General
The TCO must determine the contractor's adjusted fee after termination based on completion and work performed, excluding fees for subcontractor efforts already settled.
Overview
FAR 49.305-1 outlines the general principles for determining the adjusted fee payable to a contractor after a contract termination. The Termination Contracting Officer (TCO) is responsible for calculating the adjusted fee, typically based on the percentage of contract completion or the terminated portion. This calculation must consider not only incurred costs but also the extent and complexity of the work performed, including planning, technical studies, production, and efforts related to stopping performance and settling subcontracts. Importantly, the contractor's adjusted fee cannot include fees for subcontractor efforts that are already covered in subcontractors’ settlement proposals. The ratio of costs incurred is just one factor; the TCO must also evaluate other relevant factors to determine the true percentage of completion.
Key Rules
- TCO Determines Adjusted Fee
- The TCO calculates the adjusted fee as specified in the contract, usually based on the percentage of completion.
- Consideration of Work Performed
- The TCO must assess the extent and difficulty of all work performed, including efforts to stop performance and settle subcontracts.
- Exclusion of Subcontractor Fees
- Contractors cannot claim fees for subcontractor work already included in subcontractors’ settlements.
- Cost Ratio is Not Sole Factor
- The ratio of incurred costs to estimated total cost is only one factor; other pertinent factors must be considered.
Responsibilities
- Contracting Officers: Must thoroughly evaluate all relevant factors and ensure subcontractor fees are not double-counted.
- Contractors: Must provide accurate records of work performed and avoid including subcontractor fees in their adjusted fee proposals.
- Agencies: Oversee the TCO’s determination and ensure compliance with FAR requirements.
Practical Implications
- This section ensures fair and accurate fee adjustments after contract termination, preventing overpayment and double-counting of subcontractor fees.
- Contractors must maintain detailed documentation of work performed and costs incurred.
- Disputes may arise if the TCO and contractor disagree on the percentage of completion or the value of work performed.