Termination for Default
FAR Subpart 49.4 establishes the procedures and responsibilities for terminating government contracts for default, ensuring due process and protection of government interests.
Overview
FAR Subpart 49.4, "Termination for Default," provides the regulatory framework and procedures for terminating government contracts when a contractor fails to perform or meet contractual obligations. This subpart covers the general principles of default termination, specific procedures for fixed-price and cost-reimbursement contracts, the role of sureties, completion by alternate contractors, and the process for liquidating liabilities. It is designed to protect the government's interests while ensuring due process for contractors. The subpart outlines the steps contracting officers must follow, including issuing notices, documenting failures, and managing the transition of work or financial responsibilities. It also addresses the involvement of sureties and the potential for re-procurement or completion by another contractor if the original contractor defaults.
Key Rules
- General Principles (49.401)
- Establishes the authority and grounds for terminating contracts for default.
- Fixed-Price Contracts (49.402)
- Details procedures and requirements for default termination of fixed-price contracts.
- Cost-Reimbursement Contracts (49.403)
- Specifies how to handle default terminations for cost-reimbursement contracts.
- Surety-Takeover Agreements (49.404)
- Outlines the process for sureties to take over contract performance after default.
- Completion by Another Contractor (49.405)
- Provides guidance for completing work through another contractor if the original defaults.
- Liquidation of Liability (49.406)
- Explains how to determine and recover the government's financial losses after default.
Responsibilities
- Contracting Officers: Must follow prescribed procedures for issuing default notices, documenting contractor failures, coordinating with sureties, and managing re-procurement or completion.
- Contractors: Must comply with contract terms, respond to default notices, and cooperate with government and sureties if default occurs.
- Agencies: Oversee the process, ensure compliance with FAR, and protect government interests in case of default.
Practical Implications
- This subpart exists to provide a structured, fair process for handling contractor defaults, minimizing disruption to government operations.
- It impacts daily contracting by establishing clear steps for both government and contractors in the event of non-performance.
- Common pitfalls include inadequate documentation, failure to follow notice procedures, and misunderstandings about surety or re-procurement roles.