Alternate Approach Rates Adjustment Clause.doc

9952.902-H902

RATE ADJUSTMENT CLAUSE

The Labor Category Rate Matrix includes the awardees proposed twelve years of rates (CY 2009 thru CY 2020) for the basic contract. Individual task orders may be proposed with rates lower than these rates but cannot be proposed with rates exceeding these rates.

Contractors are allowed to request rates adjustments in accordance with the terms of this clause. The basic contract rates are Not to Exceed (NTE) rates; as such the rates adjustment under this clause will only be upward.

The proposed rates for the first three years (CY’s 2009 thru 2011) shall be fixed and are not subject to this clause and will not be adjusted. The rates for CY’s 2012 thru 2020 may be adjusted prospectively in accordance with the terms of this clause.

The index used for the forecast of labor escalation is Aerospace Product and Parts Manufacturing (CEU3133640008), published by Global Insight, Inc. The Department of Labor, Bureau of Labor Statistics (BLS) series identification number for this index is NAICS 3364. The government may unilaterally change the index used for rates adjustment if a more appropriate index is identified during the period of the contract.

Adjusted rates will not have a retroactive effect on task orders and proposals. Prices of task orders awarded or proposed will be subject to the rates in effect at the time of task order proposal; and will not be adjusted based on the rates adjustment made after task order proposal.

Definitions: As used in this clause-- “Actual” means the escalation factor based on history published by the BLS for a particular time period “Forecast/base value” means escalation factors forecasted for future years as published by Global Insight, Inc. current at the time of RFP release.

“Forecasted cumulative factor” means the cumulative factor calculated by compounding forecasted escalation factors

“Actual cumulative factor” means the cumulative factor calculated by compounding actual escalation factors

“Adjustment factor” means the comparison of the actual and forecasted cumulative factors (actual divided by forecasted)

“Baseline/Re-baseline” means correlating the forecasted escalation and actual escalation to establish an adjustment factor of 1.0; accomplished by replacing forecasted values with actual values

“Rates” means contractual not-to-exceed (NTE) Labor Hour Rates, proposed to the prime contractor’s cost line, included in the basic contract in the NTE Labor Category Rate Matrix.

Mechanics of the rates adjustment:

Rates re-calculation may take place annually on or about Feb 1st 2012 and on or about every Feb 1st thereafter. The previous year’s escalation information is typically published approximately February 1. Once the previous year’s actual value is published, the actual value is added to the actual values table and a new actual cumulative factor is calculated. The difference in the actual cumulative factor vs. the forecasted cumulative factor is what is used to adjust the rates.

The contractor is eligible for a rates adjustment only when the adjustment factor is greater than 1.02.

When an adjustment factor is calculated to be greater than 1.02 the actual cumulative factors become the new baseline for the base value (forecast) cumulative factors. If an adjustment factor is calculated to be less than 1.02 no adjustment is made, the base value (forecast) cumulative factors are not re-baselined. Each year the adjustment factor exceeds 1.02 the cumulative factors will be re-baselined. As described below the contractor may choose whether or not to request an adjustment when eligible, but for consistency among contactors cumulative factors will be re-baselined regardless of an adjustment request.

See Section J attachment Rate Adjustment Example for a scenario of actual escalation being higher than forecast and a scenario of actual escalation being lower than forecast.

Requesting an adjustment:

Each year, beginning in 2012, upon receipt of the publication of the actual escalation value the Air Force will calculate the adjustment factor and notify the contractor. The contractor may request a rates adjustment if the calculated adjustment factor is greater than 1.02. Adjustment request must be sent to the Contracting Officer within 30 days of notification to be eligible for adjustments.

Rates adjustment will be made by multiplying each future rate (the current and future CY rates) in the Labor Category Rates Matrix by the adjustment factor.

If a rates adjustment is requested the contractor will provide a revised Labor Category Rate Matrix which will be contractual binding. The contractor shall also provide sufficient information to enable the government to validate the request. The contractor must initiate any rate adjustment; otherwise the rates will stand as is.