This report examines how inflation impacts federal contractors across pricing, labor, materials, and contract performance. It outlines key inflation drivers such as supply chain disruptions, labor shortages, energy costs, and macroeconomic policy shifts. The report explains how fixed-price and long-term contracts expose contractors to margin erosion when costs rise faster than anticipated. It also highlights challenges related to wage pressure, subcontractor pricing volatility, and material availability. The guide discusses mitigation strategies including contract clause reviews, price escalation provisions, proactive reforecasting, and improved cost tracking. It emphasizes the importance of scenario planning, data-driven pricing decisions, and early engagement with contracting officers to

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