49.101 Authorities and responsibilities
Source: FAR 49.101 on acquisition.gov
Contracting officers must terminate contracts only in the Government’s interest, prioritize no-cost settlements when possible, and give preference to small businesses in partial terminations.
Overview
FAR 49.101 outlines the authorities and responsibilities of contracting officers regarding contract terminations, whether for convenience or default. It specifies when and how contracts may be terminated, the preference for no-cost settlements under certain conditions, and the roles of termination contracting officers (TCOs) and auditors in the settlement process. The section also addresses special considerations for small businesses and the release of excess funds following termination.
Key Rules
- Termination Authority
- Contracting officers are empowered to terminate contracts for convenience or default and to enter into settlement agreements as authorized by contract clauses.
- Government’s Interest and No-Cost Settlements
- Contracts should only be terminated when it serves the Government’s interest. A no-cost settlement should be pursued if the contractor agrees, no Government property was provided, and there are no outstanding financial obligations.
- Small Value Contracts
- Contracts with an undelivered balance under $5,000 should generally be allowed to run to completion rather than being terminated for convenience.
- Settlement Negotiations
- After termination, the TCO is responsible for negotiating settlements, with prompt attention required for small business concerns.
- Small Business Preference
- When terminating contracts for the same item with both large and small businesses, preference should be given to continuing small business contracts unless otherwise determined.
- Release of Excess Funds
- The contracting officer is responsible for releasing excess funds after termination unless delegated to the TCO.
Responsibilities
- Contracting Officers: Must determine when termination is in the Government’s interest, pursue no-cost settlements when applicable, and release excess funds unless delegated.
- Contractors: Should be prepared for possible terminations and understand the conditions for no-cost settlements.
- Agencies: Must ensure timely audits and settlements, especially for small businesses, and document decisions regarding small business preferences.
Practical Implications
- This section ensures contract terminations are handled efficiently and fairly, with special protections for small businesses and cost-effective settlements. Contractors should be aware of their rights and obligations in termination scenarios, and agencies must act promptly to avoid unnecessary delays or costs.
(a) The termination clauses or other contract clauses authorize contracting officers to terminate contracts for convenience, or for default, and to enter into settlement agreements under this regulation.
(b) The contracting officer shall terminate contracts, whether for default or convenience, only when it is in the Government’s interest. The contracting officer shall effect a no-cost settlement instead of issuing a termination notice when-
(1) It is known that the contractor will accept one,
(2) Government property was not furnished, and
(3) There are no outstanding payments, debts due the Government, or other contractor obligations.
(c) When the price of the undelivered balance of the contract is less than $5,000, the contract should not normally be terminated for convenience but should be permitted to run to completion.
(d) After the contracting officer issues a notice of termination, the termination contracting officer (TCO) is responsible for negotiating any settlement with the contractor, including a no-cost settlement if appropriate. Auditors and TCO’s shall promptly schedule and complete audit reviews and negotiations, giving particular attention to the need for timely action on all settlements involving small business concerns.
(e) If the same item is under contract with both large and small business concerns and it is necessary to terminate for convenience part of the units still to be delivered, preference shall be given to the continuing performance of small business contracts over large business contracts unless the chief of the contracting office determines that this is not in the Government’s interest.
(f) The contracting officer is responsible for the release of excess funds resulting from the termination unless this responsibility is specifically delegated to the TCO.