49.109-5
Partial settlements
Partial settlements are only allowed when issues are clearly separable and neither party's interests are prejudiced, otherwise a comprehensive settlement is required.
Overview
FAR 49.109-5 addresses the procedures for partial settlements in the context of contract terminations. The section instructs Termination Contracting Officers (TCOs) to aim for a single, comprehensive settlement agreement covering all rights and liabilities under the contract, except for those related to any continued portion. Partial settlements—agreements that resolve only certain issues or items—are generally discouraged. However, if a full settlement cannot be promptly achieved, a partial settlement may be made if the agreed-upon issues are clearly separable from unresolved issues and if such a settlement does not harm the interests of either the Government or the contractor regarding the remaining unsettled matters.
Key Rules
- Comprehensive Settlement Preferred
- TCOs should strive to resolve all contract rights and liabilities in one agreement, except for continued contract portions.
- Partial Settlements Discouraged
- Partial settlements on specific items of the contractor’s proposal are generally not allowed.
- Conditions for Partial Settlement
- Partial settlements are permitted only if: (a) agreed issues are clearly severable, and (b) the partial settlement does not prejudice either party’s interests regarding unresolved issues.
Responsibilities
- Contracting Officers: Must seek comprehensive settlements and only pursue partial settlements when conditions are met.
- Contractors: Should cooperate in comprehensive settlements and ensure partial settlements do not prejudice their interests.
- Agencies: Oversee that settlements comply with these requirements and protect government interests.
Practical Implications
- This section exists to streamline the settlement process and avoid piecemeal agreements that could complicate or delay final resolution.
- It impacts daily contracting by setting clear expectations for how and when partial settlements may be used.
- Common pitfalls include attempting partial settlements without ensuring issues are severable or without safeguarding both parties’ interests.