Hello and thank you for joining us for Episode 24 of Fun with the FAR Season 10! Our next session will cover FAR Part 49 (Termination of Contracts). As we prepare for our 25th episode of Season 10, here are a few FAR Facts for us to think about:

  • Prime contractors are required to use guidance in FAR Part 49 to settle subcontracts terminated as a result of modification of a prime contract. FAR 49.002(b).
  • Upon receiving a termination notice, a prime contractor is required to immediately stop work and terminate all subcontracts related to the terminated portion of the prime contract. FAR 49.104(a) and (b).
  • The TCO usually must ratify or approve a prime contractor’s settlement agreement with its subcontractor. FAR 49.108-3(c). However, in some cases, if the prime requests it in writing, the TCO may authorize the prime to settle with subs without ratification or approval from the TCO. FAR 49.108-4(a)(1).
  • The Government is required to pay for profit on preparations made and work performed by the contractor for the terminated portion of the contract but not on settlement expenses. FAR 49.202(a). However, the Government is not permitted to pay for such profit if it appears that the contractor would have incurred a loss had the contract been completed. FAR 49.203.
  • A contracting officer must obtain the prior approval of his/her contracting office prior to issuing a show cause or cure notice to a contractor. FAR 49.402-3(b).