On November 8, 2022, Forvis Mazars held a webinar on pricing the impact of inflation in contracts with the Defense Pricing and Contracting (DPC) principal director within the Office of the Secretary of Defense. At this webinar, we mentioned potential legislative proposals that may provide some hope of equitable price adjustments in the near future.
The House and Senate Armed Services Committees worked together to issue the $858B bipartisan agreement on this year’s National Defense Authorization Act (NDAA). Now, the NDAA has been approved by the House and is expected to be introduced in the Senate this week.
Buried within the 4,408 pages of the proposed law is Section 822, Modification of Contracts to Provide Extraordinary Relief Due to Inflation Impacts. If the NDAA passes the Senate unchanged and if it is signed into law by President Biden, Section 822 provides the DoD with a temporary authority to modify certain fixed price contracts and options based on the impact of inflation. This authority would be made possible through changes to Public Law 85-804 which outlines various forms of extraordinary contractual relief.
While the NDAA in its current form certainly seems like a step forward to help fixed-price contractors and subcontractors that are adversely impacted by inflation, any potential assistance will not likely be immediate, nor will it be mandatory. The current version of the NDAA requires the DoD to prepare guidance implementing the authority “not later than 90 days after the date of the enactment.”
While there are many more questions than answers at the current moment, the Government Contracting Team at Forvis Mazars will continue to follow as this legislation and guidance evolve. If you have any questions, please feel free to reach out to our team or use the Contact Us form below.