Subpart 42.9
Bankruptcy
Prompt notification and coordinated action are essential when a contractor files for bankruptcy to protect government interests and ensure contract continuity.
Overview
FAR Subpart 42.9 addresses the procedures and responsibilities when a contractor files for bankruptcy during the performance of a federal contract. Its purpose is to ensure that contracting officers and agencies respond appropriately to protect the government's interests and maintain contract continuity where possible. The subpart outlines notification requirements, steps contracting officers must take upon learning of a bankruptcy, and the inclusion of specific contract clauses related to bankruptcy.
Key Rules
- Notification Requirement
- Contractors must promptly notify the contracting officer if they file for bankruptcy or become aware of bankruptcy proceedings affecting them.
- Contracting Officer Actions
- Upon notification, contracting officers must gather relevant information, coordinate with legal counsel, and determine the impact on contract performance.
- Procedures for Handling Bankruptcy
- The subpart details steps for assessing the government's rights, protecting assets, and communicating with the bankruptcy court as needed.
- Solicitation Provision and Contract Clause
- Contracts must include specific clauses requiring bankruptcy notification and outlining the government's rights in such events.
Responsibilities
- Contracting Officers: Must monitor contractor status, respond to bankruptcy notifications, coordinate with legal counsel, and take actions to safeguard government interests.
- Contractors: Required to notify the government promptly of bankruptcy filings or proceedings.
- Agencies: Oversee compliance, provide legal support, and ensure proper contract administration during bankruptcy situations.
Practical Implications
- This subpart exists to minimize disruption to government contracts when a contractor faces bankruptcy.
- It ensures the government is informed and can take timely action to protect its interests.
- Common pitfalls include delayed notification, failure to coordinate with legal counsel, or not including required contract clauses.