Undefinitized Contract Action

Overview

To meet urgent needs, DOD can issue undefinitized contract actions (UCA), which authorize contractors to begin work before reaching a final agreement on contract terms.

DFAR 217.74

“Undefinitized contract action” means any contract action for which the contract terms, specifications, or price are not agreed upon before performance is begun under the action. Examples are letter contracts, orders under basic ordering agreements, and provisioned item orders, for which the price has not been agreed upon before performance has begun.

Per 217.7403, DoD policy is that undefinitized contract actions shall be used only when:

• (1) The negotiation of a definitive contract action is not possible in sufficient time to meet the Government's requirements; and
• (2) The Government's interest demands that the contractor be given a binding commitment so that contract performance can begin immediately.

UCA's shall be as complete and definite as practicable under the particular circumstances.

Per 217.7404-2, UCAs shall include a not-to-exceed price.

217.7404-3 Definitization schedule.

UCAs shall contain definitization schedules that provide for definitization by the earlier of—

• (1) The date that is 180 days after issuance of the action (this date may be extended but may not exceed the date that is 180 days after the contractor submits a qualifying proposal); or
• (2) The date on which the amount of funds obligated under the contract action is equal to more than 50 percent of the not-to-exceed price.

Submission of a qualifying proposal in accordance with the definitization schedule is a material element of the contract. If the contractor does not submit a timely qualifying proposal, the contacting officer may suspend or reduce progress payments under FAR 32.503-6, or take other appropriate action.

217.7404-4 Limitations on obligations

• The Government shall not obligate more than 50 percent of the not-to-exceed price before definitization. However, if a contractor submits a qualifying proposal before 50 percent of the not-to-exceed price has been obligated by the Government, then the limitation on obligations before definitization may be increased to no more than 75 percent (see 232.102-70 for coverage on provisional delivery payments).

217.7404-5 Exceptions

The limitations in 217.7404-2, 217.7404-3, and 217.7404-4 do not apply to UCAs for the purchase of initial spares.

217.7404-6 Allowable profit

When the final price of a UCA is negotiated after a substantial portion of the required performance has been completed, the head of the agency shall ensure the profit allowed reflects—

• (a) Any reduced cost risk to the contractor for costs incurred during contract performance before negotiation of the final price; and
• (b) The contractor's reduced cost risk for costs incurred during performance of the remainder of the contract.

217.7405 Definitizations

For each definitization modification, the contracting officer shall include all data required by 243.171. 217.7406 Contract clauses.

• (a) Use the clause at FAR 52.216-24, Limitation of Government Liability, in all UCAs, solicitations associated with UCAs, basic ordering agreements, indefinite delivery contracts, and any other type of contract providing for the use of UCAs.
• (b) Use the clause at 252.217-7027, Contract Definitization, in all UCAs, solicitations associated with UCAs, basic ordering agreements, indefinite delivery contracts, and any other type of contract providing for the use of UCAs. Insert the applicable information in paragraphs (a), (b), and (d) of the clause. If, at the time of entering into the UCA, the contracting officer knows that the definitive contract action will meet the criteria of FAR 15.403-1, 15.403-2, or 15.403-3 for not requiring submission of cost or pricing data, the words “and cost or pricing data” may be deleted from paragraph (a) of the clause.

Related Pages

DFAR 252.217-7027 Contract Definitization

References

DFAR 217-74 Undefinitized Contract Action