49.305-2 Construction contracts
Source: FAR 49.305-2 on acquisition.gov
FAR 49.305-2 ensures equitable fee adjustments for construction contracts by requiring a comprehensive, weighted assessment of all contractor efforts—not just physical construction—when determining percentage of completion after termination.
Overview
FAR 49.305-2 outlines the method for determining the percentage of completion for construction contracts, particularly under cost-reimbursement or professional services arrangements, when calculating equitable adjustments after contract termination. The regulation emphasizes that the percentage of completion should reflect the contractor’s total effort, not just the physical construction work. It lists several factors—such as mobilization, financial management, subcontracting, shop drawings, supervision, administration, and demobilization—that should be considered and weighted according to their importance and difficulty. The sum of the weighted values should be easily divisible (e.g., by 100) to facilitate percentage calculations. The overall percentage of completion is then used to determine the portion of the contract fee applicable to the terminated work, ensuring fair compensation for the contractor’s efforts up to the point of termination.
Key Rules
- Total Effort Consideration
- The percentage of completion must account for all aspects of the contractor’s work, not just construction activities.
- Weighted Factors
- Each relevant factor (e.g., mobilization, subcontracting, administration) must be assigned a weighted value based on its significance and complexity.
- Calculation Method
- The percentage of completion for each factor is determined by contract-specific facts, and the overall completion percentage is calculated by applying these to the weighted values.
- Equitable Adjustment
- The final percentage is used to adjust the contract fee or the fee for the terminated portion, ensuring fair compensation.
Responsibilities
- Contracting Officers: Must ensure all relevant factors are identified, appropriately weighted, and that the calculation method is applied consistently for equitable adjustments.
- Contractors: Must provide accurate data on progress for each factor and support the calculation of completion percentages.
- Agencies: Oversee the process to ensure compliance and fairness in fee adjustments.
Practical Implications
- This section ensures that contractors are fairly compensated for all work performed, not just visible construction, in the event of contract termination.
- It requires careful documentation and justification of progress across multiple project aspects.
- Common pitfalls include underestimating non-construction efforts or misapplying weights, which can lead to disputes over fee adjustments.
(a) The percentage of completion basis refers to the contractor’s total effort and not solely to the actual construction work. Generally, the effort of a contractor under a cost-reimbursement construction or professional services contract can be segregated into factors such as-
(1) Mobilization including organization,
(2) Use of finances,
(3) Contracting for and receipt of materials,
(4) Placement of subcontracts,
(5) Preparation of shop drawings,
(6) Work in place performed by own forces,
(7) Supervision of subcontractors’ work,
(8) Job administration, and
(9) Demobilization.
(b) Each of the applicable factors in paragraph (a) of this section shall be assigned a weighted value depending on its importance and difficulty. The total weight value of all factors should be easily divisible (e.g., by 100) to determine percentages. The percentage of completion of each factor must be established based upon the specific facts of each contract. When totaled, the percentage of completion of each factor applied to the weighted value of each factor results in the overall percentage of contract completion. The percentage of completion is then applied to the total contract fee or to the fee applicable to the terminated portion of the contract to arrive at an equitable adjustment.