FAR Part 49 Flashcards
Termination of Contracts
Part 49
Termination of Contracts
FAR Part 49: Termination of Contacts
Overview of FAR Part 49 - Termination of Contracts
Purpose: Establishes policies and procedures for terminating contracts (FAR 49.000).
Key Sections:
49.1 General Principles
49.2 Additional Principles for Fixed-Price Contracts Terminated for Convenience
49.3 Additional Principles for Cost-Reimbursement Contracts Terminated for Convenience
49.4 Termination for Default
49.5 Contract Termination Clauses
49.6 Contract Termination Forms and Formats
Instructor Dialogue:
“FAR Part 49 focuses on the policies and procedures for terminating contracts.”
“This part helps manage risks associated with contract termination, ensuring that the process is handled fairly and efficiently.”
“Understanding these procedures is crucial for mitigating financial and operational risks in contract management.”
FAR Part 49: Termination of Contacts
Subpart 49.1 - General Principles
Purpose: Outlines the general principles for contract termination (FAR 49.101).
Key Features:
Reasons for contract termination, including convenience and default (FAR 49.102).
Procedures for issuing termination notices (FAR 49.103).
Rights and obligations of both parties during termination (FAR 49.104).
Instructor Dialogue:
“Subpart 49.1 outlines the general principles for contract termination.”
“Reasons for termination include convenience and default.”
“Procedures for issuing termination notices ensure clear communication.”
“Both parties have specific rights and obligations during the termination process.”
FAR Part 49: Termination of Contacts
Subpart 49.2 - Additional Principles for Fixed-Price Contracts Terminated for Convenience
Purpose: Provides additional principles for terminating fixed-price contracts for convenience (FAR 49.201).
Key Features:
Calculation of termination settlement amounts (FAR 49.202).
Guidelines for contractor claims and government audits (FAR 49.203).
Procedures for negotiating and finalizing settlements (FAR 49.204).
Instructor Dialogue:
“Subpart 49.2 provides additional principles for terminating fixed-price contracts for convenience.”
“It includes guidelines for calculating termination settlement amounts.”
“Contractor claims and government audits are also addressed.”
“Procedures for negotiating and finalizing settlements ensure a fair process.”
FAR Part 49: Termination of Contacts
Subpart 49.3 - Additional Principles for Cost-Reimbursement Contracts Terminated for Convenience
Purpose: Establishes additional principles for terminating cost-reimbursement contracts for convenience (FAR 49.301).
Key Features:
Determination of allowable costs and fees (FAR 49.302).
Guidelines for contractor reimbursement claims (FAR 49.303).
Procedures for reviewing and approving claims (FAR 49.304
Instructor Dialogue:
“Subpart 49.3 establishes additional principles for terminating cost-reimbursement contracts for convenience.”
“It focuses on determining allowable costs and fees.”
“Guidelines for contractor reimbursement claims are provided.”
“Procedures for reviewing and approving claims ensure that all costs are justified.”
FAR Part 49: Termination of Contacts
Subpart 49.4 - Termination for Default
Purpose: Provides procedures for terminating contracts for default (FAR 49.401).
Key Features:
Criteria for determining default (FAR 49.402).
Contractor rights and government remedies (FAR 49.403).
Procedures for issuing default notices and handling disputes (FAR 49.404).
Instructor Dialogue:
“Subpart 49.4 provides procedures for terminating contracts for default.”
“It includes criteria for determining default situations.”
“Contractor rights and government remedies are clearly defined.”
“Procedures for issuing default notices and handling disputes are outlined.”
FAR Part 49: Termination of Contacts
Subpart 49.5 - Contract Termination Clauses
Purpose: Establishes standard termination clauses to be included in contracts (FAR 49.501).
Key Features:
Inclusion of termination for convenience clauses (FAR 49.502).
Inclusion of termination for default clauses (FAR 49.503).
Guidelines for modifying or tailoring clauses to specific contracts (FAR 49.504).
Instructor Dialogue:
“Subpart 49.5 establishes standard termination clauses to be included in contracts.”
“Termination for convenience clauses are included to allow flexibility.”
“Termination for default clauses provide clear guidelines for handling defaults.”
“Guidelines for modifying or tailoring clauses ensure they fit specific contract needs.”
FAR Part 49: Termination of Contacts
Subpart 49.6 - Contract Termination Forms and Formats
Purpose: Provides standard forms and formats for contract termination (FAR 49.601).
Key Features:
Use of standard forms for termination notices (FAR 49.602).
Guidelines for completing and submitting termination documentation (FAR 49.603).
Ensuring consistency and clarity in termination paperwork (FAR 49.604).
Instructor Dialogue:
“Subpart 49.6 provides standard forms and formats for contract termination.”
“Standard forms for termination notices ensure consistency.”
“Guidelines for completing and submitting termination documentation are provided.”
“Consistency and clarity in termination paperwork help mitigate risks and ensure a smooth process.”
Termination for convenience
Termination of a contract by the unilateral right of the government to do so, for the convenience of the government when the contract no longer serves the government’s best interests
Terminations for convenience often result from a change in government
priorities, program termination, downsizing, or other significant events that were not anticipated at the time of contract formation.
When the government pursues a termination for convenience, a termination agreement is negotiated with the seller.
The government always has the right ot terminate a contract for convenience.
“Convenience” means the convenience of the government.
Termination for default
Termination of a contract resulting from one party’s failure to perform one or more actions required by the contract
Termination for default is normally a right of law in addition ot a right vested as the result of inclusion of appropriate terms and conditions in the contract.
If the surety does not arrange for completion of the contract,
the contracting officer wil normaly arrange for completion of
the work by awarding a new contract based on the same plans and specifications.
Alternativest oTermination
In certain cases, lieu of a termination, a contracting officer may effect a no-cost settlement.
This can be done when it is known that
The contractor will accept it,
No government-furnished property was furnished, and
The contractor has no outstanding debts or obligations to the government.
Excusable Delays
The contractor shall not be in default because of any failure to perform this contract under its terms fi the failure arises from causes beyond the
control and without the fault or negligence of the contractor. Examples include:
Acts of God or of the public enemy
Acts of the government in either its sovereign or contractual capacity
Fire
Flood
Epidemic
Quarantine restrictions
Strike
Freight embargo
Unusually sever weather
FAR PART 49. TERMINATION
OF CONTRACTS
A. GENERAL PRINCIPLES (FAR 49.1)
The government exercises termination for convenience or default when it is in its best interests.
No-cost settlements may be effected in lieu thereof only when it is known that the contractor will accept one, government-furnished property was not furnished,
and there are no outstanding payments/debts due the government or other contractor obligations
When the price of the undelivered balance of the contract is less than the amount prescribed in
FAR 49.101(c), the contract should not normally be terminated for convenience but rather permitted to reach completion.
If the same item is under contract with both a large and small business and it becomes necessary to terminate for convenience part of the units, preference will be given to continue performance of the small business over the large business unless not in the government’s interest.
Terminations are generally settled by one of the following methods: negotiated agreement, terminating contracting officer (TCO) determination, costing out under SF 1034, or a combination of these methods.
When possible, the TCO should negotiate a fair and prompt settlement with the contractor. The TCO shall settle a settlement proposal by determination only when it cannot be settled by agreement.
After receiving notice of termination, the prime contractor shall
stop work immediately on the terminated portion of the contract and stop placing subcontracts; terminate all subcontracts related to the terminated portion of the prime contract; immediately advise the TCO of any special circumstances precluding the stoppage of work; perform the continued portion of the contract and submit promptly any supported request for equitable adjustment; take necessary or directed action to protect and preserve government furnished property and deliver it to the government; promptly notify the TCO in writing of any legal proceedings growing out of any subcontract or other commitment related to the terminated portion of the contract; settle outstanding liabilities; promptly submit the settlement proposal; and dispose of terminated
The TCO is responsible
for directing the action required of the prime; examining, negotiating, and settling settlement proposals; sending the contracting officer periodic status reports; and estimating and recommending release of excess funds.
