Glossary of Defense Contracting Terms (L)

This Glossary provides you with the most frequently used terms in government and military base contracting. Familiarity with the language of government contracting is essential for doing business with the Department of Defense (DoD) and working with contracting offices at military bases and DoD agencies.  You may also find it helpful to use our master list of Acronyms frequently used in DoD contracting.


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View ACRONYMS used in Defense Contracting

A pre-established measure of the labor element of cost, computed by multiplying labor-rate standard by a labor-time standard.

LABOR MARKET   A place where individuals exchange their labor for compensation.

LEAD TIME   The time it takes a supplier to deliver goods or services after receipt of an order.

LETTER OF INTENT     A letter signifying an intention to enter in to a formal agreement, typically including the terms of that agreement.

LIMITATION OF COST    A limitation on the funds available under a cost-reimbursement contract. The parties estimate that the contract cost will not exceed the limitation of cost. The contractor agrees to use its best efforts to perform the work specified in the contract and all obligations under the contract within the estimated cost, which, if the contract is a cost-sharing contract, includes both the Government's and contractor's share of cost.

LIMITED AUTHORITY    When large organizations are involved, most negotiators have limited authority. For example, Government negotiator authority is limited by the funds available and any required management approvals. However, negotiators using this tactic claim they have very little or no authority to negotiate a key issue or issues. Win/lose negotiators use limited authority to identify your negotiation limits without making any commitment or divulging any information themselves.

LINE ITEM   An item of supply or service specified in a solicitation for which the vendor must specify a separate price.

LIQUIDATION RATES    Progress payments are recouped by the Government through the deduction of liquidations from payments that would otherwise be due to the contractor for completed contract items.  To determine the amount of the liquidation, a liquidation rate is applied to the contract price of contract items delivered and accepted.  


Pentagon Spokesman Department of Defense (DoD)

Guidance for Doing Business with Military Bases