[Federal Register Volume 83, Number 35 (Wednesday, February 21, 2018)]
[Rules and Regulations]
[Pages 7401-7410]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-03164]


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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)

AGENCY: Department of Veterans Affairs.

ACTION: Final rule.

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SUMMARY: The Department of Veterans Affairs (VA) adopts as final the 
proposed amendments to VA regulations. This rulemaking prescribes five 
new Economic Price Adjustment clauses for firm-fixed-price contracts, 
identifies VA's task-order and delivery-order ombudsman, clarifies the 
nature and use of consignment agreements, adds policy coverage on bond 
premium adjustments and insurance under fixed-price contracts, and 
provides for indemnification of contractors for medical research or 
development contracts. This document adopts the proposed rule published 
on March 13, 2017, as a final rule with five technical non-substantive 
changes.

[[Page 7402]]


DATES: This rule is effective on March 23, 2018.

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: This document adopts as a final rule without 
change a proposed rule amending the VA Acquisition Regulation (VAAR). 
On March 13, 2017, VA published a proposed rule in the Federal Register 
(82 FR 13418) which announced VA`s intent to amend regulations for 
parts 816 and 828. On April 4, 2017, VA published in the Federal 
Register a correction to the proposed rule at 82 FR 16332.
    We provided a 60 day comment period for interested parties to 
submit comments to VA on or before May 12, 2017. Five respondents 
submitted comments to the proposed rule. A discussion of the comments 
is provided below.
    One commenter asserted that the restrictions imposed on VA 
regarding 38 U.S.C. 8127 can often impact the efficiency of using the 
combined synopsis/solicitation method. The commenter recommends: 
``Creating a policy and procedure for COs to utilize the commercial 
combo and still comply with the ``purpose'' of 38 U.S.C. 8127 but COs 
will need guidance and limitations.''
    The parts in this final rule do not address acquisition of 
commercial items or simplified acquisition procedures set forth in the 
Federal Acquisition Regulation (FAR) parts 12 and 13 or VAAR parts 812 
and 813. However, in response to the comment, VA does not concur. In 
order to satisfy the requirements of 38 U.S.C. 8127, VA must ensure 
that preference is given for awards to service-disabled veteran-owned 
small businesses and veteran-owned small businesses, even for 
acquisition of commercial items under FAR part 13. Accordingly, VA has 
revised its market research process to facilitate the identification of 
verified and qualified veteran-owned firms for contract awards. VA's 
contracting officers will be able to perform the required market 
research and identify veteran-owned firms more quickly and efficiently 
as the learning curve diminishes. VA is committed to complying with 38 
U.S.C. 8127, ensuring the mission is not compromised, and that 
contracting officers are making awards in a timely fashion. 
Additionally, implementation of 38 U.S.C. 8127, the Veterans Benefits, 
Healthcare, and Information Technology Act of 2006, does not prohibit 
the use of the combined synopsis/solicitation method set forth in FAR 
part 12.
    One commenter expressed general support for veterans programs and 
complimented the revisions made in the rule. VA appreciates the 
commenter's support of veterans.
    One commenter noted that the proposed rule does not require formal 
rulemaking. VA removed the term ``formal'' in the description of its 
rulemaking process. However, in accordance with 41 U.S.C. 1707 (the 
Office of Federal Procurement Policy Act), a procurement policy, 
regulation, procedure, or form (including an amendment or modification 
thereto) may not take effect until 60 days after it is published for 
public comment in the Federal Register. During this process where VA is 
examining its VA Acquisition Regulation, proposed rules will be 
published for public comment in accordance with the Federal rulemaking 
process.
    One commenter stated that this rule could benefit from further 
explanation as currently in VA there is confusion regarding how 
consignment agreements are entered into. The first sentence of section 
816.770 has been changed from ``A consignment agreement is not a 
contract'' to ``Consignment agreements shall only be established under 
a contract and by a contracting officer.''
    The final rule informs the public that consignment agreements are 
permitted to be used at VA. As stated in the proposed rule: ``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.'' Internal agency guidance and procedures relating to 
consignment agreements are included in M816, the corresponding VA 
Acquisition Manual (VAAM) part that will be issued within VA when the 
revised VAAR part 816 is published. The information included in the 
VAAM will address the concerns raised by the commenter.
    One commenter recommends that VA consider the use of cascading set-
asides in FAR part 16 related acquisitions. The commenter also takes 
issue with VA's implementation of 38 U.S.C. 8127 in that it doesn't 
explicitly allow cascading set-asides and believes that this slows the 
procurement process. We are making no change to VAAR Part 816 at this 
time based on this comment.
    This comment was beyond the scope of the proposed rule. Guidance on 
cascading set-asides would more appropriately be placed in VAAR Part 
819. VA will consider including guidance on cascading when VA proposes 
revisions to VAAR Part 819. VA is committed to complying with 38 U.S.C. 
8127, ensuring the mission is not compromised, and that contracting 
officers are making awards in a timely fashion.

Technical Non-Substantive Changes to the Proposed Rule

    This final rule removes the citation of 38 U.S.C. 501 from parts 
828 and 852, 41 U.S.C 1121 and 41 U.S.C. 1702 to the authority of parts 
816, 828, and 852 which address overall direction of procurement 
policy, acquisition planning and management responsibilities.
    This final rule revises subsection 816.203-4(f) to remove ``or 
under a VA provider agreement.'' This clarifies that the prescribed 
clause applies to VA contracts and should not be utilized for VA 
provider agreements that are not made under a contract. Clause 852.216-
72, ``Proportional Economic Price Adjustment of Contract Price(s) Based 
on a Price Index,'' included in a footnote the sentence, ``Selection of 
the wrong index may result in a claim and reformation of a contract.'' 
This sentence has been removed. The deleted text represents internal VA 
guidance for VA contracting personnel and is not appropriate for 
inclusion in a regulation.
    This final rule revises section 828.306(b) by replacing ``VA Manual 
MP-1, Part II, Chapter 3'' with ``VA Policy'' in reference to the 
policy document for emergency or sporadic ambulance services. This 
change was made to avoid the need to amend the regulation should VA 
place this policy in a different document in the future.
    This final rule revises section 852.216-73(a) by including ``by a 
contracting officer'' at the end of the paragraph. This is to clarify 
that contract modifications must be performed by a contracting officer. 
Sections 852.216-73(a) and 852.216-74 are revised to remove the terms 
``ALT #1'' and ``ALT #2'' from the titles of the clauses as well as 
from their prescriptions at section 816.203-4(e)(3) and (4).
    Based on the rationale set forth in the proposed rule and in this 
document, VA is adopting the provisions of the proposed rule as a final 
rule with the changes discussed above.

Paperwork Reduction Act

    Although this action contains provisions constituting collections 
of

[[Page 7403]]

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 
final rule. The information collection requirements for 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 final 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 final rule will 
generally be small business neutral. The overall impact of the final 
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 final 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 final rule is exempt from the initial and final regulatory 
flexibility analysis requirements of sections 603 and 604.

Executive Orders 12866, 13563 and 13771

    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 to be a significant regulatory action under E.O. 12866, 
because it raises novel legal or policy issues arising out of legal 
mandates, the President's priorities, or the principles set forth in 
this Executive order. 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 website at 
http://www.va.gov/orpm by following the link for VA Regulations 
Published from FY 2004 Through Fiscal Year to Date. This rule is not 
expected to be subject to the requirements of E.O. 13771, Reducing 
Regulation and Controlling Regulatory Costs, because this rule is 
expected to result in no more than de minimis costs.

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 final rule will have no such effect on 
State, local, and tribal Governments or on the private sector.

List of Subjects

48 CFR Part 816

    Government procurement.

48 CFR Part 828

    Government procurement, Insurance, Surety bonds.

48 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 the Department of Veterans Affairs. Gina S. 
Farrisee, Deputy Chief of Staff, Department of Veterans Affairs, 
approved this document on December 15, 2017, for publication.

    Dated: February 12, 2018.
Consuela Benjamin,
Regulations Development Coordinator, Office of Regulation Policy & 
Management, Office of the Secretary, Department of Veterans Affairs.

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

PART 816--TYPES OF CONTRACTS

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

    Authority:  40 U.S.C. 121(c); 41 U.S.C. 1121; 41 U.S.C. 1702; 
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, consisting of section 816.203, 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:

[[Page 7404]]

    (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 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 for 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,'' 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 or contract.
    (4) The contracting officer shall insert the clause at 852.216-74, 
``Economic Price Adjustment--Medicaid Labor Rates,'' in solicitations 
and firm fixed price contracts when the conditions specified in FAR 
16.203-4(c)(1) apply. The clause is modifiable by increasing the 10-
percent maximum limit on aggregate increases specified in paragraph 
(c)(4) of this section, 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) 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 making payments under contracts for nursing home care for Veterans.


816.504  [Removed]

0
4. Section 816.504 is removed.

0
5. Section 816.505 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.

    Consignment agreements shall only be established under a contract 
and by a contracting officer. A consignment agreement 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 is 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.

PART 828--BONDS AND INSURANCE

0
7. The authority citation for part 828 is amended to read as follows:

    Authority:  38 8127-8128 and 8151-8153; 40 U.S.C. 121(c); 41 
U.S.C 1121; 41 U.S.C. 1702; and 48 CFR 1.301-1.304.

Subpart 828.1--Bonds and Other Financial Protections 828.101, 
828.101-2, and 828.101-70 [Removed]

0
8. Sections 828.101, 828.101-2, and 828.101-70 are removed.


828.106-6   [Removed]

0
9. Section 828.106-6 is removed.

0
10. 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 Adjustment, in solicitations and contracts when performance and 
payment bonds or payment protection is required.

Subpart 828.2 [Removed and Reserved]

0
11. Subpart 828.2 is removed and reserved.

0
12. 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 as Subpart 828.70]

0
13. Subpart 828.71 is redesignated as subpart 828.70 and revised to 
read as follows:

Subpart 828.70--Indemnification of Contractors for Medical Research or 
Development Contracts
828.7000 Scope of subpart.
828.7001 Extent of indemnification.
828.7002 Financial protection.
828.7003 Indemnification clause.

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.


828.7001   Extent of indemnification.

    (a) A contract for medical research or development authorized by 38 
U.S.C. 7303, may provide that the Government will indemnify the 
contractor against losses or liability specified in paragraphs (b) and 
(c) of this section if all of the following apply:
    (1) The contract work involves a risk of an unusually hazardous 
nature.
    (2) The losses or liability arise out of the direct performance of 
the contract.
    (3) The losses or liability are not covered by the financial 
protection required under 828.7002.
    (b) The Government may indemnify a contractor for 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. The

[[Page 7405]]

indemnification will not cover liability under State or Federal 
worker's injury compensation laws to employees of the contractor who 
are both:
    (1) Employed at the site of the contract work; and
    (2) Working on the contract for which indemnification is granted.
    (c) The Government may indemnify the contractor for loss of or 
damage to property of the contractor from a risk that the contract 
defines as unusually hazardous.
    (d) A contract that provides for indemnification in accordance with 
this subpart must also require that:
    (1) The contractor must 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 choose to control or assist in the defense 
of any suit or claim for which indemnification is provided in the 
contract. (38 U.S.C. 7317)


828.7002   Financial protection.

    (a) 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 that meets 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.
    (b) 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. If a contractor elects to self-insure, the contractor must 
provide the contracting officer, before award, proof of financial 
responsibility up to the maximum amount required. (38 U.S.C. 7317)


828.7003   Indemnification clause.

    The contracting officer shall include the clause, 852.228-72, 
``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
14. The authority citation for 48 CFR part 852 is revised to read as 
follows:

    Authority:  38 U.S.C. 8127-8128, and 8151-8153; 40 U.S.C. 
121(c); 41 U.S.C. 1121(c)(3); 41 U.S.C 1702; and 48 CFR 1.301-1.304.


852.216-70  [Removed and Reserved]

0
15. Section 852.216-70 is removed and reserved.

0
16. 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.
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    (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.
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    \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.
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    (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 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.
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    (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

[[Page 7406]]

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 period...  196.6
Minus the Base Index.....................  -188.0
Equals the Index Point Change............  8.6
Index Point Change Divided by the Base     8.6/188.0 = .0457 *
 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) of this clause, 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) of this clause 
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
17. 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. 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 website (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 (%) \5\ of the price of ___ \6\ represents 
the

[[Page 7407]]

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 cost    $2.129 per gallon.
 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 Base  $0.570.
 Index.
Divide increase (or decrease) to the Base  $0.570 + $1.559 = .3656 *
 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 cost    $1.449 per gallon.
 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 Base  ($0.11) + $1.559 = (.0706) (7.06% decrease).
 Index by the Base Index.
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

[[Page 7408]]

contract adjustment period would be calculated as follows:

 
 
 
Adjusting Index (most recent Index cost    $1.899 per gallon.
 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 Base  $0.340.
 Index.
Divide the increase (or decrease) to the   $0.34 + $1.559 = .2181 (21.81% increase).
 Base Index by the Base Index.
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
18. Section 852.216-73 is added to read as follows:


852.216-73  Economic price adjustment--state nursing home care for 
veterans.

    As prescribed in 816.203-4(e)(3), insert the following clause:
ECONOMIC PRICE ADJUSTMENT--STATE NURSING HOME CARE FOR VETERANS (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 require a 
modification to the contract by the Contacting Officer.
    (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 
Officer 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)


852.216-74  [Amended]

0
19. Subsection 852.216-74 is added to read as follows:


852.216-74  Economic price adjustment--medicaid labor rates.

    As prescribed in 816.203-4(e)(4), insert the following clause:
ECONOMIC PRICE ADJUSTMENT--MEDICAID LABOR RATES (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 Medicaid 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

[[Page 7409]]

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.
    (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)

852.216-75  [Amended]

0
20. 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   Price $2.50 Base (+ or -) 15%
 change:.                            Average National Diesel Fuel $2.88-
                                     $2.13.
3rd QTR (3rd week June) first       $3.05-2.88 = $.17 (rounded down to
 year. Fuel Price $3.05              10 cents) Add one cent per
 Calculation:                        delivered 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
21. 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.

[[Page 7410]]

    (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
22. Section 852.228-73 is added to read as follows:


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.


(End of clause)

[FR Doc. 2018-03164 Filed 2-20-18; 8:45 am]
 BILLING CODE 8320-01-P