FAR 52.216-3—Economic Price Adjustment-Semistandard Supplies.
Plain-English Summary
FAR 52.216-3, Economic Price Adjustment—Semistandard Supplies, is a special pricing clause used when the contractor is selling supplies that are not fully commercial standard items but do have an established catalog or market price for a commercial product sold in substantial quantities to the general public. The clause addresses the contractor’s warranty about its established prices, how the contract price is adjusted when the contractor’s established price decreases, how the contract price may be increased when the established price rises, the 10 percent cap on total increases, the timing rules for when an increase becomes effective, the requirement that the Contracting Officer verify the increase before modifying the contract, and the Government’s right to cancel undelivered quantities after a requested increase. It also distinguishes the portion of the unit price attributable to contract-specific modifications, preservation, packaging, and packing beyond standard commercial practice, which is excluded from the economic price adjustment. In practice, this clause gives both sides a controlled mechanism to track market-based price movement while protecting the Government from unsupported increases and preserving the contractor’s ability to recover legitimate price changes tied to its established commercial pricing. It is especially important for contractors to maintain documentation of established prices and for contracting officers to monitor requests, verify price changes, and decide whether to cancel remaining quantities when increases are requested.
Key Rules
Applies to semistandard supplies
This clause is used for supplies with an established commercial price, but where the contract price may differ because of required specifications or special preservation, packaging, or packing. The clause only covers the line items identified in the schedule.
Contractor warrants established pricing
The contractor must warrant that the covered supplies have an established price, meaning an established catalog or market price for a commercial product sold in substantial quantities to the general public, net of standard trade discounts. The contractor also warrants that any difference between contract price and like commercial equivalents is due only to contract-specific requirements.
Price decreases flow through automatically
If the contractor’s established price decreases, the contractor must promptly notify the Contracting Officer of the amount and effective date. The corresponding contract unit price must be reduced by the same percentage, excluding any portion tied to specifications or special packaging requirements.
Price increases require a written request
If the established price increases after contract award, the contractor may request a corresponding increase in the contract unit price. The increase is not automatic; it must be requested in writing and is subject to the clause’s limits and Government verification.
Increase is capped at 10 percent
The total increase in any contract unit price under this clause may not exceed 10 percent of the original contract unit price. This cap applies to the aggregate of increases under the clause, not just a single request.
Strict timing controls apply
If the Contracting Officer receives the contractor’s written request within 10 days after the effective date of the established price increase, the higher contract price is effective on that same effective date. If the request arrives later, the increase is effective only when the Contracting Officer receives the request.
No retroactive increase for earlier deliveries
The increased unit price does not apply to quantities scheduled for delivery before the effective date of the increase, unless the contractor’s failure to deliver earlier was beyond its control and without its fault or negligence under the Default clause.
Government may cancel undelivered quantities
Within 30 days after receiving the contractor’s written request, the Contracting Officer may cancel any undelivered portion of the affected items without liability to either party. This gives the Government an exit option if the price increase is unacceptable.
Verification required before modification
The Contracting Officer may not execute a modification increasing the unit price until the contractor’s claimed increase in the applicable established price is verified. This protects against unsupported or inflated price adjustment requests.
Responsibilities
Contractor
Warrant that the identified line items have established prices and that any price difference from commercial equivalents is due only to contract specifications or special preservation, packaging, or packing. Promptly notify the Contracting Officer of any decrease in the established price, and submit a written request for any increase, supported by evidence of the price change and its effective date.
Contracting Officer
Review and verify claimed established price changes, adjust contract prices for decreases, determine whether an increase request was timely, decide whether to cancel undelivered quantities within 30 days of the request, and execute contract modifications only after verification and within the clause’s limits.
Government
Pay the adjusted contract unit price for deliveries made on or after the effective date of a valid decrease or increase, and exercise the cancellation right if the requested increase is not acceptable or if continued performance is no longer in the Government’s interest.
Schedule/Ordering Activity
Identify the covered line items in the schedule and ensure the contract clearly separates the portion of price attributable to commercial pricing from the portion attributable to contract-specific modifications or special packaging requirements.
Practical Implications
Contractors should keep contemporaneous evidence of catalog or market prices, standard discounts, and the effective dates of any changes, because unsupported requests can be denied or delayed.
The 10-day request window for increases is critical; missing it can delay the effective date and reduce recovery on deliveries already scheduled.
Contracting officers should verify whether the claimed increase applies only to the commercial-price portion of the unit price, not to the portion tied to specifications or special packaging.
The Government’s 30-day cancellation right means a price increase request can trigger a business decision to cancel remaining quantities rather than accept the higher price.
Both sides should track delivery schedules carefully, because the effective date of the price change determines which quantities are priced at the old rate versus the adjusted rate.
Official Regulatory Text
As prescribed in 16.203-4 (b) , insert the following clause: Economic Price Adjustment-Semistandard Supplies (Nov 2021) (a) The Contractor warrants that the supplies identified as line items ____________ [ offeror insert Schedule line item number ] in the Schedule are, except for modifications required by the contract specifications, supplies for which it has an established price. The term "established price" means a price that (1)is an established catalog or market price for a commercial product sold in substantial quantities to the general public, and (2)is the net price after applying any standard trade discounts offered by the Contractor. The Contractor further warrants that, as of the date of this contract, any difference between the unit prices stated in the contract for these line items and the Contractor’s established prices for like quantities of the nearest commercial equivalents are due to compliance with contract specifications and with any contract requirements for preservation, packaging, and packing beyond standard commercial practice. (b) The Contractor shall promptly notify the Contracting Officer of the amount and effective date of each decrease in any applicable established price. Each corresponding contract unit price (exclusive of any part of the unit price that reflects modifications resulting from compliance with specifications or with requirements for preservation, packaging, and packing beyond standard commercial practice) shall be decreased by the same percentage that the established price is decreased. The decrease shall apply to those items delivered on and after the effective date of the decrease in the Contractor’s established price, and this contract shall be modified accordingly. (c) If the Contractor’s applicable established price is increased after the contract date, the corresponding contract unit price (exclusive of any part of the unit price resulting from compliance with specifications or with requirements for preservation, packaging, and packing beyond standard commercial practice) shall be increased, upon the Contractor’s written request to the Contracting Officer, by the same percentage that the established price is increased, and the contract shall be modified accordingly, subject to the following limitations: (1) The aggregate of the increases in any contract unit price under this clause shall not exceed 10 percent of the original contract unit price. (2) The increased contract unit price shall be effective- (i) On the effective date of the increase in the applicable established price if the Contracting Officer receives the Contractor’s written request within 10 days thereafter; or (ii) If the written request is received later, on the date the Contracting Officer receives the request. (3) The increased contract unit price shall not apply to quantities scheduled under the contract for delivery before the effective date of the increased contract unit price, unless failure to deliver before that date results from causes beyond the control and without the fault or negligence of the Contractor, within the meaning of the Default clause. (4) No modification increasing a contract unit price shall be executed under this paragraph (c) until the Contracting Officer verifies the increase in the applicable established price. (5) Within 30 days after receipt of the Contractor’s written request, the Contracting Officer may cancel, without liability to either party, any undelivered portion of the contract items affected by the requested increase. (d) During the time allowed for the cancellation provided for in paragraph (c)(5) of this clause, and thereafter if there is no cancellation, the Contractor shall continue deliveries according to the contract delivery schedule, and the Government shall pay for such deliveries at the contract unit price, increased to the extent provided by paragraph (c) of this clause. (End of clause)