What FAR Part 49 - Termination of Contracts (Convenience, Default, and Settlement) requires
Federal Acquisition Regulation (FAR) Part 49 governs the termination of federal contracts for the convenience of the Government or for contractor default and prescribes the settlement framework: Subpart 49.1 (General Principles) requires contracting officers to terminate only when in the Government's interest, prefer no-cost settlements where feasible, avoid unnecessary terminations of contracts under USD 5,000, ensure timely settlements particularly for small businesses, and issue written notices of termination under 49.102 stating the basis, effective date, extent of termination, special instructions, and steps to minimize impact on personnel; the Termination Contracting Officer (TCO) under 49.105 must examine settlement proposals, negotiate promptly, hold conferences with contractors to establish definite settlement programs, and address general settlement principles and accounting practices; Subpart 49.2 (Convenience Termination of Fixed-Price Contracts) and 49.3 (Convenience Termination of Cost-Reimbursement Contracts) govern T4C settlements which compensate the contractor fairly for work done with reasonable allowance for profit, treating fair compensation as business judgment rather than rigid accounting; Subpart 49.4 (Default) prescribes default termination procedures for fixed-price (49.402) and cost-reimbursement (49.403) contracts with mandatory show-cause notices and findings of fact; Subpart 49.5 contains the standard termination clauses (52.249-1 through 52.249-14) inserted under 49.5 based on contract type and termination type. Termination decisions create complex audit and reprocurement exposure.
Pillar: Public Sector & Government Procurement · Authority: Federal Acquisition Regulatory Council (DOD, GSA, NASA) issuing the Federal Acquisition Regulation under 41 USC 1303 and 48 CFR Chapter 1 · Version: 1.0.0 · Last updated:
Primary source: https://www.acquisition.gov/far/part-49
SHA-256 integrity: 86466c7f3bcfa0d8e102c05faaeea0b5875f9de304dff8b38584ff17543cd137
Primary Citations — 6 traced to source
- FAR Part 49 Section 49.101(a) (General principles): 'Contracts should be terminated for convenience or default only when it is in the Government's interest. Settlements may be negotiated or determined unilaterally as prescribed in Subpart 49.1. The preferred method is by negotiation.'
- FAR Part 49 Section 49.102(a) (Notice of termination): 'The contracting officer shall terminate contracts, whether for default or convenience, only by a written notice to the contractor. When the notice is mailed, it shall be by certified mail, return receipt requested. When the contracting officer learns that the contractor has received the notice, the contracting officer shall ensure that the contract is modified formally to reflect the termination.'
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