52.249-9 Default (Fixed-Price Research and Development)
Source: FAR 52.249-9 on acquisition.gov
FAR 52.249-9 empowers the Government to terminate fixed-price R&D contracts for contractor default, with liability for excess costs unless the failure was beyond the contractor's control.
Overview
FAR 52.249-9 outlines the procedures and consequences for default under fixed-price research and development contracts. This clause gives the Government the right to terminate the contract, in whole or in part, if the contractor fails to perform on time, endangers contract performance, or fails to comply with contract provisions. Contractors are given a cure period (typically 10 days) to address deficiencies after receiving notice. If terminated for default, the Government may obtain similar work elsewhere and hold the contractor liable for excess costs, unless the failure was due to uncontrollable and non-negligent causes. The clause also addresses the handling of subcontractor defaults, the transfer of completed or partially completed work, and payment for accepted work. If it is later determined that the contractor was not in default or the default was excusable, the termination is treated as a termination for convenience. The Government's rights under this clause are cumulative with other legal or contractual remedies.
Key Rules
- Government Right to Terminate for Default
- The Government can terminate the contract for failure to perform, endangerment of performance, or breach of contract provisions, subject to a cure period.
- Contractor Liability for Excess Costs
- If terminated, the contractor may be liable for excess costs incurred by the Government to obtain similar work, unless the failure was beyond the contractor's control and without negligence.
- Exceptions for Uncontrollable Causes
- Contractors are not liable for excess costs if failure to perform was due to causes beyond their control (e.g., acts of God, government acts, natural disasters).
- Subcontractor Defaults
- Liability for subcontractor defaults is limited if the cause was beyond both the contractor's and subcontractor's control and the supplies/services were not otherwise obtainable in time.
- Transfer of Work and Property
- Upon default termination, the contractor must transfer completed or partially completed work and other property to the Government as directed.
- Payment for Accepted Work
- The Government pays for accepted completed work and agreed amounts for partially completed work or property, subject to withholding for liens or claims.
- Disputes and Remedies
- Disagreements are resolved under the Disputes clause, and the Government's remedies are cumulative.
Responsibilities
- Contracting Officers: Must provide written notice of default, specify deficiencies, allow a cure period, determine liability, and direct transfer of work/property.
- Contractors: Must respond to cure notices, correct deficiencies, transfer work/property upon termination, and protect Government interests in property.
- Agencies: Oversee compliance, ensure proper documentation, and manage disputes or claims.
Practical Implications
- This clause protects the Government's interests in R&D contracts by providing clear procedures for addressing contractor nonperformance.
- Contractors must be vigilant in meeting deadlines and contract requirements to avoid default and potential liability for excess costs.
- Proper documentation and communication are critical, especially when uncontrollable events impact performance. Failure to respond promptly to cure notices or to transfer property can result in additional liabilities.
As prescribed in 49.504(b), insert the following clause:
Default (Fixed-Price Research and Development) (Apr 1984)
(a)
(1) The Government may, subject to paragraphs (c) and (d) of this clause, by written Notice of Default to the Contractor, terminate this contract in whole or in part if the Contractor fails to-
(i) Perform the work under the contract within the time specified in this contract or any extension;
(ii) Prosecute the work so as to endanger performance of this contract (but see paragraph (a)(2) of this clause); or
(iii) Perform any of the other provisions of this contract (but see paragraph (a)(2) of this clause).
(2) The Government’s right to terminate this contract under subdivisions (a)(1)(ii) and (iii) of this clause may be exercised if the Contractor does not cure such failure within 10 days (or more, if authorized in writing by the Contracting Officer) after receipt of the notice from the Contracting Officer specifying the failure.
(b) If the Government terminates this contract in whole or in part, it may acquire, under the terms and in the manner the Contracting Officer considers appropriate, work similar to the work terminated, and the Contractor will be liable to the Government for any excess costs for the similar work. However, the Contractor shall continue the work not terminated.
(c) Except for defaults of subcontractors at any tier, the Contractor shall not be liable for any excess costs if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Contractor. Examples of such causes include (1) acts of God or of the public enemy, (2) acts of the Government in either its sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics, (6) quarantine restrictions, (7) strikes, (8) freight embargoes, and (9) unusually severe weather. In each instance the failure to perform must be beyond the control and without the fault or negligence of the Contractor.
(d) If the failure to perform is caused by the default of a subcontractor at any tier, and if the cause of the default is beyond the control of both the Contractor and subcontractor, and without the fault or negligence of either, the Contractor shall not be liable for any excess costs for failure to perform, unless the subcontracted supplies or services were obtainable from other sources in sufficient time for the Contractor to meet the required delivery schedule or other performance requirements.
(e) If this contract is terminated for default, the Government may require the Contractor to transfer title and deliver to the Government, as directed by the Contracting Officer, any (1) completed or partially completed work not previously delivered to, and accepted by, the Government and (2) other property, including contract rights, specifically produced or acquired for the terminated portion of this contract. Upon direction of the Contracting Officer, the Contractor shall also protect and preserve property in its possession in which the Government has an interest.
(f) The Government shall pay the contract price, if separately stated, for completed work it has accepted and the amount agreed upon by the Contractor and the Contracting Officer for (1) completed work for which no separate price is stated, (2) partially completed work, (3) other property described above that it accepts, and (4) the protection and preservation of the property. Failure to agree will be a dispute under the Disputes clause. The Government may withhold from these amounts any sum the Contracting Officer determines to be necessary to protect the Government against loss from outstanding liens or claims of former lien holders.
(g) If, after termination, it is determined that the Contractor was not in default, or that the default was excusable, the rights and obligations of the parties shall be the same as if the termination had been issued for the convenience of the Government.
(h) The rights and remedies of the Government in this clause are in addition to any other rights and remedies provided by law or under this contract.
(End of clause)