Letter of Intent (LOI)

A Letter of Intent (LOI) in Canadian federal contracting is a binding commitment to establish a contract with a designated supplier. It lets the Crown authorize that supplier to begin specified work before the related contract is awarded. It is used in exceptional circumstances, when lengthy negotiations could jeopardize the timely delivery of goods or services.

The Government of Canada's Buyer's Guide treats the LOI as a measure for situations where a project's start is delayed by extended negotiations. An LOI is not a replacement for the contract. Negotiations continue, and the contract is still finalized and approved afterward.

What a pre-contract LOI must state

Federal guidance sets out the content of an LOI. It must identify the work the supplier is authorized to perform, the maximum financial liability of the Crown, and the method of payment. It must also give the serial number intended for the subsequent contract. The LOI must not duplicate work that will be covered under that later contract.

These limits define what the supplier can safely do. The authorization covers only the work described, and the Crown's exposure stops at the stated ceiling.

Approval and signing of an LOI

An LOI requires prior approval. Under the Buyer's Guide, the negotiated conditions must first be approved by the Deputy Minister. An audit at Indigenous and Northern Affairs Canada records the same practice, noting that the Deputy Minister may use an LOI when timely delivery could be jeopardized by lengthy negotiations.

An LOI must not create a contractual commitment that would constitute the first step of a procurement requiring later Treasury Board approval. Legal Services drafts the document in collaboration with the responsible contracting officials. After approval, the appropriate contract-signing authority signs the original, and it is distributed in the same manner as a contract.

Negotiations continue after the LOI is issued

Issuing an LOI does not end the contracting process. The department keeps negotiating with the supplier, and once the contract terms are finalized, the contract approval document must be submitted at the appropriate approval level. The LOI bridges the gap so work can start. The contract remains the instrument that governs the full scope of the engagement.

A different meaning: LOIs in funding programs

The same term is used in a separate way in grant and contribution programs. Fisheries and Oceans Canada uses a Letter of Intent in its science funding opportunities as a brief preliminary submission. Applicants use it to express interest in submitting a full application and to give preliminary information such as a project description, alignment with priorities, and budget estimates.

This is not the pre-contracting instrument described above. It does not authorize work, commit the Crown to a supplier, or award funding.

What an LOI means for a supplier bidding on Canadian public contracts

Check which kind of LOI you hold or are asked to submit.

• Pre-contracting LOI: perform only the work expressly authorized, stay within the stated financial ceiling and payment terms, and keep working with the department toward the definitive contract.
• Application-stage LOI: submit the preliminary information the program requests, and do not treat the submission as a contract award or a funding agreement.

Work done outside the authorized scope, or beyond the maximum liability, falls outside the Crown's commitment. Keep the LOI on file and track its limits against your work.