FAR 52.216-4 - Economic Price Adjustment - Labor and Material

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Prescribed in 16.203-4(c)
Effective Date:	1 January 1997
Clause or Provision:	Clause
Provision or Clause Number:	52.216-4 - Economic Price Adjustment - Labor and Material
Principle Type And/Or Purpose of Contract:
Required:
Applicable:
Optional:	Utility Services; Simplified Acquisition Procedures (Excludes Micro-Purchase); Facilities; Indefinite Delivery; Architect-Engineering; Dismantling, Demolition or Removal of Improvements; Leasing of Motor Vehicles; Communication Services; Fixed Price, Construction; Time & Material/Labor Hour; Cost Reimbursement, Construction; Fixed Price, Service; Fixed Price, Supply; Cost Reimbursement, Supply; Cost Reimbursement, Service
Subject:	Economic Price Adjustment
ProcurementType:
Contract Threshold:
Prescription Overview:	Prescription (c) Adjustments based on actual cost of labor or material. (1) The contracting officer shall, when contracting by negotiation, insert a clause that is substantially the same as the clause at 52.216-4, Economic Price Adjustment —Labor and Material, or an agency-prescribed clause as authorized in subparagraph (c)(2) of this section, in solicitations and contracts when all of the following conditions apply: (i) A fixed-price contract is contemplated. (ii) There is no major element of design engineering or development work involved. (iii) One or more identifiable labor or material cost factors are subject to change. (iv) The contracting officer has made the determination specified in 16.203-3. (2) If all conditions in paragraph (c)(1) of this section apply and the contracting officer determines that the use of the clause at 52.216-4 is inappropriate, the contracting officer may use an agency-prescribed clause instead of the clause at 52.216-4.
Clause Overview:	Clause (a) The Contractor shall notify the Contracting Officer if, at any time during contract performance, the rate of pay for labor (including fringe benefits) or the unit prices for material shown in the Schedule either increase or decrease. The Contractor shall furnish this notice within 60 days after the increase or decrease, or within any additional period that the Contracting Officer may approve in writing, but not later than the date of final payment under this contract. The notice shall include the Contractor’s proposal for an adjustment in the contract unit prices to be negotiated under paragraph (b) of this clause, and shall include, in the form required by the Contracting Officer, supporting data explaining the cause, effective date, and amount of the increase or decrease and the amount of the Contractor’s adjustment proposal. (b) Promptly after the Contracting Officer receives the notice and data under paragraph (a) of this clause, the Contracting Officer and the Contractor shall negotiate a price adjustment in the contract unit prices and its effective date. However, the Contracting Officer may postpone the negotiations until an accumulation of increases and decreases in the labor rates (including fringe benefits) and unit prices of material shown in the Schedule results in an adjustment allowable under paragraph (c)(3) of this clause. The Contracting Officer shall modify this contract (1) to include the price adjustment and its effective date and (2) to revise the labor rates (including fringe benefits) or unit prices of material as shown in the Schedule to reflect the increases or decreases resulting from the adjustment. The Contractor shall continue performance pending agreement on, or determination of, any adjustment and its effective date. (c) Any price adjustment under this clause is subject to the following limitations: (1) Any adjustment shall be limited to the effect on unit prices of the increases or decreases in the rates of pay for labor (including fringe benefits) or unit prices for material shown in the Schedule. There shall be no adjustment for— (i) Supplies or services for which the production cost is not affected by such changes; (ii) Changes in rates or unit prices other than those shown in the Schedule; or (iii) Changes in the quantities of labor or material used from those shown in the Schedule for each item. (2) No upward adjustment shall apply to supplies or services that are required to be delivered or performed before the effective date of the adjustment, unless the Contractor’s failure to deliver or perform according to the delivery schedule results from causes beyond the Contractor’s control and without its fault or negligence, within the meaning of the Default clause. (3) There shall be no adjustment for any change in rates of pay for labor (including fringe benefits) or unit prices for material which would not result in a net change of at least 3 percent of the then-current total contract price. This limitation shall not apply, however, if, after final delivery of all contract line items, either party requests an adjustment under paragraph (b) of this clause. (4) The aggregate of the increases in any contract unit price made under this clause shall not exceed 10 percent of the original unit price. There is no percentage limitation on the amount of decreases that may be made under this clause. (d) The Contracting Officer may examine the Contractor’s books, records, and other supporting data relevant to the cost of labor (including fringe benefits) and material during all reasonable times until the end of 3 years after the date of final payment under this contract or the time periods specified in Subpart 4.7 of the Federal Acquisition Regulation (FAR), whichever is earlier.
Important Notes/Requirements:
Subcontract Threshold:
Incorporated by Reference:	Yes
Uniform Contract Format:	I
Editor:	Marshall

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Personal notes.