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    The clause 52.216-2 indicates the price can be adjusted up to 10% of the contract price. Several individuals indicate they believe this was per year, or believe the wording use to say it was for each year, but I cannot locate the wording to indicate it is applicable to each year. I understand it is for the entire length of the contract. Please advise. Secondly, since I believe this contract should not be a firm fixed price contract because of the volatile market conditions for propane, gas or oil, what type of contract would you suggest be sought the next time propane is required to be purchased?


    Answer

    The following response is based solely on the question and background information provided.  As we do not have all the facts particular to your contract, program and situation, we highly recommend you consult you Contracting Officer and Legal Office for guidance.
     
    52.216-2, Economic Price Adjustment - Standard Supplies paragraph (c)(1) which states:  "The aggregate of the increases in any contract unit price under this clause shall not exceed 10 percent of the original contract unit price.  The price increase means the unit price for life of the contract as opposed to individual option years."
     
     
    A suggested contract type for a volatile market would be the fixed-price with an economic price adjustment contract.  Per 16.203-2, a fixed-price contract with economic price adjustments may be used when (i) there is serious doubt concerning the stability of market or labor conditions that will exist during an extended period of contract performance; and (ii) contingencies that would otherwise be included in the contract price can be identified and covered separately in the contract.  Price adjustments based on established prices should normally be restricted to industry-wide contingencies.  Price adjustments based on labor and material costs should be limited to contingencies beyond the contractor's control.  For use of economic price adjustment in sealed bid contracts, see 14.408-4.
     

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