16.603-1 Description. A contract letter is a written pre-contractual instrument that authorizes the contractor to immediately begin manufacturing deliveries or providing services. 16.603-2 Application. (a) A contract letter may be used when (1) government interests require the Contractor to make a binding commitment so that work can begin immediately, and (2) negotiation of a final contract is not possible in time to meet the requirement. However, a contractual letter must be as complete and final as possible in the circumstances. (b) If the award of a letter contract is based on price competition, the contractor shall include an overall price cap in the letter of contract. (c) Each contract letter shall include a negotiated definition plan, as required by clause 52.216-25, Definition of Contract, which includes (1) data for the submission of the Contractor`s price proposal, required cost or certified price data, and data other than certified costs or price data; and, if necessary, manufacturing or purchasing and subcontracting plans, (2) a date for the start of negotiations and (3) a target date for the definition, which is the earliest possible date for the definition. The schedule provides for the determination of the contract within 180 days of the date of the contract letter or before the completion of 40% of the work to be performed, whichever comes first. However, the contract staff may, in extreme cases and in accordance with the Agency`s procedures, authorise an additional period.

If, after exhausting all reasonable efforts, the Contractor and the Contractor are unable to negotiate a final contract because no agreement on price or fees could be reached, the clause under subsections 52.216-25 requires the Contractor to proceed with the Work and provides that the Contractor, with the consent of the head of the contracting activity, determine a reasonable price or cost in accordance with paragraphs 15.4 and 31, subject to appeal in accordance with the dispute resolution clause. (d) The maximum liability of the Government inserted in article 52.216-24, Limitation of State Liability, is the estimated amount necessary to meet the financing needs of the contractor prior to the definition. However, it may not exceed 50 per cent of the estimated cost of the final contract, unless it has previously approved the staff member who approved the contract letter. e) The customer assigns a priority assessment to the contractual letter if this is appropriate in accordance with 11,604. 16.603-3 Restrictions. A contract letter can only be used after the head of the contractual activity or an agent has determined in writing that no other contract is appropriate. Letter letters do not require the government to enter into a final contract that goes beyond the funds available at the time of execution of the contract letter; (b) be submitted without a contest if the contest is required under Part 6; or (c) be modified to meet a new requirement, unless that requirement is inextricably linked to the existing contractual letter. Such a change is subject to the same requirements and restrictions as a new contract letter. 16.603-4 Contractual clauses. (a) the member of the contract staff shall include in each letter the terms required by this Regulation for the nature of the final contract envisaged and any additional terms which are known to be suitable for him; (b) In addition, the Contractor shall include the following clauses in applications and contracts when considering a letter of contract: (1) Clause 52.216-23, performance and commencement of work, except that this clause may be omitted from contract letters awarded under SF 26; (2) Clause 52.216-24, Limitation of Crown Liability, with dollar amounts entered into pursuant to 16 603-2 (d); and (3) Clause 52.216-25, definition of the contract, paragraph (b), which is supplemented in a manner consistent with paragraph (c) 16.603-2. If, at the time of entering into the contract letter, the Contractor is aware that the Final Contract is based on reasonable price competition or otherwise meets the criteria of Section 15 403(1) to require the non-transmission of certified cost or price data, the words “and certified cost or price data in accordance with FAR 15.408, Table 15-2 justifying their proposal” may be deleted from subparagraph (a) of the clause.

If the letter contract is awarded on the basis of price competition, the contractor must use the clause with his assistant I. (c) The contractor must also include clause 52.216-26, payments of eligible costs prior to definition, in invitations and contracts when reviewing a final contract for the reimbursement of costs, unless the acquisition involves a conversion. Conversion or repair of ships. (3) There is reasonable assurance that reliable additional information will be available at an early stage of order fulfillment, allowing either (i) a fixed fixed price or (ii) fixed targets and a formula for determining the final profit and the price to be negotiated, which provide a fair and proportionate incentive. . . .