# DLAD PART 16

- SUBPART 16.1 – SELECTING CONTRACT TYPES

- 16.105 SOLICITATION PROVISION

- 16.105-91

- SUBPART 16.2 - FIXED PRICE CONTRACTS

- 16.203 Fixed-price contracts with economic price adjustment.
- 16.203 Definitions.

- 16.203-1 Description
- 16.203-2 Application.
- 16.203-3 Limitations.
- 16.203-4 Contract clauses.

- SUBPART 16.5 - INDEFINITE-DELIVERY CONTRACTS

- 16.501-2 General.

- 16.503 Requirements Contracts.
- 16.504 Indefinite-quantity contracts.
- 16.505 Ordering.
- 16.506 Solicitation Provisions and Contract Clauses.
- 16.506 (f)(90)
- 16.506 (92)(a)

- 16.506-93
- 16.506-94
- 16.506-95

- 16.506 (96)
- 16.506 (96)(b)

- SUBPART 16.6 - TIME-AND-MATERIALS, LABOR-HOUR, AND LETTER CONTRACTS

- 16.601 Time and materials contracts.
- 16.601 (90) Supply chains shall annually monitor their percentage of acquisition dollars being spent on T&M/LH contracts and orders.
- 16.603 Letter contracts.

- 16.603-3 Limitations.
- 16.603-90 Procedures.

- SUBPART 16.7 - AGREEMENTS

- 16.703 Basic ordering agreements.

PART 16

TYPES OF CONTRACTS

TABLE OF CONTENTS

SUBPART 16.1 – SELECTING CONTRACT TYPES

16.105 SOLICITATION PROVISION

16.105-91

SUBPART 16.2 - FIXED PRICE CONTRACTS

16.203 Fixed-price contracts with economic price adjustment.

16.203 Definitions.

16.203-1 Description.

16.203-2 Application.

16.203-3 Limitations.

16.203-4 Contract clauses.

SUBPART 16.5 - INDEFINITE-DELIVERY CONTRACTS

16.501-2 General.

16.503 Requirements contracts.

16.504 Indefinite-quantity contracts.

16.505 Ordering.

16.506 Solicitation Provisions and Contract Clauses.

SUBPART 16.6 - TIME-AND-MATERIALS, LABOR-HOUR, AND LETTER CONTRACTS

16.601 Time and materials contracts.

16.603 Letter contracts.

16.603-3 Limitations.

16.603-90 Procedures.

SUBPART 16.7 - AGREEMENTS

16.703 Basic ordering agreements.

TYPES OF CONTRACTS

SUBPART 16.1 – SELECTING CONTRACT TYPES

16.105 SOLICITATION PROVISION

16.105-91

Use 52.216-9018, Alternate Offer Conditional Award, when clause 52.216-9017 was included in Section I of the solicitation, and award of this contract is made under the condition that an alternate offer will be approved.

TYPES OF CONTRACTS

SUBPART 16.2 - FIXED PRICE CONTRACTS

16.203 Fixed-price contracts with economic price adjustment.

16.203 Definitions.

(90) As used in this section---

“Established catalog price” means prices (including discounted prices) recorded in a catalog, price list, schedule, or other record that (a) are regularly maintained by the manufacturer or vendor; and (b) are published or otherwise available for customer inspection.

“Established market price” means a price that is established in the course of ordinary and usual trade between buyers and sellers free to bargain and that can be substantiated by data from sources independent of the offeror.

“Existing EPA clause” means a clause prescribed in FAR 16.203-4 or DFARS 216.203-4-70, respectively, or a locally developed EPA clause that has been reviewed and approved in accordance with agency procedures (16.203-3(93)).

16.203-1 Description

(a)(90) Adjustment based on established prices. Established prices may reflect industry-wide and/or geographically based market price fluctuations for commodity groups, specific supplies or services, or contract end items. (DAR Tracking Number 95-D0003, FARS DEV 96-10).

(c)(90) Adjustments based on cost indexes of labor or material. These price adjustments may also be based on increases or decreases in indexes for commodity groups, specific supplies or services, or contract end items. (DAR Tracking Number 95-D0003, FARS DEV 96-10).

16.203-2 Application.

(90) Established prices and cost indexes need not reflect changes in the costs or established prices of a specific contractor. The established price or cost index may be derived from sales prices in the marketplace, quotes, or assessments as reported or made available in a consistent manner in a publication, electronic database, or other form, by an independent trade association, Government body, or other third party independent of the contractor. More than one established price or cost index may be combined in a formula for economic price adjustment purposes in the absence of an appropriate single price or cost index. (DAR Tracking Number 95-D0003, FARS DEV 96-10).

(91) Although a specific item or element of cost may require EPA coverage, the contracting officer should also determine whether an EPA clause should cover the entire end item to take advantage of competitive market forces to moderate price fluctuations. The decision should be based on risk and price analyses of the alternatives, and may be an appropriate element of tradeoff in negotiations.

16.203-3 Limitations.

(90) A fixed price contract with economic price adjustment may also be used to provide for price adjustments authorized in this section. (DAR Tracking Number 95-D0003, FARS DEV 96-10). (See 16.203-1, 16.203-2(90) and 16.203-4(90).

(91) An economic price adjustment (EPA) clause may be planned for use in the event the contracting officer substantiates in documentation included as part of the acquisition plan that the conditions cited in FAR 16.203-3 exist and an EPA provision is required to achieve one of the two objectives stated therein, and/or its use is authorized in this section.

(92) When the contracting officer determines that no existing FAR EPA clause (including a FAR EPA used in conjunction with the corresponding FAR EPA “Implementation” DLAD clause (see 16.203-4(a)(1)(90), -4(b)(1)(90), and -4(c)(1)(90)), no DFARS EPA clause and no locally-developed HQ DLA approved clause satisfies the need for an EPA clause, a new EPA clause may be developed in accordance with FAR 16.203-4, DFARS 216.203-4-70, and this section.

(93) Prior to issuance of a solicitation containing a new EPA or revision to an existing EPA clause, the contracting officer shall submit it to the local policy office for review and approval. All new EPA clauses and revisions to existing EPA clauses shall be forwarded to HQ DLA, ATTN: J-73, for review and approval, along with identification of any options and other EPA to be included. This DLA approval requirement also applies to acquisitions of commercial items. However, this DLA approval requirement does not apply to a minor, (i.e., editorial revision clarification, or an incidental correction or update change to an existing (HQ DLA-approved, locally-developed) EPA clause, provided that a copy of the revised clause is furnished to J-73 at the time of decision to include it in the solicitation; nor to use of a FAR EPA “Implementation” DLA clause.

(94) The CCO or designee (not lower than one level above the contracting officer) shall approve any ceiling exceeding ten (10) percent. Such approval may cover more than (1) contract and extend over a stated definite period of time not to exceed two (2) years.

(95) If not included in the EPA clause, the solicitation and contract shall elsewhere contain, and the contracting officer shall assure compliance with, the contractor's warranty that the contract prices do not include allowance for any contingency to cover increased costs also considered by the EPA clause. (When a contract option is also planned see 17.203(d).)

(96) If it becomes apparent that an EPA clause is clearly justified in a solicitation that did not include one, a FAR, DFARS, DLAD or locally developed HQ DLA-approved EPA clause may be included by amendment to the solicitation and in any resulting contracts if all EPA contingencies covered by the EPA clause are removed from any formerly offered price(s).

16.203-4 Contract clauses.

(90) When the contracting officer determines that no existing EPA clause (including a FAR clause used in conjunction with the corresponding FAR EPA “Implementation” DLAD clause (see (a)(1)(90), (b)(1)(90) and (c)(1)(90) below) is appropriate, the contracting officer may develop and use a modification to an existing EPA clause, or a new clause, in accordance with 16.203-1(a)(90) or (c)(90). Established prices and cost indexes need not reflect changes in the costs or established prices of a specific contractor. The established price or cost index may be derived from sales prices in the marketplace, quotes, or assessments as reported or made available in a consistent manner in a publication, electronic database, or other form, by an independent trade association, Governmental body, or other third party independent of the contractor. More than one established price or cost index may be combined in a formula for economic price adjustment purposes in the absence of an appropriate single price or cost index upon approval pursuant to 16.203-3(91). (DAR Tracking Number 95-D0003, FARS DEV 96-10).

(91) Adjustments based on established market prices or indexes (see also (d.) below).

(i) The contracting officer shall determine the most appropriate international, national, regional, or local area market. The EPA clause included in the solicitation shall identify the index or established market price, the document containing such index or price, and its effective date or period.

(ii) If the contracting officer is unable to identify an established market price or index that satisfactorily reflects economic fluctuations, then the EPA provision included in the solicitation may provide for offeror fill-in to recommend the most appropriate established market price or index (if none, the most appropriate established catalog price), along with the document containing the established price or index and the effective date/period of the established price or index (and, for established catalog price EPA clauses, the identification and amount of any applicable extras, discounts, or rebates used in calculating the contract price). The contracting officer shall select the most appropriate established market price or index identified (if none, the most appropriate established catalog price). The contracting officer may amend the request for proposal (RFP), after requesting and receiving best and final offers, to include this selection.

(iii) In addition, when preparing a new, locally developed EPA clause or a revision to an existing clause involving using an established or published market price clause, include the provision at (d)(iv)(90), after substituting the phrase “market price” indicator for the five occurrences of the word “index”.

(iv) The clause at 52.216-9003 may be included in solicitations and resulting contracts for items containing specialty metals, when there is potential for unpredictable increases or decreases in the cost of the specialty metal, and the changes can be tracked by a published market price indicator (e.g. London Metals Exchange, Platts). Cost or price indices that are subject to recalculation after initial publication (to take into account late survey reports and corrections by respondents e.g. PPI) shall not be used with this clause. Clause requires contractor submission of information adequate to support derivation of the dollar value of specialty metal(s) in the unit price.

(92) Adjustments based on established catalog prices. An established catalog price-type EPA clause (FAR 52.216-2 or –3, DFARS 252.216-7000 or –70001, or similar locally-developed clause) may be included in solicitations and resulting contracts for an item previously bought without such EPA clause only after the contracting officer determines that neither an index-type or an established market priced EPA is suitable (i.e., the requirements of FAR 16.203-4(d) and DFARS 216.203-4(d) are not met or there is no suitable index or established market price describing the supplies with specificity) and documents in the acquisition plan the results of actions taken in reaching this determination.

> (a) Adjustments based on established prices--standard supplies.

> (1)(90) The clause at 52.216-9000 (or substantially the same clause) may be used with FAR clause 52.216-2.

> (i) The clause at 52.216-9011, Economic Price Adjustment - DoD Electronic Mall (EMALL) may be included in long-term contracts to be loaded into the DoD Electronic Mall (EMALL).

(b) Adjustments based on established prices--semistandard supplies.

(1)(90) The clause at 52.216-9001 (or substantially the same clause) may be used with FAR clause 52.216-3.

(c) Adjustments based on actual cost of labor or material.

(90) An actual cost type EPA clause (FAR 52.216-4 or a locally-developed clause) may be included in solicitations and resulting contracts for an item previously bought without such an EPA clause only after the contracting officer determines that no other type of EPA clause is appropriate and documents in the acquisition plan the results of actions taken in reaching this determination. A provision shall also be included in the solicitation and any resulting contracts that--

(i) Identifies the specific direct cost factor and dollar amount needed to establish the baseline from which adjustments will be made, regardless of whether cost or pricing data was submitted;

(ii) Incorporates by reference, the cost principles and procedures in FAR Subpart 31.2 for use as the basis for pricing the baseline and any adjustment under the EPA clause;

(iii) Identifies any appropriate markup factors/amounts; and

(iv) Provides the methodology for price adjustment calculations.

(1)(90) The clause at 52.216-9002 (or substantially the same clause) may be used with FAR clause 52.216-4.

(3)(90) When the FAR “Implementation” DLAD clause is also used (along with the note specified at 15.204-2(b)(91)), the contracting officer shall include the required information in such clause vice the contract Schedule.

(4)(iii)(90) When the FAR “Implementation” DLAD clause is also used (along with the note specified at 15.204-2(b)(91)), the contracting officer shall include the required information in such clause vice the contract Schedule.

(2) The clause at 52.216-9012 may be included in solicitations and resulting contracts for Unitized Group Rations – A (UGR-A) when the requirements of FAR 16.203-2 are met and the determination required by FAR 16.203-3 is made. The clause is based on cost of materials (total components price defined below). There is no adjustment for the distribution price (defined below) for these rations. If the Contractor’s applicable total components price of a ration component(s) changes (i.e. increase or decrease) after the contract date, the corresponding unit price may be increased, or shall be decreased, by the same amount (subject to upward ceiling discussed below). Clause requires contractor submission of supporting data adequate to support any requested price change.

(d) Adjustments based on cost indexes of labor or material. An index clause may be included in solicitations and resulting contracts only if the contracting officer documents in the acquisition plan, rationale indicating that the acquisition satisfies the requirements of FAR 16.203-4(d) and DFARS 216.203-4(d). The contracting officer shall select the most appropriate index published by the Bureau of Labor Statistics (BLS). Another index may be used provided the contracting officer determines that no BLS index is suitable and documents in the acquisition plan the specific BLS indexes considered, why they were unsuitable, and rationale demonstrating the suitablility of the index selected.

(d)(iv)(90) "In the event—

> (i) Any applicable index is discontinued or its method of derivation is altered substantially; or

> (ii) The contracting officer determines that the index consistently and substantially fails to reflect market conditions—

the parties shall agree upon an appropriate substitute index for determining price adjustments hereunder. The contract shall be modified to reflect such substitute index, effective on the date the index specified in the contract is no longer published or began to consistently and substantially fail to reflect market conditions."

(d)(v)(90) When planning to use an index-type clause which provides for price adjustment, whenever the actual index for a period differs from the projected index for that period sufficiently to trigger a price adjustment, the contracting officer shall ensure that the projected index for each period to be included in the clause at least equals the projected indexes used in pricing the same cost element under the contract.

SUBPART 16.5 - INDEFINITE-DELIVERY CONTRACTS

16.501-2 General.

(c) The requirements of DFARS Subpart 217.74 and DLAD 17.74 shall be met for indefinite-delivery contracts providing for issuance of undefinitized delivery orders (UDOs).

(90) IDCs that enable decentralized ordering shall contain provisions for customers and other users the options of (i) placing orders to be paid using their Governmentwide purchase card and (ii) ordering against their purchase card, for individual orders not to exceed $100,000. An exception is authorized only to the extent the prospective contractor refuses to accept the purchase card for ordering and payment. Customers and other users of the Governmentwide purchase card against IDCs issued by contracting offices of DLA and other agencies are bound by any applicable restrictions and policies issued by or in accordance with procedures applicable to the indvidual users (DLA users are governed by DLAD DLA Government Purchase Card Program One Book Chapter & DLAI DLA Government Purchase Card Program One Book Chapter, DLA Governmentwide Commerical Purchase Card Program).

(d) Indefinite-delivery contracts may provide for any appropriate cost or pricing arrangements under Part 16, including firm fixed price, fixed price with economic price adjustment, fixed price with prospective redetermination, or price based on catalog or market prices. When prices are based on catalog or market prices, the price to be paid may be determined by establishing an adjustment factor and applying it to the price in industry-wide pricing guides or manufacturers’ price catalogs. Normally, the adjustment factor will be a fixed percentage discount to be applied to the price in effect on the date of each order.

16.503 Requirements Contracts.

(d) The determination that award of multiple contracts is not practicable shall be contained in the acquisition plan or otherwise documented in writing prior to issuance of the solicitation.

16.504 Indefinite-quantity contracts.

16.504-90

The clause at 52.216-9027, Evaluation of Quantity Sensitive and Indefinite Delivery Contracts (IDC), shall be used in Solicitations which will result in IDC contracts when it is anticipated that the contractor will offer a price break for high quantity delivery orders. Coordinate with the demand planner manager for establishment of the quantity most likely to be procured for each delivery order. The highest weight should then be assigned to this quantity. The SF 36 shall be manually typed in the buying section to show the range of order quantities and to reflect the evaluation weight which will be placed upon the specific quantity range. Buyer shall also provide the contractor with an estimate of the annual requirements.

16.504

(a) The Government's quantity limitations may be stated in different ways; for example, as a number of items or a dollar value worth of items. Stating the Government's minimum/maximum liability for the entire contract is appropriate for multiple line item contracts when, due to the unique nature of the requirement, it is difficult or impossible to predict, prior to solicitation, the number of individual items needed. The contracting officer must balance the risks inherent in providing more specific limitations with the increased risk to the contractor, and possible increased cost to the Government, of providing less specific limitations.

(4)(iv) Consideration of past performance in order placement decisions shall include success in implementation of proposed socioeconomic support programs (see 15.605(b)(1)(91) and performance in carrying out Mentoring Business Agreement proposals (see 19.90)and 15.605(b)(92), and support of Javits-Wagner-O’Day Act (JWOD) qualified entities (see 15.605(b)(1)(94)). Solicitations shall so state in the explanation of order placement criteria (FAR 16.504(a)(4)(iv)).

(c) The determination not to make multiple awards shall be contained in the acquisition plan or otherwise documented in writing in the contract file.

16.505 Ordering.

(a)(90) A delivery order must be issued for any quantity ordered, including a quantity ordered concurrent with award of a basic contract.

(a)(5) DLA Form 1224, Shipping Instruction, may be used to issue automated orders under

indefinite-delivery contracts not exceeding the simplified acquisition threshold.

(b) Solicitations shall advise offerors that (1) the competition requirements of FAR Part 6 do not apply to placement of individual task and delivery orders; (2) individual orders shall be placed in accordance with the selection criteria specified in the solicitation/contract; and (3) complaints about the placement of individual orders shall be reviewed by the activity competition advocate.

(2) The determination not to provide all awardees a fair opportunity to be considered for a particular order in excess of $3,000 should be documented in the order file.

(5) The competition advocate at each contracting activity/office (as defined in DLAD 2.101) shall act as the activity task and delivery order contract ombudsman pursuant to FAR 16.505(b)(5). The ombudsman shall attempt to resolve contractor complaints relative to placement of individual task and delivery orders at the local level. Complaints which cannot be so resolved shall be forwarded to the HQ through J-72 for resolution by the DLA competition advocate. Each activity is responsible for developing procedures for executing the duties and responsibilities of its local ombudsman. The competition advocate at each contracting activity/office (as defined in DLAD 2.101) shall act as the activity task and delivery order contract ombudsman pursuant to FAR 16.505(b)(5).

(b)(90) Use 52.216-9022, Placement of Task/Delivery Orders Against Multiple Indefinite Delivery Contracts as needed to indicate delivery order procedures in multiple award indefinite delivery contracts pursuant to FAR 16.504. Indicate in the clause whether price for the task or delivery order is significantly more, less, or approximately equal in importance to all other factors combined.

16.506 Solicitation Provisions and Contract Clauses.

16.506 (f)(90)

Use 52.216-9017, Single or Multiple Awards, on Solicitations and Contracts for single or multiple awards of indefinite quantity contracts when the Government reserves the right to award multiple task/delivery order contracts for the same or similar services or supplies to two or more sources under this solicitation. One or more awards may be conditioned on the approval of an alternate offer. Use with 52.216-27.

(90) Additions or deletions. The clause at 52.216-9006 may be used in solicitations when a mechanism is needed for making additions or deletions to items covered by the contract, e.g. corporate contracts, LTCs incorporating a manufacturer’s price list, comprehensive weapon system spare parts support or a specific range of items, etc.

(1) Competition requirements must be addressed before new items may be added to a contract.

(2) A scope of contract statement is necessary in both solicitation and contract to clearly establish the Government's intentions and rights under the contract. The contract scope statement should communicate a comprehensive objective for the acquisition, i.e. whether it is based on a specific stock class, weapon system, product line, manufacturer, or distributor, etc. The scope statement must not include information that conflicts with Section B or other terms of the solicitation. Contract specialists have considerable flexibility in defining contract scope but must be careful to avoid ambiguities. Example of a contract scope statement: "In addition to those items specified in Section B of this solicitation, the scope of this contract includes all DLA managed items manufactured by ABC Corp. in support of the XYZ weapon system. Items within the scope may be added to the contract at a later date in accordance with the terms of the clause 52.216-9006, Addition/Deletion of Items."

(91)(a) The Contracting Officer may use the clause at 52.216-9007, Contract and Delivery Order Limitations in conjunction with FAR 52.216-19 to establish contract and/or delivery order limitations.

(b)The clause at 52.216-9008, Offeror’s Quantity Limitations may be used when the Contracting Officer anticipates the receipt of offers containing quantity limitations.

(c)(1) The Contracting Officer may use the clause at 52.216-9009, Estimated Total Quantity in solicitations for Requirements Contracts using information furnished by the Item manager.

(2) The Contracting Officer may use the clause at 52.216-9010, Contract Quantity Limitations in solicitations for Indefinite Quantity Contracts using information furnished by the Item manager.

(d) The Contracting Officer may use the clause at 52.216-9010, Contract Quantity Limitations in conjunction with FAR 52.216-27 to establish quantity limitations for single, split, or multiple awards of indefinite-quantity contracts.

(e) The Contracting Officer may use the clause at 52.216-9023, Additional Ordering Limitation, in conjunction with FAR 52.216-19, Ordering Limitations in solicitations and contracts for definite-quantity, indefinite quantity, or a requirements contracts, when the Government wants to ensure that ordering will not be required until the Contractor cures an untimely delivery status on a previous order or other contract.

(f) The Contracting Officer may use the provision at 52.216-9024, Adjustment to Ordering Period, in conjunction with FAR 52.216-18, Ordering, in solicitations for definite-quantity, indefinite quantity, or a requirements contract, when the Government may need to adjust the ordering period at time of award. Fill in the assumed award date.

16.506 (92)(a)

The Contracting Officer may use the provision at 52.216-9013, Evaluation of Offers for Indefinite Delivery Type Solicitations, to indicate to offerors how prices for quantity increments will be evaluated in solicitations for indefinite delivery contracts. If (c) (5) is selected, use when transportation costs will be evaluated and do not use FAR 52.247-50, No Evaluation of Transportation Costs. Use ALT I when not using the specified weights, but rather assigning the greatest weight to the quantity increment most likely to be procured for each delivery order.

16.506-93

(a) Use 52.216-9014, Area Requirements – Tentative Destinations, in solicitations permitting FOB Origin offers when it is desired to list one or more tentative destinations, each designating an area consisting of certain specified states or geographic areas.

(b) Use 52.216-9015, Area Requirements- Contiguous U.S., in solicitations and contracts for IDCs and IDPOs when the industry practice is to offer one price for delivery anywhere within the Contiguous United States (48 contiguous states and the District of Columbia).

16.506-94

Insert provision at 52.216-9019, Area Requirements – East and West of Mississippi, in C&E Solicitations for IDCs/IQCs specifying FOB Destination only, covering items of supply (NSN) which are divided into requirements for delivery East and West of the Mississippi River, within the continental United States, excluding Alaska, and the procurement is not partially set aside. Clause requires the use of odd numbered items (i.e., 0001, 0003, 0005, etc.) for requirements scheduled for delivery East of the Mississippi River and even numbered items (i.e., 0002, 0004, 0006, etc.) for requirements scheduled for delivery West of the Mississippi River.

16.506-95

Use a clause substantially the same as 52.216-9020, Prime Vendor Requirements, in Medical Pharmaceutical Prime vendor solicitations and contracts when an indefinite delivery modified requirements contract is contemplated. 52.216-9020 is to be used only for acquisitions in the Medical Supply Chain.

16.506 (96)

Use 52.216-9025, Invoices for Delivery Orders, in Delivery Orders against Federal Supply Schedules assigned to DSCR for administration.

16.506 (96)(b)

Use 52.216-9026, Pricing of Delivery Orders with Quantity Increments, in solicitations and awards for long term contracts which provide for shipment to more than one location and include quantity range pricing. Use when transportation costs will be relatively small compared to the cost of the item or when the contract price will be FOB origin.

SUBPART 16.6 - TIME-AND-MATERIALS, LABOR-HOUR, AND LETTER CONTRACTS

16.601 Time and materials contracts.

16.601 (90) Supply chains shall annually monitor their percentage of acquisition dollars being spent on T&M/LH contracts and orders.

At the earliest opportunity, particularly when a service contracting requirement becomes repetitive and more predictable in nature, contracting officers should migrate T&M/LH vehicles to other contract types, preferably a fixed price arrangement, if possible. Of particular focus should be the use of T&M/LH contracts and orders for professional, administrative, management support, information technology, and communication services. HCAs and, for activities for which the Director, Acquisition Management is the HCA, CCOs, shall report to the J-7 CAE at the close of the calendar year any percentages of T&M/LH contract action dollars for the preceding fiscal year exceeding 8 percent of service dollars, including a discussion of the supply chain’s strategy to decrease the use of T&M/LH contract type and the risk mitigation measures being used in administering these contract types.

(c) Limitations.

(90) "Not to exceed" price ceilings shall be included in each option and delivery order.

16.603 Letter contracts.

16.603-3 Limitations.

(a) See DFARS 217.74 and subpart 17.74 for additional requirements for the use of letter contracts.

(b) The determination required by FAR 16.603-3 shall be included with the DFARS 217.7404-1 authorization request.

16.603-90 Procedures.

(a)(2) Requests for HQ DLA preaward review and approval of a letter contract or other undefinitized contract action (UCA) shall be made by the chief of the contracting office. Requests subject to 1.690-6(g) may be transmitted electronically to J-73.

(b) At a minimum, requests for approval shall include:

(1) A written Statement of Urgency supporting the requirement for a UCA, including:

(i) The quantities, dates and priorities of existing and projected requirements to be filled by the buy;

(ii) The date that the requirement was first known to exist;

(iii) Why the interests of national defense demand that a contractor be given a binding commitment so that work can begin immediately;

(iv) Why negotiation of a definitive contract or priced order did not and cannot occur in sufficient time to meet the acquisition need; and

(v) The determination required by FAR 16.603-3 (letter contracts only) and authorization to take the necessary actions for entering into an UCA required by DFARS 217.7404-1;

(2) The contracting officer's responsibility determination of the prospective contractor (FAR 9.103);

(3) The ceiling total price and ceiling unit price(s) to be included in DFARS Clause 252.217-7027 Contract Definitization, an explanation of how they were derived, and documentation of the reasonableness of each ceiling unit price (see 16.703(d)(90) or 17.7603-3(a), as applicable), to include identification of the lowest unit price for each item within the most recent 12-month period.

(4) The obligated amount, interim billing price, and the predefinitization limits of the Government's liability under the UCA;

(5) A discussion of any requirement for progress payments, provisional payments, and options for increased quantity or performance period;

(6) The proposed definitization schedule including dates for--

(i) Receipt of the contractor's proposal;

(ii) Beginning of negotiations;

(iii) Completion of negotiations;

(iv) Target date for definitization; and

(7) The following additional milestone dates (unless another contract management activity will definitize):

(i) Receipt of field pricing report;

(ii) Receipt of the local price or cost/price analysis; and

(iii) Submission of the proposed definitive contract and supporting file for HQ DLA review and approval, pursuant to 1.690-6(c)(6).

(8) The delivery schedule.

(c) A copy of the signed letter contract shall be forwarded to HQ DLA, ATTN: J-73, within 1 week of execution.

SUBPART 16.7 - AGREEMENTS

16.703 Basic ordering agreements.

(b)(90) Application

Use 52.216-9016, Intent to Award Against Existing BOA, on solicitations between $25,000.01 and $100,000 which are expected to be awarded to a sole source contractor against an existing BOA and are posted to the DLA-BSM Internet Bid Board System (DIBBS) in lieu of being synopsized.

(c) Limitations.

(90) If a DLA BOA is to permit progress payments, such payments should normally be precluded on orders with a ceiling price below $1 million and/or having deliveries scheduled to commence in less than 6 months (less than $100,000 and/or less than 4 months for small business firms). This exclusion may be waived where the contracting officer documents the review and results specified in FAR 32.502-1(d)(1) and approval is granted at a level above the contracting officer.

(1)(ii)(90) The requirements of DFARS 217.7404-1 through 217.7404-4, DFARS 217.7405 through DFARS 217.7406, and DLAD 17.7404-2 through 17.7404-90 shall be included in the terms and conditions of BOAs executed by DLA contracting offices which authorize issuance of undefinitized delivery orders (UDOs), for applicability to such UDOs.

(d) Orders.

(90) The file shall be documented when the price or cost analysis techniques discussed at 15.404-1(b) and –1(c) are used for award of priced delivery orders and definitization of UDOs.

(2)(ii)(90) If a DLA BOA contains a progress payment clause without an exclusion provision for orders with a ceiling price below $1 million ($100,000 for small business firms) and/or having deliveries scheduled to commence in less than 6 months (4 months for small business firms), a provision precluding such applicability shall be included in all delivery orders below these thresholds except where the contracting officer documents that the requirements of 16.703(c)(90) and/or FAR 32.502-1 have been met.

(3)(90) The requirements of DFARS Subpart 217.74 and DLAD 17.74 shall be met on all UDOs issued by DLA contracting offices.

(3)(91) The requirements of 16.603-90(a)(2) through (90)(c) shall be followed when HQ DLA preaward review and approval to award a UDO is required by 1.690-6(g).