49.108-7
Government assistance in settling subcontracts
In rare cases, the Government can help settle subcontracts during contract termination, but only with the prime contractor’s consent and all payments must go through the prime contractor.
Overview
FAR 49.108-7 addresses situations where the Government may assist a prime contractor in settling subcontracts during contract termination. This provision is intended for unusual cases where such assistance is deemed to be in the Government’s interest and requires the consent of the prime contractor. In these cases, the Government, prime contractor, and subcontractor can enter into a three-party agreement to settle one or more subcontracts. Importantly, any payments to the subcontractor are made through the prime contractor as part of the overall settlement, not directly from the Government.
Key Rules
- Government Assistance in Subcontract Settlement
- The Termination Contracting Officer (TCO) may, with the prime contractor’s consent, provide assistance in settling subcontracts if it serves the Government’s interest.
- Three-Party Settlement Agreement
- The Government, prime contractor, and subcontractor may enter into an agreement to settle one or more subcontracts.
- Payment Process
- Subcontractors are paid through the prime contractor as part of the overall settlement, not directly by the Government.
Responsibilities
- Contracting Officers: Assess when Government assistance is warranted, obtain prime contractor consent, and facilitate three-party agreements.
- Contractors: Provide consent for Government involvement and ensure proper payment to subcontractors as part of the settlement.
- Agencies: Oversee the process to ensure settlements are in the Government’s interest and compliant with regulations.
Practical Implications
- This provision exists to resolve complex or unusual subcontract settlements during contract termination, ensuring fair and efficient resolution.
- It impacts daily contracting by providing a mechanism for Government involvement when necessary, but only with prime contractor consent.
- Common pitfalls include failing to obtain proper consent or misunderstanding the payment process, which must always go through the prime contractor.