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This management instruction establishes guidelines and procedures for
making economic pay adjustments for regular and temporary highway
and inland domestic water contracts. Contracts for box delivery and
combination routes may be adjusted as costs are incurred in accordance
with these guidelines. For transportation routes, contracts with terms of
2 years or less may not be adjusted. Contracts for transportation routes
with terms greater than 2 years may be adjusted as indicated in these
guidelines. A matrix is attached to these instructions that shows box
delivery/combination routes versus transportation route adjustments.
Contents
1
Policy
2
Authority
3
Basic Principles
4
Limitations and Restrictions
5
Initiating the Request
6
Processing the Request
7
Effective Date
8
Changes While Adjustment Is Pending
Attachment: U.S. Postal Service Surface Transportation CMC Adjusting Highway Contract Routes
Section 5005(b)(1) of Title 39, U.S. Code, provides that the Postal Service, with the consent of a mail transportation supplier, may adjust the
rate of compensation allowed under a contract because of increased or
decreased costs resulting from changed economic conditions occurring
during the term of the contract. It is Postal Service policy to allow regular
and temporary highway and inland domestic water transportation suppliers an adjustment in the rate of compensation when changed economic conditions or operational requirements occur over which the supplier has little or no control, subject to the provisions of this management
instruction.
This management instruction applies only to adjustments in the rate of
compensation due to changed economic conditions or operational requirements. Adjustments because of significant service changes must
be negotiated between the supplier and the contracting officer and put
in writing before the changes are made.
This management instruction does not apply to emergency contracts,
except as specifically stated in other sections of this management instruction. Refer questions relating to the interpretation of these instructions that cannot be resolved by a Distribution Networks (DN) contracting officer to the manager of Surface Transportation Category
Management Center (ST-CMC).
The contracting officer (CO) or the contracting officer's representative
(COR) is responsible for approving or disapproving all contract compensation adjustments covered by this management instruction. The
ST-CMC manager is responsible for conducting periodic reviews of
contract adjustments at the DNs through the Supply Management Review for Excellence Program. The COR may approve adjustments up to
10 percent of the annual contract rate. Adjustments exceeding 10 percent must be approved by the CO. Adjustments made under the provisions of these guidelines may be made only with the consent of the
supplier except for exceptions noted in other sections of this document
and stated in the contract.
Note:
ACRONYMS AND DEFINITIONS
CBA - collective bargaining agreement
CO - contracting officer
COR - contracting officer's representative
cost statement - another term for PS Form
7463
CPIW - Consumer Price Index for urban
wage earners
DN - Distribution Networks
economic adjustments - adjustments
made due to changed economic conditions
(not due to operational requirements or
significant service changes)
HCR-TPC - highway contract route
transportation pay cycle
PM - Purchasing Manual
PS Form 7463 - Cost Statement -
Highway Transportation Contracts
SCA - Service Contract Act
ST-CMC - Surface Transportation
Category Management Center
The supplier's full request for economic adjustment may be granted if:
a. The requested amount is less than or equal to the allowable
amount, or
b. The supplier has completed the appropriate section of PS Form
7463, Cost Statement - Highway Transportation Contracts (also
called the cost statement), requesting that the CO grant the
maximum adjustment based on either:
1. The Consumer Price Index - Urban Wage Earner (CPI)
numbers available when the adjustment is processed, or
2. The application of a new wage determination. Economic
adjustments due to the application of new wage
determinations occur only as a result of the determination of
minimum prevailing Service Contract Act (SCA) wages and
fringe benefits applicable at the beginning of a renewal
period, or when an increased or decreased wage
determination is otherwise applied to the contract and
becomes applicable to the contract by operation of law, and
the supplier increases or decreases wages or fringe benefits
of employees working on the contract in order to comply with
the SCA. Such adjustments are determined in accordance
with the Postal Service Purchasing Manual (PM) Clause
9-12, Fair Labor Standards Act and Service Contract Act -
Price Adjustment (January 1997).
The criteria for fuel adjustments are addressed in section 62.f.
The supplier's full request for economic adjustment may be granted if:
a. The requested amount is less than or equal to the allowable
amount.
b. The supplier has completed the appropriate section of PS Form
7463, Cost Statement - Highway Transportation Contracts (also
called the cost statement), requesting that the CO grant the
maximum adjustment based on the application of a new wage
determination. Economic adjustments due to the application of
new wage determinations occur only as a result of the
determination of minimum prevailing Service Contract Act (SCA)
wages and fringe benefits applicable at the beginning of a
renewal period, or when an increased or decreased wage
determination is otherwise applied to the contract and becomes
applicable to the contract by operation of law, and the supplier
increases or decreases wages or fringe benefits of employees
working on the contract in order to comply with the SCA. Such
adjustments are determined in accordance with Postal Service
Purchasing Manual (PM) Clause 9-12, Fair Labor Standards Act
and Service Contract Act - Price Adjustment (January 1997).
c. For contracts with terms of up to 2 years, the supplier must
consider any off-year CBA costs as part of the contract award or
renewal rate.
d. For contracts with terms beyond 2 years, SCA/CBA adjustments
will be made as required by statute (but not more frequently than
every 2 years).
e. The criteria for fuel adjustments are addressed in section 62.f.
Requests for less than the allowable amount may not be adjusted upward.
The following basic principles apply to the adjustment process:
a. A request for an adjustment in the rate of compensation may be
initiated by the supplier or the Postal Service. Postal
Service-initiated adjustments other than those related to the cost
of fuel are limited to the amount of increases granted during the
term of the contract. Any exception to the above policy must be
stated in the contract.
b. To be eligible for an economic adjustment, the supplier must
submit, prior to the contract award, a completed PS Form
7468-A, Highway Transportation Contract Bid or Renewal
Worksheet.
c. PS Form 7463 is designed to identify the supplier's operating cost
items at the beginning and end of the period for which an
adjustment is requested. To receive consideration for an
adjustment in compensation, the supplier must provide
documented evidence of actual increased costs on those items
requiring documentation.
d. Cases involving suspected fraud require the CO to submit a
written report, accompanied by supporting evidence, to the
ST-CMC manager. The manager may refer the file to the Office
of the Inspector General for review and investigation.
e. When a completed PS Form 7463 is submitted to the CO, it
becomes the basis not only for the requested adjustment but also
for comparison with future costs.
f. The Postal Service will not allow a contract rate adjustment for
the purpose of recovering a deficiency in income in cases where
the proposal or renewal price was predicated on revenue to be
derived from other sources that did not materialize or that did
materialize but were later lost.
g. The supplier is expected to conduct an efficient operation and
provide equipment that reflects favorably on the Postal Service's
image."
h. Fixed-price contracts: In those instances where the Postal
Service and the supplier enter into a fixed-price contract, risk
related to increased costs, except as specified in the contract, will
be the responsibility of the supplier. If the supplier initiates
operational or other business changes that improve efficiency
and/or performance, the resulting cost reductions will be for the
benefit of the supplier. However, in those instances where
improvements require operational or contractual changes, the
Postal Service must approve the impact on operations and/or the
change. The resulting savings will be shared between the Postal
Service and the supplier based on a negotiated agreement (see
Purchasing Manual section 2.2.10)."
Adjustments are allowed only for cost changes that occur during the
contract term or as otherwise specified in this management instruction.
Proposal errors or omissions in the supplier's cost statement are the
responsibility of the supplier. The Postal Service does not allow adjustments for them, except as discussed in chapter 4 of the Purchasing
Manual.
Adjustments are not allowed before the beginning of the 14th highway
contract route transportation pay cycle (HCR-TPC) after proposal closing or the beginning of the 8th HCR-TPC in which the renewal was
effective after the effective date of the contract renewal and not before
the beginning of the 14th HCR-TPC (including the HCR-TPC of the last
effective adjustment) thereafter, except that one-line adjustments may
be allowed as stated in section 44. The CPIW comparison date on a
novated or subcontracted contract is the same as the previous supplier's
comparison date.
For contracts with terms of greater than 2 years, the supplier may be
eligible for one contract adjustment beginning with the first day of the
third year of the contract. Requests for adjustments must be submitted
to the contracting officer (CO) no later than 60 days prior to the end of
the second year of the contract term and will become effective the first
day of the third year of the contract. Adjustments to the cost statement
will not be retroactive.
One-line adjustments must be processed and approved as outlined in
section 6 of this management instruction. In instances where a one-line
adjustment will result in a changed cost to another line item, the affected
line item(s) (e.g., change in equipment, fuel cost, or insurance (gross
receipts) may also be adjusted. Adjustments that increase or decrease
the supplier's compensation may be processed as one-line adjustments
due to the changed conditions listed below:
a. Fuel price changes. Adjustments are made in accordance with
the fuel purchase plan.
b. The application of a new wage determination. Economic
adjustments due to the application of new wage determinations
occur only as a result of the determination of minimum prevailing
SCA wages and fringe benefits applicable at the beginning of a
renewal period, or when an increased or decreased wage
determination is otherwise applied to the contract and becomes
applicable to the contract by operation of law, and the supplier
increases or decreases wages or fringe benefits of employees
working on the contract in order to comply with the SCA. Such
adjustments are determined in accordance with PM Clause 9-12,
Fair Labor Standards Act and Service Contract Act - Price
Adjustment (January 1997). Note that contracts of fewer than 2
years are not eligible for increases in SCA wages and fringe
benefits. Suppliers should consider any collective bargaining
agreement "off-year" costs as part of the original price proposal.
c. Insignificant minor service changes that affect one line item.
d. Adjustments to documented line items. Where applicable,
documented line items may be adjusted as part of a regular
economic pay adjustment or in conjunction with a, b, and c above
or with a negotiated service change. For box delivery and
combination routes, adjustments to documented line items will be
retroactive to the date costs were incurred provided that the
supplier notified the CO of increases within 60 days of the
supplier's knowledge of increases. For Transportation routes,
adjustment will be effective in accordance with section 43 above.
For box delivery and combination routes, all adjustments during the first
13 HCR-TPCs of a new contract, or during the first 7 HCR-TPCs of a
renewal contract, are further restricted to those items that could not have
been reasonably anticipated at the time of the proposal submission or
contract renewal, whichever is later. Adjustments in rate of compensation during the first 7 or 13 HCR-TPCs for any reason other than those
listed in section 44 may be made only with the prior written approval of
the ST-CMC manager.
For transportation routes, for contracts with terms of 2 years or less, the
supplier must include all costs in the contract award or renewal rate. For
contracts with terms longer than 2 years, one adjustment may be made
to the contract after it has been in effect for 2 years, in accordance with
section 62 of this document.
Nonallowable increases consist of:
a. Cost increases for items that were omitted in the original or
renewal cost statement.
b. Increased labor cost resulting from a supplier's choice to hire a
driver or supervisor in lieu of personal operation during the term
of the contract, except as provided for in q(4) of section 62.
c. Rate of pay on emergency contracts. Quarterly adjustments may
be made to emergency contracts as described in section 62.f.
For box delivery and combination routes, contract adjustment limits are
as follows:
a. Adjustments in the rate of compensation for PS Form 7463, lines
1b, 5, and 17, are limited to an amount that does not exceed the
CPIW percentage change.
b. Adjustments in the rate of compensation for non-CPIW line items
are limited to the actual cost changes documented by the
supplier.
For transportation routes, the contract is not eligible for adjustments in
the rate of compensation for PS Form 7463, lines 1b, 5, and 17.
To initiate an adjustment request, the supplier must complete and submit
PS Form 7463 and the required documentation to the CO.
Note: PS Form 7463 is available from the CO upon request. The
supplier should verify the information in column I upon receipt.
Upon receipt of the request for adjustment PS Forms 7463, the CO will
forward the forms to the supplier within 5 working days, with PS Form
7463, column I, completed to show (whichever is later):
a. The last approved cost and the CPIW number used in developing
the current column I, or
b. The CPIW number in effect the month prior to the date of
proposal closing or renewal.
Other pertinent Postal Service forms are to be sent to the supplier at this
time. The CO will also advise the supplier of the CPIW number available
when the PS Forms are mailed and alert the supplier to verify column I.
When completed PS Forms are received from the supplier, the CO must
verify them through an itemized comparison with the last approved PS
Form 7463.
After a specialist completes an initial review of the adjustment(s), the
CO's designee must review the entire file. The CO or COR, as appropriate, must approve or disapprove the adjustment(s). The CO is responsible for ensuring that the adjustment file contains all Postal Service forms,
correspondence, and documentation concerning the request.
Each file must contain an itemized summary showing the reason for
each non-CPIW-changed line item.
It is the intent of the Postal Service to process adjustment requests in a
timely manner. However, the adjustment process cannot begin until after
receipt of pertinent documentation. A PS Form 7463 is required for all
adjustments other than fuel. For fuel adjustments, written documentation is required (via letter, fax or e-mail).
PS Form 7463 analysis consists of the following:
a. Item 1.
1. Item 1A, Vehicle Cost.
(a) The annual vehicle cost should reflect the sum of the
depreciation and the interest paid on the vehicle(s)
purchased or leased as shown on the last approved cost
statement.
(b) The vehicle cost is adjustable on box delivery and
combination routes only. The annual cost of each vehicle
is subject to individual adjustment only when replacement
equipment is placed in service on the route. The value of
the replacement equipment must exceed the present
value in order for the additional compensation to be
considered. When a supplier changes equipment on the
route, the allowable increase is determined as follows:
(i) Identify whichever is the later of:
a) The CPIW number used in computing the most
recent adjustment due to replaced equipment, or
b) The CPIW number of the month prior to the
solicitation proposal closing date.
(ii) Establish the percentage change formula using the
procedure in section 632.
(c) If the supplier agrees, use CPIW computation dates that
will yield less than the maximum dollar adjustment which
the supplier may otherwise be eligible. As an example,
based on previous adjustments for equipment changes,
the supplier may be eligible to use a comparison period
from August 1996 to August 2001. To keep the contract
rate competitive, the supplier may use a comparison
period that will produce a total dollar increase that is less
than the period cited above (e.g., August 1996 to August
2000). The maximum adjustment to which the supplier
will be entitled; however, may not exceed the amount
determined by the CPIW computation.
Exception: The ST-CMC manager may authorize the
CO to approve an increase in excess of CPIW for
equipment replacement cost (purchased or leased) in
unusual or unique situations. The supplier must provide
complete documentation justifying an exception.
(d) All replacement equipment involved in requests for
economic cost adjustment must be properly documented
and inspected as directed by the CO.
(e) A supplier may be granted an increase in the cost of
leased equipment, provided that such an increase has
actually been incurred. However, the allowable amount of
the adjustment is limited to the same guidelines as
outlined in section 62.
(f) The approved annual cost divided by the annual miles
equals the new rate per mile. The rate per mile (unit cost)
will be carried out five decimal places.
2. Item 1B, Operational Cost. This includes cost of repairs,
repair labor, tires, and other miscellaneous operational costs
not carried in other line items on this form. For box delivery
and combination routes only, an allowable increase in this
line is the amount determined by using procedures outlined in
section 63. (No documentation is required.)
b. Item 2 Taxes. This is for personal property taxes for vehicles to
be used on the route or other business taxes specifically required
to operate the mail transportation business. Documentation, such
as a tax receipt or tax bill, is required. For box delivery and
combination routes, the contract may be adjusted for increases in
taxes with appropriate documentation. Transportation routes with
contract terms for less than 2 years are not eligible for an
adjustment. The Postal Service may negotiate an adjustment for
expenses incurred after 2 years for federal, state or local
assessments when knowledge of the increase was unknown or
could not reasonably have been known by the supplier at the time
of contract award/renewal. Documented requests must be made
60 days prior to the last day of year 2 of the contract and will
become effective on the first day of year 3 of the contract. The
supplier will not be eligible for another adjustment for at least 2
years.
c. Item 3, Vehicle Registration. This should show registration fees
for all vehicles used on the route. For box delivery and
combination routes, the contract may be adjusted for increases in
vehicle registration with appropriate documentation.
Transportation routes with contract terms for less than 2 years
are not eligible for an adjustment. The Postal Service may
negotiate an adjustment for expenses incurred after 2 years for
federal, state or local registration fees when knowledge of the
increase was unknown or could not reasonably have been known
by the supplier at the time of contract award/renewal.
Documented requests must be made 60 days prior to the last day
of year 2 of the contract and will become effective on the first day
of year 3 of the contract. The supplier will not be eligible for
another adjustment for at least 2 years.
d. Item 4, Miscellaneous. This is for listing miscellaneous expenses
associated with the annual cost (not contract term cost) for the
service. This line item is not adjustable.
e. Item 5, General Overhead Cost. General overhead includes all
management expenses not included in other line items. Included
are general supervision and all related supervisory costs (not
included in line item 17) such as telephone, office expenses,
garage rents, parking fees, bulk fuel handling cost, terminal cost,
interest and insurance (except interest and insurance on vehicles,
etc.). An allowable adjustment (for box delivery and combination
routes only) in this line item is the amount determined by using
procedures outlined in section 631. (No documentation is
required.)
f. Item 6, Fuel. When directed by the contracting officer, the supplier
agrees to purchase all of its fuel for its contracted service or
accept compensation for fuel in accordance with the document
titled Fuel Management Program.
Details discussing the specific processes for fuel cost calculations
are contained in the document titled Fuel Management Program.
g. Item 7, Oil. Base the adjustment for the cost of oil on documented
unit cost.
h. Item 8, Insurance. For box delivery and combination routes, the
contract may be adjusted for increases in insurance with
appropriate documentation. Transportation routes with contract
terms for less than 2 years are not eligible for an adjustment to
insurance. For transportation contracts with terms greater than 2
years, documented requests must be made 60 days prior to the
last day of year 2 of the contract and will become effective on the
first day of year 3 of the contract. The supplier will not be eligible
for another adjustment for at least 2 years.
Adjustments will be determined based on the following:
1. General. This item is the cost of insurance on vehicles used
in the performance of service on the route. (Insurance
coverage carried by suppliers for terminal facilities, keyman
insurance coverage, etc. should be included in Item 5,
General Overhead Cost.) The adjustment will be allowed only
when there is an increase or decrease in cost of "same
coverage" as reflected in the last approved cost statement
(see Realignment). Cost of additional coverage purchased at
the option of the supplier is not allowable. Also, no
adjustment will be allowed for the higher cost of insurance
caused by the supplier's high accident rate or other actions
within the reasonable control of the supplier that result in
increased premiums.
2. Documentation. The supplier is required to document both
previous and current insurance cost. Policies must be
provided that reflect amounts and types of coverage and
premium cost identifying vehicles used on the route.
3. Gross Receipts. The CO allows an adjustment of a supplier's
insurance cost when the policy cost is based on a percentage
of the supplier's annual gross receipts and the request for an
insurance adjustment is accompanied with a request for any
adjustment that changes the annual rate. In computing the
amount of increased insurance cost, use the following
procedure:
Step 1 Determine the total of column III of PS Form 7463
exclusive of insurance. (Insurance cost may be
included, however, provided that the supplier
provides proof that the insurance carrier uses
insurance cost in developing total insurance cost).
Step 2 Identify the documented gross receipts insurance
rate per $100 and change to a decimal equivalent.
Step 3 Subtract decimal equivalent of insurance premium
rate (e.g., 7.05 percent converted to .0705) from
decimal equivalent of gross adjustment base (100
percent expressed as 1.0000).
Step 4 Determine the new contract rate by dividing step 1
by 3.
Step 5 The difference between amounts in steps 4 and 1 is
the allowable insurance cost.
Step 6 The new contract rate multiplied by the gross
receipts insurance rate (expressed as a decimal)
must equal the allowable insurance cost found in
section 62.h(3), step 5.
Example:
Step 1 Total of column Ill of PS Form 7463 exclusive of
insurance cost = $47,904.00
Step 2 Documented gross receipts insurance rate = $7.05
per $100.00
Expressed as a decimal equivalent (move decimal 2
places to the left) = .0705
Step 3 1.000 less .0705 = .92950
Step 4 New contract rate = $47,904.00 divided by .92950 =
$51,537.00
Step 5 Allowable insurance cost = $51,537.00 less
$47,904.00 =$3,633.00
Step 6 $51,537 x .0705 = $3,633.00
Note: The procedure described above is applicable to the
cost statement any time there is an increase or decrease in the contract annual rate. In processing adjustments that reduce the contract annual rate, the CO may
process the insurance reduction as outlined above. The
adjustments may reduce the contract rate to below the
original proposal price.
i. Item 9, Miscellaneous Road Taxes. The supplier is responsible
for the payment of all federal highway use tax, state highway use
tax, state mileage tax, and state road tax. For box delivery and
combination routes, the contract may be adjusted for increases
due to additional state or federal taxes incurred by the supplier
when properly documented. Transportation routes with contract
terms for less than 2 years are not eligible for an adjustment to
miscellaneous road taxes. For transportation contracts with terms
greater than 2 years, requests must be made 60 days prior to the
last day of year 2 of the contract and will become effective on the
first day of year 3 of the contract. The supplier will not be eligible
for another adjustment for at least 2 years.
j. Item 10, Tolls. For box delivery and combination routes, the
contract may be adjusted for new or increased toll fees when they
incur and properly documented. Transportation routes with
contract terms for less than 2 years are not eligible for an
adjustment to tolls. For transportation contracts with terms
greater than 2 years, requests must be made 60 days prior to the
last day of year 2 of the contract and will become effective on the
first day of year 3 of the contract. The supplier will not be eligible
for another adjustment for at least 2 years.
k. Item 11, Total Field and Operational Cost. Sum of items 1 through
10.
l. Item 12, Straight Time.
1. The contract rate of compensation may be adjusted to offset
increased driver costs resulting from the application of a new
wage determination. Economic adjustments due to the
application of new wage determinations occur only as a result
of the determination of minimum prevailing SCA wages and
fringe benefits applicable at the beginning of a renewal
period, or when an increased or decreased wage
determination is otherwise applied to the contract and
becomes applicable to the contract by operation of law, and
the supplier increases or decreases wages or fringe benefits
of employees working on the contract in order to comply with
the SCA. Such adjustments are determined in accordance
with PM Clause 9-12, Fair Labor Standards Act and Service
Contract Act - Price Adjustment (January 1997).
2. The allowable adjustment is determined by multiplying the
allowable hours by the hourly straight time rate.
3. The allowable hours are the hours shown on the cost
statement of the original proposal, renewal contract,
subcontract, last approved adjustment, or negotiated service
change, whichever is latest, plus increased hours
necessitated by service change orders, new or revised
statutes, or other changed conditions affecting the hours
required to perform the service. Conversely, service change
orders, new or revised statutes, or other changed conditions
that enable the supplier to reduce paid hours will reduce the
allowable hours and offset allowable increases in other line
items (or result in a reduction in the annual rate).
4. Payroll journals or check stubs that reflect the number of
hours paid, in addition to fringe benefits and the gross
amount paid, will normally constitute sufficient documentation
to support increased costs for these items. If the supplier has
a collective bargaining agreement with employees, that
document should normally be sufficient to document the
employees' salary scale. The incorporation of a new wage
determination into a contract requires the supplier to pay, as
a minimum, the new wage rate. Therefore, a request for
adjustment when a new wage determination is incorporated
into a contract should be allowed without immediate
documentation. The CO may require the supplier to furnish
copies of payroll journals and/or check stubs within 90 days
after the effective date of the increased wage rate. If the
supplier fails to provide the requested information within 60
days of receipt of the request for the information, the
contracting officer may retroactively rescind the adjustment. If
the supplier provides the requested documentation at some
later date, the adjustment will become effective the first day
of the HCR-TPC in which the documentation is received.
5. The wages of terminal employees and/or supervisors are to
be included in either item 1b or item 5 and, therefore, are not
to be considered in this item.
m. Item 13, Overtime. The allowable adjustment is determined by
multiplying the allowable hours by the hourly overtime rate.
n. Item 14, Payroll Taxes. This is for federal or state payroll taxes
paid on salaries of drivers. The contract rate of compensation
may be adjusted to offset any increased cost incurred for these
payroll taxes. Social Security tax paid by employers is based on a
percentage rate of each employee's earnings up to the maximum
as specified by law. The rates for federal and state
unemployment compensation are controlled by federal and state
governments. The supplier must adequately document the cost of
federal and state unemployment compensation taxes when a
request for an economic cost adjustment is filed. Worker's
compensation is based on the experience factor of the employer
and, therefore, may vary from year to year and supplier to
supplier. The supplier may be allowed up to the manual rate for
worker's compensation without consideration of experience
modification. As an example, the supplier may, due to a low
claims record, reduce rates below the manual rate. The resulting
savings may be realigned to another line item. Self-employment
tax paid by the supplier is not an adjustable item.
o. Item 15, Fringe Benefits. This item is for the cost of employee
health and welfare, pension benefits, vacations, and holidays
based on the number of employees reflected by the number of
hours in items 12 and 13.
The Postal Service allows adjustments based on increased costs
resulting from a new wage determination. Economic adjustments
due to the application of new wage determinations occur only as
a result of the determination of minimum prevailing SCA wages
and fringe benefits applicable at the beginning of a renewal
period, or when an increased or decreased wage determination is
otherwise applied to the contract and becomes applicable to the
contract by operation of law, and the supplier increases or
decreases wages or fringe benefits of employees working on the
contract in order to comply with the SCA. Such adjustments are
determined in accordance with PM Clause 9-12, Fair Labor
Standards Act and Service Contract Act - Price Adjustment
(January 1997). Fringe benefits are computed on the basis of the
number of hours employees work. In cases where an employee
does not work 40 hours per week, the fringe benefits are prorated
according to the number of hours worked.
p. Item 16, Total Operations Labor Cost. Sum of items 12 through
15. For transportation routes only:
1. The supplier must consider all costs (including off-year
adjustments for collective bargaining agreements) in its
award or renewal rate. No adjustments will be made during
the first 2 years of the contract.
2. For contracts with terms longer than 2 years, SCA/CBA
adjustments will be made in accordance with the statute, but
not more frequently than every 2 years.
q. Item 17, Supplier's Wages, Personal Driving/Supervision.
Contract adjustments to Supplier's Wages, Personal
Driver/Supervision apply to box delivery and combination routes
only.
1. The allowable adjustment in the supplier's wages granted
solely for changed economic conditions is limited to the
amount shown on the last approved cost statement multiplied
by the percentage increase/decrease in CPIW since proposal
closing, renewal, or last approved economic cost adjustment,
whichever is the latest. (No documentation is required.)
2. Determine the adjustment by multiplying the annual cost by
the appropriate CPIW multiplier and then dividing the product
by the allowable hours shown on the last approved cost
statement to obtain the per hour unit cost. If new hours are
being added to the contract, multiply the new annual hours by
the new hourly rate to determine the new annual cost.
3. The supplier's wages may be increased in all cases to allow
the supplier at least the minimum wages established by the
Fair Labor Standards Act (as amended). If local minimum
wages exceed Fair Labor Standards Act wages, the CO may
adjust the supplier's hourly wage rate up to the local
minimum wage.
4. Contracting officers are authorized to approve one-time
payments when the illness of the supplier forces the supplier
to temporarily employ a driver. Any reasonable increase over
the hourly rate that suppliers were receiving for their own
driving time may be approved. The one-time payment is
normally limited to the amount of increased cost for a period
of 30 days or less. Requests for compensation that exceed
30 days must be approved by the ST-CMC manager or the
manager's designee.
r. Item 18, Total Cost. Sum of items 11, 16, and 17.
s. Item 19, Return on Investment. Return on investment may be
adjusted only when vehicles used on a route are replaced and an
increase is allowed and a value previously appeared in line 19.
The adjustment in return on investment is limited to a maximum
of 10 percent of the change allowed in item 1a.
t. Item 20, Total Contract Rate. Sum of items 18 and 19.
Perform the following steps to establish the CPIW factors for an
economic adjustment.
Step 1 Identify the HCR number.
Step 2 Identify the date the request is received by the CO.
Step 3 Determine the beginning month of the comparison
period. This is the month that contains one of the
following dates, whichever is latest:
• Proposal Closing Date.
• Renewal Date.
• Last Economic Adjustment Date (if applicable).
• Not applicable - Return to supplier, denied.
Step 4 Determine the ending month of the comparison
period. This is the month prior to the month in which
the request is received by the CO (see step 2).
Step 5 Determine the beginning CPIW number. This is the
CPIW number for the month prior to the beginning
month identified in step 3.
Step 6 Determine the ending CPIW number. This is the
CPIW number for the month prior to the I-ICR-TPC
in which the request is received by the CO. The data
gathered in this section will be used to calculate the
percentage change formula in section 632.
Note: The CPIW comparison date is adjustment-specific and not
line-item-specific. As an example, when submitting an economic adjustment, a supplier may elect to request a CPIW adjustment on line items 1b and 5. At the next adjustment, the CPIW
comparison dates would be the same for all line items adjustable by CPIW, except items 1a(1) or 1a(2) equipment.
The supplier will be allowed an amount equal to the percentage change
in the CPIW for those items adjustable by CPIW changes. Determine the
percentage change as described in the example below:
Step 1 Determine the effective date of adjustment. This is
the first day of the highway contract route
transportation pay cycle in which the request was
received.
Step 2 Identify the beginning CPIW number (from section
631, step 5).
Step 3 Identify the ending CPIW number (from section 631,
step 6).
Step 4 Calculate the percentage factor. Divide the ending
CPIW number by the beginning CPIW number. Carry
the decimal to 5 places.
Step 5 Calculate the new allowable amount per line item.
Use the line items in column Ill of the most recently
approved cost statement. Multiply a line item by the
percentage factor.
Note: Apply only to line items eligible to be adjusted by CPIW
changes.
Example: Establishing the Percentage Change Formula for an
Economic Adjustment
Step 1 Effective date of adjustment: October 6, 2001.
Step 2 Beginning CPIW number (from part 631, step 5):
169.1
Step 3 Ending CPIW number (from part 631, step 6): 174.8
Step 4 174.8 divided by 169.1 = 1.03371
Step 5 (For a line item in which the last approved amount is,
for example, $2,500.00:)
$2,500.00 x 1.03371 = $2,584.28, the new allowable
amount.
The CO or COR issues orders on PS Form 7440, Contract Route Service Order, and provides a copy to the supplier.
When an adjustment request is denied, the CO or COR advises the
supplier of the reason for this action. A detailed explanation is required.
When a supplier makes a request for adjustment in compensation for
economic reasons, and the CO's allowance is less than that requested,
the CO will advise the supplier in writing of each item disallowed in whole
or in part and the specific reasons why. After the CO has provided a final
decision, if the adjustment is disputed by the supplier, the case may be
appealed by the supplier in accordance with the Claims and Disputes
clause of the contract.
Adjustment of different line items may be effective on different dates as
prescribed in the following section. Economic adjustments, that is, an
adjustment solely for economic reasons, including supplier's wages, for
awarded contracts will not be granted more frequently than every 13
HCR-TPC5 (364 days). The first economic adjustment after a renewal
may be granted seven HCR-TPC's (196 days) after the effective date of
the renewal and every HCR-TPC5 (364 days) thereafter.
The effective date of an approved economic adjustment (other than
one-line adjustments and documented line items) is the first day of the
HCR-TPC in which the completed PS Form 7463 is received. If the
supplier's initial request is not supported by the necessary documentation and the supplier fails to respond to the CO's request for documentation within 28 days of the request (either providing the requested documentation or advising the CO when the documentation will be provided),
the adjustment for all line items will become effective the first day of the
HCR-TPC in which the necessary documentation is received.
Adjustments due to the application of a new wage determination will be
allowed only as a result of the determination of minimum prevailing SCA
wages and fringe benefits applicable at the beginning of a renewal
period, or when an increased or decreased wage determination is otherwise applied to the contract and becomes applicable to the contract by
operation of law (normally only on the 2-year anniversary date of the
contract). Adjustments due to such application of a new wage determination are treated as one-line adjustments. The adjustment is effective on the date when the new wage determination becomes applicable
to the contract, but in no event shall adjustments that increase compensation be effective earlier than the date when the supplier incurs the
increased costs. Further, the supplier must provide all relevant supporting data for his or her increased costs and request adjustment within 60
days after the new wage determination becomes applicable to the contract. If the adjustment request and supporting data are not received
within 60 days, the effective date is the first day of the highway contract
route transportation pay cycle in which the request and supporting data
are received.
Adjustments in documented line items for box delivery and combination
routes will be retroactive to the date costs were incurred provided that
the supplier has notified the CO of increases within 60 days of the
supplier's knowledge of increases. If the supplier fails to notify the CO
of increases within 60 days of having knowledge of those increases,
then the increased costs will become effective the first day of the HCR-
TPC in which documentation is received in accordance with section 44.
For transportation routes, adjustments to the cost statement will not be
retroactive.
Adjustments in the rate of compensation due to the supplier's election
to replace equipment on a route will be effective the date that such
equipment was placed in service on the route, provided that the supplier
notifies the CO within 60 days of the date replacement equipment was
actually placed in service on the route. Adjustments for equipment are
treated as documented one-line adjustments (see section 74).
If a route is subcontracted while a contract adjustment is pending, any
adjustment that is determined to be due the supplier will be allowed to
the subsupplier.
Any pending cost adjustment, if known at the time of processing a
negotiated service change that would have an effective date preceding
the service change effective date, may be processed along with the
service change but must be calculated separately (i.e., develop a cost
statement for each). This will prevent an amendment to the service
change at a later date.
If a supplier dies before completing a pending adjustment, the supplier's
estate or next of kin should be given an opportunity to complete the
adjustment case. Any adjustment thus allowed will be allowed to the
subsupplier if the route is subcontracted.
The CO or COR may approve a supplier's request for an interim adjustment when it is determined that there may be a delay in processing the
supplier's request. In cases where there is a dispute, interim adjustments may be for the full amount that is not in dispute.
The CO or COR shall qualify all interim adjustments with a statement on
PS Form 7440 that the amount is not final and is subject to modification
after final approval of the adjustment request.
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