D.C. Mun. Regs. tit. 27, r. 27-2425
The contracting officer may use a letter contract when the District's interests require that the contractor be given a binding commitment so that work can start immediately and executing a definitive contract is not possible in sufficient time to meet the requirement. Each letter contract shall be as complete and definite as possible under the circumstances.
A letter contract is always associated with a definitive contract, and a letter contract by itself cannot be the sole document used for a complete procurement.
A letter contract shall not commit the District to a definitive contract in excess of the funds available at the time the letter contract is executed.
A letter contract shall not be entered into without competition, except as provided for in Chapter 17 (Sole Source and Emergency Procurements) of this title.
A letter contract shall not be amended to satisfy a new requirement unless the new requirement is inseparable from the existing contract. Any amendment shall be subject to the same requirements as a new letter contract.
When a letter contract is executed, the contracting officer shall include a price ceiling for the anticipated definitive contract. The price ceiling shall not be exceeded. Each letter contract shall also include a clause indicating the maximum liability of the District under the letter contract.
The maximum liability to the District under a letter contract shall be the estimated amount necessary to cover the contractor's requirement for funds before execution of the definitive contract. However, the District's maximum liability shall not exceed fifty percent (50%) of the overall price ceiling for the term of the definitive contract pursuant to § 2425.5 of this chapter.
The contracting officer shall execute a definitive contract within one hundred and twenty (120) days after the date of execution of the letter contract or before completion of fifty percent (50%) of the work to be performed, whichever occurs first. The contracting officer may extend the letter contract but shall nevertheless execute a definitive contract prior to completion of fifty percent (50%) of the work to be performed.
In procurements by other than competitive sealed bids, if the contracting officer and the contractor cannot negotiate a definitive contract because of failure to reach agreement regarding price or fee, the contractor shall be required to continue the work and the contracting officer may, with the approval of the Director, determine a reasonable price or fee, subject to review in accordance with Chapter 38 (Protests, Claims, and Disputes) of this title.
Prior to the execution of a letter contract, the contracting officer shall ensure that funds are encumbered for obligation in the amount of the maximum District liability for the term of the letter contract.
D.C. Mun. Regs. tit. 27, r. 27-2425