49.402-4 Procedure in lieu of termination for default
Source: FAR 49.402-4 on acquisition.gov
FAR 49.402-4 gives contracting officers flexible alternatives to default termination, allowing continued performance or no-cost settlements when it benefits the Government.
Overview
FAR 49.402-4 outlines alternative procedures that contracting officers may use instead of terminating a contract for default when it serves the Government’s interest. These alternatives provide flexibility in managing contract performance issues and allow for solutions that may be less disruptive or costly than default termination. The section details three main options: permitting continued performance under a revised schedule, allowing subcontracting or third-party arrangements, and executing a no-cost termination settlement if the requirement no longer exists and the contractor is not liable for damages.
Key Rules
- Revised Delivery Schedule
- The contracting officer may allow the contractor, surety, or guarantor to continue performance under a new delivery schedule.
- Subcontracting or Third-Party Arrangements
- The contractor may continue performance through a subcontract or other arrangement with an acceptable third party, as long as the Government’s rights are protected.
- No-Cost Termination Settlement
- If the Government no longer needs the supplies/services and the contractor is not liable for damages, a no-cost termination settlement agreement may be executed using prescribed formats.
Responsibilities
- Contracting Officers: Assess the Government’s interest, select and document the appropriate alternative, ensure Government rights are preserved, and use correct settlement formats.
- Contractors: Comply with revised schedules, obtain approval for third-party arrangements, and participate in settlement agreements as required.
- Agencies: Oversee contracting officer decisions and ensure compliance with FAR procedures.
Practical Implications
- This section provides alternatives to default termination, potentially saving time and resources for both parties.
- It allows for flexibility in resolving performance issues, but requires careful documentation and protection of Government interests.
- Common pitfalls include failing to adequately preserve Government rights or improperly executing settlement agreements.
The following courses of action, among others, are available to the contracting officer in lieu of termination for default when in the Government’s interest:
(a) Permit the contractor, the surety, or the guarantor, to continue performance of the contract under a revised delivery schedule.
(b) Permit the contractor to continue performance of the contract by means of a subcontract or other business arrangement with an acceptable third party, provided the rights of the Government are adequately preserved.
(c) If the requirement for the supplies and services in the contract no longer exists, and the contractor is not liable to the Government for damages as provided in 49.402-7, execute a no-cost termination settlement agreement using the formats in 49.603-6 and 49.603-7 as a guide.