49.503 Termination for convenience of the Government and default
Source: FAR 49.503 on acquisition.gov
FAR 49.503 mandates the use of specific termination clauses and alternates based on contract type and parties, ensuring proper procedures for contract termination.
Overview
FAR 49.503 prescribes the use of specific termination clauses for cost-reimbursement, construction, time-and-material, labor-hour, and architect-engineer contracts. It details which versions or alternates of the termination clauses must be inserted into solicitations and contracts, depending on contract type and the parties involved. The section also provides guidance for the use of these clauses in subcontracts, including necessary modifications to fit the subcontract relationship and reduce proposal submission periods.
Key Rules
- Cost-Reimbursement Contracts
- Use clause 52.249-6, with alternates as required for construction, partial payments, or time-and-material/labor-hour contracts.
- Construction Contracts
- Use clause 52.249-6 with Alternate I.
- Contracts with Governmental Entities
- Use Alternate II or III for partial payments if interest on excess partial payments is inappropriate.
- Time-and-Material/Labor-Hour Contracts
- Use Alternate IV or V as applicable.
- Fixed-Price Architect-Engineer Contracts
- Use clause 52.249-7.
- Subcontracts
- Prime contractors may use 52.249-6 in cost-reimbursement subcontracts, with modifications for relationship clarity and reduced settlement proposal periods.
Responsibilities
- Contracting Officers: Must ensure the correct termination clause and alternates are included in solicitations and contracts based on contract type and parties.
- Contractors: Should be aware of which termination clauses apply and ensure subcontracts reflect appropriate modifications.
- Agencies: Oversee compliance with clause inclusion and proper use of alternates.
Practical Implications
- Ensures contracts contain the correct termination provisions, protecting both government and contractor interests.
- Reduces disputes by clarifying procedures for termination and settlement.
- Common pitfalls include failing to use the correct alternate or not modifying subcontracts appropriately.
(a) Cost-reimbursement contracts-
(1) General use. Insert the clause at 52.249-6, Termination (Cost-Reimbursement), in solicitations and contracts when a cost-reimbursement contract is contemplated, except contracts for research and development with an educational or nonprofit institution on a no-fee basis.
(2) Construction. If the contract is for construction, the contracting officer shall use the clause with its AlternateI.
(3) Partial payments. If the contract is with an agency of the U.S. Government or with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess partial payments is inappropriate, the contracting officer shall use the clause with its AlternateII. In such contracts for construction, the contracting officer shall use the clause with its AlternateIII.
(4) Time-and-material and labor-hour contracts. If the contract is a time-and-material or labor-hour contract, the contracting officer shall use the clause with its AlternateIV. If the contract is with an agency of the U.S. Government or with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess partial payments is inappropriate, the contracting officer shall use the clause with its Alternate V.
(b) Insert the clause at 52.249-7, Termination (Fixed-Price Architect-Engineer), in solicitations and contracts for architect-engineer services, when a fixed-price contract is contemplated.
(c) Subcontracts. The prime contractor may find the clause at 52.249-6, Termination (Cost-Reimbursement), suitable for use in cost-reimbursement subcontracts; provided, that the relationship between the contractor and subcontractor is clearly indicated. Inapplicable conditions (e.g., paragraphs (e), (j) and (n)) should be deleted and the period for submitting the subcontractor’s termination settlement proposal should be reduced (e.g.,6 months).