16.603-1
Description
A letter contract allows contractors to begin work immediately under urgent circumstances before all contract terms are finalized.
Overview
FAR 16.603-1 defines a letter contract as a written preliminary contractual instrument that allows a contractor to start work immediately on manufacturing supplies or performing services before the final contract terms are negotiated and definitized. This section establishes the basic concept and purpose of letter contracts, which are used when there is an urgent need to begin performance and it is not feasible to negotiate a definitive contract in time. Letter contracts are intended to provide a rapid means to authorize work while ensuring that a formal contract will follow.
Key Rules
- Definition of Letter Contract
- A letter contract is a written, preliminary agreement that authorizes immediate commencement of work by the contractor.
- Purpose and Use
- Letter contracts are used when urgent circumstances require work to begin before all contract terms can be finalized.
Responsibilities
- Contracting Officers: Must issue the letter contract in writing and ensure it is followed by a definitive contract.
- Contractors: Must begin work as authorized and comply with the terms of the letter contract.
- Agencies: Must oversee the use of letter contracts and ensure timely definitization.
Practical Implications
- Letter contracts enable urgent work to start quickly, but require careful management to ensure timely negotiation of final terms.
- Contractors should be aware that the initial authorization is preliminary and subject to further negotiation.
- Common pitfalls include delays in definitizing the contract and misunderstandings about the scope or limitations of the letter contract.