(Editor’s Note.  One of the attorney members of our Ask the Experts panel, Len Birnbaum, helped us with the following question.)

Q. Our firm was awarded a firm fixed price contract for the manufacture and delivery of specialty items to the Navy.  The shipping point is F.O.B. destination. The items, once manufactured, are stored at origin until they are needed by the Navy where they are shipped from the East coast to California via dedicated refrigerated trucks.  The original proposal and contract pricing was based on freight costs as they were known at that time. It was impossible to anticipate the additional $6,560 in fuel surcharges that have been added to the shipping costs by the carrier. Since the additional freight costs associated with this contract are out of our control do we have any recourse regarding cost recovery?  Are there any FAR or other government regulations that would help us recover the unanticipated fuel surcharge costs?

A. First, I am surprised to hear there was no government bill of lading, where they pay all shipments. Though I doubt it is there, you should first look closely at the contract to see if there is a provision indicating relief for an increase in freight charges. But assuming you are responsible for payment and it is included in your contract price, then you are most likely responsible for all payments, including increases.  Unless the contract provides for relief, the only opportunity I see for you is Public Law 85-804, which is basically implemented in FAR Part 50 that gives the contracting officer the discretion to adjust the contract price upward to prevent hardship.  If the amount is substantial, or would put the contract in a loss position, that would certainly apply. I would recommend calling the CO and explain the situation to them, even referencing Part 50. I forget the amount of the dollar threshold but I think its around $50,000 where the CO has authority to resolve the situation without going higher up their chain of command.

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