Undefinitized Contract Actions (UCA) are those contract actions for which the contract terms, specifications, or price are not agreed upon before performance commences (DFARS 217.7401). Examples are letter contracts, orders under basic ordering agreements, and provisioned item orders, for which the price has not been agreed upon before performance has begun. Further guidance for Letter Contracts and UCAs is provided for in FAR 16.603 and DFARS 217.7403.
- Restrictions on Use: Subject to the limitations set forth in DFARS 217.7404, DoD policy per DFARS 217.7403 is that undefinitized contract actions shall be used only when:
- The negotiation of definitive contract action is not possible in sufficient time to meet the Government’s requirements; and
- The Government’s interest demands that the Contractor be given a binding commitment so that contract performance can begin immediately, and shall be as complete and definite as practicable under the particular circumstances.
Letter Contracts. Per FAR 16.603-1, a Letter Contract/UCA is a written preliminary contractual instrument that authorizes the Contractor to begin immediately manufacturing supplies or performing services. A Letter Contract/UCA should be as complete and definitive as possible under the circumstances.
- Applicability. Per FAR 16.603-2(a), a Letter Contract may be used when (i) the Government’s interests demand that the Contractor be given a binding commitment so that work can start immediately, and (ii) negotiating a definitive contract is not possible insufficient time to meet the requirement. However, a Letter Contract should be as complete and definite as feasible under the circumstances.
- Limitations. Per FAR 16.603-3, a Letter Contract may be used only after the Head of the Contracting activity or a designee determines in writing that no other contract is suitable. A Letter Contract may not do any of the following:
- Commit the Government to a definitive contract in excess of the funds available at the time the letter contract is executed;
- Be entered into without competition when the competition is required by FAR Part 6;
- Be amended to satisfy a new requirement unless that requirement is inseparable from the existing letter contract. Any such amendment is subject to the same requirements and limitations as a new letter contract; or
- Per DFARS 217.7404-4 obligate more than 50% of the not-to-exceed (NTE) price before definitization. However, if the Contractor submits a qualifying proposal before 50 percent of the NTE price has been obligated by the Govt., then the limitation on obligations before definitization may be increased to no more than 75%.
- Documentation Requirements. The documentation described below must be submitted to the Contract Review Board prior to issuance of a Letter contract:
- A request for UCA approval package prepared in accordance with DFARS PGI 217.7404-1.
- A Letter Contract may be used only after the Head of the Contracting Activity or a designee determines in writing that no other contract is suitable.
- A Statement of Urgency from the requiring organization is required to support the need of issuing a Letter Contract.
- A Funding Document is required.
- The issuance of a Letter Contract does not excuse the requirement for a Business Clearance Memorandum (BCM). The BCM for a Letter Contract award authorization should include at a minimum:
- BCM Cover Page;
- Why you need to award a Letter Contract vice a conventional contract (urgency impact statement);
- How you selected the particular firm for the award (competitive bids or proposals, or approved Justification and Approval (J&A);
- A responsibility determination in accordance with FAR Subpart 9.1 for the proposed awardee;
- Basis (analysis) for establishing the not-to-exceed (NTE) dollar amount(s) for the Letter Contract; and
- What the planned definitization schedule is and how it was established. (Relationship between dollars and schedule).
- Contents of a Letter Contract. Per FAR 16.603-2(c) and as required by the clause at FAR 52.216-25, a Letter Contract must include a Definitization Schedule (accomplished by inclusion of the clause at DFARS 252.217-7027) as well as a Qualifying Proposal in accordance with the definitization schedule. Clauses for the type of definitive contract contemplated must also be included, and appropriate clauses, as well as further details, are listed in the SCPPM document UCA.
AcqLinks and References:
- DoD Contracting Officer Representative (COR) Handbook – 22 Mar 12
- DAU “Comparison of Major Contract Types” – Jan 2014
- Website: Federal Acquisition Regulations (FAR) Home Page
- Website: DFARS Table of Content
- Website: DFARS 216 “Contract Types”
- Website: Defense Procurement and Acquisition Policy