Methods of settlement
FAR 49.103 requires that settlements for terminated contracts prioritize negotiation, but allows for TCO determination or voucher costing-out if agreement cannot be reached.
Overview
FAR 49.103 outlines the acceptable methods for settling contracts that have been terminated for convenience, specifically addressing both cost-reimbursement and fixed-price contracts. The regulation provides four primary methods for settlement: (a) negotiated agreement between the parties, (b) determination by the Termination Contracting Officer (TCO), (c) costing-out under vouchers (using SF 1034 for cost-reimbursement contracts), or (d) a combination of these methods. The preferred approach is negotiation, aiming for a fair and prompt resolution. The TCO is only to make a unilateral determination if a negotiated agreement cannot be reached. This section emphasizes the importance of efficiency and fairness in the settlement process, while also specifying the use of standard forms and procedures for cost-reimbursement contracts.
Key Rules
- Settlement Methods
- Settlements may be reached by negotiation, TCO determination, voucher costing-out (for cost-reimbursement contracts), or a combination.
- Negotiation Preferred
- The TCO should prioritize negotiating a fair and prompt settlement with the contractor.
- Unilateral Determination
- The TCO may settle by determination only if negotiation fails.
- Voucher Costing-Out
- For cost-reimbursement contracts, settlements may be processed using SF 1034 as prescribed in subpart 49.3.
Responsibilities
- Contracting Officers: Must attempt to negotiate settlements first and use determination only as a last resort; ensure proper use of SF 1034 for cost-reimbursement contracts.
- Contractors: Should engage in good faith negotiations and submit settlement proposals as required.
- Agencies: Oversee that settlements are handled fairly, promptly, and in accordance with prescribed methods.
Practical Implications
- This section ensures that contract terminations are resolved efficiently and fairly, minimizing disputes and delays.
- Contractors should be prepared for negotiation and understand the possible settlement methods.
- Failure to reach agreement may result in a unilateral determination by the TCO, which may not be as favorable to the contractor.