Authorization for subcontract settlements without approval or ratification
TCOs may authorize prime contractors to settle terminated subcontracts up to $100,000 without further approval if proper procedures and oversight are maintained.
Overview
FAR 49.108-4 establishes the conditions under which a Termination Contracting Officer (TCO) may authorize a prime contractor to settle terminated subcontracts without further approval or ratification, provided the settlement amount is $100,000 or less. The regulation outlines the procedures, limitations, and oversight requirements for such authorizations, including the need for adequate contractor procedures, audit and property disposal reviews, and periodic TCO oversight. It also addresses the consolidation of settlement proposals, the prohibition on splitting settlements to avoid thresholds, and the process for increasing authorization limits. The section ensures that subcontract settlements are handled efficiently while maintaining government oversight and preventing abuse.
Key Rules
- TCO Authorization for Settlements ≤ $100,000
- TCO may authorize prime contractors to settle subcontracts up to $100,000 without further approval if contractor procedures are adequate and proper certifications are provided.
- Oversight and Review
- TCO must periodically review settlements and procedures, with input from audit agencies and plant clearance officers, and may revoke authorization if standards are not met.
- Inventory Disposal
- Termination inventory may be disposed of by the contractor without TCO review or screening, subject to certain conditions and exceptions.
- Consolidation and Prohibition on Splitting
- Contractors must not split settlements to stay under the threshold and should consolidate related proposals.
- Limitations and Exceptions
- Authorizations do not apply to intra-company orders and may be revoked or limited by the contracting officer.
Responsibilities
- Contracting Officers: Review and authorize settlements, conduct periodic oversight, and revoke authorizations if necessary.
- Contractors: Ensure adequate settlement procedures, provide required certifications, consolidate proposals, and comply with authorization limits.
- Agencies: Provide audit and property disposal recommendations, and maintain oversight of the process.
Practical Implications
- This section streamlines the settlement process for small-value terminated subcontracts, reducing administrative burden while maintaining oversight.
- Contractors must have robust procedures and documentation to retain authorization and avoid revocation.
- Common pitfalls include improper splitting of settlements, inadequate procedures, and failure to consolidate related proposals.