Relief for DoD contractors due to inflation may be on the way. The proposed National Defense Authorization Act (NDAA) for 2023, which is Congress’ annual budget for the Department of Defense (DoD), includes a provision that would grant the DoD more discretion to allow inflation relief for DoD contractors. The NDAA would amend 50 U.S.C. § 1431 to give the DoD more discretion in allowing adjustments to contracts to account for inflation, although this allowance would only be temporary, lasting from when the NDAA is signed by the President until December 31, 2023.

This would give DoD more flexibility to address the concern of inflation for its contractors, as currently, the Federal Acquisition Regulation (FAR) Part 50 is quite stringent in its application. The NDAA would allow the DoD to make an amendment or modification to an eligible contract when, due solely to economic inflation, the cost to a prime contractor of performing the contract is greater than the price of the contract. This means that it allows the DoD to adjust the contract if the prime contractor would otherwise face a loss on the contract due to the increase in cost, and only if the increase in cost is due to inflation.

It is important to note that the NDAA does not mandate the DoD to grant adjustments to contracts for inflation. It gives them the authority to do so but the final decision will be made by the agency and even with this new provision, the DoD does not have to grant an adjustment even if you are facing a loss on your contract due to inflation.

For federal contractors doing work with Civilian agencies, you may consider economic relief through FAR 52.243 Request for Equitable Adjustment (REA). Learn more about REA at: https://www.acquisition.gov/dfars/252.243-7002-requests-equitable-adjustment.

If you need assistance navigating the government contracting process, attend one of our upcoming events: https://www.govassociation.org/events