Draft Economic Price Adjustment_05 Jun 08.doc

SOLICITATION: HTC711-08-R-0019

ECONOMIC PRICE ADJUSTMENT (EPA)

(a) In order to protect the contractor and government against significant market fluctuations, the unit prices shall be adjusted on 1 Oct of each Option Year beginning 1 Oct 2009. The adjustment shall be based on the North American Industrial Classification System (NAICS) Index for Scheduled Freight Air Transportation (NAICS 481112). In the event publication of the index is discontinued, the parties shall agree upon an appropriate substitute index.

(b) Index figures subsequently revised by the Bureau of Labor Statistics (e.g., amending formerly released indices by removing or replacing components within the index, describing revisions by footnote or appendix, significantly altering the method of calculating the index, or any other method) shall not warrant a retroactive price adjustment under the terms and conditions of this contract.

(c) Price adjustments shall be executed via a contract modification.

(d) Any price adjustments under this EPA clause shall be rounded to two decimal positions (e.g. $1.50).

(e) The formula for determining the adjusted unit prices for the Option Year is –

I2 x P = Adjusted Unit Price

I1

Where:

P = Base contract unit price listed in the Schedule. These prices are fixed and establish the base for all adjustments to future option years. Exception: If at any time the adjusted unit price falls below the base contract unit price, the adjusted unit price shall become the new base contract unit price for calculating future economic price adjustments.

I1 = Index for Base Period (average of the index figures for the 12 month period from Jun 2007 through May 2008. This figure will be provided by contract modification after index data for that period is finalized. This number will not change for the life of the contract.

I2 = Index for the Adjustment Period is the average of the index figures for the most recent 12 month period ending 4 months prior to start of the next option period:

Option Year 1 = Average of index figures from Jun 2008 through May 2009

Option Year 2 = Average of index figures from Jun 2009 through May 2010

Option Year 3 = Average of index figures from Jun 2010 through May 2011

EXAMPLE:

Contract performance start date is 01 Oct 08. The first EPA will take place on 1 Oct 09.

Sample Index:

Note: The below figures are provided as an example only. The exact numbers for the base year ( I1 ) and ( I2 ) cannot be determined at this point.

Example P = $2.34

Example I1 = Avg from Jun 2006 through May 2007

(110.1+111.3+107.8+107.9+107.3+106.7+106.7+106.9+106.0+106.0+106.2+109.4)/12 = 107.7 Example I2 = Avg from Jun 2007 through May 2008

(109.4+109.4+109.4+109.6+111.2+109.5+112.2+113.4+118.0+117.8+118.0+118.0))/12 = 113.0

Example Adjustment: [(113.0/107.7) x $2.34] = [1.05 x $2.34] = $2.46 (f) Notwithstanding the economic price adjustment discussed above, the Government will accept one downward price adjustment annually. The revised pricing must be submitted no later than 30 Jan, for prices to be effective by 1 Apr. The downward adjustment percentage shall apply to all incremental and aggregate pricing within the identified CLIN(s).

(g) In addition, carriers may waive the EPA or any part of thereof for the entire contract or identified CLIN(s). The adjustment percentage shall apply to all incremental and aggregate pricing within the identified CLIN(s).