Clause and Effect: Strategic Economic Price Adjustment Clauses

摘要

In the situation described above, if the purchaser had not included the EPA clause and therefore the supplier kept in his 30% contingency on the material for the two year period, the 1st shipment would have cost $1,075,000 or an increase of $66,850 over the adjusted price with the EPA clause. Of course it could go the other way if the index had increased over 30% the purchaser would have paid more than the original price with contingency built in. But, as also often happens in volatile markets, the index for the adjustment could also have gone down even below the base index resulting in additional savings to the purchaser. This of course was a simple case. Many situations requiring the use of EPA clauses can be complex and of course will need to address additional issues such as contract changes, but by following the basics described herein, the supply manager has another powerful tool for continuous improvement.