The Economic Price Adjustment (EPA) Clause is a contractual provision included in GSA Schedule contracts that outlines the conditions under which a contractor may adjust prices for products or services during the life of the contract. This clause ensures pricing flexibility while maintaining fairness and transparency for both contractors and the government. The EPA Clause is a core part of contract pricing policy and must be understood and followed carefully to avoid compliance violations.
Purpose of the EPA Clause
The primary purpose of the EPA Clause is to allow contractors to adjust their contract prices in response to certain market-driven or cost-based factors without requiring a full recompetition or renegotiation. These adjustments are only permitted under predefined circumstances and must be properly documented.
The clause protects contractors from inflation or cost increases beyond their control while also protecting the government from unjustified or excessive price changes. It creates a balance between contract stability and economic realities over a multi-year contract term.
Types of EPA Clauses
Different types of EPA clauses may be used in GSA contracts, depending on how the original pricing was established. Each type has its own rules for implementation and supporting documentation.
Catalog-Based EPA (FAR 552.216-70)
This type of EPA applies when pricing is based on a published commercial price list or catalog. Under this clause, contractors may request price increases or decreases that reflect changes in their commercial pricing, provided that:
- The new prices are reflected in the contractor’s published commercial catalog
- The same price changes are offered to the general public or commercial customers
- GSA receives sufficient documentation, such as updated catalogs or price lists
This clause is commonly used for commercial item suppliers that maintain standard pricing documentation across customer segments.
Market Index-Based EPA
This clause allows for pricing adjustments based on a third-party economic index, such as the Consumer Price Index (CPI), Producer Price Index (PPI), or other government-approved benchmarks. It is typically used for commodities or services where costs fluctuate based on external market forces.
Key characteristics:
- Adjustments are tied directly to movements in the index
- Increases are limited to defined thresholds per period (often annually)
- Decreases may also be required if the index shows a drop
Contractors must clearly specify the index and adjustment formula in the contract.
Cost-Based EPA
Less commonly used in GSA Schedules, this type of clause permits adjustments based on actual cost increases in labor, materials, or overhead. It requires detailed cost justification and is typically limited to contracts that involve customized or labor-intensive services.
Cost-based adjustments must:
- Be supported by verifiable cost data
- Be reviewed and approved by the Contracting Officer
- Include detailed explanations and calculations
This clause is more complex and carries higher compliance risk due to the level of documentation required.
Limitations and Restrictions
The EPA Clause does not provide unrestricted authority to raise prices. Key limitations include:
- Timing Restrictions: Most EPA clauses only allow one or two price increases per year
- Notice Periods: Contractors must provide advance notice, typically 30 days before the effective date
- Ceiling Limits: GSA may place a cap on the total allowable increase during a given period
- Justification Requirements: All adjustments must be accompanied by supporting data and explanations
- Contracting Officer Approval: No price change is valid until the modification is approved by the Contracting Officer
Failure to follow these rules can result in rejection of the request, delays, or even audit findings.
EPA Clause in Practice
Contractors must submit price adjustment requests through the eMod system. A typical EPA request includes:
- A cover letter explaining the basis for the increase
- Updated pricing documentation (catalog, index report, or cost data)
- A table comparing current and proposed prices
- A justification that links the change to the applicable EPA clause
- Certification that the pricing remains fair and reasonable
Once submitted, the Contracting Officer will review the request and may ask for clarification or additional evidence. If approved, the contract will be modified to reflect the new pricing and the catalog updated accordingly.
Contractor Considerations
To manage EPA adjustments effectively, contractors should:
- Understand which EPA clause applies to their contract
- Monitor commercial price lists or index trends regularly
- Maintain complete and up-to-date pricing documentation
- Submit requests proactively, especially before major contract actions
- Be prepared for GSA review and follow-up questions
Contractors that fail to manage the EPA process correctly risk noncompliance, contract delays, or pricing disputes.
Conclusion
The Economic Price Adjustment (EPA) Clause is a vital contract mechanism that enables GSA Schedule contractors to maintain pricing that reflects market conditions while preserving government protections against overpricing. By understanding the type of EPA clause in their contract, following proper procedures, and maintaining accurate documentation, contractors can responsibly adjust prices and ensure ongoing contract compliance.
