Subpart 49.2
Additional Principles for Fixed-Price Contracts Terminated for Convenience
FAR Subpart 49.2 establishes the rules and procedures for settling fixed-price contracts terminated for convenience, ensuring fair and consistent treatment of costs, profit, and settlement proposals.
Overview
FAR Subpart 49.2 provides detailed principles and procedures for handling fixed-price contracts that are terminated for the convenience of the government. It supplements the general termination rules by addressing specific issues such as profit calculations, adjustments for contractor losses, deductions, treatment of completed end items, settlement proposal requirements, limitations on settlements, and equitable adjustments after partial terminations. The subpart ensures that both contractors and contracting officers follow consistent, fair, and transparent processes when settling terminated fixed-price contracts, minimizing disputes and ensuring compliance with federal acquisition policies.
Key Rules
- General Principles (49.201)
- Outlines the foundational rules for settling fixed-price contracts terminated for convenience.
- Profit (49.202)
- Specifies how profit is determined and adjusted in termination settlements.
- Adjustment for Loss (49.203)
- Addresses how losses are factored into settlement calculations.
- Deductions (49.204)
- Details allowable deductions from settlement amounts.
- Completed End Items (49.205)
- Explains the handling of finished goods or deliverables at termination.
- Settlement Proposals (49.206)
- Sets requirements for submitting and supporting settlement proposals.
- Limitation on Settlements (49.207)
- Imposes limits on the amounts that can be settled.
- Equitable Adjustment after Partial Termination (49.208)
- Provides for adjustments to the contract after a partial termination.
Responsibilities
- Contracting Officers: Must apply these principles when negotiating and settling terminations, ensure proper documentation, and verify contractor claims.
- Contractors: Must prepare accurate settlement proposals, justify claimed costs and profit, and comply with submission requirements.
- Agencies: Oversee the termination process, ensure compliance, and resolve disputes as needed.
Practical Implications
- This subpart exists to ensure fair and orderly settlements for fixed-price contracts terminated for convenience, protecting both government and contractor interests.
- It impacts daily contracting by providing clear rules for calculating settlements, profit, and allowable costs.
- Common pitfalls include incomplete documentation, improper profit calculations, and failure to adhere to proposal requirements.