A letter contract is a useful preliminary contractual instrument when time is of the essence. It enables the CO to authorize a contractor to start work immediately and to negotiate a fair and equitable contract or purchase order while the work is underway.
A letter contract is defined as “a written preliminary contractual instrument that authorizes the contractor to begin immediately manufacturing supplies or performing services.” FAR 16.603-1.
FAR 16.603-2 provides the following guidelines for drafting and implementing letter contracts:
1. A letter contract is used to bind the parties in a contractual arrangement when it is in the government’s best interest to have the contractor start work ...