract Modification Compliance

Schedule contracts allow contractors to increase or decrease their prices according to their commercial practices. Although a common thread of all contracts is that prices must remain constant over the first 12 months of your contract, other Economic Price Adjustment (EPA) provisions vary depending on how your contract was awarded. At any time, contractors are able to reduce their prices to government buyers. This is referred to as one-time spot discounts, which are used in order to take advantage of flexible and dynamic pricing in the commercial marketplace such as: technological changes, labor conditions, supply and demand, industry sales goals, and inventory reductions. The Price Reduction clause allows spot discounts; however, spot discounts are not permitted to your "Basis of Award" customer or class of customer. Lowering prices to your Most Favored Customer triggers the Price Reduction clause

552.216-70 Economic Price Adjustment--SS Multiple Award Schedule Contracts.

Price adjustments include price increases and price decreases. Adjustments will be considered as follows:

(a) Contractors shall submit price decreases anytime during the contract period in which they occur. Price decreases will be handled in accordance with the provisions of the Price Reduction Clause.

(b) Contractors may request price increases to be effective on or after the first 12 months of the contract period providing all of the following conditions are met:

(1) Increases resulting from a reissue or other modification of the contractor's commercial catalog/pricelist that was used as the basis for the contract award.

(2) No more than three increases will be considered during each succeeding 12-month period of the contract. (For succeeding contract periods of less than 12 months, up to three increases will be considered subject to the other conditions of this paragraph (b)).

(3) Increases are requested before the last 60 days of the contract period.

(4) At least 30 days elapse between requested increases.

(c) any contract period during which price increases will be considered, the aggregate of the increases during any 12-month period shall not exceed _ percent of the contract unit price in effect at the end of the preceding 12-month period. This percentage should be determined based on the trend established by an appropriate index such as the Producer Prices and Price Index. A ceiling of more than 10 percent must be approved by the Contracting Director. The Government reserves the right to raise the ceiling when market conditions during the contract period support such a change.

(d) The following material shall be submitted with the request for a price increase:

(1) A copy of the commercial catalog/pricelist showing the price increase and the effective date for commercial customers.

(2) Commercial Sales Practice format regarding the contractor's commercial pricing practice relating to the reissued or modified catalog/pricelist, or a certification that no change has occurred in the data since completion of the initial negotiation or a subsequent submission.

(3) Documentation supporting the reasonableness of the price increase.

(e) The Government reserves the right to exercise one of the following options:

(1) Accept the contractor's price increases as requested when all conditions of (b), (c), and (d) of this clause are satisfied;

(2) Negotiate more favorable discounts from the new commercial prices when the total increase requested is not supported; or,

(3) Remove the product(s) from contract involved pursuant to the Cancellation Clause of this contract, when the increase requested is not supported.

(f) The contract modification reflecting the price adjustment shall be signed by the Government and made effective upon receipt of notification from the contractor that the new catalog/pricelist has been mailed to the addressees previously furnished by the Contracting Officer, provided that in no event shall such price adjustment be effective prior to the effective date of the commercial price increases. The increased contract prices shall apply to delivery orders issued to the contractor on or after the effective date of the contract modification.

552.238-75 Price Reductions

(a) Before award of a contract, the Contracting Officer and the offeror will agree upon (1) the customer (or category of customers) which will be the basis of award, and (2) the Government's price or discount relationship to the identified customer (or category of customers). This relationship shall be maintained throughout the contract period. Any change in the contractor's commercial pricing or discount arrangement applicable to the identified customer (or category of customers) which disturbs this relationship shall constitute a price reduction.

(b) During the contract period, the contractor shall report to the Contracting Officer all price reductions to the customer (or category of customers) that was the basis of award. The contractor's report shall include an explanation of the conditions under which the reductions were made.

(c) 1. A price reduction shall apply to purchases under this contract if, after the date negotiations conclude, the contractor-

• Revises the commercial catalog, pricelist, schedule or other document upon which contract award was predicated to reduce prices;
• Grants more favorable discounts or terms and conditions than those contained in the commercial catalog, pricelist, schedule or other documents upon which contract award was predicated; or
• Grants special discounts to the customer (or category of customers) that formed the basis of award, and the change disturbs the price/discount relationship of the Government to the customer (or category of customers) that was the basis of award.

2. The contractor shall offer the price reduction to the Government with the same effective date, and for the same time period, as extended to the commercial customer (or category of customers).

(d) There shall be no price reduction for sales-

• To commercial customers under firm, fixed-price definite quantity contracts with specified delivery in excess of the maximum order threshold specified in this contract;
• To Federal agencies; or
• Caused by an error in quotation or billing, provided adequate documentation is furnished by the contractor to the Contracting Officer.

(e) The contractor may offer the Contracting Officer a voluntary Governmentwide price reduction at any time during the contract period.

(f) The contractor shall notify the Contracting Officer of any price reduction subject to this clause as soon as possible, but not later than 15 calendar days after its effective date.

(g) The contract will be modified to reflect any price reduction, which becomes applicable in accordance with this clause.

Part 5, Contractor Report Cards…

Talk About Compliance

It's Up To You

You should take contract compliance seriously… your COs, IOAs, IGs, and competitors certainly do!

Contract Compliance

• Compliance Overview
• Trade Agreements Act
• False Claims and Whistleblowers
• Mandatory EDI Catalog Uploads
• Contract Modifications
• Contractor Report Cards
• Mandatory Disclosure Rule