Economic Price Adjustment (EPA) Provisions.
ARMY PROCUREMENT RESEARCH OFFICE FORT LEE VA
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This report reviews the US Army Materiel Development and Readiness Commands DARCOM Economic Price Adjustment EPA experience. In the fall of 1973 few DARCOM contracts contained EPA provisions and the resulting inflation caused many DARCOM contractors to absorb large cost increases on their firm-fixed-price contracts. Although many contractors requested relief as a result of inflation, there was no legal method to grant relief since they did not contain EPA provision. Since the current economic trend foresees continued inflation, a need exists to study recent DARCOM EPA experience to preclude a repeat of the past. The writers believe that Economic Price Adjustment provisions are necessary contractural options available to the Contracting Officer in the selection of contract type. The contract type should be a fair, reasonable, and equitable risk allocation between the contract prices. The report concludes that todays EPA policy promulgated since 1974 dictates current usage. The findings show that current usage fails to take into account DOD policy on risk, profit, contract type, and cost analysis. The recommendations include revision to DOD policy on EPA, risk, profit, contract type, and cost analysis areas of emphasis on the use of EPA and potential areas for future studies.
- Administration and Management
- Economics and Cost Analysis