Tag Archives: Risk

Getting the Best Value in a Source Selection?

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Authors: Brian Schultz and David Dotson

Competition in acquisition is an important topic and has been since the Department of Defense (DoD) started acquiring systems from the defense industry. The key premise is that DoD will get greater value for the price paid as a result of competition. Some studies suggest savings in the 15 percent to 25 percent range and even greater under some conditions as a result of competition. However, greater value is not always tied to lower prices or cost savings. Greater value can be realized through a superior technical solution as part of a trade-off of price and other factors in a source selection.

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Valuing the Cost of an Economic Price Adjustment Clause to the Government

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Authors: Scot Arnold, Bruce Harmon, Susan Rose, and John Whitley

An Economic Price Adjustment (EPA) clause in a contract allows for adjustment of contract price if certain conditions are met. The Department of Defense (DoD) often uses an EPA clause in contracts where there is an increased risk that the costs of inputs used by the contractor will diverge from the forecasts used in the original pricing of the contract. EPA clauses transfer risk from the contractor to the government; thus, they are of economic value to the contractor. This article reviews EPA clauses, analyzes the value of risk transfer, and discusses how DoD could account for this value in negotiating fees for contracts that contain EPA clauses. Other government costs and risks associated with EPA clauses are also discussed.

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