Default (Fixed-Price Research and Development)
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.