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Letter Contracts

Rabbanai T. Morgan Chief, Contingency Contracting Element February 2005. Letter Contracts. Letter Contracts. Overview Governing Directives Definition/Circumstances for Use Essential Elements Limitations Clauses Summary. Governing Directives FAR 16.603 DFARS 216.603-3/217.74

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Letter Contracts

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  1. Rabbanai T. Morgan Chief, Contingency Contracting Element February 2005 Letter Contracts

  2. Letter Contracts Overview • Governing Directives • Definition/Circumstances for Use • Essential Elements • Limitations • Clauses • Summary

  3. Governing Directives FAR 16.603 DFARS 216.603-3/217.74 AFFARS 5317.74 Appendix CC CC-501 Expedited Contingency Procedures Attachment CC-1, Deployment Kits Letter Contracts

  4. Letter Contract: A written preliminary contractual instrument that authorizes the contractor to begin immediately manufacturing supplies or performing services. Circumstances for Use: Government's interests demand that the contractor be given a binding commitment so that work can start immediately and Negotiating a definitive contract isn’t possible in sufficient time to meet the requirement. However, a letter K should be as complete and definite as feasible under the circumstances. Letter Contracts

  5. Essential Elements Price ceiling if based on price competition Negotiated definitization schedule Dates for submission of price proposal Required cost or pricing data Make-or-buy & subcontracting plans Date for start of negotiations Target date for definitization (earliest practicable date) 180 days after date of Letter K/40% completion of work Letter Contracts

  6. Essential Elements Maximum liability of the Gov’t - 52.216-24 Estimated amount necessary to cover the contractor's requirements for funds before definitization. NTE 50% of the estimated cost of the definitive contract unless approved in advance by the official that authorized the letter contract. Appropriate priority rating Letter Contracts

  7. Limitations Requires D&F by HCA/Designee Shall not exceed availability of funds at time of execution Shall comply with competition requirements Shall not be amended to satisfy new requirement unless new requirement is inseparable from original requirement new requirement subject to same requirements and limitations Letter Contracts

  8. Limitations Final price negotiation after a substantial portion of the required performance has been completed HCA shall ensure the profit allowed reflects contractor’s actual risk for costs incurred for performance before final price negotiation and through performance of the remainder of the contract Letter Contracts

  9. FAR Clauses As required by for the type of definitive contract contemplated and any additional appropriate clauses 52.216-23, Execution and Commencement of Work, (may be omitted from letter Ks awarded on SF 26) 52.216-24, Limitation of Government Liability IAW (16.603-2(d)) Letter Contracts

  10. DFARS Clauses 252.217-7027, Contract Definitization, in all UCAs & associated solicitations IAW its prescription at 217.7406(b), vs. FAR 52.216-25 If, at the time of entering into the UCA, the contracting officer knows that the definitive contract action will meet the criteria of FAR 15.403-1, 15.403-2, or 15.403-3 for not requiring submission of cost or pricing data, the words "and cost or pricing data" may be deleted from paragraph (a) of the clause. Letter Contracts

  11. Rabbanai T. Morgan Chief, Contingency Contracting Element February 2005 Letter Contracts

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