Inflation Remedies Too Sparse to Aid Fixed-Price Contractors
Federal contractors are feeling the pinch of the highest rate of inflation in decades, and those with fixed-price deals have few options for mitigating its effects beyond turning to government agencies to voluntarily ease the squeeze.
Contractors can, for example, make a request for equitable adjustment, but outside a specific related contractual clause, there is no obligation on the agency to grant that request.
And the size of the needed adjustments — particularly for contractors who work extensively with materials such as steel or lumber, for which prices have shot up significantly beyond the rate of inflation — is likely putting off contracting officers that may otherwise be inclined to allow smaller adjustments, according to Blank Rome LLP partner Merle DeLancey.
"If you were coming in saying I need [a] 3, 4 or 5% [adjustment], it would be a different situation," he said. "I think that when you come walking in and say I need to increase prices by a third, contracting officers just aren't expecting that."
In the future, even if the current level of inflation is only a temporary blip, contractors and prospective contractors are likely to be more wary of fixed-price deals without EPA clauses and try to push for their widespread inclusion, perhaps tied to specific indices that allow for automatic adjustments, said DeLancey.
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"Inflation Remedies Too Sparse to Aid Fixed-Price Contractors," by Daniel Wilson was published in Law360 on May 13, 2022.