52.216-25 Contract Definitization
Source: FAR 52.216-25 on acquisition.gov
FAR 52.216-25 mandates prompt negotiation and submission of proposals to definitize letter contracts, with strict schedules and the risk of unilateral government pricing if deadlines are missed.
Overview
FAR 52.216-25, Contract Definitization, governs the process for converting a letter contract into a definitive contract. It requires contractors to promptly negotiate the terms of the final contract, submit detailed proposals (including cost or pricing data), and adhere to a set schedule for definitization. If the parties cannot reach agreement by the target date, the Contracting Officer may unilaterally determine a reasonable price or fee, subject to contractor appeal. The clause also specifies which contract clauses will govern after definitization and provides an alternate for contracts awarded via price competition, requiring a negotiated price ceiling or firm fixed price.
Key Rules
- Negotiation of Definitive Contract
- Contractors must begin negotiations promptly and submit a comprehensive proposal with supporting data.
- Definitization Schedule
- The contract must specify target dates for proposal submission, negotiations, and other required plans.
- Unilateral Determination
- If no agreement is reached by the target date, the Contracting Officer can set the price or fee, with the contractor retaining appeal rights.
- Applicable Clauses
- The definitive contract will include all required FAR and legal clauses as of the relevant dates, plus mutually agreed terms.
- Alternate I (Price Competition)
- For letter contracts awarded via price competition, a price ceiling or firm fixed price must be negotiated and included.
Responsibilities
- Contracting Officers: Set and enforce definitization schedules, negotiate terms, and determine prices if needed.
- Contractors: Submit timely, complete proposals and negotiate in good faith; comply with all data and schedule requirements.
- Agencies: Approve unilateral determinations and oversee compliance with definitization procedures.
Practical Implications
- Ensures timely conversion of letter contracts to definitive contracts, reducing risk and uncertainty.
- Requires disciplined proposal preparation and negotiation by contractors.
- Failure to meet deadlines can result in unilateral government pricing, which may not favor the contractor.
As prescribed in 16.603-4(b)(3), insert the following clause:
Contract Definitization (Oct 2010)
(a) A ______________ [insert specific type of contract] definitive contract is contemplated. The Contractor agrees to begin promptly negotiating with the Contracting Officer the terms of a definitive contract that will include (1) all clauses required by the Federal Acquisition Regulation (FAR) on the date of execution of the letter contract, (2) all clauses required by law on the date of execution of the definitive contract, and (3) any other mutually agreeable clauses, terms, and conditions. The Contractor agrees to submit a ______ [insert specific type of proposal (e.g., fixed-price or cost-and-fee)] proposal, including data other than certified cost or pricing data, and certified cost or pricing data, in accordance with FAR 15.408, Table 15-1, supporting its proposal.
(b) The schedule for definitizing this contract is [insert target date for definitization of the contract and dates for submission of proposal, beginning of negotiations, and, if appropriate, submission of make-or-buy and subcontracting plans and certified cost or pricing data]: ___________________________________________________________________________________________ ___________________________________________________________________________________________
(c) If agreement on a definitive contract to supersede this letter contract is not reached by the target date in paragraph (b) of this section, or within any extension of it granted by the Contracting Officer, the Contracting Officer may, with the approval of the head of the contracting activity, determine a reasonable price or fee in accordance with subpart 15.4 and part 31 of the FAR, subject to Contractor appeal as provided in the Disputes clause. In any event, the Contractor shall proceed with completion of the contract, subject only to the Limitation of Government Liability clause.
(1) After the Contracting Officer’s determination of price or fee, the contract shall be governed by-
(i) All clauses required by the FAR on the date of execution of this letter contract for either fixed-price or cost-reimbursement contracts, as determined by the Contracting Officer under this paragraph (c);
(ii) All clauses required by law as of the date of the Contracting Officer’s determination; and
(iii) Any other clauses, terms, and conditions mutually agreed upon.
(2) To the extent consistent with paragraph (c)(1) of this section, all clauses, terms, and conditions included in this letter contract shall continue in effect, except those that by their nature apply only to a letter contract.
(End of clause)
Alternate I (Apr 1984). In letter contracts awarded on the basis of price competition, add the following paragraph (d) to the basic clause:
(d) The definitive contract resulting from this letter contract will include a negotiated _____________ [insert "price ceiling" or "firm fixed price"] in no event to exceed ___________________ [insert the proposed price upon which the award was based].