Economic Price Adjustment(EPA)
A contract clause that allows price changes based on specified economic indicators or market conditions.
Overview
Economic Price Adjustment (EPA) clauses permit contract prices to rise or fall during performance based on predefined formulas, indexes (such as labor or material indices), or market benchmarks. They protect both the government and contractor from volatile cost swings in long-term contracts.
Why It Matters in GovCon
EPA clauses are common in multi-year contracts where material costs, labor rates, or fuel prices may shift significantly. Understanding how EPA is structured helps contractors bid accurately and manage profitability over the contract life.
Key Details
- Fixed EPA: Uses published indices (e.g., Bureau of Labor Statistics) to adjust prices automatically.
- Negotiated EPA: Requires bilateral agreement on price changes when conditions warrant.
- Limits: Most EPA clauses include caps on upward or downward adjustments.
- FAR Guidance: FAR 16.203 addresses economic price adjustment in fixed-price contracts.
Related Terms
- Fixed Price Contract
- Contract Modifications
- Escalation Clause
- FAR Part 16
More Contracts Terms
A simplified method of filling anticipated repetitive needs for supplies or services by establishing charge accounts with qualified vendors.
A numbered item in a contract that identifies a specific deliverable, service, or unit of work along with its quantity and price.
A contract type where the government reimburses the contractor for allowable costs plus a predetermined fixed fee representing profit.
An order placed against an existing contract for the delivery of supplies or materials.
A contract type where the price is set at award and does not change regardless of the contractor's actual costs, placing maximum risk on the contractor.
Long-term government-wide contracts with commercial firms that provide federal agencies access to products and services at pre-negotiated prices.
Ready to Win More Contracts?
Use GovCon Data to find opportunities matched to your business and generate winning proposals with AI.