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DoD Will Consider Contract Adjustments Addressing Inflation

Client Alert | 2 min read | 09.12.22

On Friday September 9, 2022, the Principal Director for DoD Defense Pricing and Contracting (DPC) issued a Memorandum titled “Managing the Effects of Inflation with Existing Contracts.”  The Memorandum provides guidance to Contracting Officers about the range of approaches available to address the effects of inflation on the Defense Industrial Base.  Of note, it highlights two paths contractors may pursue to recover for inflation under fixed-price contracts.

First, the Memorandum notes that the ability to recognize cost increases is largely dependent on contract type, asserting that “[c]ontractors performing under firm-fixed-price contracts that were priced and negotiated before the onset of the current economic conditions generally bear the risk of cost increases.”  This is similar to guidance DPC issued in May encouraging Contracting Officers to consider including economic price adjustment (EPA) clauses in new contracts but expressing skepticism about contractors’ ability to recover for inflation under existing fixed-price contracts.  However, the new Memorandum allows that “there may be circumstances where an accommodation [such as schedule relief or amended contract requirements] can be reached by mutual agreement of the contracting parties, perhaps to address acute impacts on small business and other suppliers.”

Second, the Memorandum states that DoD “will consider” contractor requests for “Extraordinary Contractual Relief”—including potential upward price adjustments under firm-fixed-price contracts—under Public Law 85-804.  That law, as implemented at FAR Part 50, allows DoD (and other limited agencies) to amend contracts without consideration when doing so is essential to the national defense, when a contractor suffers a loss under a defense contract because of Government action, and/or to correct or mitigate the effect of mistakes.  The Government’s authority under 85-804 is broad but has certain important limitations, including: (1) 85-804 authority may not be relied upon where other adequate legal authority exists; (2) the funding must not exceed appropriated amounts (except when used to approve indemnification agreements); (3) any amendment can only be to the “extent necessary to avoid such impairment to the contractor’s productive ability”; (4) the contractor must suffer a “loss,” and not merely a decrease in anticipated profits; and (5) the contractor must submit a request for contract amendment before all obligations under the contract have been discharged.  The Memorandum notes that requests for Extraordinary Contractual Relief must satisfy “stringent criteria,” but the fact that DPC is encouraging such requests signals a potential willingness by DoD to meaningfully consider them and may provide hope for contractors struggling with the effects of inflation.

In light of this new guidance, contractors impacted by inflation should (1) continue to scrutinize their existing contracts for potential remedy granting clauses that would address inflation; (2) consider requesting both price and non-price accommodations; and (3) consider whether to seek Extraordinary Contractual Relief under Public Law 85-804.

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Client Alert | 4 min read | 08.07.25

File First, Facts Later? Eleventh Circuit Says That Discovery Can Inform False Claims Act Allegations in Amended Complaints

On July 25, 2025, the Eleventh Circuit Court of Appeals issued its decision in United States ex. rel. Sedona Partners LLC v. Able Moving & Storage Inc. et al., holding that a district court cannot ignore new factual allegations included in an amended complaint filed by a False Claims Act qui tam relator based on the fact that those additional facts were learned in discovery, even while a motion to dismiss for failure to comply with the heightened pleading standard under Federal Rule of Civil Procedure 9(b) is pending.  Under Rule 9(b), allegations of fraud typically must include factual support showing the who, what, where, why, and how of the fraud to survive a defendant’s motion to dismiss.  And while that standard has not changed, Sedona gives room for a relator to file first and seek out discovery in order to amend an otherwise deficient complaint and survive a motion to dismiss, at least in the Eleventh Circuit.  Importantly, however, the Eleventh Circuit clarified that a district court retains the discretion to dismiss a relator’s complaint before or after discovery has begun, meaning that district courts are not required to permit discovery at the pleading stage.  Nevertheless, the Sedona decision is an about-face from precedent in the Eleventh Circuit, and many other circuits, where, historically, facts learned during discovery could not be used to circumvent Rule 9(b) by bolstering a relator’s factual allegations while a motion to dismiss was pending.  While the long-term effects of the decision remain to be seen, in the short term the decision may encourage relators to engage in early discovery in hopes of learning facts that they can use to survive otherwise meritorious motions to dismiss....

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