49.109-7
Settlement by determination
If a contractor and the TCO cannot agree on a termination settlement, the TCO will unilaterally determine the amount due, but the contractor has rights to submit evidence and appeal the decision if proper procedures are followed.
Overview
FAR 49.109-7 outlines the procedures for settling contract terminations by determination when the contractor and Termination Contracting Officer (TCO) cannot reach an agreement or when the contractor fails to submit a timely settlement proposal. The TCO is responsible for determining the amount due, following specific procedural safeguards to ensure fairness and compliance with applicable cost principles and contract clauses. The regulation details notification requirements, the contractor’s burden of proof, documentation standards, the appeals process, and the preservation of evidence.
Key Rules
- Settlement by Determination
- If no agreement is reached or no timely proposal is submitted, the TCO determines the settlement amount, following relevant cost principles and procedures.
- Notice to Contractor
- The TCO must give the contractor at least 15 days’ notice to submit evidence supporting their proposed amount before issuing a determination.
- Justification and Documentation
- The contractor must substantiate their proposal with satisfactory proof and may submit various supporting documents. The TCO may request additional information or hold conferences.
- Issuing the Determination
- The TCO issues a detailed, supported determination, which is a final decision subject to appeal, and explains any disallowed items.
- Preservation of Evidence
- The TCO must retain all evidence relied upon and return original documents to the contractor in a timely manner.
- Appeals
- Contractors may appeal the determination under the Disputes clause, except in cases of untimely or unrequested proposals.
- Effect of Appeals Decisions
- The TCO must implement decisions from appeals by modifying the contract as necessary and may need to obtain a release from the contractor.
Responsibilities
- Contracting Officers (TCOs): Must follow procedural steps for determination, provide notice, retain evidence, and implement appeal decisions.
- Contractors: Must provide timely, substantiated settlement proposals and supporting documentation; may appeal determinations as allowed.
- Agencies: Ensure oversight of TCO actions and compliance with FAR procedures.
Practical Implications
- This section ensures a fair, documented process when settlement negotiations fail, protecting both government and contractor interests.
- Contractors must be diligent in submitting timely, well-supported proposals to avoid unilateral determinations.
- Failure to comply with documentation or deadlines can limit a contractor’s appeal rights and affect final settlement outcomes.