In June of this year, Clause 552.216-70 was changed, which may cause some headaches for GSA contractors. All economic price adjustments (EPAs) in Schedule contracts are made in accordance with clause I-FSS-969 or clause 552.216-70, depending on which clause you chose when you applied for your contract. In the past, the percentage of Economic Price Adjustment was set at a 10% increase every 12 months. As of June, this ceiling has been lowered to 4%. But what does that mean for contractors that need to increase pricing?
First, the maximum increase per 12 months has now been severely limited from what was allowed in the past. Contracting officers like to say that Contractors may ask for 4% but based on competitive research that does not mean that 4% will be granted. When increasing pricing, the most important thing is to do your research. If you are a service-based Labor Category company, take a look at the Contract-Awarded Labor Category (CALC) tool to help you determine whether your pricing falls within competitive range. CALC will allow you to narrow down your LCATs by schedule and experience levels to see at what prices other Contractors are actually winning work with similar LCATs. If you are a product based company, your best bet will eventually be the roll out of the Formatted Product Tool to your schedule.
The change to a 4% EPA increase under clause 552.216-70 puts pricing increase more in line with clause I-FSS-969 for escalation rates. Although the clause does not contain language specifying what the maximum allowed escalation rate is, standard practice has uncovered that more than 2.5% escalation per year isn’t being awarded at this time.
Overall, Contractors should be aware that they won’t be able to increase pricing as much year to year anymore and those of you applying for new schedules with LCATS should consider going with clause I-FSS-969 over clause 552.216-70 simply because the numbers are now so close and the escalation clause requires less work to increase (since its automatic).