Pricing Adjustments

Written by Darrell Oyer

A claim for an adjustment was summarily granted because the contract's Variation in Quantity clause clearly contemplated payment of the indirect and overhead costs sought by the contractor.

The contract was for guard services in support of a government embassy. The government ordered only three percent of the estimated emergency services specified in the contract. The contractor sought an adjustment for unabsorbed indirect costs. The contractor relied on the contract’s Variation in Quantity clause, which was intended to permit repricing of unit prices to adjust for costs that are not recovered because the estimated amounts fell short of the stated range in the clause. The government responded that it did not have to pay for services not provided! The court opined that the Variation in Quantity clause clearly provided for an adjustment in situations where the stated range of estimated hours was exceeded or not met so as to cause the contractor to reap a windfall or incur a loss. The government failed to order the minimum number of hours for emergency services and the contractor still incurred the fixed, indirect costs originally allocated to the hours the government failed to order.

[Brinks/Hermes Joint
Venture, CBCA No. 1188]

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