In the National Defense Authorization Acts for 2017 and 2018, Congress required the Department of Defense (DoD) to implement certain reforms for issuing and definitizing Undefinitized Contract Actions (UCAs). 

After a long delay, DoD has issued a proposed rule and requested comments from industry.

UCAs are meant to be used when the Government has urgent needs that do not leave enough time for the parties to agree on all the terms, conditions, and pricing of a formal contract.  In those circumstances, the parties can agree to a general framework that allows work to begin and payments to be made on a modified cost-reimbursement basis under a UCA, and the parties agree to definitize the contract in the near future – aspirationally, no later than 180 days after the UCA award date, or before 50 percent of the work is complete, whichever is earlier.  (See: DFARS 217.7404-3)

The Defense Federal Acquisition Regulation Supplement (DFARS) currently allows the contracting officer to extend that date to 180 days after the date on which the contractor submits a “qualifying proposal” for definitization.  In practice, as the GAO repeatedly has highlighted and as Congress has noted, poor acquisition planning has led to the unnecessary use of UCAs, and UCAs often are not definitized within the 180-day time set by regulation.

One particularly inequitable result of the delayed definitization of UCAs is its effect on profit.  Because UCAs are cost-type agreements with the contractor bearing minimal cost risk, the DFARS provides guidance for acceptable profit rates when “a substantial portion of the required performance” is completed before definitization.  If a contractor completes a large proportion of the work before the contract is belatedly definitized, an agency often will insist on a profit rate that is materially lower than it would have been if the agency had promptly definitized the contract.

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