GSA Overhauls Price Adjustments on Multiple Award Schedule Contracts

At a glance

• The main takeaway: GSA replaced its existing Multiple Award Schedule (MAS) Economic Price Adjustment (EPA) clauses with a single clause. The new clause 552.238-120, Economic Price Adjustment–Federal Supply Schedule Contracts, will be incorporated into existing MAS contracts later in the year.
• The impact on your business: Existing EPA regulations applied strict limitations on price increases. The rigid structure created significant challenges with inflation and supply chain volatility. The new clause does not explicitly cap increases, allowing GSA and contractors flexibility to respond to market conditions.
• Next steps: GSA will incorporate the new EPA clause into MAS contracts as part of the next solicitation refresh. Hopefully, GSA will release additional guidance at the same time. Contractors should prepare for uncertainty and delays regarding price increases as stakeholders adjust to the changes.

Schedule a consultation with Aprio’s GSA team today.

The full story:

The pandemic’s impact on supply chains and resulting inflation caught many flat-footed. Government contracts, infamous for stifling red tape, were especially ill-suited to cope with such volatility. MAS contractors quickly raised concerns about the negative impacts of GSA’s regulatory restrictions on price increases. Companies were forced to choose between removing items or selling them at a loss.

GSA Senior Procurement Executive (SPE) Jeff Koses issued a moratorium on some EPA limitations in early 2022. This gave contractors and contracting officers more flexibility to respond to the rapidly evolving situation. After extending the moratorium several times, GSA announced plans to replace its existing MAS EPA clauses with a single, simplified clause. The final rule implementing the new clause came into effect on September 4, 2024.

Existing MAS price increase processes

For decades, MAS price increases have been governed by multiple clauses. Which one applied depended on the basis for each contractor’s pricing.

Contractors with commercial pricelists, typically products companies, were governed by GSAR 552.216-70, Economic Price Adjustment–FSS Multiple Award Schedule Contracts. Contractors could only request increases upon the publication of a new pricelist. The clause not only limited how often contractors could request increases, but it also included an annual cap on increases ranging from 4.0-10.0%.

Contractors with pricing based on market rates, largely services companies, were governed by I-FSS-969, Economic Price Adjustment–FSS Multiple Award Schedule. Under this clause, price increases were tied to a market index such as the Bureau of Labor Statistics (BLS) Employment Cost Index (ECI). The contractor could either negotiate a fixed escalation rate for the five-year contract period or submit annual increase requests based on the index rate at the time of the modification.

Contractors with pricing based on statutory compensation, such as the Service Contract Labor Standards (SCLS), had to elect one of the two clauses above in conjunction with FAR 52.222-43, Fair Labor Standards Act and Service Contract Labor Standards-Price Adjustment (Multiple Year and Option Contracts).

It’s worth noting that the SCLS price adjustment clause will still be applicable to SCLS-covered labor categories on MAS contracts. The new EPA clause does not cover “[a]djustments based on statute, Executive Order, or regulation.”

One clause to rule them all

Under the new clause, increases are allowed per the established EPA method. GSA defines this ambiguous term as the “agreed upon procedures by which pricing may be adjusted throughout the contract period to include, but not limited to, the mechanism(s) to be used to adjust pricing (e.g., adjustments based on established pricing), the pricing subject to adjustment, and any other requirements (e.g., timing, frequency, limits on increases).”

Despite this being all the clause says, contractors are instructed to submit requests for price increases that “fully conform to the requirements of the EPA method.”

Will the pendulum swing too far?

Jeff Koses stated in a recent LinkedIn post that the new approach relies on “the power of the market, data analytics, collaboration, and contracting officer judgment to make good business decisions.” It removes restrictions in hopes of making price changes easier and more dynamic.

Unfortunately, the lack of detail about acceptable EPA methods raises concern that contractors may not be treated consistently. Furthermore, the Office of Inspector General (OIG) has identified problems with GSA’s pricing tools. Increases are especially at risk because databases are saturated with lower historical price points. As GSA rolls out additional guidance, hopefully it will address these concerns.

The bottom line

GSA took a major step to simplify price adjustments on MAS contracts. The new EPA clause removes unpopular restrictions on how often and how much prices can increase. At the same time, the new clause does not provide a framework for establishing a contract’s “EPA method.” In the absence of such guidance, MAS contractors may be subject to differing interpretations, creating an uneven playing field.

Aprio’s GSA consultants have the industry experience that will help you maximize MAS price increases. Contact us today to learn more about our GSA consulting services.

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