FAR 2.101 & EPA Clause.pdf

FAR 2.101 – Commercial item means

(1) A product, other than real property, that is of a type customarily used by the general public or by nongovernmental entities for purposes other than governmental purposes, and–

(i) Has been sold, leased, or licensed to the general public; or

(ii) Has been offered for sale, lease, or license to the general public;

(2) A product that evolved from a product described in paragraph (1) of this definition through advances in technology or performance and that is not yet available in the commercial marketplace, but will be available in the commercial marketplace in time to satisfy the delivery requirements under a Government solicitation;

(3) A product that would satisfy a criterion expressed in paragraph (1) or (2) of this definition, except for-

(i) Modifications of a type customarily available in the commercial marketplace;

or

(ii) Minor modifications of a type not customarily available in the commercial marketplace made to meet Federal Government requirements. “Minor modifications” means modifications that do not significantly alter the nongovernmental function or essential physical characteristics of an item or component, or change the purpose of a process. Factors to be considered in determining whether a modification is minor include the value and size of the modification and the comparative value and size of the final product. Dollar values and percentages may be used as guideposts, but are not conclusive evidence that a modification is minor;

(4) Any combination of products meeting the requirements of paragraph (1), (2), or

(3) of this definition that are of a type customarily combined and sold in combination to the general public;

(5) A product, or combination of products, referred to in paragraphs (1) through (4) of this definition, even though the product, or combination of products, is transferred between or among separate divisions, subsidiaries, or affiliates of a contractor; or

(6) A nondevelopmental item, if the procuring agency determines the product was developed exclusively at private expense and sold in substantial quantities, on a competitive basis, to multiple State and local governments or to multiple foreign governments.

Prescription for Local Procurement Note DTS01 Material Costs Economic Price Adjustment - Department of Labor Index (FEB 2023)

WHEN USED: The clause may be inserted in long term contracts ( beginning year 2 and beyond) when market research definitively indicates that it will not be possible to achieve fair and reasonable contract pricing with reasonable price contingency for items containing domestically produced contractor furnished material (solicitations containing domestic basic materials and fibers; cotton, cotton/synthetic blends or synthetic broadwoven material) in DLA Troop Support solicitations and resulting contracts when the circumstances in FAR 16.203- 4(d)(1) exist, and the specific basic material or materials contained per deliverable is known and can be quantified as a discrete percentage (or percentages if 2 indexes are utilized) of end item cost. The unit allowance (or allowances) as a percent of end item cost shall be inserted in the body of the clause, for the unpredictable base domestic material and the changes can be tracked by a published market price indicator (e.g. Bureau of Labor Statistics Index, Not Seasonally Adjusted Series Id: WPU xxxx-x).

NOTES:

Paragraph (b)(1) – Buyer will insert the appropriate United States (U.S.) Department of Labor (DOL), Bureau of Labor Statistics (BLS) Not Seasonally Adjusted Series ID: WPU code number or code numbers (up to 2 (two)) indexes can be used under this procurement note and the percentage of cost attributed to each must be inserted). In the event one or two indexes are to be used, a percentage of end item cost must be allocated for each index; one percentage if only one is to be used or if two indexes are used a percentage allocations for each index must be indicated.

Paragraph (d) – Unless approved by the Chief of the Contracting Office, the ceiling shall be no more than 10%.

DTS01 Material Costs Economic Price Adjustment – Department of Labor Index (FEB 2023)

(a) Warranties. The contractor warrants that—

(1) The base unit prices set forth in the Schedule do not include allowances for any portion of the contingency covered by this procurement note; and

(2) Prices invoiced shall be computed in accordance with the terms of this procurement note.

(b) Definitions. As used throughout this procurement note—

(1) "Index", for the purpose of price adjustment under this procurement note, means the Producer Price Index(es) reported in the monthly publication entitled, “Producer Price Indexes”, published by the United States (U.S.) Department of Labor (DOL), Bureau of Labor Statistics (BLS) for the following code number(s) and title(s):

_________________[contracting officer fill-in]_________________________. Note:

Up to two indexes can be used under this procurement note. If two indexes are used, a unit allowance for each index must be identified in paragraph (5).

(2) "Base index" means the arithmetic average of the final version of the index published for the 3 months preceding the closing date for receipt of proposals or the date required for receipt of final proposal revisions if discussions were held.

(3) “Adjusting index" means the arithmetic average of the first published and/or the final version of the index for the 3 months prior to the month in which the adjusting contract modification is effective.

(4) "Base unit price" means the unit price applicable to a quantity of a contract line item established at contract award, exclusive of any price adjustment pursuant to this procurement note. Thus, when applicable, the term “base unit price” shall mean the tier or option term unit price established at contract award that corresponds to the tier or option term for which a price adjustment is being made.

(5) “Unit allowance” means the portion of the base unit price’s material-related cost(s) that is/are subject to the adjustment under this procurement note. For this solicitation, the unit allowance is: ________[contacting officer fill-in percentage] _________. If two indexes are being used, indicate the unit allowance per index cited in paragraph (1):

(6) “Adjustment period” means the period during which a particular adjustment to the unit price under this procurement note (calculated at the beginning of the adjustment period) will apply.

(c) Adjustments. The price adjustment shall be made to the base unit price that was established at contract award for the tier or option period that corresponds to the adjustment period for which the adjustment is being made. Prior to the end of each adjustment period, the contracting officer will calculate the adjusting index and any adjusted contract unit price(s) for the new adjustment period and modify the contract accordingly. The contracting officer will make price adjustments in accordance with this procurement note by issuing a contract modification showing the base index, the adjusting index, the base unit price, the mathematical calculations, and the changed unit price(s). The price adjustment shall apply to orders issued after the effective date of the contract modification establishing the adjusted unit price for the adjustment period. The contracting officer will base the price adjustment(s) for each adjustment period on the percentage change between the base index and the adjusting index for the adjustment period, as applied to the unit allowance of the applicable base unit price(s). The unit allowance agreed to at time of award will remain fixed throughout the life of the contract unless the Government authorizes a change.

1) The contractor shall decrease its price in any particular adjustment period if the adjusting index is less than the base index. This contract allows one (1) price adjustment per year.

(2) Example of adjustment calculation if one index is used:

A contract containing three (3), one-year tier terms was awarded on 24 March 2021. The date for receipt of final proposal revisions was 21 January 2021. The Tier Term 2 unit price (i.e., the base unit price in this example) is being adjusted under the terms of this procurement note. Tier Term 2 contains a unit price of $35.50 and begins on 24 March 2022. The index being used is WPU 034203 – PPI Commodity data for Textile products and apparel-Finished manmade, silk, and other natural fiber (excluding cotton and wool) broadwoven fabrics, not seasonally adjusted. The unit allowance is 30%.

Calculating the base index: Average the final version of the index published for the 3 months preceding the date required for receipt of final proposal revisions (21 January 2021).

(Final version of index for October 2020: 185.8; November 2020: 187.9; December 2020: 187.6) = 187.1*

Calculating the adjusting index: Average the first published or final version (as applicable) of the index for the 3 months prior to the month in which the adjusting contract modification is effective (March 2022).

(Index for December 2021: 246.591; January 2022: 246.745; February 2022: 248.606) = 247.3*

Calculating the change to index: Adjusting index (247.3) minus base index (187.1) = 60.2

Calculating the economic price adjustment:

1. Divide the change to index (60.2) by the base index (187.1) to obtain the economic price adjustment factor = 60.2 /187.1 = .32182790 or 32.1828%**

2. Multiply the base unit price ($35.50) by the unit allowance (30%) to obtain the cost covered for this adjustment = $35.50 x 30% = $10.65***

3. Multiply the cost covered ($10.65) by the economic price adjustment factor (32.1828%) to calculate the economic price adjustment amount = $10.65 x 32.1828% = $3.43***

4. Add the economic price adjustment amount ($3.43) to the base unit price ($35.50) to calculate the adjusted Tier Term 2 unit price = $35.50 + $3.43 = $38.93

(3) Example of adjustment calculation if two indexes are used:

A contract containing three (3), one-year tier terms was awarded on 24 March 2021. The date for receipt of final proposal revisions was 21 January 2021. The Tier Term 2 unit price (i.e., the base unit price in this example) is being adjusted under the terms of this procurement note. Tier Term 2 contains a unit price of $55.00 and begins on 24 March 2022. The item is a 50/50 blend of nylon and cotton, therefore two indexes are being used: (1) Index WPU 034203 – PPI Commodity data for Textile products and apparel- Finished manmade, silk, and other natural fiber (excluding cotton and wool) broadwoven fabrics, not seasonally adjusted and (2) Index WPU 034201 - PPI Commodity data for Textile products and apparel-Finished cotton broadwoven fabrics, not seasonally adjusted. The corresponding unit allowance for index WPU 034203 is 20%. The corresponding unit allowance for index WPU 034201 is also 20%.

Calculating the base index: Average the final version of the index published for the 3 months preceding the date required for receipt of final proposal revisions (21 January 2021).

(1) (Final version of index WPU 034203 for October 2020: 185.8; November 2020:

187.9; December 2020: 187.6) = 187.1*

(2) (Final version of index WPU 034201 for October 2020: 158.3; November 2020:

158.3; December 2020: 158.3) = 158.3*

Calculating the adjusting index: Average the first published or final version (as applicable) of the index for the 3 months prior to the month in which the adjusting contract modification is effective (March 2022).

(1) (Index WPU 034203 for December 2021: 246.591; January 2022: 246.745; February 2022: 248.606) = 247.3*

(2) (Index WPU 034201 for December 2021: 178.728; January 2022: 178.88; February 2022: 185.634) = 181.1*

Calculating the change to index:

(1) Adjusting index (247.3) minus base index (187.1) = 60.2 (index WPU 034203)

(2) Adjusting index (181.1) minus base index (158.3) = 22.8 (index WPU 034201)

Calculating the economic price adjustment:

1. Divide the change to index by the base index to obtain the economic price adjustment factor.

a. 60.2 /187.1 = .32182790 or 32.1828%**

b. 22.8/158.3 = .14390819 or 14.3908%**

2. Multiply the base unit price by the unit allowance to obtain the cost covered for this adjustment.

a. $55.00 x 20% = $11.00***

b. $55.00 x 20% = $11.00***

3. Multiply the cost covered by the economic price adjustment factor to calculate the economic price adjustment amount.

a. $11.00 x 32.1828% = $3.54***

b. $11.00 x 14.3908% = $1.58***

4. Add the total economic price adjustment amount ($3.54 + $1.58 = $5.12) to the base unit price ($55.00) to calculate the adjusted Tier Term 2 unit price = $55.00 + $5.12 = $60.12

*In computing the base and adjusting indexes, the contracting officer will round the resulting figure to the first decimal place.

**The contracting officer will round this number to the fourth decimal place.

***The contracting officer will round all dollar figures to the nearest cent.

(d) Upward ceiling and downward floor on economic price adjustment. An upward ceiling and downward floor of no more than 10% of the applicable base unit price shall apply. The contractor agrees that the aggregate of the increases in any contract unit price under the terms of this procurement note shall not exceed 10% of the applicable base unit price, except as provided hereafter.

(1) If at any time the contractor has reason to believe that within the near future a price adjustment under the terms of this procurement note will be required that will exceed the adjustment ceiling or floor for any item, the contractor shall promptly notify the contracting officer in writing of the expected increase or decrease. The notification shall include a revised ceiling or floor the contractor believes is sufficient to permit completion of remaining contract performance, along with appropriate explanation and documentation as required by the contracting officer.

(2) If an increase in the index would raise a contract unit price for an item above the current ceiling, the contracting officer may issue a contract modification to raise the ceiling. If the contracting officer does not raise the contract ceiling, the contracting officer will promptly notify the contractor in writing. If a decrease in the index would lower a contract unit price for an item below the current floor, the contacting officer may issue a contract modification to lower the floor. If the contracting officer does not lower the contract floor, the contracting officer will promptly notify the contractor in writing.

(e) Invoices. The basis for prices payable under this contract is the latest adjusted unit price incorporated into the contract as of the date of order.

(f) Retroactive adjustment. This paragraph applies only if the contracting officer selected “first published index” in paragraph (b)(3). If the Government has already paid for orders delivered during an adjustment period, the contractor may request a retroactive adjustment. The contracting officer will base the retroactive adjustment on the difference between a higher final revised index applicable to an adjustment period and the index values used in calculating the unit price for that adjustment period, subject to the adjustment ceiling in paragraph (d) and under the following conditions:

(1) The request for equitable adjustment clearly establishes that the unit price adjustment for the adjustment period would have been higher if the final revised index had been used and identifies all invoices and payments to which it applies cites the specific index differences relating to the requested adjustment and provides a calculation of the total net price adjustment for items delivered during that adjustment period.

(2) The total dollar change for items delivered is $____[contracting officer fill-in]____ ($500.00 unless otherwise stated) or more for the applicable adjustment period(s).

(3) The contracting officer received the contractor’s written request within 45 days following publication of the final revised index.

The contractor shall adjust its prices downward based on the difference between a lower final revised index applicable to an adjustment period and the index values used in calculating the unit price for that adjustment period, subject to the limitation in paragraph (f)(2).

(g) Revision of index. If the applicable index is discontinued or its method of derivation is altered substantially, or if the contracting officer determines that the index consistently and substantially fails to reflect market conditions, the parties shall mutually agree upon an appropriate and comparable substitute. The contracting officer will modify the contract to reflect such substitute effective on the date the index was discontinued, altered, or began to consistently and substantially fail to reflect market conditions.

(h) Final invoice. The contractor shall include a statement on the final invoice confirming it has applied all decreases required by this procurement note to the amounts invoiced.

(i) Disputes. The “Disputes” clause of the contract applies to any dispute arising under this procurement note.