[Federal Register Volume 82, Number 47 (Monday, March 13, 2017)]
[Proposed Rules]
[Pages 13418-13427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-04877]


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DEPARTMENT OF VETERANS AFFAIRS

48 CFR Parts 816, 828 and 852

RIN 2900-AP82


Revise and Streamline VA Acquisition Regulation To Adhere to 
Federal Acquisition Regulation Principles (VAAR Case 2014-V002--Parts 
816, 828)

AGENCY: Department of Veterans Affairs.

ACTION: Proposed rule.

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SUMMARY: The Department of Veterans Affairs (VA) is proposing to amend 
and update its VA Acquisition Regulation (VAAR). Under this initiative, 
all parts of the regulation are being reviewed in phased increments to 
revise or remove any policy that has been superseded by changes in 
Federal Acquisition Regulation (FAR), to remove any procedural guidance 
that is internal to the VA, and to incorporate any new regulations or 
policies.
    Acquisition regulations become outdated over time and require 
updating to incorporate additional policies, solicitation provisions, 
or contract clauses that implement and supplement the FAR to satisfy VA 
mission needs, and to incorporate changes in dollar and approval 
thresholds, definitions, and VA position titles and offices. This 
Proposed Rule will correct inconsistencies, remove redundant and 
duplicate material already covered by the FAR, delete outdated material 
or information, and appropriately renumber VAAR text, clauses and 
provisions where required to comport with FAR format, numbering and 
arrangement.
    This Proposed Rule will streamline the VAAR to implement and 
supplement the FAR only when required, and remove internal agency 
guidance as noted above in keeping with the FAR principles concerning 
agency acquisition regulations.

DATES: Comments must be received on or before May 12, 2017 to be 
considered in the formulation of the final rule.

ADDRESSES: Written comments may be submitted through 
www.Regulations.gov; by mail or hand-delivery to Director, Regulation 
Policy and Management (00REG), Department of Veterans Affairs, 810 
Vermont Avenue NW., Room 1068, Washington, DC 20420; or by fax to (202) 
273-9026. Comments should indicate that they are submitted in response 
to ``RIN 2900-AP82--Revise and Streamline VA Acquisition Regulation to 
Adhere to Federal Acquisition Regulation

[[Page 13419]]

Principles (VAAR Case 2014-V002--parts 816, 828).'' Copies of comments 
received will be available for public inspection in the Office of 
Regulation Policy and Management, Room 1068, between the hours of 8:00 
a.m. and 4:30 p.m., Monday through Friday (except holidays). Please 
call (202) 461-4902 for an appointment. This is not a toll-free number. 
In addition, during the comment period, comments may be viewed online 
through the Federal Docket Management System (FDMS) at 
www.Regulations.gov.

FOR FURTHER INFORMATION CONTACT: Mr. Ricky Clark, Senior Procurement 
Analyst, Procurement Policy and Warrant Management Services, 003A2A, 
425 I Street NW., Washington, DC 20001, (202) 632-5276. This is not a 
toll-free telephone number.

SUPPLEMENTARY INFORMATION: 

Background

    This action is being taken under the authority of the Office of 
Federal Procurement Policy Act which provides the authority for an 
agency head to authorize the issuance of agency acquisition regulations 
that implement or supplement the FAR. This authority ensures that 
Government procurements are handled fairly and consistently, that the 
Government receives overall best value, and that the Government and 
contractors both operate under a known set of rules.
    The Proposed Rule updates the VAAR to current FAR titles, 
requirements, and definitions; it updates VA titles and offices; it 
corrects inconsistencies, removes redundancies and duplicate material 
already covered by the FAR; it deletes outdated material or information 
and appropriately renumbers VAAR text, clauses, and provisions where 
required to comport with FAR format, numbering and arrangement. All 
amendments, revisions, and removals have been peer reviewed and 
concurred with by an Integrated Product Team of agency stakeholders.
    The VAAR uses the regulatory structure and arrangement of the FAR 
and headings and subject areas are broken up consistent with the FAR 
content. The VAAR is divided into subchapters, parts (each of which 
covers a separate aspect of acquisition), subparts, sections, and 
subsections.
    The Office of Federal Procurement Policy Act provides the authority 
for the Federal Acquisition Regulation and for the issuance of agency 
acquisition regulations consistent with the FAR.
    When Federal agencies acquire supplies and services using 
appropriated funds, the purchase is governed by the FAR, set forth at 
Title 48 Code of Federal Regulations (CFR), chapter 1, parts 1 through 
53, and the agency regulations that implement and supplement the FAR. 
The VAAR is set forth at Title 48 CFR, chapter 8, parts 801 to 873. 
These authorities are designed to ensure that Government procurements 
are handled fairly and consistently, that the Government receives 
overall best value, and that the Government and contractors both 
operate under a known set of rules.
    VA is proposing to revise the VAAR to add new policy or regulatory 
requirements and to remove any guidance that is applicable only to VA's 
internal operating processes or procedures. Codified acquisition 
regulations may be amended and revised only through formal rulemaking 
under the Office of Federal Procurement Policy Act. This proposed rule 
will not have a significant economic impact on a substantial number of 
small entities as they are defined in the Regulatory Flexibility Act. 
This proposed rule will generally be small business neutral. VA has 
examined the economic, interagency, budgetary, legal, and policy 
implications of this regulatory action, and it has been determined this 
rule is not a significant regulatory action.

Discussion and Analysis

    VA proposes to make the following changes to the VAAR in this phase 
of its revision and streamlining initiative. For procedural guidance 
cited below that is proposed to be deleted from the VAAR, each section 
cited for removal is being considered for inclusion in VA's internal 
agency operating procedures in accordance with FAR 1.301(a)(2). 
Similarly, delegations of authorities that are removed from the VAAR 
will be included in the VA Acquisition Manual (VAAM) as internal agency 
guidance.

VAAR Part 816--Types of Contracts

    In subpart 816.1, Selecting Contract Types, we propose to delete 
816.102, Policies, since it contains procedural guidance and a 
delegation of authority that is internal to VA and will be in the VA 
Acquisition Manual (VAAM).
    We propose to add a new subpart: 816.2, Fixed-Price Contracts. This 
subpart 816.2 includes one subsection, 816.203-4, Contract clauses, 
which prescribes the various Economic Price Adjustment (EPA) clauses.
    In subpart 816.5, Indefinite-Delivery Contracts, we propose to 
delete 816.504, Indefinite-quantity contracts, due to the issuance of a 
Class Deviation from VAAR 816.504, which prohibited the use of 
estimated quantity clauses.
    In subpart 816.5, Infinite-Delivery Contracts, we propose to amend 
section 816.505, Ordering, to include the title and office of the Task 
and Delivery Order Ombudsman.
    We propose to add a new subpart 816.7, Agreements, that includes 
one section, 816.770, Consignment agreements, which defines and 
describes the consignment agreement acquisition method used for 
satisfying the need for immediate and on-going requirements.
    We propose to delete subpart 816.70, Unauthorized Agreements, since 
the only section included, 816.7001, Letters of availability, covers a 
procurement method that is no longer in use in VA.

VAAR Part 828--Bonds and Insurance

    In subpart 828.1, Bonds and Other Financial Protections, we propose 
to delete section 814.101, Bid guarantees, and subsection 828.101-2, 
Solicitation provision or contract clause, because the FAR guidance is 
sufficient in this area. We also propose to delete subsection 828.101-
70, Safekeeping and return of bid guarantee, because the information 
included is considered to be procedural guidance and it will be moved 
to the VAAM.
    In section 828.106, Administration, we propose to delete subsection 
828.106-6, Furnishing information, since it includes an internal 
delegation of authority.
    In section 828.106, Administration, we propose to amend subsection 
828.106-70, Bond premium adjustment, to clarify the clause 
prescription.''
    In subpart 828.2, Sureties and Other Security for Bonds, we propose 
to delete the entire subpart since it contains only internal procedural 
guidance and it will be moved to the VAAM.
    In subpart 828.3, Insurance, we propose to amend section 828.306, 
Insurance under fixed-price contracts, to clarify the clause 
prescription.
    In subpart 828.71, Indemnification of Contractors, Medical Research 
or Development Contracts, we propose to delete section 828.7101, 
Approval for indemnification, as it contains only internal procedural 
information.
    In subpart 828.71, Indemnification of Contractors for Medical 
Research or Development Contracts, we propose to revise the numbering 
from 828.71 to 828.70 to conform to the FAR drafting guide. 
Accordingly, under this subpart, we propose to revise the numbering for 
section 828.7100, Scope of part, to 828.7000; to change the numbering 
for section 828.7102, Extent of indemnification, to 828.7001; and to 
revise the numbering of section

[[Page 13420]]

828.7103, Financial protection, to 828.7002.
    In the proposed subpart 828.70, Indemnification of Contractors for 
Medical Research or Development Contracts, we propose to add a new 
subsection, 828.7003, Indemnification clause, which prescribes the use 
of clause 852.228-73, Indemnification of Contractor--Hazardous Research 
Projects, when certain conditions apply.

VAAR Part 852--Solicitation Provisions and Contract Clauses

    In subpart 852.2, we propose to remove clause 852.216-70, Estimated 
Quantities, as it includes language that codifies contracting practices 
that are not recommended as they increase the risk level for VA 
procurements. In this subpart we propose to add clause 852.216-71, 
Economic price adjustment of contract price(s) based on a price index.
    We propose to add the following clauses which are based on VA-
specific clauses that were previously uncodified: 852.216-72, 
Proportional economic price adjustment of contract price(s) based on a 
price index;'' clause 852.216-73, Economic price adjustment--state 
nursing home care for veterans (ALT #1); add clause 852.216-74, 
Economic price adjustment--Medicaid labor rates (ALT #2), and clause 
852.216-75, Economic price adjustment clause--fuel surcharge.
    In subpart 252.2, we propose to amend 852.228-71, Indemnification 
and insurance, to correct minor typographical and grammatical errors. 
We propose to add clause 852.228-73, Indemnification of contractor-
hazardous research projects, which requires contractors to have 
appropriate insurance coverage when performing work of a hazardous 
nature which protects the Government's interest.

Effect of Rulemaking

    Title 48, Federal Acquisition Regulations System, Chapter 8, 
Department of Veterans Affairs, of the Code of Federal Regulations, as 
revised by this proposed rulemaking, represents VA's implementation of 
its legal authority and publication of the Department of Veterans 
Affairs Acquisition Regulation (VAAR) for the cited applicable parts. 
Other than future amendments to this rule or governing statutes for the 
cited applicable parts, or as otherwise authorized by approved 
deviations or waivers in accordance with Federal Acquisition Regulation 
(FAR) subpart 1.4, Deviations from the FAR, and as implemented by VAAR 
subpart 801.4, Deviations from the FAR or VAAR, no contrary guidance or 
procedures are authorized. All existing or subsequent VA guidance must 
be read to conform with the rulemaking if possible or, if not possible, 
such guidance is superseded by this rulemaking as pertains to the cited 
applicable VAAR parts.

Executive Orders 12866 and 13563

    Executive Orders (E.O.) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
E.O. 12866, Regulatory Planning and Review defines ``significant 
regulatory action'' to mean any regulatory action that is likely to 
result in a rule that may: ``(1) Have an annual effect on the economy 
of $100 million or more or adversely affect in a material way the 
economy, a sector of the economy, productivity, competition, jobs, the 
environment, public health or safety, or State, local, or tribal 
governments or communities; (2) Create a serious inconsistency or 
otherwise interfere with an action taken or planned by another agency; 
(3) Materially alter the budgetary impact of entitlements, grants, user 
fees, or loan programs or the rights and obligations of recipients 
thereof; or (4) Raise novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive order.''
    VA has examined the economic, interagency, budgetary, legal, and 
policy implications of this regulatory action, and it has been 
determined this rule is not a significant regulatory action under E.O. 
12866.
    VA's impact analysis can be found as a supporting document at 
http://www.regulations.gov, usually within 48 hours after the 
rulemaking document is published. Additionally, a copy of the 
rulemaking and its impact analysis are available on VA's Web site at 
http://www.va.gov/orpm by following the link for VA Regulations 
Published from FY 2004 Through Fiscal Year to Date.

Paperwork Reduction Act

    Although this action contains provisions constituting collections 
of information at 48 CFR 828.306 and 852.228-71, under the provisions 
of the Paperwork Reduction Act of 1995 (44 U.S.C. 3501-3521), no new or 
proposed revised collections of information are associated with this 
proposed rule. The information collection requirements for Sec. Sec.  
48 CFR 828.306 and 852.228-71 are currently approved by the Office of 
Management and Budget (OMB) and have been assigned OMB control number 
2900-0590.

Regulatory Flexibility Act

    This proposed rule will not have a significant economic impact on a 
substantial number of small entities as they are defined in the 
Regulatory Flexibility Act, 5 U.S.C. 601-612. This proposed rule will 
generally be small business neutral. The overall impact of the proposed 
rule will be of benefit to small businesses owned by Veterans or 
service-disabled Veterans as the VAAR is being updated to remove 
extraneous procedural information that applies only to VA's internal 
operating procedures. VA estimates no cost impact to individual 
business resulting from these rule updates. On this basis, the adoption 
of this proposed rule will not have a significant economic impact on a 
substantial number of small entities as they are defined in the 
Regulatory Flexibility Act, 5 U.S.C. 601-612. Therefore, under 5 U.S.C. 
605(b), this proposed rule is exempt from the initial and final 
regulatory flexibility analysis requirements of sections 603 and 604.

Unfunded Mandates

    The Unfunded Mandates Reform Act of 1995 requires, at 2 U.S.C. 
1532, that agencies prepare an assessment of anticipated costs and 
benefits before issuing any rule that may result in the expenditure by 
State, local, and tribal Governments, in the aggregate, or by the 
private sector, of $100 million or more (adjusted annually for 
inflation) in any one year. This proposed rule will have no such effect 
on State, local, and tribal Governments or on the private sector.

List of Subjects

38 CFR Part 816

    Government procurement.

38 CFR Part 828

    Government procurement, Insurance, Surety bonds.

38 CFR Part 852

    Government procurement. Reporting and recordkeeping requirements.

Signing Authority

    The Secretary of Veterans Affairs, or designee, approved this 
document and authorized the undersigned to sign and submit the document 
to the Office of the Federal Register for publication electronically as 
an official document of

[[Page 13421]]

the Department of Veterans Affairs. Gina S. Farrisee, Deputy Chief of 
Staff, Department of Veterans Affairs, approved this document on 
January 12, 2017, for publication.

Janet Coleman,
Chief, Office of Regulation Policy & Management, Office of the 
Secretary, Department of Veterans Affairs.

    For the reasons set out in the preamble, VA proposes to amend 48 
CFR, chapter 8, parts 816, 828, and 852 as follows:

PART 816--TYPES OF CONTRACTS

0
1. The authority citation for part 816 continues to read as follows:

    Authority: 40 U.S.C. 121(c) and 48 CFR 1.301-1.304.

Subpart 816.1 [Removed and Reserved]

0
2. Subpart 816.1 is removed and reserved.
0
3. Subpart 816.2 is added to read as follows:

Subpart 816.2--Fixed-Price Contracts


816.203   Fixed-price contracts with economic price adjustment.


816.203-4   Contract clauses.

    (e) The contracting officer shall, when contracting by negotiation, 
use the following clauses.
    (1) The contracting officer shall insert the clause at 852.216-71, 
Economic Price Adjustment of Contract Price(s) based on a Price Index, 
in solicitations and firm-fixed-price contracts, subject to FAR 16.203-
4(d)(1) and when changes to a price index will be used to calculate 
corresponding changes to the total contract price or unit prices of the 
contract.
    (i) Exceptions:
    (A) Do not use this clause when changes to the price index will 
apply to only a component part of the contract price.
    (B) Do not publish or include the footnotes in the solicitation, 
they are only included herein to provide guidance to contracting 
officers.
    (2) The contracting officer shall insert the clause at 852.216-72, 
Proportional Economic Price Adjustment of Contract Price(s) based on a 
Price Index, in solicitations and firm-fixed-price contracts, and 
subject to FAR 16.203-4(d)(1) when changes to an industry price index 
shall be used to calculate changes to only a portion of the contract 
price or the unit prices of the contract.
    (i) Exceptions:
    (A) The clause should not be used when a change in the index price 
will be applied directly and totally to the contract price or the unit 
prices, i.e., when the Consumer Price Index (CPI) is used to calculate 
changes and a 5% increase in the CPI would result in a 5% increase in 
the total contract price of the unit prices.
    (B) Do not publish or include the footnotes in the solicitation, as 
they are only provided herein for the guidance to the contracting 
officer.
    (3) The contracting officer shall Insert the clause at 852.216-73, 
Economic Price Adjustment--State Nursing Home Care for Veterans (ALT 
#1) in solicitations and firm-fixed-price contracts subject to FAR 
16.203-4(d)(1) and the following circumstance: When changes to the 
Medicaid rate as authorized by the State Medicaid Agency (SMA) shall be 
used to calculate corresponding changes in the total contract price or 
the per diem prices of the agreement.
    (4) The contracting officer shall insert the clause at 852.216-74, 
Economic Price Adjustment--Medicaid Labor Rates (ALT #2) in 
solicitations and firm fixed price contracts when the conditions 
specified in FAR 16.203-4(c)(1) exist. The clause is modifiable by 
increasing the 10-percent maximum limit on aggregate increases 
specified in subparagraph (c)(4), upon the approval by the Head of the 
Contracting Activity (HCA) or designee.
    (5) The contracting officer shall insert the clause at 852.216-75, 
Economic Price Adjustment--Fuel Surcharge, in solicitations and firm 
fixed price contracts when contracting by negotiation is subject to 
changes in the cost of fuel increases. The clause is subject to the 
conditions at FAR 16.203-4(d)(1).
    (f) The contracting officer shall follow procedures as prescribed 
in FAR 16.203-4(c) and 38 CFR 51.41(b)(1)(c) for EPA fixed price 
contracts based on Medicaid rates. These procedures shall be used when 
contracting by negotiation between the VA and the State Veteran Home 
for both making payments under contracts or under a VA provider 
agreement for nursing home care for veterans.

Subpart 816.5--Indefinite-Delivery Contracts

Subpart 816.504 [Removed]

0
4. Subpart 816.504 is removed.
0
5. Section 803.505 is revised to read as follows:


816.505   Ordering.

    (b)(8) Task-order and delivery-order ombudsman. The task-order 
contract and delivery-order ombudsman for VA is the Associate Deputy 
Assistant Secretary (ADAS) for Procurement Policy, Systems and 
Oversight. The VA Ombudsman shall review and resolve complaints from 
contractors concerning all task and delivery order actions. If any 
corrective action is needed after reviewing complaints from 
contractors, the VA Ombudsman shall provide a written determination of 
such action to the contracting officer. Contracting officers shall be 
notified of any complaints submitted to the VA Ombudsman.
0
6. Subpart 816.7 is added to read as follows:

Subpart 816.7--Agreements


816.770  Consignment agreements.

    A consignment agreement is not a contract. It is defined as a 
delivery method for a specified period of time in which the contractor 
provides an item/s for Government use and the contractor receives 
reimbursement only if and when the item is used by the Government. 
Consignment agreements are allowable and shall be considered in those 
instances when the requirement for an item will be immediate and on-
going and when it is impossible to predetermine the type or model of a 
particular item until the need is established, and it is determined to 
be in the best interest of the VA.

Subpart 816.70 [Removed and Reserved]

0
7. Subpart 816.70 is removed and reserved.

PART 828--BONDS AND INSURANCE

0
8. The authority citation for part 828 continues to read as follows:

    Authority:  38 U.S.C. 501, 8127, 8128 and 8151-8153; 40 U.S.C. 
121(c); and 48 CFR 1.301-1.304.


828.101   [Removed]

0
9. Section 828.101 is removed.


828.101-2  [Removed]

0
10. Section 828.101-2 is removed.


828.101-70   [Removed]

0
11. Section 828.101-70 is removed.


828.106-6  [Removed]

0
12. Section 828.106-6 is removed.


828.106-70   [Amended]

0
13. Section 828.106-70 is revised to read as follows:


828.106-70   Bond premium adjustment.

    The contracting officer shall insert the clause at 852.228-70, Bond 
Premium

[[Page 13422]]

Adjustment, in solicitations and contracts when performance and payment 
bonds, or payment protection is required.


828.2   [Removed]

0
14. Subpart 828.2 is removed.

Subpart 828.3--Insurance


828.306  [Amended]

0
15. Section 816.306 is amended by revising paragraph (a) to read as 
follows:


828.306   Insurance under fixed-price contracts.

    (a) The contracting officer shall insert the provision at 852.228-
71, Indemnification and insurance, in solicitations when utilizing term 
contracts, or contracts of a continuing nature, for ambulance, 
automobile and aircraft service.
* * * * *

Subpart 828.71 [Redesignated and Amended]

0
16. Subpart 828.71 is redesignated as subpart 828.70 and the subpart 
heading of newly redesignated subpart 828.70 is revised to read as 
follows:

Subpart 828.70--Indemnification of Contractors, for Medical 
Research or Development Contracts


828.7100   [Redesignated and Amended]

0
17. Section 828.7100 is redesignated as section 828.7000 and revised to 
read as follows:


828.7000   Scope of subpart.

    (a) As used in this subpart, the term ``contractor'' includes 
subcontractors of any tier under a contract containing an 
indemnification provision under 38 U.S.C. 7317.
    (b) This subpart sets forth the policies and procedures concerning 
indemnification of contractors performing contracts involving medical 
research or research and development that involve risks of an unusually 
hazardous nature, as authorized by 38 U.S.C. 7317.
    (c) The authority to indemnify the contractor under this subpart 
does not create any rights to third parties that do not exist by law.


828.7101   [Removed]

0
18. Section 828.7101 is removed.


828.7102  [Redesignated and amended]

0
19. Section 828.7102 is redesignated as section 828.7001 and paragraph 
(a)(3) is revised to read as follows:


828.7001   Extent of indemnification.

* * * * *
    (a) * * *
    (3) The losses or liability are not covered by the financial 
protection required under 828.7002.
* * * * *


828.7103  [Redesignated]

0
20. Section 828.7103 is redesignated as section 828.7002.
0
21. Section 828.7003 is added to read as follows:


828.7003   Indemnification Clause.

    The contracting officer shall include the clause, 852.228-73, 
Indemnification of contractor--Hazardous Research Projects, in 
contracts and solicitations that indemnify a contractor for liability 
(including reasonable expenses of litigation or settlement) to third 
person for death, bodily injury, or loss of or damage to property from 
a risk that the contract defines in the performance work statement, the 
statement of work, or the statement of objectives as unusually 
hazardous.

PART 852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
22. The authority citation for 48 CFR part 852 continues to read as 
follows:

    Authority:  38 U.S.C. 501, 8127, 8128, and 8151-8153; 40 U.S.C. 
121(c); and 48 CFR 1.301-1.304.

Subpart 852.2--Text of Provisions and Clauses


852.216-70   [Removed and reserved]

0
23. Section 852.216-70 is removed and reserved.
0
24. Section 852.216-71 is added to read as follows:


852.216-71   Economic price adjustment of contract price(s) based on a 
price index.

    As prescribed in 816.203-4(e)(1), insert the following clause:

Economic Price Adjustment of Contract Price(s) Based on a Price Index 
(Date)

    (a) To the extent that contract cost increases are provided for 
by this economic price adjustment clause, the contractor warrants 
that the prices in this contract for the base period and any option 
periods do not include any amount to protect against such contingent 
cost increases.
    (b) The Base and Adjusting Indexes, for the purpose of price 
adjustment under this clause, shall be___,\1\ as contained in___,\2\ 
as published by ___.\3\ All adjustments authorized under this clause 
shall be made by using the Base Index and Adjusting Indexes, which 
are published___.\4\
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    \1\ The contracting officer shall conduct market research to 
determine a suitable Consumer Price Index or other independent 
broad-based index to use for the solicitation. For example, for 
medical services, an appropriate index may be the Consumer Price 
Index that tracks medical services.
    \2\ Specify where the Index can be found, such as in a 
solicitation for laboratory services, the contracting officer might 
enter ``Table 1, CPI-U: U.S. City Average, by expenditure category 
and commodity and service group, found at http://www.bls.gov/
news.release/cpi.t01.htm''.
    \3\ Provide the information on who publishes the applicable 
Index used e.g., in the example for laboratory services, ``the U.S. 
Department of Labor''.
    \4\ State how often the Index is published, such as ``monthly, 
around the middle of the month''. Note that some Consumer Price 
Indexes are not published monthly. Ensure that the correct 
information is provided for the specific Index used.
---------------------------------------------------------------------------

    (1) The Base Index, for the purposes of price adjustment under 
this clause, shall be the most recent Index published prior to the 
date for receipt of offers, or the due date for receipt of best and 
final offers if discussions were held whichever is later. The Base 
Index shall remain constant for the entire term of the contract, 
including all option periods.
    (2) The Adjusting Index shall be the most recent Index published 
prior to the date of contract adjustment, as specified in paragraph 
(d) of this clause.
    (c) The percentage difference between the Base Index and the 
Adjusting Index, rounded to the nearest .01 percent (e.g., 4.57%), 
will be used in calculating all adjustments to the following line 
items:___\5\ The prices for these line items will be multiplied by 
the percentage increase or decrease and the resulting amount will be 
added to or deducted from the original line item price for that 
contract period (e.g., Base Year) to arrive at the new contract 
price for those line items from the effective date of the adjustment 
to the beginning of the next contract adjustment period, rounded to 
the same number of decimal points as the prices originally bid. 
Calculations for option year contract terms will be based on the 
prices in the schedule for those option years.
---------------------------------------------------------------------------

    \5\ Enter the line items that will be subject to adjustment or 
revise this paragraph to otherwise state what prices are subject to 
adjustment under this clause.
---------------------------------------------------------------------------

    (d) The dates of contract adjustment shall be___ \6\ and the 
starting dates of each option year, if not already included in these 
dates. The contracting officer shall retain a copy of the Base Index 
in the contract file and, on each date of adjustment specified in 
this paragraph (d), shall obtain a copy of the Adjusting Index. The 
contracting officer shall calculate the adjustment due and shall, 
within 5 business days, issue a modification to the contract 
adjusting the unit or contract prices, as specified in paragraph 
(c). The adjusted unit or contract prices shall be effective for all 
orders placed or services provided after the date of contract 
adjustment as specified in this paragraph (d) until the

[[Page 13423]]

beginning of the next contract adjustment period. If the contracting 
officer fails to act, the contractor shall request in writing a 
contract adjustment and any subsequent adjustment shall be 
retroactive to the applicable date of contract adjustment specified 
in this paragraph (d). The contractor's entitlement to price 
increases for a prior contract period (base year or option year) is 
waived unless the contractor's written request for an adjustment 
under this clause is received by the contracting officer no later 
than 30 days following the end of the base year for changes 
applicable to the base year, or 30 days following the end of each 
option year for changes applicable to that option year. The 
Government's right to contract decreases for prior contract periods 
(base year or option year) is waived unless the contracting officer 
processes a contract modification no later than 30 days following 
the end of the base year for changes applicable to the base year, or 
30 days following the end of each option year for changes applicable 
to that option year.
---------------------------------------------------------------------------

    \6\ Establish time periods for when the contracting officer will 
process adjustments. This could be ``the first day of every quarter, 
January, April, July, and October'' or ``Annually on October 1st. or 
some other similar time periods. Since the contracting officer is 
responsible for initiating the change, the contracting officer must 
establish a reminder mechanism to ensure that the adjustments are 
accomplished within the time period specified.
---------------------------------------------------------------------------

    (e) An example of an adjustment calculation is provided herein 
for informational purposes only.
    (1) The original contract price or line item prices for that 
contract term (e.g., base year) shall be used for all calculations 
during that particular contract term and new calculations shall be 
made for each and every contract adjustment period specified in 
paragraph (d) during that contract term.
    (2) For purposes of this example, the contract prices for the 
line items as specified in paragraph (c) will be adjusted by the 
percentage calculated as follows:

 
 
 
Adjusting Index for the current        196.6
 period.
Minus the Base Index.................  -188.0
Equals the Index Point Change........  8.6
Index Point Change Divided by the      8.6/188.0 = .0457 *
 Base Index.
Result Multiplied by 100 Equals the    4.57%
 Percentage Change (The Index Point
 Change Percentage).
 

    *This figure shall be rounded to the fourth decimal place. When 
the fifth decimal is 1 to 4, the figure shall be rounded down, 5 to 
9, rounded up.
    (3) For a line item with an original bid price of $25.00 and a 
4.57 percent Index Point Change increase as of the first contract 
adjustment period, as shown above, the calculations for a new 
contract price for the first contract adjustment period would be as 
follows: $25.00 x .0457 = $1.14, $25 + $1.14 = $26.14 **. The new 
contract price for this line item from the beginning of that first 
contract adjustment period until the start of the next contract 
adjustment period would be $26.14 and the contracting officer would 
issue a contract modification reflecting this price change.
    ** The unit price adjustment shall be rounded up or down, as in 
paragraph (e)(1) above, to match the number of decimal places in the 
original bid.
    (4) If the Adjusting Index went down for the second adjustment 
period, reflecting only a 3 percent Index Point Change increase over 
the Base Index, the new price for this sample line item would be 
reduced for the second contract adjustment period from $26.14 to 
$25.75 as follows: $25 x .03 = $0.75, $25 + $0.75 = $25.75. Note 
that the calculations for the second contract adjustment period are 
based on the original contract price for that contract term of 
$25.00. The contract price for this line item is modified to reflect 
this new price for the second contract adjustment period.
    (5) At the start of the first option year and each subsequent 
option year period (as well as for each contract adjustment period 
specified in paragraph (d) during that option year, if different), 
the contracting officer shall recalculate the contract or unit 
prices for that first option year based on any changes between the 
Adjusting Index and the Base Index, from the original contract award 
date to the start of the first option period, and based on the 
contractor's new option year prices. Assume the contractor's bid 
price for the first option year for the above sample line item was 
$25.50 and the calculations shown in paragraph (e)(1) above at the 
start of the first option period reflected a 6 percent Index Point 
Change. The new contract price for this sample line item at the 
start of the first option period would be calculated as follows: 
$25.50 x .06 = $1.53, $25.50 + $1.53 = $27.03. The contracting 
officer would process a contract modification reflecting a revised 
contract price of $27.03 for the first contract adjustment period in 
the first option year.
    (f) Price adjustments pursuant to this clause, shall be 
documented by a contract modification issued by the contracting 
officer, show the Base Index (see paragraph (b)(1)), the Adjusting 
Index, the adjusted contract prices (see paragraph (c)), the 
mathematical calculations used to arrive at the adjusted contract 
prices, and the effective date of the adjustment (see paragraph 
(d)).
    (g) At the start of each option year, the contracting officer 
shall, within 5 days of the start of the option year period, process 
a contract modification adjusting the option year prices by the then 
current Index Point Change percentage, if any, reflecting the new 
adjusted prices for that first contract adjustment period in that 
option year.
    (h) In the event that ___ \7\ discontinues, or alters 
substantially, its method of calculating the Index cited herein, the 
parties shall mutually agree upon an appropriate substitute for 
determining the price adjustment described herein. If the 
contracting officer determines that the Index consistently and 
substantially fails to reflect market conditions, the contracting 
officer may modify the contract to specify the use of an appropriate 
substitute index, effective on the date the Index specified herein 
begins to consistently and substantially fail to reflect market 
conditions.
---------------------------------------------------------------------------

    \7\ Enter in the name of the entity whose index is used in the 
clause. In most cases when using this clause format, the index used 
would be a CPI-U Index and the contracting officer would enter ``the 
U.S. Department of Labor''.
---------------------------------------------------------------------------

    (i) Any dispute arising under this clause shall be resolved 
subject to the ``Disputes'' clause of the contract.


(End of clause)

* * * * *
0
25. Section 852.216-72 is added to read as follows:


852.216-72   Proportional Economic Price Adjustment of Contract 
Price(s) Based on a Price Index.

    As prescribed in 816.203-4(e)(2), insert the following clause:

Proportional Economic Price Adjustment of Contract Price(s) Based on a 
Price Index (Date)

    (a) To the extent that contract cost increases are provided for 
by this economic price adjustment clause, the contractor warrants 
that the prices in this contract for any option periods do not 
include any amount to protect against such contingent cost 
increases.
    (b) The cost index, for the purpose of price adjustment under 
this clause, shall be___ \1\ as contained in___ \2\ as published 
by___ \3\All adjustments authorized under this clause shall be made 
by using the Base Index and Adjusting Indexes, which are 
published.\4\
---------------------------------------------------------------------------

    \1\ The contracting officer shall conduct market research to 
determine a suitable cost index for use in the solicitation. The 
index used is directly related to the type of commodity or service 
most likely to impact the contractor and must approximately track 
the economic changes affecting the contractor's costs. Selection of 
the wrong index may result in a claim and reformation of the 
contract. For transportation services, an appropriate index might be 
one that tracks the price of gasoline or diesel fuel. For example, 
in a solicitation for ambulance services, the contracting officer 
might enter into this block ``the ``Weekly U.S. Retail Gasoline 
Prices, Regular Grade'' Index for New England'' (or California or 
whichever index is the most appropriate).
    \2\ Specify where the index can be found, such as in an example 
for gasoline, ``the Energy Information Administration Web site (see 
VAAM M816.203-70).
    \3\ Provide the information on who publishes the index, such as, 
in an example for gasoline, ``the U.S. Department of Energy''.
    \4\ State how often the index used is published, such as, in an 
example for an index for gasoline, ``weekly each Monday at 5:00 p.m. 
(Eastern time), or Tuesday if Monday is a holiday''.
---------------------------------------------------------------------------

    (1) The Base Index, for the purposes of price adjustment under 
this clause, shall be the most recent Index published prior to the 
closing date for receipt of offers, or the due date for receipt of 
best and final offers if discussions are held. This Base Index shall 
remain constant throughout the life of the contract, including all 
options.
    (2) The Adjusting Index shall be the most recent Index published 
prior to the date of contract adjustment, as specified in paragraph 
(f).
    (c) For purposes of this clause, it will be conclusively 
presumed that___percent

[[Page 13424]]

(%) \5\ of the price of___ \6\ represents the Base Cost of ___ \7\ 
and the resulting Base Cost will be the basis upon which adjustment 
will be made under this clause. This Base Cost will be used in 
calculating all adjustments to the following line items:___ \8\ A 
new Base Cost will be calculated for each option year period based 
on the new option year prices.
---------------------------------------------------------------------------

    \5\ Prior to issuing the solicitation, the contracting officer 
must conduct market research to determine an appropriate percentage 
to include in this paragraph. The percentage should reflect that 
portion of the unit price for the services or supplies being 
acquired that is applicable to the indexed commodity. For instance, 
in the case of an ambulance contract, research might indicate that, 
at the time the solicitation is being drafted and based on prior 
per-mile bid prices, the cost of gasoline accounts for 10% of the 
per mile cost of operating an ambulance. For example, if the prior 
bid price had been $1.60 per mile, ambulances average 10 miles per 
gallon, and the cost of gasoline had been $1.559 per gallon, 1 
mile's worth of gasoline ($.16) would be approximately ten (10) 
percent of the prior per mile bid price of $1.60 per mile. This 
percent must be stated in the solicitation so that the same figure 
applies to all bidders. This figure remains constant throughout the 
life of the contract.
    \6\ Enter in this block the portion of the contract that will be 
subject to price adjustment, e.g., ``each one-way mile of ambulance 
services,'' or the line items that will be subject to price 
adjustment.
    \7\ Enter in this block the commodity applicable to the index 
being used, as in an example for an ambulance contract, ``regular 
grade gasoline''.
    \8\ Enter the line items that will be subject to adjustment, as 
in an example for an ambulance contract, the line items that reflect 
the one-way cost per mile for ambulance services for the base year 
and for each option year.
---------------------------------------------------------------------------

    (d) The percentage of the price of the indexed commodity (see 
paragraph (c)) remains fixed throughout the life of the contract and 
is not subject to modification under this clause. Any pricing 
actions pursuant to the ``Changes'' clause or other clause or 
provision of the contract, except for this clause, will be priced as 
though there were no provisions for economic price adjustment.
    (e) All price adjustments shall be applicable only to the 
specific contract adjustment period to which the calculations are 
made. For every contract adjustment period, new calculations shall 
be made and new prices determined. Every adjustment during the Base 
Year shall be based on the original contract prices for that 
contract year and every adjustment during an option year shall be 
based on the original contract prices for that option year. The 
contracting officer must make new calculations for each and every 
contract adjustment period specified in paragraph (f) and at the 
beginning of each new option year, if different.
    (f) The dates of contract adjustment shall be___ \9\ and the 
starting dates of each option year, if not already included in these 
dates. The contracting officer shall retain a copy of the Base Index 
in the contract file and, on each date of adjustment specified 
herein, obtain a copy of the Adjusting Index. The contracting 
officer shall calculate the adjustment due and shall, within 5 
business days, issue a modification to the contract adjusting the 
contract or unit price(s). The adjusted contract or unit price(s) 
shall be effective for all orders placed or services provided after 
the date of contract adjustment, as specified in this paragraph (f), 
until the date of the next contract adjustment. If the contracting 
officer fails to act, the contractor shall request a contract 
adjustment in writing and any subsequent adjustment shall be 
retroactive to the applicable date of contract adjustment. The 
contractor's entitlement to price increases for a prior contract 
period (base year or option year) shall be waived unless the 
contractor's written request for an adjustment under this clause is 
received by the contracting officer no later than 30 days following 
the end of the base year for changes applicable to the base year, or 
30 days following the end of each option year for changes applicable 
to that option year. The Government's right to contract decreases 
for prior contract periods (base year or option year) shall be 
waived unless the contracting officer processes a contract 
modification no later than 30 days following the end of the base 
year for changes applicable to the base year, or 30 days following 
the end of each option year for changes applicable to that option 
year.
---------------------------------------------------------------------------

    \9\ Establish time periods for when the contracting officer will 
process adjustments. This could be ``the first day of each month'' 
or ``the first day of every quarter, January, April, July, and 
October'' or ``annually on October 1st'' or some other similar time 
periods. Since the contracting officer is responsible for initiating 
the change, the contracting officer must establish a reminder 
mechanism to ensure that the adjustments are accomplished on time.
---------------------------------------------------------------------------

    (g) An example of an adjustment calculation is provided herein 
for informational purposes only.
    (1) For purposes of this example, assume that a contract is for 
ambulance services, that the contract price is $2.10 per mile one 
way, that price adjustments will be made on the basis of the cost of 
gasoline, that the cost of gasoline represents 10% of the total cost 
per mile (the Base Cost is 10% of $2.10 (the per mile one way price 
in Line Item X), or $0.21), and that contract adjustments will be 
made quarterly. If the Base Index (the price of gasoline the week 
prior to receipt of bids) is $1.559 per gallon and the price of 
gasoline at the first date of contract adjustment is $2.129 per 
gallon, the calculations for contract price adjustment would be as 
follows:

 
 
 
Adjusting Index (most recent Index     $2.129 per gallon
 cost of gasoline as of the date of
 the first adjustment period).
Minus the Base Index (Index cost of    -$1.559 per gallon
 gasoline as of the date of receipt
 of offers).
Equals increase (or decrease) to the   $0.570
 Base Index.
Divide increase (or decrease) to the   $0.570 + $1.559 = .3656 *
 Base Index by the Base Index.         (36.56% increase)
 

    Base Cost of $0.21 (10% of $2.10) multiplied by .3656 = $0.0768 
unit price increase.
    New Unit price following the adjustment is $2.10 plus $0.0768 = 
$2.1768 per mile (rounded to $2.18).**
    * This figure shall be rounded to the fourth decimal place. When 
the fifth decimal is 1 to 4, the figure shall be rounded down, 5 to 
9, rounded up.
    ** The unit price adjustment shall be rounded up or down, as 
above, to match the number of decimal places in the original bid.
    (2) For the second contract adjustment period, all calculations 
would be based on the original contract bid price for that contract 
year, $2.10 per mile in this example. If the price of gasoline goes 
down during the second adjustment period to the original Base Index 
price of $1.559 per gallon, the adjusted contract price for that 
second period would return to $2.10 per mile (there would be a zero 
percent increase or decrease to the Base Cost and thus no change to 
the original bid price for that contract adjustment period). The 
contracting officer would then issue a contract modification 
returning the contract price from $2.18 to $2.10 per mile for that 
contract adjustment period. If, on the other hand, the price of 
gasoline actually went below the Base Index price, say to $1.449 per 
gallon, the calculations for the second economic price adjustment 
period would be as follows:

 
 
 
Adjusting Index (most recent Index     $1.449 per gallon
 cost of gasoline as of the date of
 the second adjustment period).
Minus the Base Index (Index cost of    -$1.559 per gallon
 gasoline as of the date of receipt
 of offers).
Equals increase (or decrease) to Base  ($0.110) (a negative $.11)
 Index.
Divide increase (or decrease) to the   ($0.11) + $1.559 = (.0706)
 Base Index by the Base Index.         (7.06% decrease)
 

    Base Cost of $0.21 (10% of $2.10) multiplied by (.0706) = 
($0.0148) unit price decrease.
    New Unit price following the second economic price adjustment is 
$2.10 minus $0.0148 = $2.0852 per mile (rounded to $2.09).
    (3) At the start of the first option year, the contracting 
officer shall recalculate the price per mile based on any changes in 
the price of gasoline from the original contract award date and 
based on the contractor's new first option year price per mile. 
Assuming the contractor's bid price per mile for the first option 
year was $2.25 per mile, the new Base Cost for gasoline would be 10% 
of $2.25, or $0.225 (note that the original percent figure from 
paragraph (c) (10% in this sample) stays constant throughout the 
life of the contract), but the Base Cost would change if the option 
year contract price changes. If the Adjusting Index for gasoline at 
the start of the first option year was now up to $1.899 per gallon, 
the new first option year price for the first contract adjustment 
period would be calculated as follows:

 
 
 
Adjusting Index (most recent Index     $1.899 per gallon
 cost of gasoline as of the first day
 of the first option period).
Minus the Base Index (Index cost of    -$1.559 per gallon
 gasoline as of the date of receipt
 of offers).
Equals increase (or decrease) to the   $0.340
 Base Index.

[[Page 13425]]

 
Divide the increase (or decrease) to   $0.34 + $1.559 = .2181
 the Base Index by the Base Index.     (21.81% increase)
 

    Base Cost of $0.225 (10% * of $2.25) multiplied by .2181 = 
$0.0491 unit price increase.
    New Unit price for the first contract adjustment period in the 
first option year is $2.25 plus $0.0491 = $2.2991 per mile (rounded 
to $2.30 per mile).
    * Note that the percentage remains constant (10%) but that the 
Base Cost has been increased for the first contract adjustment 
period in the first option year, since the Base Cost is a percentage 
of the first option year unit cost per mile (in this sample), and 
the unit cost per mile has increased in this sample for the first 
option year from $2.10 to $2.25.
    Although the new unit price for the first contract adjustment 
period of the first option year following application of the 
economic price adjustment in this sample would be $2.30 per mile, 
all economic price adjustment calculations made during that first 
option year would be based on the original first option year bid 
price ($2.25 in this sample). If in the second contract adjustment 
period of the first option year, the calculations resulted in a unit 
price increase for gasoline of $0.0332, the adjusted price for that 
period would be $2.25 + $0.0332 = $2.2832, rounded to $2.28 per 
mile.
    (h) Price adjustments pursuant to this clause, which shall be 
made by contract modification issued by the contracting officer, 
shall show the Base Index (see paragraph (b)(1)), the Adjusting 
Index, the Base Cost (see paragraph (c)), the mathematical 
calculations used to arrive at the adjusted contract unit price, and 
the effective date of the adjustment.
    (i) In the event that___ \10\ discontinues, or alters 
substantially, its method of calculating the Index cited herein, the 
parties shall mutually agree upon an appropriate substitute for 
determining the price adjustment described herein. If the 
contracting officer determines that the Index consistently and 
substantially fails to reflect market conditions, the contracting 
officer may modify the contract to specify use of an appropriate 
substitute index, effective on the date the Index specified herein 
begins to consistently and substantially fail to reflect market 
conditions.
---------------------------------------------------------------------------

    \10\ Enter in the name of the entity whose index is used in the 
clause. In the example for ambulance services using the ``Weekly 
U.S. Retail Gasoline Prices, Regular Grade'' index; the contracting 
officer would enter the ``Energy Information Administration, 
Department of Energy''.
---------------------------------------------------------------------------

    (j) Any dispute arising under this clause shall subject to the 
``Disputes'' clause of the contract.


(End of clause)
0
26. Section 852.216-73 is added to read as follows:


852.216-73   Economic Price Adjustment--State Nursing Home Care for 
Veterans (Alt #1).

As prescribed in 816.203-4(e)(3), insert the following clause:

Economic Price Adjustment--State Nursing Home Care For Veterans (Alt 
#1) (Date)

    This clause does not apply to rates for non-Medicaid nursing 
homes.
    (a) Rate Determination. The per diem rate is established by the 
current Medicaid rate for Medicaid approved nursing home care plus a 
fair market amount (percentage) to cover the costs of supplies, 
services, and equipment above that provided under Medicaid 
established by the local State Medicaid Agency (SMA). Rates 
established after the effective date of this contract will 
constitute a modification to the contract.
    (1) The Medicaid rate covers room, board, and routine nursing 
care services.
    (2) For all levels of nursing care a percentage is added for 
routine ancillary services/supplies, such as drugs, nursing 
supplies, oxygen (occasional use), x-ray, laboratory, physician 
visits, and rental equipment.
    (3) Special equipment, e.g. Clinitron bed, is not considered 
routine ancillary services. (and may not be provided by the VA).
    (4) Drug costs which comprise more than eight and one-half 
percent (8.5%) of the per diem rate are generally not considered 
routine ancillary supplies (and may not be provided by the VA).
    (5) Rehabilitation therapies will be provided as distinct levels 
of care, i.e., skilled, intermediate, and custodial care. Hospice 
Care and Dialysis are not included in the rate. Payment for Hospices 
and Dialysis services is provided by the VA or other payers as 
determined by the veteran with the VA's Approval.
    (b) Economic Price Adjustment. This clause does not apply to 
ancillary services that may be added or deleted from the agreement.
    (1) The per diem rate(s) will apply throughout the term of this 
contract, including extension period(s). The rate(s) may be adjusted 
only to reflect a change in a Medicaid rate as authorized by the 
SMA. Normally, this will be on an annual basis. The negotiated 
percentage above the Medicaid rate, to cover the all-inclusive 
nature of the contract, will not be renegotiated; but will be 
applied and added to the new Medicaid rate for the adjusted per diem 
rate for each level of care item. In this regard, new rates will be 
negotiated requiring a modification to the contact. Each per diem 
price adjustment under this clause is subject to the following 
limitations:
    (2) Any adjustment shall be limited to the effect of increases 
or decreases in the approved SMA's patient care components within 
the affected Medicaid groups.
    (3) Adjustments will occur no more frequently than those issued 
by the SMA.
    (4) No adjustments are made until the contracting officer 
receives from the SMA an authenticated copy of the new rates signed 
and dated at the top right of the document by the authorized nursing 
home official. Within ten days after this occurs, the contracting 
officers will execute an approval signature and date at the 
approximate locations of the nursing home official's signature, the 
action of which will serve as the effective date of the adjusted 
rate. A copy of the fully executed document will be sent to the 
nursing home official for record keeping purposes.


(End of clause)
0
27. Section 852.216-74 is added to read as follows:


852.216-74  Economic Price Adjustment--Medicaid Labor Rates (Date) (Alt 
#2)

    As prescribed in 816.203-4(e)(4), insert the following clause:

Economic Price Adjustment--State Nursing Home Care for Veterans (Alt 
#1) (Date)

    This clause does not apply to rates for non-Medicaid nursing 
homes.
    (a) The contractor shall notify the contracting officer if, at 
any time during contract performance, the Medicaid rate set by the 
State Medical Agency (SMA) for contract line item increases or 
decreases in the Schedule. The contractor shall furnish this notice 
within 60 days after the increase or decrease, or within any 
additional period that the contracting officer may approve in 
writing, but not later than the date of final payment under this 
contract. The notice shall include the contractor's proposal for an 
adjustment in the contract unit prices to be negotiated under 
paragraph (b) of this clause, and shall include, in the form 
required by the contracting officer, supporting data explaining the 
cause, effective date, and the amount of the increase or decrease 
and the amount of the contractor's adjustment proposal.
    (b) The contracting officer and the contractor shall negotiate a 
price adjustment to the contract's unit prices and its effective 
date upon receipt of the notice and data under paragraph (a) of this 
clause. However, the contracting officer may postpone the 
negotiations until an accumulation of increases and decreases of the 
Medicaid labor rates (including fringe benefits) shown in the 
Schedule results in an adjustment allowable under paragraph (c)(3) 
of this clause. The contracting officer shall modify this contract 
as follows:
    (1) Include the price adjustment and its effective date;
    (2) Revise the Medicaid labor rates (including fringe benefits) 
as shown in the Schedule to reflect the increases or decreases 
resulting from the SMA adjustment. The contractor shall continue 
performance pending agreement on, or determination of, any 
adjustment and its effective date.
    (c) Any price adjustment under this clause is subject to the 
following limitations:
    (1) Adjustment shall be limited to the effect on unit prices of 
the increases or decreases of the Medicaid rates of pay for labor 
(including fringe benefits) shown in the Schedule. There shall be no 
adjustment for changes in rates or unit prices other than those 
shown in the Schedule.
    (2) No upward adjustment shall apply to supplies or services 
that are required to be delivered or performed before the effective 
date of the adjustment, unless the contractor's failure to deliver 
or perform according to the delivery schedule results from causes 
beyond the contractor's control and without its fault or negligence, 
within the meaning of the Default clause.

[[Page 13426]]

    (3) There shall be no adjustment for any change in rates of pay 
for labor (including fringe benefits) or unit prices for material 
which would not result in a net change of at least three percent of 
the then-current total contract price. This limitation shall not 
apply, however, if, after final delivery of all contract line items, 
either party requests an adjustment under paragraph (b) of this 
clause.
    (4) The aggregate of the increases in any contract unit price 
made under this clause shall not exceed 10 percent of the original 
unit price. There is no percentage limitation on the amount of 
decreases made under this clause.
    (d) The contracting officer, precluding certified cost and 
pricing data may examine the contractor's books, records, and other 
supporting data relevant to the cost of labor (including fringe 
benefits) and material during all reasonable times until the end of 
3 years after the date of final payment under this contract or the 
time periods specified in Subpart 4.7 of the Federal Acquisition 
Regulation (FAR), whichever is earlier.


(End of clause)

0
28. Section 852.216-75 is added to read as follows:


852.216-75   Economic Price Adjustment Clause--Fuel Surcharge.

    As prescribed in 816.203-4(e)(5), insert the following clause:

Economic Price Adjustment Clause--Fuel Surcharge (Date)

    (a) To the extent that contract fuel cost increases are provided 
for by this economic price adjustment clause, the contractor 
warrants that the prices in this contract for any option periods do 
not include any amount to protect against such contingent fuel cost 
increases.
    (b) The fuel cost index, for the purpose of price adjustment 
under this clause, shall be the ``Weekly Retail On-Highway Diesel 
Prices Index.''
    The Base Fuel Cost, for the purpose of price adjustments under 
this clause, shall be the most recent Index Weekly Average Diesel 
Fuel Price per gallon published prior to the closing date for 
receipt of offers, or the due date for receipt of final proposal 
revisions if discussions are held.
    (c) For purposes of this clause, it will be conclusively 
presumed that x% increase or decrease of the Base Fuel Cost 
represents a reasonable fluctuation of diesel fuel prices. The Base 
Fuel Cost (+/-) x% price range will be determined for the base 
contract year and will remain constant throughout the life of the 
contract, including option years. Base Fuel Cost price range is 
documented at time of contract award.
    (d) Increases (or decreases) in the diesel fuel costs (Base Fuel 
Cost x%) as listed on the Index two weeks prior to the end of each 
calendar quarter can trigger a request from the contractor to the 
Government (or from the Government to the contractor) for cost 
adjustments. Notice must be in writing to the Subsistence Prime 
Vendor (SPV) contracting officer (or contracting officer's 
representative) no less than ten days prior to the beginning of the 
next quarter.
    (e) Since fuel cost is only a part of the SPV Contracted 
distribution cost, the adjustment will be made as a penny per 
delivered case for every ten cent fuel price per gallon increase or 
decrease to the Base Fuel Cost x%. The difference is rounded down to 
the nearest whole cent and will be added to last line of each 
invoice noted as ``Fuel Adjustment''.

 
 
 
Example calculation of fuel price change:   Price $2.50 Base (+ or -)
                                             15% Average National Diesel
                                             Fuel $2.88-$2.13.
3rd QTR (3rd week June) first year          $3.05-2.88 = $ .17 (rounded
                                             down to 10 cents) Add one
                                             cent per delivered.
Fuel Price $3.05 Calculation:               Case to each invoice,
                                             starting first Monday of
                                             July.
3rd QTR Diesel Fuel Price decrease          $2.13-1.80 = $ .33 (rounded
                                             down to $.30 cents) Credit
                                             each. invoice
$1.80 Calculation:                          $.03 cents per delivered
                                             case.
 

    (f) Once approved, the date for contract fuel price adjustment 
will be the first Monday of the first month of each quarter unless 
otherwise designated at time of contract award.
    (g) The contracting officer shall retain a copy of the Base Fuel 
Index establishing the Base Fuel Cost and the calculation of the 
price range incorporating the (+/-) x% adjustment in the contract 
file. All subsequent changes will be documented within the contract 
file and communicated to the contractor and VA SPV customers via 
email one week prior to the fuel price adjustment implementation.
    (h) Any adjustments for fuel price changes will only be 
implemented if requested in writing, reviewed by both parties, and 
provided within the designated time frames. No retroactive cost 
adjustments will be made. A contract modification will be issued at 
inception of first increase or decrease detailing Base Fuel Cost, 
price range, and calculation of first fuel adjustment charge. 
Adjustment will remain in effect with quarterly calculation changes 
as needed until price falls within Base Fuel Cost price range. A 
contract modification will be issued to terminate the adjustment 
when price returns to Base Fuel Cost (+/-) x% price range.
    (i) In the event that ``the Energy Information Administration, 
Department of Energy'' discontinues, or substantially alters its 
method of calculating the national average diesel fuel prices cited 
herein, the parties shall mutually agree upon an appropriate 
substitute for determining the price adjustment described herein. If 
the contracting officer determines the Index consistently and 
substantially fails to reflect market conditions, the contracting 
officer may modify the contract to specify use of an appropriate 
substitute Index, effective on the date the Index specified herein 
begins to consistently and substantially fail to reflect market 
conditions.
    (j) Any dispute arising under this clause shall be determined in 
accordance with and subject to the ``Disputes'' clause of the 
contract.


(End of clause)
* * * * *
0
29. Section 852.228-71 is revised to read as follows:


852.228-71   Indemnification and Insurance.

    As prescribed in 828.306, insert the following clause:

Indemnification and Insurance (Date)

    (a) Indemnification. The contractor expressly agrees to 
indemnify and save the Government, its officers, agents, servants, 
and employees harmless from and against any and all claims, loss, 
damage, injury, and liability, however caused, resulting from, 
arising out of, or in any way connected with the performance of work 
under this contract. Further, it is agreed that any negligence or 
alleged negligence of the Government, its officers, agents, 
servants, and employees, shall not be a bar to a claim for 
indemnification unless the act or omission of the Government, its 
officers, agents, servants, and employees is the sole, competent, 
and producing cause of such claims, loss, damage, injury, and 
liability. At the option of the contractor, and subject to the 
approval by the contracting officer, insurance coverage may be 
employed as guaranty of indemnification.
    (b) Insurance. Satisfactory insurance coverage is a condition 
precedent to award of this contract. In general, a successful bidder 
must present satisfactory evidence of full compliance with State and 
local requirements, or those below stipulated, whichever are the 
greater. More specifically, workers' compensation and employer's 
liability coverage will conform to applicable State law requirements 
for the service defined, whereas general liability and automobile 
liability of comprehensive type shall, in the absence of higher 
statutory minimums, be required in the amounts per vehicle used of 
not less than $200,000 per person and $500,000 per occurrence for 
bodily injury and $20,000 per occurrence for property damage. State-
approved sources of insurance coverage ordinarily will be deemed 
acceptable to the Department of Veterans Affairs, subject to timely 
certifications by such sources of the types and limits of the 
coverages afforded by the sources to the bidder. [Contracting 
Officer's Note: In those instances where airplane service is to be 
used, substitute the word ``aircraft'' for ``automobile'' and 
``vehicle'' and modify coverage to require aircraft public and 
passenger liability insurance of at least $200,000 per passenger and 
$500,000 per occurrence for bodily injury, other than passenger 
liability, and $200,000 per occurrence for property damage. Coverage 
for passenger liability bodily injury shall be at least $200,000 
multiplied by the number of seats or passengers, whichever is 
greater.]


(End of clause)
* * * * *
0
30. Section 852.228-73 is added to read as follows:

[[Page 13427]]

852.228-73  Indemnification of Contractor--Hazardous Research Projects.

    As prescribed in 828.7003, insert the following clause:

Indemnification of Contractor--Hazardous Research Projects (Date)

    (a) This contract involves work with a risk of an unusually 
hazardous nature as specifically defined in the contract. The 
government shall indemnify the contractor, including subcontractors 
of any tier, against losses or liability specified in paragraphs (b) 
and (c) of this clause if:
    (1) The losses or liability arise out of or results from a risk 
defined in this contract as unusually hazardous, and
    (2) The losses or liability are not covered by the financial 
protection required by paragraph (c).
    (b) The Government shall indemnify a contractor for:
    (1) Liability (including reasonable expenses of litigation or 
settlement) to third persons for death, bodily injury, or loss of or 
damage to property from a risk that the contract defines as 
unusually hazardous. This indemnification shall not cover liability 
under State or Federal worker's injury compensation laws to 
employees of the contractor who are both:
    (i) Employed at the site of the contract work; and
    (ii) Working on the contract for which indemnification is 
granted.
    (2) The Government shall also indemnify the contractor for loss 
of or damage to property of the contractor from a risk that the 
contract defines as unusually hazardous.
    (c) A contractor shall have and maintain an amount of financial 
protection to cover liability to third persons and loss of or damage 
to the contractor's property. Financial protection may include 
private insurance, private contractual indemnities, self-insurance, 
other proof of financial responsibility, or a combination that 
provides the maximum amount required. The financial protection 
provided must meet one of the following:
    (1) The maximum amount of insurance available from private 
sources, or
    (2) A lesser amount that the Secretary establishes after taking 
into consideration the cost and terms of private insurance.
    (d) Actions in event of a claim:
    (1) The contractor shall notify the contracting officer of any 
claim or suit against the contractor for death, bodily injury, or 
loss of or damage to property; and
    (2) The Government may elect to control or assist in the defense 
of any suit or claim for which indemnification is provided in the 
contract.

[FR Doc. 2017-04877 Filed 3-10-17; 8:45 am]
 BILLING CODE 8320-01-P