49.108-8 Assignment of rights under subcontracts
Source: FAR 49.108-8 on acquisition.gov
Prime contractors must assign terminated subcontract rights to the Government and generally settle subcontractor proposals, unless the TCO determines direct Government intervention is in the Government’s interest.
Overview
FAR 49.108-8 addresses the assignment of rights under subcontracts when a prime contract is terminated for convenience. It outlines the obligations of the prime contractor to assign rights, titles, and interests in terminated subcontracts to the Government if directed by the Termination Contracting Officer (TCO), but only when it serves the Government’s interest. The section also clarifies the Government’s discretionary right to settle and pay subcontractor settlement proposals, though the primary responsibility remains with the prime contractor unless the TCO determines otherwise. Direct settlements by the Government are discouraged and should only occur in exceptional circumstances, such as when a sole-source subcontractor’s financial stability is at risk due to delays by the prime contractor.
Key Rules
- Assignment of Subcontract Rights
- Prime contractors must assign all rights, titles, and interests in terminated subcontracts to the Government if directed by the TCO, but only if it is in the Government’s interest.
- Settlement of Subcontractor Proposals
- The Government may, at its discretion, settle and pay subcontractor settlement proposals, but is not obligated to do so. The prime contractor is generally responsible for these settlements unless the TCO intervenes for the Government’s benefit.
Responsibilities
- Contracting Officers: Decide if assignment or direct settlement is in the Government’s interest and notify the contractor if intervening.
- Contractors: Assign subcontract rights as directed and generally settle subcontractor proposals unless otherwise instructed.
- Agencies: Oversee TCO decisions and ensure compliance with settlement procedures.
Practical Implications
- Ensures the Government can protect its interests in subcontract terminations.
- Clarifies when and how the Government may intervene in subcontract settlements.
- Contractors must be prepared for possible assignment or Government intervention, especially in sole-source or financially sensitive situations.
(a) The termination for convenience clauses in 52.249, except the short-form clauses, obligate the prime contractor to assign to the Government, as directed by the TCO, all rights, titles, and interest under any subcontract terminated because of termination of the prime contract. The TCO shall not require the assignment unless it is in the Government’s interest.
(b) The termination for convenience clauses (except the short-form clauses) also provide the Government the right, in its discretion, to settle and pay any settlement proposal arising out of the termination of subcontracts. This right does not obligate the Government to settle and pay settlement proposals of subcontractors. As a general rule, the prime contractor is obligated to settle and pay these proposals. However, when the TCO determines that it is in the Government’s interest, the TCO shall, after notifying the contractor, settle the subcontractor’s proposal using the procedures for settlement of prime contracts. An example in which the Government’s interest would be served is when a subcontractor is a sole source and it appears that a delay by the prime contractor in settlement or payment of the subcontractor’s proposal will jeopardize the financial position of the subcontractor. Direct settlements with subcontractors are not encouraged.