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

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

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

4. Letter Contracts Letter Contract: Circumstances for Use:
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.

5. Letter Contracts 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
Target date for definitization
Whichever is earlier
CO may authorize additional period in extreme cases
Before exceeding the definitization date, the contracting officer shall document in the
contract file the reason(s) for the delay, remedial actions, and the revised definitization
schedule. This documentation requires approval at a level no lower than the initial approval
authority.
The date that is 180 days after issuance of the action (this date may be
extended but may not exceed the date that is 180 days after the contractor
submits a qualifying proposal); or
The date on which the amount of funds obligated under the contract action is
equal to more than 50 percent of the not-to-exceed price.
Submission of a qualifying proposal in accordance with the definitization
schedule is a material element of the contract. If the contractor does not
submit a timely qualifying proposal, the contacting officer may suspend
or reduce progress payments under FAR , or take other
appropriate action.
If unable to definitize, contractor must perform and CO may (with HCA
approval) determine fair and reasonable $ subject to appeal under disputes clause

6. Letter Contracts Essential Elements
Maximum liability of the Gov’t
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
The Government shall not obligate more than 50 percent of the not-to-exceed price before definitization. However, if a contractor submits a qualifying proposal before 50 percent of the not-to-exceed price has been obligated by the Government, then the limitation on obligations before definitization may be increased to no more than 75 percent
Exception: The HCA may waive the limitations regarding ceilings,
definitization schedules, or obligations for UCAs if the head of the agency
determines that the waiver is necessary to support-
(1) A contingency operation as defined in 10 U.S.C. 101(a)(13); or
(2) A humanitarian or peacekeeping operation as defined in 10 U.S.C.
2302(7).
Limitations on obligations.
Obligations exceeding 50 percent of the NTE must be approved at a level no
lower than the initial approval authority and documented in the contract file.
Obligations for UCAs shall never exceed 75 percent of the NTE.
SAF/AQC signed Enduring Freedom Memo, EF-01-03, concerning undefinitized contract
actions and contingency operations in support of Operations Enduring Freedom and Noble
Eagle. This memo waives several DFARS limitations, declares Operation Noble Eagle
meets the statutory definition of a contingency operation and grants a class deviation to
AFFARS

7. Letter Contracts 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
D&F
2) Requirements impact statements shall:
(i) Specifically address the impact on mission requirements projected to occur during the time that would be required to issue a definitive contract action; and
(ii) Be signed by the official with responsibility for the requirement.
HCA/Designee:
Contracting Authority - CC-201
Contracting Relationships - CC-205

8. Letter Contracts 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

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

10. Letter Contracts DFARS Clauses
, Contract Definitization, in all UCAs & associated solicitations IAW its prescription at (b), vs. FAR
If, at the time of entering into the UCA, the contracting officer knows that the definitive contract action will meet the criteria of FAR , , or 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.

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