FAR 16.206-4—Contract clause.
Plain-English Summary
FAR 16.206-4 tells contracting officers when they must include the Price Redetermination-Retroactive clause at FAR 52.216-6 in negotiated solicitations and contracts. This section is narrow but important: it applies only when a fixed-price contract is contemplated and the conditions in FAR 16.206-2 and 16.206-3(a) through (d) are met. In practice, it links the decision to use a retroactive price redetermination arrangement to the specific circumstances that justify it, and it makes the clause mandatory once those conditions exist. The purpose is to ensure the contract contains the mechanism needed to later adjust the price retroactively based on the required redetermination process. For contractors, this means the final price is not fully settled at award and may change later under the clause’s terms. For contracting officers, it means they must recognize when the regulatory prerequisites are present and include the correct clause in both the solicitation and the contract.
Key Rules
Clause is mandatory
When the stated conditions are met, the contracting officer shall insert FAR 52.216-6, Price Redetermination-Retroactive, in the solicitation and contract. This is not discretionary once the rule applies.
Applies in negotiated acquisitions
The requirement applies when contracting by negotiation. It does not create a general clause requirement for all procurement methods.
Fixed-price contract contemplated
The clause is used only when the acquisition contemplates a fixed-price contract. The contract may still be subject to later retroactive price adjustment under the redetermination framework.
Conditions must be satisfied
The clause is required only when the conditions in FAR 16.206-2 and 16.206-3(a) through (d) apply. Those provisions define the circumstances under which retroactive price redetermination is appropriate.
Include in both solicitation and contract
The rule requires the clause to be placed in the solicitation and the resulting contract, ensuring offerors know the pricing mechanism before award and the contract contains the operative term after award.
Responsibilities
Contracting Officer
Determine whether the acquisition is being conducted by negotiation, whether a fixed-price contract is contemplated, and whether the conditions in FAR 16.206-2 and 16.206-3(a) through (d) are met. If so, include FAR 52.216-6 in the solicitation and contract.
Contractor
Review the solicitation and contract for the retroactive price redetermination clause and understand that the contract price may be adjusted later under the clause’s terms. Prepare pricing, accounting, and recordkeeping practices accordingly.
Agency
Ensure acquisition personnel apply the correct clause when the regulatory conditions exist and maintain consistency between the solicitation and contract documents.
Practical Implications
This clause signals that the initial fixed price is not necessarily final, so contractors should plan for later price adjustment and preserve cost and pricing records.
A common pitfall is omitting the clause from the solicitation or contract even though the regulatory conditions are present, which can create administration and enforceability problems.
Contracting officers should verify the underlying conditions in FAR 16.206-2 and 16.206-3(a) through (d) before deciding the clause is required; the trigger is not simply that a fixed-price contract is being used.
Because the clause must appear in both the solicitation and the contract, offerors should see the pricing risk before submitting proposals, and award documents should match the solicitation exactly.
This section is short, but it is operationally important: it ensures the contract contains the mechanism needed to retroactively redetermine price when the acquisition fits the limited circumstances allowed by the FAR.
Official Regulatory Text
The contracting officer shall, when contracting by negotiation, insert the clause at 52.216-6 , Price Redetermination-Retroactive, in solicitations and contracts when a fixed-price contract is contemplated and the conditions in 16.206-2 and 16.206-3 (a) through (d) apply.