Client Alert: Revised Guidance to Help Contractors Manage the Effects of Inflation
The Office of the Under Secretary of Defense, Acquisition and Sustainment, Defense Pricing and Contracting (DPC) issued revised guidance last Friday granting DoD contracting officers increased flexibility to help contractors manage the effects of inflation—including for firm-fixed-price contracts.
The new guidance is “[b]ased on feedback from the Department’s acquisition executives about how inflation is presently affecting the Defense Industrial Base and contractors’ ability to perform under existing firm-fixed-price contracts . . .” and notes that “there may be circumstances where an accommodation can be reached by mutual agreement of the contracting parties” to address the “acute impacts on small businesses and other suppliers.” The guidance indicates schedule relief or otherwise amending contractual requirements may be appropriate as long as the government receives “adequate consideration” in return.
It also reminds acquisition staff of the ability to seek Extraordinary Contractual Relief under Public Law 85-804 in the form of an “upward adjustment to the price of an existing firm-fixed-price contract to account for current economic conditions.”
Prior guidance had provided that “under firm-fixed-price (FFP) contracts [contractors] generally must bear the risk of cost increases, including those due to inflation.” This blunt statement led some contracting officers to conclude they had limited room to adjust firm-fixed-price contracts struggling under the weight of inflation. This new guidance is a noteworthy acknowledgement of the significant burden on the defense industrial base and the need for contracting officers to have flexibility in responding to individual circumstances and meeting the government’s needs.
Jenner and Block’s Government Contracts attorneys have significant experience helping contractors negotiate schedule relief, equitable adjustments, and appropriate consideration and we stand ready to assist.
The new guidance is “[b]ased on feedback from the Department’s acquisition executives about how inflation is presently affecting the Defense Industrial Base and contractors’ ability to perform under existing firm-fixed-price contracts . . .” and notes that “there may be circumstances where an accommodation can be reached by mutual agreement of the contracting parties” to address the “acute impacts on small businesses and other suppliers.” The guidance indicates schedule relief or otherwise amending contractual requirements may be appropriate as long as the government receives “adequate consideration” in return.
It also reminds acquisition staff of the ability to seek Extraordinary Contractual Relief under Public Law 85-804 in the form of an “upward adjustment to the price of an existing firm-fixed-price contract to account for current economic conditions.”
Prior guidance had provided that “under firm-fixed-price (FFP) contracts [contractors] generally must bear the risk of cost increases, including those due to inflation.” This blunt statement led some contracting officers to conclude they had limited room to adjust firm-fixed-price contracts struggling under the weight of inflation. This new guidance is a noteworthy acknowledgement of the significant burden on the defense industrial base and the need for contracting officers to have flexibility in responding to individual circumstances and meeting the government’s needs.
Jenner and Block’s Government Contracts attorneys have significant experience helping contractors negotiate schedule relief, equitable adjustments, and appropriate consideration and we stand ready to assist.
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© 2026 Jenner & Block LLP. Attorney Advertising. Jenner & Block LLP is an Illinois Limited Liability Partnership including professional corporations. This publication, presentation, or event is not intended to provide legal advice but to provide information on legal matters and/or firm news of interest to our clients and colleagues. Readers or attendees should seek specific legal advice before taking any action with respect to matters mentioned in this publication or at this event. The attorney responsible for this communication is Brent E. Kidwell, Jenner & Block LLP, 353 N. Clark Street, Chicago, IL 60654-3456. Prior results do not guarantee a similar outcome. Jenner & Block London LLP, an affiliate of Jenner & Block LLP, is a limited liability partnership established under the laws of the State of Delaware, USA and is authorised and regulated by the Solicitors Regulation Authority with SRA number 615729. Information regarding the data we collect and the rights you have over your data can be found in our Privacy Notice. For further inquiries, please contact dataprotection@jenner.com.
The Office of the Under Secretary of Defense, Acquisition and Sustainment, Defense Pricing and Contracting (DPC) issued revised guidance last Friday granting DoD contracting officers increased flexibility to help contractors manage the effects of inflation—including for firm-fixed-price contracts.
The new guidance is “[b]ased on feedback from the Department’s acquisition executives about how inflation is presently affecting the Defense Industrial Base and contractors’ ability to perform under existing firm-fixed-price contracts . . .” and notes that “there may be circumstances where an accommodation can be reached by mutual agreement of the contracting parties” to address the “acute impacts on small businesses and other suppliers.” The guidance indicates schedule relief or otherwise amending contractual requirements may be appropriate as long as the government receives “adequate consideration” in return.
It also reminds acquisition staff of the ability to seek Extraordinary Contractual Relief under Public Law 85-804 in the form of an “upward adjustment to the price of an existing firm-fixed-price contract to account for current economic conditions.”
Prior guidance had provided that “under firm-fixed-price (FFP) contracts [contractors] generally must bear the risk of cost increases, including those due to inflation.” This blunt statement led some contracting officers to conclude they had limited room to adjust firm-fixed-price contracts struggling under the weight of inflation. This new guidance is a noteworthy acknowledgement of the significant burden on the defense industrial base and the need for contracting officers to have flexibility in responding to individual circumstances and meeting the government’s needs.
Jenner and Block’s Government Contracts attorneys have significant experience helping contractors negotiate schedule relief, equitable adjustments, and appropriate consideration and we stand ready to assist.
The new guidance is “[b]ased on feedback from the Department’s acquisition executives about how inflation is presently affecting the Defense Industrial Base and contractors’ ability to perform under existing firm-fixed-price contracts . . .” and notes that “there may be circumstances where an accommodation can be reached by mutual agreement of the contracting parties” to address the “acute impacts on small businesses and other suppliers.” The guidance indicates schedule relief or otherwise amending contractual requirements may be appropriate as long as the government receives “adequate consideration” in return.
It also reminds acquisition staff of the ability to seek Extraordinary Contractual Relief under Public Law 85-804 in the form of an “upward adjustment to the price of an existing firm-fixed-price contract to account for current economic conditions.”
Prior guidance had provided that “under firm-fixed-price (FFP) contracts [contractors] generally must bear the risk of cost increases, including those due to inflation.” This blunt statement led some contracting officers to conclude they had limited room to adjust firm-fixed-price contracts struggling under the weight of inflation. This new guidance is a noteworthy acknowledgement of the significant burden on the defense industrial base and the need for contracting officers to have flexibility in responding to individual circumstances and meeting the government’s needs.
Jenner and Block’s Government Contracts attorneys have significant experience helping contractors negotiate schedule relief, equitable adjustments, and appropriate consideration and we stand ready to assist.
Related Lawyers
Related Capabilities
© 2026 Jenner & Block LLP. Attorney Advertising. Jenner & Block LLP is an Illinois Limited Liability Partnership including professional corporations. This publication, presentation, or event is not intended to provide legal advice but to provide information on legal matters and/or firm news of interest to our clients and colleagues. Readers or attendees should seek specific legal advice before taking any action with respect to matters mentioned in this publication or at this event. The attorney responsible for this communication is Brent E. Kidwell, Jenner & Block LLP, 353 N. Clark Street, Chicago, IL 60654-3456. Prior results do not guarantee a similar outcome. Jenner & Block London LLP, an affiliate of Jenner & Block LLP, is a limited liability partnership established under the laws of the State of Delaware, USA and is authorised and regulated by the Solicitors Regulation Authority with SRA number 615729. Information regarding the data we collect and the rights you have over your data can be found in our Privacy Notice. For further inquiries, please contact dataprotection@jenner.com.
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