On May 25, 2022, the Department of Defense (“DoD”) issued a memorandum recognizing that contractors are not immune from the “period of unusually high” inflation. The memorandum, titled “Guidance on Inflation and Economic Price Adjustments,” provides guidelines on when relief from cost increases due to inflation is appropriate and provides considerations for the proper use of economic price adjustment (“EPA”) clauses when entering into new contracts.
For existing DoD contracts, whether contractors can get relief from inflation depends on the type of contract.
Last week, the U.S. Court of Appeals for the Federal Circuit articulated limits to the government’s ability to rely on the waiver doctrine to enforce Federal Acquisition Regulation (“FAR”) provisions of questionable legality, and, in so doing, cast doubt on the government’s “heads we win, tails you lose” approach to measuring the cost impact of simultaneous changes to a contractor’s cost accounting practices.
In The Boeing Company v. United States, 2019-2148 (Aug. 10, 2020), the Federal Circuit rejected the government’s argument that Boeing’s claim—which was based on an apparent conflict between (1) a statutory provision limiting the costs the government may recover for cost accounting practice changes to the aggregate increased cost to the government, and (2) a FAR provision under which the government’s recovery considers only the changes that increase costs to the government, and disregards changes that decrease costs to the government—was waived because Boeing did not raise the issue prior to contract award. Continue reading “Government Reliance on Waiver Argument to Keep Price Adjustment Windfall Fails”