The Effect of Economic Price Adjustment Clauses and Selected Provisions of These Clauses on The Profit Earned and the Profit Rates Realized on Fixed-Price Type Contracts.

摘要

Economic price adjustment (EPA) clauses are currently being used on Department of Defense major weapon system fixed-price type contracts to protect the contractor and the government against significant economic fluctuations in contract prices. The Armed Services Procurement Regulations provide general guidelines regarding the use of EPA clauses. Thus, there are many varieties of EPA clauses. They differ in the manner in which certain EPA provisions are implemented and in the methods of adjustment utilized. Little research has been conducted regarding how EPA clauses are actually being implemented and what effect these clauses have on contract cost and profit. In this study quantitative computations were performed in order to predict the effect of EPA clauses currently in use on four fixed-price type contracts on the profit earned and the profit rates realized on these contracts. Also, the effect of varying selected provisions of the contractual EPA clauses on the profit earned and the profit rates realized on the contracts was determined. The results presented in this study should assist in determining whether changes in EPA provisions should be made in order to better support Department of Defense profit policy objectives. (Author)