Inflation Relief For DoD Contractors

Over the past year, the U.S. Government has taken numerous steps to provide relief to Department of Defense (DoD) contractors impacted by significant inflation, with each measure more beneficial than the last. Now, with the passage of the National Defense Authorization Act (NDAA), there is a $12.6 billion pool of money specifically earmarked for defense contractors who have or will suffer losses on contracts due solely to inflation.

In May 2022, the DoD issued guidance encouraging contracting officers to incorporate economic price adjustment (EPA) clauses into contracts to equitably balance the risk of inflation between the contractor and the Government. However, for contracts that did not include an EPA clause, the DoD stated that "there is no authority for providing contractual relief for unanticipated inflation under an [firm fixed price] contract." Thus, the guidance provided no relief on contracts that did not include an EPA clause.