Escalation and Economic Indexes

Escalation

There are 2 ways that companies commonly protect itself for the pricing of future sales. They are:

• Including language in proposals, reserving for the right to renegotiate the price of a contract if a price index exceeds a certain amount,

• Including escalation factors in the pricing of proposals.

Economic Indexes

DCAA uses Economic Indexes in Proposal Audits. DCAA considers both inflation (cost of living) as well as the effects of other general economic changes. That information is can only be obtained via DCAA's Intranet, which means it is unavailable to the general public. The location of the "internal " information is DCAAP 7641.74, Use of Economic Indexes in Contract Audits.

If labor rates are to be adjusted to account for inflation alone, the Consumer Price Index, Urban Wage Earners and Clerical Workers (CPIW) should be used.

Labor Escalation

Common Escalation Factors for Labor are:

• Global Insight

• Consumer Price Index

Material Escalation

See Producer Price Index (PPI)

Global Insight

http://www.ihs.com/products/global-insight/country-analysis/us-industry-economic-forecasts.aspx

Related Pages

Consumer Price Index, Urban Wage Earners and Clerical Workers (CPIW)

Employment Cost Index (ECI)

Escalation and Economic Indexes