In March 2022, the GSA introduced Economic Price Adjustment (EPA) exemptions to compensate for possible losses that GSA Schedule contract holders may face due to changes in the worldwide economic situation. Recently, the GSA revised and extended the Moratorium on EPA restrictions. Here is what you need to know about this.
- What does the revised Moratorium mean for GSA contractors?
- How long are GSA’s EPA changes in effect?
- Need help increasing your GSA pricing?
What happened?
Normally, GSA contract price cannot be increased by GSA contractors at will; an EPA modification mechanism must be utilized for that. EPA stands for Economic Price Adjustment. It permits GSA contract holders to make adjustments to contract prices, but only with certain restrictions.
In March, the GSA suspended these restrictions by introducing the Moratorium. The Moratorium on GSA EPA restrictions gave contractors more price flexibility, and so supported them in a difficult economic situation, so that the contractors in turn could continue providing their services and products to the GSA.
Now, the GSA revises the Moratorium on Economic Price Adjustment restrictions, and extends it.
How it was before
GSA contract price increases – explained
Previously, holders of GSA Multiple Award Schedule (MAS) contracts had to submit Economic Price Adjustment modifications to the GSA. The purpose of the EPA mechanism is clear: in order to cope with inflation and changes in the current economic environment, contractors need a way to increase their prices and rates to retain profitability.
Indeed, without a way to adjust prices, vendors are forced to sell their products at a loss or stop selling completely. Needless to say, such an outcome is harmful for federal agencies too, because they will need to find another contractor to replace the one that stopped selling. And if such interruptions happen constantly, it is only a matter of time when federal buyers will experience lack of offers, which in turn may lead to deficiency and a drop in quality levels.
The GSA acknowledges this, so it uses EPAs as a way to assist GSA contract holders to keep up with the ever-changing economy. However, the GSA restricts uncontrolled price increases to prevent contractors from abusing the mechanism to the disadvantage of the GSA and federal buyers.
Standard Economic Price Adjustment restrictions
When everything goes as it should, the standard EPA restrictions are:
- Contractors cannot increase the price for an item more than thrice during a 12-month period.
- Contractors cannot increase the price over the predefined ceiling price (previously, no more than 10% increase per year, later – no more than 4% per year in total)
- Contractors cannot increase prices during the first year of the contract or the first year after that item subject to increase is added to the contract.
- If a contractor submits a price change, he or she cannot submit another earlier than 30 days after the last price increase.
- Contractors cannot submit price changes during the last 60 days of the contract period.
That’s how it was.
What has changed with the Moratorium
When the GSA issued the Moratorium on EPA restrictions on March 17th, its purpose was to allow the GSA to continue offering the complete range of products, solutions and services.
Specifically, the memorandum for Federal Acquisition Services heads of contracting activity puts the temporary Moratorium on enforcement of certain restrictions:
- Lowers the approval for price increases above the EPA clause ceiling in 552.216-70, from the contracting director to one level above the GSA contracting officers;
- Relaxes time limitations on EPA increases;
- Relaxes limitations on the number of EPA increases a contractor may request;
- Clarifies that if a contractor has removed an item from their Schedule contract, GSA will not enforce the limitation on adding the same item back at a higher price.
In September, the Moratorium was revised and extended further.
What does the revised Moratorium mean for GSA contractors?
First of all, now you can submit Economic Price Adjustments at any time, not just three times per year. You can now do it at any time, even every day if you want, no need for the 30 days to cool down between two consecutive price adjustments. Finally, you can exceed the EPA ceiling price. With growing inflation this year, that’s not only reasonable, but actually a recommended way to deal with GSA pricing.
Also, GSA contracting officers are instructed and are allowed to waive the standard restrictions during the period of the Moratorium. However, GSA officers are still responsible for verifying the suggested price increase, asking for confirmation documents, negotiating the price increase, and either accepting or declining it.
Also, with the new September revision of the Moratorium, GSA contracting officers are eligible for approving EPA modifications that exceed the ceiling without receiving additional approval first. This is intended to further speed up the price adjustment process and to reflect the dynamically changing economic situation.
Previously, any GSA specialist could only approve a price change over the ceiling price through the approval by the Contract Director. The Moratorium has added more flexibility by lowering the approval to one level above the GSA contracting specialist. But that still meant a contractor had to wait up to 3 months before the EPA price came into effect. With the latest revision, approval should be much faster, which means you can now adjust prices for your products very promptly.
Note that the Memorandum has effect on both the I-FSS-696 clause and the FAR 552.216-70 clause. Which means Economic Price Adjustments are unrestricted now for any products and services.
How long are GSA’s EPA changes in effect?
The first issued Moratorium on EPA restrictions remained in effect until September 30, 2022. The revised Moratorium issued on September 12, 2022 will be in effect until March 31, 2023.
What should you do?
If you experience losses (or even if you merely expect them) within your GSA contract and were unable to increase your prices using the EPA price adjustment, you can now do this freely. The Memorandum on EPA restrictions is a great opportunity for GSA contractors to stay in business even with the current market situation. You certainly should take advantage of this.
However, you should keep in mind that the Economic Price Adjustment mechanism still requires you to provide proof that the price increase you request is reasonable.
Need help increasing your GSA pricing?
Since you need a documentary confirmation of economic price adjustment, it is only advisable to leverage help of GSA contracting specialists such as Price Reporter. This can save you from many future problems including long negotiations, disputes and potential losses due to underpricing. Price Reporter has been doing GSA contract management and helping companies getting on GSA Schedule for more than a decade now.
If you need help increasing your GSA pricing, whether while the EPA restrictions Memorandum is still in effect or when it eventually ends, we are glad to lend a hand to you. Make sure to leave a message to our specialist, describe your situation, and we will get back shortly with a practical plan of EPA price adjustment. Contact us today!
Conclusion
Now that you know about revision of the Memorandum on Economic Price Adjustment contract modification, you can take steps on applying it to your advantage. Don’t wait too long: the more you wait, the more potential contracting opportunities you can miss. Indeed, why put yourself in an unfavorable position, continuing to work with prices that have become unprofitable at the very least? Adapt your contract to the volatility of market prices via the EPA and make sure your GSA contract is still a win-win cooperation with the GSA. And if you don’t want to spend weeks on submitting all the required EPA modification documents yourself, contact Price Reporter and delegate the hardest part of this work to us.
