[Title 48 CFR 5316]
[Code of Federal Regulations (annual edition) - October 1, 1996 Edition]
[Title 48 - FEDERAL ACQUISITION REGULATIONS SYSTEM]
[Chapter 53 - DEPARTMENT OF THE AIR FORCE FEDERAL ACQUISITION REGULATION]
[Part 5316 - TYPES OF CONTRACTS]
[From the U.S. Government Publishing Office]




  48
  FEDERAL ACQUISITION REGULATIONS SYSTEM
  8
  1996-10-01
  1996-10-01
  false
  
  5316
  PART 5316
  
    FEDERAL ACQUISITION REGULATIONS SYSTEM
    DEPARTMENT OF THE AIR FORCE FEDERAL ACQUISITION REGULATION
  


PART 5316--TYPES OF CONTRACTS--Table of Contents




    Authority: 5 U.S.C. 301 and FAR 1.301.



                  Subpart 5316.2--Fixed-Price Contracts



Sec. 5316.203-4  Contract clauses.

    (d) Adjustments based on cost indexes of labor or material. 
(3)(iii)(A) When using the abnormal escalation index method, on 
contracts in excess of $50,000,000, the clause shall provide that 
contract adjustments will include the compounding effect of actual 
indices for future periods. Since predicted economic trends have a 
compounding effect on the scheduled price, when calculating each 
economic price adjustment (EPA) for costs within a completed period, a 
further provisional adjustment shall be made to all future period costs. 
This provisional adjustment shall be calculated using the same 
percentage decrease (or increase) as was made in the adjustment for the 
completed period. Provisional adjustments for each period must be 
liquidated against the final adjustment for each period. For example, 
the following formula could be used in computing adjustments:

Adjustment=((x-y)/y) [z]-s

where
    x=actual index
    y=projected index
    z=sum of dollars subject to adjustment for all periods in which a 
final adjustment has not been made
    s=sum of unliquidated provisional adjustments

    (B) For those EPA clauses which include a dead band in which no 
adjustment is make, the upper end of the dead band becomes the projected 
index value during the times of increasing inflation, and the lower end 
of the dead band becomes the projected index value during times of 
decreasing inflation. For those EPA clauses which provide for price 
adjustments only if the difference between the projected index value 
exceeds a predetermined threshold (trigger bands), no adjustment will be 
made for the future periods unless the actual index value exceeds the 
predetermined threshold. However, when the actual index exceeds the 
projected index by the predetermined threshold, then an adjustment must 
be made to future periods.
    (C) The above requirement is optional on multinational contracts 
where the impact of multiple country index recalculations are extremely 
complex.

[52 FR 6332, Mar. 3, 1987]

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