EPA clause since DOD's guidance combining Tolerance Bands and a NTE

Started by 504CPA · Oct 29, 2024 · 2 replies

  1. 5

    504CPA

    Oct 29, 2024 · 1y ago

    Original post

    Have you ever seen an EPA clause for a FPIF with an annual tolerance dead band and a Not To Exceed (NTE) % change value? 

    EPA Payout would be based on the lesser of the NTE OR Actual % outside of the tolerance band.

    For example, if an NTE of 15% above the tolerance band (dead band) was established in a year where actual inflation was 21% above the upper limit. EPA payout would be the lesser of NTE or Actual % outside of the range.

  2. D

    Don Mansfield

    Oct 29, 2024 · 1y ago

    What do you mean by "dead band"? If inflation were less than 15%, then no adjustment?

  3. V

    Vern Edwards

    Oct 30, 2024 · 1y ago

    Don Mansfield said:

    What do you mean by "dead band"? If inflation were less than 15%, then no adjustment?

    Since the contract is FPI(F), the OP may be referring to a "flat spot" within +/- a certain range on either side of the target cost. See the DOD/NASA Incentive Contracting Guide (1969) page 2-8.

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