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(Revised July 29, 2009)



 217.7400 Scope.
 217.7401 Definitions.
 217.7402 Exceptions.
 217.7403 Policy.
 217.7404 Limitations.
 217.7404-1 Authorization.
 217.7404-2 Price ceiling.
 217.7404-3 Definitization schedule.
 217.7404-4 Limitations on obligations.
 217.7404-5 Exceptions.
 217.7404-6 Allowable profit.
 217.7405 Plans and reports.
 217.7406 Contract clauses.

217.7400  Scope.

This subpart prescribes policies and procedures implementing 10 U.S.C. 2326.


217.7401  Definitions.

As used in this subpart—


      (a)  “Contract action” means an action which results in a contract.


              (1)  It includes contract modifications for additional supplies or services.


              (2)  It does not include change orders, administrative changes, funding modifications, or any other contract modifications that are within the scope and under the terms of the contract, e.g., engineering change proposals, value engineering change proposals, and over and above work requests as described in Subpart 217.77.


      (b)  “Definitization” means the agreement on, or determination of, contract terms, specifications, and price, which converts the undefinitized contract action to a definitive contract.


      (c)  “Qualifying proposal” means a proposal containing sufficient information for the DoD to do complete and meaningful analyses and audits of the—


              (1)  Information in the proposal; and


              (2)  Any other information that the contracting officer has determined DoD needs to review in connection with the contract.


      (d)  “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.


217.7402  Exceptions.

The following undefinitized contract actions (UCAs) are not subject to this subpart, but the contracting officer should apply the policy to them (and to changes under the Changes clause) to the maximum extent practicable—


      (a)  UCAs for foreign military sales;


      (b)  Purchases at or below the simplified acquisition threshold;


      (c)  Special access programs;


      (d)  Congressionally mandated long-lead procurement contracts.


217.7403  Policy.

DoD policy is that undefinitized contract actions shall—


      (a)  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.


      (b)  Be as complete and definite as practicable under the particular circumstances.


217.7404  Limitations.


217.7404-1  Authorization.

The contracting officer shall obtain approval from the head of the contracting activity before—


      (a)  Entering into a UCA.  The request for approval must fully explain the need to begin performance before definitization, including the adverse impact on agency requirements resulting from delays in beginning performance.


      (b)  Including requirements for non-urgent spare parts and support equipment in a UCA.  The request should show that inclusion of the non-urgent items is consistent with good business practices and in the best interest of the United States.


      (c)  Modifying the scope of a UCA when performance has already begun.  The request should show that the modification is consistent with good business practices and in the best interests of the United States.


217.7404-2  Price ceiling.

UCAs shall include a not-to-exceed price.


217.7404-3  Definitization schedule.


      (a)  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.


      (b)  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.


      (a)  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).


      (b)  In determining the appropriate amount to obligate, the contracting officer shall assess the contractor’s proposal for the undefinitized period and shall obligate funds only in an amount consistent with the contractor’s requirements for the undefinitized period.


217.7404-5  Exceptions.


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


      (b)  The head of an agency may waive the limitations in 217.7404-2, 217.7404-3, and 217.7404-4 for UCAs if the head of the agency determines that the waiver is necessary to support—


              (1)  A contingency operation; or


              (2)  A humanitarian or peacekeeping operation.


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 contracting activity 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;


      (b)  The contractor's reduced cost risk for costs incurred during performance of the remainder of the contract; and


      (c)  The requirements at 215.404-71-3(d)(2).  The risk assessment shall be documented in the contract file.


217.7405  Plans and reports.


      (a)  To provide for enhanced management and oversight of UCAs, departments and agencies shall—


              (1)  Prepare and maintain a Consolidated UCA Management Plan; and


              (2)  Prepare semi-annual Consolidated UCA Management Reports addressing each UCA with an estimated value exceeding $5 million.


      (b)  Consolidated UCA Management Reports and Consolidated UCA Management Plan updates shall be submitted to the Office of the Director, Defense Procurement and Acquisition Policy, by October 31 and April 30 of each year in accordance with the procedures at PGI 217.7405 (Pop-up Window or PGI Viewer Mode).


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.




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