As part of the FY23 National Defense Authorization Act (“NDAA”), Congress has given the Department of Defense authority to pay defense contractors for increased costs due to inflation. Section 822 of the NDAA amends Public Law 85-804 (50 U.S.C. 1431) to allow contractors to apply for adjustments, while also giving the DoD wide discretion to grant or deny requests. President Biden is expected to sign the FY23 NDAA soon, and Section 822 has the potential to be welcome news for contractors who have been battling inflation under multi-year, fixed-price contracts.
As readers of this blog know from prior posts, DoD has issued position papers over the last year that attempt to address inflation with existing legal tools, but as a practical matter, the Department has provided few options for contractors impacted by rising costs. The new NDAA provision could finally provide DoD with the legal support it needs to aid contractors struggling with inflation. However, many questions remain about how this law will work and whether it will actually meet the growing needs of the defense industrial base. In particular, Congress has not yet appropriated money to fund applications for relief, and DoD must prepare guidance for implementing the statute. Both of these things will need to happen before contractors can apply for and potentially receive inflation-based price adjustments under this amended Public Law 85-804 authority.
This post discusses the amendment and analyzes the hurdles that remain between defense contractors and inflationary relief.