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Merle M. DeLancey Jr. and Sara N. Gerber
The General Services Administration (“GSA”) Office of Governmentwide Policy recently authorized contracting officers to provide relief to GSA contractors experiencing cost increases due to surging inflation. See Acquisition Letter. To assist struggling contractors, GSA issued a temporary moratorium on the enforcement of certain limitations contained in GSA economic price adjustment (“EPA”) clauses.
GSA issued the moratorium in response to an uptick in contractors’ requests for price increases and removal of items from their Federal Supply Schedule (“FSS”) contracts to avoid selling at a loss. In issuing the moratorium, GSA recognized that inflationary pressures and price volatility, caused by supply chain disruptions, strong demand, and labor shortages, are ongoing concerns unlikely to abate in the near term. GSA acknowledged that it must help contractors weather this “unusual time”—especially small businesses and new market entrants—to ensure a resilient and diverse federal industrial base and the government’s continued access to critical “products, services, and solutions.”
GSA’s moratorium directs contracting officers to be flexible in how they apply GSA EPA clauses. Those clauses (GSAR 552.216-70, GSAR 552.216-71, I-FSS-969, and Alternates) limit the number of times a contractor may request a price adjustment during the contract term, require that approval of price increases greater than 10 percent be made at the contracting director level, prohibit price increases before the first 30 days or 12 months of the contract period depending upon the applicable EPA clause, and preclude contractors from seeking a price increase less than 30 days after a previous request. The moratorium outlined in GSA’s Acquisition Letter:
- Removes the limitation on the number of price increases a contractor may request;
- Lowers the approval authority for price increases above the 10 percent ceiling from the contracting director to one level above the contracting officer;
- Allows contractors to request price increases as soon as the contract period begins and through the end of the contract period;
- Allows contractors to submit price increase requests without waiting 30 days from the last request; and
- Clarifies that if a contractor removed an item from its Schedule contract, GSA would not enforce the limitation on adding the same item back at a higher price.
The moratorium gives contracting officers latitude to provide relief to contractors confronting the effects of inflation, which, under one measure, has risen to an annual rate of 7.0 percent. But this latitude is neither mandatory, permanent, nor government-wide. The moratorium is applicable only to GSA contracts with EPA clauses and is discretionary for VA Federal Supply Schedule contracts. Contracting officers remain responsible for evaluating requests for price increases and may still adhere to a contract’s EPA clause. The moratorium became effective March 17, 2022, and will expire on September 30, 2022, unless extended.
GSA’s Acquisition Letter is refreshing and signals that it understands the unprecedented challenges contractors are facing. While we all hope inflation eases in the coming months, GSA and VA Supply Schedule contractors experiencing increases in materials, transportation, labor, energy, and other costs should review their contracts for EPA clauses, and, mindful of contracting officers’ new authority under the Acquisition Letter, consider requesting price increases to ensure commercial viability of continued business with the government.