49.402
Termination of fixed-price contracts for default
FAR 49.402 establishes the procedures and requirements for terminating fixed-price contracts for default, ensuring due process and protecting the Government’s interests.
Overview
FAR 49.402 outlines the rules and procedures for terminating fixed-price contracts for default. This section details the Government’s right to terminate, the effects of such termination, the required procedures, alternatives to termination, documentation requirements, repurchase actions, assessment of damages, and reporting obligations. It provides a structured process for contracting officers to follow when a contractor fails to perform or meet contract requirements, ensuring due process and protecting the Government’s interests.
Key Rules
- Government’s Right to Terminate (49.402-1)
- The Government may terminate a fixed-price contract for default if the contractor fails to perform or deliver as required.
- Effect of Termination (49.402-2)
- Specifies the consequences for the contractor, including liability for excess costs and potential exclusion from future contracts.
- Procedure for Default (49.402-3)
- Outlines the steps contracting officers must take, including issuing a notice of default and providing an opportunity to cure.
- Alternatives to Termination (49.402-4)
- Allows for procedures in lieu of termination, such as contract modification or other remedies.
- Documentation (49.402-5)
- Requires contracting officers to prepare a memorandum detailing the facts and rationale for the termination decision.
- Repurchase (49.402-6)
- Permits the Government to repurchase items against the contractor’s account if necessary.
- Other Damages (49.402-7)
- Addresses the Government’s right to pursue additional damages beyond repurchase costs.
- Reporting (49.402-8)
- Mandates reporting of default terminations for tracking and oversight purposes.
Responsibilities
- Contracting Officers: Must follow prescribed procedures, document decisions, and report terminations.
- Contractors: Must comply with contract terms and respond to notices of default or cure.
- Agencies: Oversee compliance, maintain records, and ensure proper reporting.
Practical Implications
- This section ensures a fair, consistent process for handling contractor defaults on fixed-price contracts.
- It protects the Government’s interests while providing contractors due process.
- Common pitfalls include inadequate documentation, failure to provide notice, or improper calculation of damages.