Applicability
FAR 49.002 clarifies when Part 49 termination procedures apply, notably excluding most commercial item contracts and providing guidance for settlements and equitable adjustments.
Overview
FAR 49.002 outlines the applicability of Part 49, which governs the termination of contracts either for the convenience of the Government or for contractor default. It clarifies that Part 49 generally applies to contracts with termination clauses, but specifically excludes commercial product and service contracts awarded under FAR Part 12 procedures, which are governed by FAR 12.403 and the clause at 52.212-4. However, Part 49 may still provide administrative guidance for such contracts if not inconsistent with Part 12 requirements. The section also addresses the use of Part 49 in settling terminated subcontracts and in determining equitable adjustments for contract modifications (except cost-reimbursement contracts). It further specifies how to calculate the "amount" of a settlement proposal for termination purposes.
Key Rules
- General Applicability
- Part 49 applies to contracts with termination for convenience or default clauses, except for commercial item contracts under Part 12.
- Exclusion for Commercial Items
- Contracts for commercial products/services under Part 12 follow FAR 12.403 and 52.212-4, but may use Part 49 as guidance if not inconsistent.
- Subcontract Settlement Guidance
- Contractors and contracting officers should use Part 49 to settle subcontracts terminated due to prime contract modifications, especially for cost-reimbursement proposals.
- Equitable Adjustments
- Contracting officers may use Part 49 to determine equitable adjustments for contract modifications (except cost-reimbursement contracts).
- Settlement Proposal Calculations
- The "amount" of a settlement proposal is calculated by deducting completed work and settled subcontracts from the gross proposal, but not inventory credits or advance payments.
Responsibilities
- Contracting Officers: Apply Part 49 as required, use as guidance for subcontracts and equitable adjustments, and ensure correct calculation of settlement proposals.
- Contractors: Follow Part 49 for settlement of terminated subcontracts unless inappropriate, and understand exclusions for commercial item contracts.
- Agencies: Oversee compliance with appropriate termination procedures and ensure settlements are properly evaluated.
Practical Implications
- This section ensures clarity on when and how Part 49 applies, helping avoid misapplication to commercial item contracts.
- It provides a framework for handling terminations and settlements, reducing disputes and ensuring consistency.
- Common pitfalls include misapplying Part 49 to commercial item contracts or incorrectly calculating settlement amounts.