49.104 Duties of prime contractor after receipt of notice of termination
Source: FAR 49.104 on acquisition.gov
After receiving a termination notice, contractors must immediately stop work on the terminated portion, communicate with the TCO, and follow all procedures for settlement and property protection.
Overview
FAR 49.104 outlines the specific duties of a prime contractor after receiving a notice of termination, typically for the Government’s convenience. Upon receipt, the contractor must follow both the termination notice and the contract’s termination clause, unless otherwise directed by the Termination Contracting Officer (TCO). The section details immediate actions required, such as stopping work on the terminated portion, terminating related subcontracts, and protecting government property. It also covers obligations to communicate with the TCO regarding special circumstances, legal proceedings, and settlement proposals. For partial terminations, the contractor must continue work on the remaining contract portion and request equitable adjustments if costs increase. The contractor is also responsible for settling subcontractor claims and disposing of termination inventory as directed by the TCO.
Key Rules
- Immediate Work Stoppage
- Cease work and subcontracting on the terminated portion immediately.
- Subcontract Termination
- Terminate all subcontracts related to the terminated portion.
- TCO Communication
- Notify the TCO of any issues preventing work stoppage or legal proceedings.
- Partial Termination Duties
- Continue work on non-terminated portions and request price adjustments if needed.
- Property Protection
- Safeguard and, if directed, deliver government property.
- Settlement and Inventory
- Settle subcontractor claims, submit a settlement proposal, and dispose of inventory as directed.
Responsibilities
- Contracting Officers: Issue clear termination notices, provide direction, and approve settlements.
- Contractors: Follow all termination instructions, communicate promptly, protect property, and settle claims.
- Agencies: Oversee compliance and ensure proper settlement of terminated contracts.
Practical Implications
This section ensures an orderly and efficient process when contracts are terminated, minimizing government risk and contractor losses. Contractors must act quickly, maintain clear communication, and document all actions to avoid compliance issues or disputes.
After receipt of the notice of termination, the contractor shall comply with the notice and the termination clause of the contract, except as otherwise directed by the TCO. The notice and clause applicable to convenience terminations generally require that the contractor-
(a) Stop work immediately on the terminated portion of the contract and stop placing subcontracts thereunder;
(b) Terminate all subcontracts related to the terminated portion of the prime contract;
(c) Immediately advise the TCO of any special circumstances precluding the stoppage of work;
(d) Perform the continued portion of the contract and submit promptly any request for an equitable adjustment of price for the continued portion, supported by evidence of any increase in the cost, if the termination is partial;
(e) Take necessary or directed action to protect and preserve property in the contractor’s possession in which the Government has or may acquire an interest and, as directed by the TCO, deliver the property to the Government;
(f) Promptly notify the TCO in writing of any legal proceedings growing out of any subcontract or other commitment related to the terminated portion of the contract;
(g) Settle outstanding liabilities and proposals arising out of termination of subcontracts, obtaining any approvals or ratifications required by the TCO;
(h) Promptly submit the contractor’s own settlement proposal, supported by appropriate schedules; and
(i) Dispose of termination inventory, as directed or authorized by the TCO.