Atch_2_EPA_Language.pdf

HTC711-17-R-CC10

Attachment 2

Combination Passenger and Cargo (Combi) Charter Airlift Services

Attachment 2 - Economic Price Adjustment (EPA) Language

1. Economic Price Adjustment for Combi Services – Airlift.

(a) In order to protect the contractor and government against significant market fluctuations, the unit prices shall be adjusted on 1 October of each year beginning 1 October 2018. The adjustment shall be based on the Bureau of Labor

Statistics (BLS), Producer Price Index (PPI) for North American Industrial Classification System (NAICS) code for 481211

Nonscheduled Chartered Passenger Air Transportation. 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 BLS (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 language shall be rounded to two decimal positions (e.g. $1.50).

(e) In addition, contractors may waive an EPA increase that results in a higher contract rate. Secondly, if the contractor elects to do so, they can offer the Government an additional downward price adjustment, effective 1 Oct of each year, in lieu of an increased EPA adjustment. A contractor may not waive a downward EPA adjustment.

(f) All EPA adjustment calculations will be based on the current period’s prices in the Schedule and the index calculations described below. A contractor shall not recoup previously waived EPA increases.

(g) The EPA period is based on the fiscal year (FY) cycle. The formula for determining adjusted unit prices is –

(Ix2 / Ix1) * Pn1 = Pn2

Solve for “Pn2” where:

I = average PPI of the NAICS code (NC) listed in paragraph (a) of this language for each calendar year (CY) quarter (QT) occurring during the applicable period of time (i.e., the average PPI)

P = unit price and:

n1 = FY currently in effect (i.e., current FY) n2 = FY to be in effect immediately following the current FY (i.e., adjustment FY) x1 = 12-month period ending 4 months prior to the start of the FY currently in effect (i.e., preceding FY) x2 = 12-month period ending 4 months prior to the start of the FY to be in effect immediately following the current

FY (i.e., current FY)

Therefore:

Ix1 = average PPI during the preceding FY

Ix2 = average PPI during the current FY

Pn1 = unit price effective during the current FY (i.e., current unit price)

Pn2 = unit price to be in effect during the adjustment FY (i.e., economically-adjusted unit price)

EXAMPLE:

This example demonstrates the process for determining the economically-adjusted unit prices using the formula, (Ix2 / Ix1) *

Pn1 = Pn2. It is based on a hypothetical contract that provides for two EPAs, the first occurs on the first day of Option Period

One (OP01) and the second occurs on the first day of Option Period Two (OP02). Additional contract details are provided below in Part 1.0, Contract Specifics. Sample PPIs are provided in Part 2.0. These specifics and indices are used in Part 3.1, Determine Pn2 for OP01 and Part 3.2, Determine Pn2 for OP02.

Note1: All inputs reflect its value during the CY QTs correlating with the applicable contract PoP specified in the formula

(x1 and x2) at the time of each adjustment. Therefore, the CY and QT correlating with x1 and x2 will differ at the time of each adjustment; thus, requiring each input’s value to be re-calculated at time of each adjustment.

Note2: The below figures are provided as an example only.

PART 1.0, CONTRACT SPECIFICS:

This section contains information and specifics of the hypothetical contract used to demonstrate the process for determining

Pn2 using the formula, (Ix2 / Ix1) * Pn1 = Pn2. These specifics apply to all parts of this example.

Contract PoPs:

Base Period (BP): 01 October 2015 - 30 September 2016

OP01: 01 October 2016 - 30 September 2017

OP02: 01 October 2017 - 30 September 2018

Sample excerpt from paragraph (a) of this language:

“…the unit prices shall be adjusted on 01 October of each Option Period beginning 01 October 2016.”

“The adjustment shall be based on the Bureau of Labor Statistics (BLS), Producer Price Index (PPI) for North

American Industrial Classification System (NAICS) codes for: 481112, Scheduled Freight Air Transportation.”

PART 2.0, SAMPLE INDICES:

The following indices are used to calculate the economically-adjusted unit price for each Option Period, demonstrated in

Part 3.0 of this example.

2.1 Quarterly PPI for Part 3.1 -

Table1 provides the PPI for each CY QT occurring during x1.

QUARTERLY PPI FOR NC 481112

01 JUNE 2014 THROUGH 31 MAY 2015

TABLE1: PPI DURING x1

CY QT PPI

2014 QT3 214.14

2014 QT4 218.16

2015 QT1 219.07

2015 QT2 214.30

Table2 provides the PPI for each CY QT occurring during x2.

01 JUNE 2015 THROUGH 31 MAY 2016

TABLE2: PPI DURING x2

CY QT PPI

2015 QT3 215.02

2015 QT4 218.60

2016 QT1 219.05

2016 QT2 218.33

2.2 Quarterly PPI for Part 3.2 -

Table3 provides the PPI for each CY QT occurring during x1.

01 JUNE 2015 THROUGH 31 MAY 2016

TABLE3: PPI DURING x1

CY QT PPI

2015 QT3 212.20

2015 QT4 217.88

2016 QT1 212.00

2016 QT2 217.54

Table4 provides the PPI for each CY QT occurring during x2.

01 JUNE 2016 THROUGH 31 MAY 2017

TABLE4: PPI DURING x2

CY QT PPI

2016 QT3 209.00

2016 QT4 217.50

2017 QT1 211.44

2017 QT2 213.33

PART 3.0, DETERMINE THE ECONOMICALLY ADJUSTED PRICE (Pn2) FOR OP01 AND OP02:

The adjustments for each OP are demonstrated below. Part 3.1 shows a sample adjustment from the BP to OP01. Part 3.2 shows a sample adjustment from OP01 to OP02.

Both adjustments are determined using the formula, (Ix2 / Ix1) * Pn1 = Pn2.

Note3The average PPI (I) results from adding the PPI for each CY QT occurring during the applicable contract PoP divided by the number of CY QTs.

3.1 Determine Pn2 For Op01 -

x1 (Preceding PoP)

Ix1 = Average from Q3 2014 to Q2 2015 (Part 2.1, Table1) =

(214.14 + 218.16 + 219.07 + 214.30) 4 =

865.67 4 =

216.42

Pn1 (Current Price) =

$2.49 x2 (Current PoP)

Ix2 = Average from Q3 2015 to Q2 2016 (Part 2.1, Table2) =

(215.02 + 218.60 + 219.05 + 218.33) 4 =

871.00 4 =

217.75

Pn2 = (217.75 216.42) * $2.49 =

1.01 * $2.49 =

$2.51

The rate effective during OP01 is $0.02 greater than the rate effective during the BP.

3.2 Determine Pn2 For OP02 -

x1 (Preceding PoP)

Ix1 = Average from Q3 2015 to Q2 2016 (Part 2.2, Table3) =

(212.20 + 217.88 + 212.00 + 217.54) 4 =

859.62 4 =

214.91

Pn1 (Current Price) =

$2.51 (Part 3.1, Px2) x2 (Current PoP)

Ix2 = Average from Q3 2016 to Q2 2017 (Part 2.2, Table4) =

(209.00 + 217.50 + 211.44 + 213.33) 4 =

851.27 4 =

212.82

Pn2 = (212.82 214.91) * $2.51 =

0.99 * $2.51 =

$2.48

The rate effective during OP02 is $0.03 less than the rate effective during OP01.

2. Economic Price Adjustment based on Actual Cost of Fuel – Airlift.

In order to protect the contractor and the government from significant market fluctuations in the price of fuel, an adjustment will be made based on actual costs incurred. Adjustments will be made as indicated below.

(a) Economic price adjustment (EPA) pursuant to this EPA language is limited to changes in the contractor’s cost for fuel only.

(b) Allowable fuel adjustments will be made upward or downward when the price of fuel varies by more than one cent per gallon from the pegged rate established in the Uniform Rates and Rules.

(1) When the average price per gallon paid by the contractor is greater than the pegged price established in the

Uniform Rates and Rules, the government will reimburse the contractor the difference between the price paid and the pegged price.

(2) When the average price per gallon paid by the contractor is below the pegged price established in the Uniform

Rates and Rules, the contractor will reimburse the government the difference between the price paid and the pegged price. Under these circumstances, the contracting officer will issue a demand letter and funds will be reimbursed as directed.

(c) The fuel adjustment process shall be in accordance with Attachment 1 of this contract, Performance Work Statement, Appendix 3.