49.402-3
Procedure for default
FAR 49.402-3 mandates a structured, documented process for default terminations, requiring proper review, notification, and consideration of all relevant factors to ensure fairness and compliance.
Overview
FAR 49.402-3 outlines the detailed procedures that contracting officers must follow when considering and executing a termination for default of a fixed-price contract. The regulation ensures that such actions are taken only after thorough review and with appropriate notifications to the contractor, surety, and relevant small business offices. It prescribes the steps for issuing cure and show cause notices, the required content of termination notices, and the factors to consider before making a default determination. The section also addresses special considerations for small businesses and construction contracts, and mandates proper documentation and distribution of notices.
Key Rules
- Review Before Action
- Termination decisions (default, convenience, or no-cost) require review by contracting, technical, and legal personnel.
- Notice Requirements
- Cure and show cause notices need prior approval and must be properly documented and distributed, especially for small businesses and sureties.
- Default Determination
- The contracting officer must consider contract terms, contractor failures, urgency, essentiality, and other relevant factors before terminating for default.
- Notice of Termination
- The termination notice must include specific information such as contract details, reasons for default, contractor rights, and Government remedies.
- Post-Termination Actions
- Notify the disbursing officer to withhold payments, and for construction contracts, determine completion methods and use of on-site materials.
Responsibilities
- Contracting Officers: Must follow procedural steps, obtain necessary approvals, issue required notices, consult with small business specialists, and document all actions.
- Contractors: Must respond to cure/show cause notices, may appeal default decisions, and must comply with all contract terms to avoid default.
- Agencies: Oversee compliance, ensure proper notification to small business offices and sureties, and maintain documentation.
Practical Implications
- This section exists to ensure fairness, due process, and legal sufficiency in default terminations, protecting both Government and contractor interests.
- It impacts daily contracting by requiring careful documentation, timely communication, and adherence to procedural safeguards.
- Common pitfalls include failure to provide proper notice, inadequate documentation, or not consulting required parties, which can lead to disputes or overturned terminations.