Granting subcontract settlement authorization
FAR 49.606 enables contractors to settle terminated subcontracts without further government approval, but only within strict limits and oversight to protect government interests.
Overview
FAR 49.606 provides the required format and conditions for contracting officers to grant subcontract settlement authorization to prime contractors when a government contract is terminated or modified. This authorization allows the contractor to settle terminated subcontracts and purchase orders without further government approval, subject to specific limitations and conditions outlined in the regulation. The section details the scope of the authorization, monetary limits, procedures for disposing of termination inventory, and requirements for consolidating settlements. It also addresses restrictions on settlements with affiliated subcontractors and outlines the government's right to review and revoke the authorization if the contractor fails to protect government interests.
Key Rules
- Authorization Format and Scope
- Contracting officers must use the prescribed letter format and specify limits and conditions for settlement authority.
- Monetary Limits
- Settlements must not exceed the specified dollar limit per subcontractor, and proposals should be consolidated where possible.
- Inventory Disposition
- Disposition of government-furnished material or completed articles requires government approval unless under the specified limit.
- Affiliated Subcontractors
- Authorization does not apply to settlements with affiliated subcontractors.
- Government Oversight
- The government may review settlement methods and revoke authorization if interests are not protected.
Responsibilities
- Contracting Officers: Issue authorization letters, set limits, provide instructions, and review settlements.
- Contractors: Settle subcontracts within limits, consolidate proposals, comply with inventory disposition rules, and avoid settlements with affiliates.
- Agencies: Oversee contractor compliance and revoke authorization if necessary.
Practical Implications
- This section streamlines the subcontract settlement process after contract termination, reducing administrative burden but imposing strict compliance requirements. Contractors must carefully track settlement amounts, avoid prohibited transactions, and maintain documentation for potential government review. Failure to comply can result in revocation of settlement authority.