Government letter contracts help get work underway quickly.
The federal government uses letter contracts for emergency needs. When there isn't time to go through the entire proposal and bidding process normally required for contractor services, agencies have the option to issue a letter contract to get someone working on their urgent situation while they conduct the longer, proper process. Officials or officers in charge of their departments or units who have financial or command authority can unilaterally issue a letter contract so long as they follow federal regulations.
Purpose
Federal letter contracts are only for use in urgent situations. When repairs need to be made immediately or when work has to be done to prepare for an imminent event or visit -- and there isn't time for the usual Request For Proposal process mandated as standard procedure -- officials have the option to use a letter contract. Letter contracts are at least in theory, temporary contracts that are in place while the agency negotiates with the contractor for better terms for the job. However, some repairs and jobs finish before an negotiations can be completed.
Process
Before an official can issue a letter contract, she must get several estimates for the work which include price and turnaround. The official must show that her final choice was the most prudent and financially sound. She must also certify with detailed explanation why it is not possible to undertake a normal RFP for the situation.
Limitations
Letter contracts must include a government drafted clause limiting the liability of the government to a specified dollar amount -- not to exceed 50 percent more than the job estimate. Also, officials cannot issue contracts in amounts which exceed funds their agencies or departments have to spend at the time of contracting.
Required Clauses
Letter contracts must include have a few specific items. These include a price ceiling, target date for the start and end of negotiations and "definitization" within 180 days of the issuance of the letter contract or 40 percent of the completed job. Letter contracts must specify that if the contracting official and the contractor cannot agree on terms for "definitization", then the contractor must complete the job at a rate given by the contracting official. However, the contractor retains the right to appeal the rate per federal contractor rules.
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