49.601-2
Letter notice
FAR 49.601-2 mandates a structured, documented process for notifying contractors of termination for convenience, ensuring all parties are properly informed and compliant with federal requirements.
Overview
FAR 49.601-2 provides a suggested template and detailed procedural requirements for issuing a letter notice of termination for convenience to prime contractors, primarily for supply contracts but adaptable for other contract types and subcontracts. The section outlines the required content, delivery methods, and follow-up actions for both the prime contractor and their subcontractors when a contract is terminated by the government for its convenience. It ensures that all parties are properly notified, records are maintained, and inventory, settlements, and employee impacts are managed in accordance with federal regulations.
Key Rules
- Notice Content and Delivery
- The termination notice must include contract details, effective date, and be sent by certified mail or electronically with proof of receipt. Alternate language is provided if no prior electronic notice was issued or confirmed.
- Cessation of Work and Subcontractor Notification
- Contractors must immediately stop work (with specific exceptions), notify affected subcontractors and suppliers, and provide them with instructions for settlement and further notification down the supply chain.
- Recordkeeping and Reporting
- Contractors must keep detailed records of compliance, notify the contracting officer of legal proceedings, and report on termination inventory and completed end items.
- Settlement and Inventory Management
- Contractors are responsible for settling with subcontractors and managing termination inventory as instructed by the contracting officer.
- Employee and Patent Considerations
- Contractors should notify employees and relevant agencies of workforce reductions and report inventions or patent applications as required.
Responsibilities
- Contracting Officers: Issue and track notices, provide instructions, and oversee settlements and inventory disposition.
- Contractors: Cease work, notify subcontractors, maintain records, manage inventory, settle with subcontractors, and address employee and patent issues.
- Agencies: Monitor compliance, assist with workforce impacts, and ensure proper contract closeout.
Practical Implications
- This section ensures orderly and documented contract termination, minimizing disputes and financial risk for both government and contractors. Failure to follow these procedures can result in delayed settlements, legal complications, or loss of reimbursement. Contractors must be diligent in communication, recordkeeping, and compliance with all notice and settlement requirements.