The news: On September 9, 2022, DoD’s pricing chief John Tenaglia issued a memo opening the door of possibility for contractors performing a firm fixed price contract to request equitable adjustments as a relief for inflation.
To be sure this door is not all wide open. The memo states that where there are extraordinary circumstances contractors may seek and upward adjustment of an “existing firm – fixed priced contract to account for current economic conditions” and DoD will entertain an upward adjustment under Part 50 of the Federal Acquisition Regulations (FAR), subject to available funding.
What does this mean for contractors: Generally, where there was no opportunity before to request an equitable price adjustment for firm – fixed – price contracts there is now a possibility to do so. Seeking relief under Part 50 of FAR is a high bar, it is not insurmountable if you are prepared and follow its requirements.
Become familiar with Part 50 of the FAR. Make the request in good faith, be precise in the adjustment request, state the facts, and show how you reached your conclusion that an adjustment is justified. Be prepared to provide a statement of payments received, history of performance, identify the people who have knowledge of the facts, and, among others, show evidence of steps take to mitigate losses. Start early start soon given that an equitable adjustment will be granted subject to available funds.
In sum, be prepared to support your request for equitable adjustment with facts and data and be prepared to defend the soundness of your request.