These contracts must include a ceiling price. This contract type may be used only if no other contract type is suitable. It would typically be used for service rather than product procurements. It may be appropriate when the extent of labor required or the costs cannot be anticipated at the outset. The labor-hour contract is similar to the time and materials contract except that materials are not supplied by the contractor.
Price is based on specified fixed labor hour rates.
The letter contract may be used when procurement needs are urgent and time is not available to negotiate or advertise a procurement. A basic agreement is not a contract. It is a written understanding that sets forth certain clauses that will be applicable to future contracts awarded to a contractor. The basic agreement provides uniform treatment of specific items under several contracts awarded to one contractor. It simplifies the negotiation of future contracts.