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Price Adjustment Clauses Based On Cost Indices
Author(s) -
Caltrider James M.
Publication year - 1987
Publication title -
journal of purchasing and materials management
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 3.75
H-Index - 92
eISSN - 1745-493X
pISSN - 0094-8594
DOI - 10.1111/j.1745-493x.1987.tb00173.x
Subject(s) - negotiation , microeconomics , business , term (time) , economics , industrial organization , physics , quantum mechanics , political science , law
Economic price adjustment (EPA) clauses can be used effectively as tools for mitigating price‐escalation risks in long‐term contracting. This approach provides for the negotiation of a mechanism that can automatically adjust contract recoveries in response to fluctuations in price levels in specific sectors of the economy. EPA clauses result not only in risk reduction for the supplier but also, if used wisely, in lower prices for the buyer.