516.203-4 Contract clauses.

(a) Special Order Program Contracts. In multiyear solicitations and contracts, after making the determination required by FAR 16.203-3, use 552.216-71, Economic Price Adjustment Special Order Program Contracts, or a clause prepared as authorized in paragraph (a)(3) of this subsection. (1) If the contract includes one or more options to extend the term of the contract, use the clause with its Alternate I or a clause substantially the same as 552.216-71 with its Alternate I suitably modified. (2) In a contract requiring a minimum adjustment before the price adjustment mechanism is effectuated, use the basic clause with Alternate II or with Alternate I and Alternate II. (3) If the Producer Price Index is not an appropriate indicator for price adjustment, modify the clause to use an alternate indicator for adjusting prices. Similarly, if other aspects of 552.216-71 are not appropriate, use an alternate clause following established procedures. (b) Adjustments based on cost indexes of labor or material. (1) If the contracting officer decides to provide for adjustments based on cost indexes of labor or material, prepare a clause that defines each of the following elements: (i) The type of labor and/or material subject to adjustment; (ii) The labor rates, including any fringe benefits and/or unit prices of materials that may be increased or decreased; (iii) The index(es) that will be used to measure changes in price levels and the base period or reference point from which changes will be measured; and (iv) The period during which the price(s) will be subject to adjustment. (2) The contracting director must approve use of this clause.