Final settlement
Final settlement of terminated contracts must exclude disallowed costs, be based on audit findings, and may involve overall compromise agreements.
Overview
FAR 49.303-5 outlines the procedures for final settlement of terminated contracts. The Termination Contracting Officer (TCO) is responsible for executing the settlement agreement after receiving the necessary audit reports and closing statements. The regulation specifies that the TCO must adjust the contractor's fee as per FAR 49.305 and that the final settlement can encompass all claims and proposals related to the terminated contract. However, costs previously disallowed by the Government or costs of a similar nature cannot be included in the settlement. The section also allows for overall settlement of costs without agreement on each individual element, provided that clearly unallowable costs are excluded. Compromises and settlements of doubtful questions are permitted if appropriate.
Key Rules
- Settlement Execution
- The TCO must execute the settlement agreement after receiving the audit report and closing statement.
- Fee Adjustment
- The TCO must adjust the contractor's fee in accordance with FAR 49.305.
- Scope of Settlement
- The final settlement may include all government demands and contractor proposals, but excludes disallowed costs.
- Overall Settlement
- Agreement on each cost element is not required if an overall settlement is reached, but unallowable costs must be excluded.
Responsibilities
- Contracting Officers: Ensure receipt of audit reports, adjust fees, exclude disallowed costs, and execute the final settlement.
- Contractors: Submit accurate cost proposals and comply with audit requirements; exclude disallowed costs from proposals.
- Agencies: Oversee the settlement process and ensure compliance with cost allowability rules.
Practical Implications
- This section ensures that final settlements are comprehensive, fair, and compliant with cost allowability rules.
- It streamlines the settlement process by allowing overall agreements and compromises, reducing administrative burden.
- Contractors must be diligent in excluding disallowed costs and preparing for audits to avoid settlement delays.