+------------+---------------------------------------------------------+
| **Overall  | Terminate contracts when it is in the best interest of  |
| Duty**     | the Government.                                         |
+------------+---------------------------------------------------------+
| **Overall  | Given a contract and evidence of a need to take action  |
| Co         | to protect the Government's interests.                  |
| nditions** |                                                         |
+------------+---------------------------------------------------------+
| *          | Determine if it is in the best interest of the          |
| *Overall** | Government to terminate the contract. Determine whether |
|            | the contract should be terminated for convenience or    |
| **         | cause/default. Carry out the termination in accordance  |
| Standard** | with applicable FAR and/or Uniform Commercial Code      |
|            | (UCC) requirements.                                     |
+------------+---------------------------------------------------------+
|            |                                                         |
+------------+---------------------------------------------------------+
| # Par      |                                                         |
| t A: Deter |                                                         |
| mine Wheth |                                                         |
| er to Term |                                                         |
| inate and  |                                                         |
| Method (if |                                                         |
|  any) of T |                                                         |
| ermination |                                                         |
+------------+---------------------------------------------------------+
| **         | Determine whether to terminate.                         |
| Sub-Duty** |                                                         |
+------------+---------------------------------------------------------+
| **         | Given evidence of performance problems, a show cause or |
| Additional | cure notice, and/or a request for termination from the  |
| Co         | requiring activity.                                     |
| nditions** |                                                         |
+------------+---------------------------------------------------------+
| **         | Terminate for convenience if funds are insufficient,    |
| Sub-Duty** | the requirement is no longer needed, or the quantity    |
|            | needed has been reduced. Also terminate for convenience |
| **         | if there has been a radical change in the requirement   |
| Standard** | that is beyond the contractor's expertise. Terminate    |
|            | for cause or default when there is no other alternative |
|            | for obtaining performance under the contract, and the   |
|            | Government has a sustainable case based on the current  |
|            | contractor's problems and deficiencies.                 |
+------------+---------------------------------------------------------+

+------------+---------------------------------------------------------+
| # Part     |                                                         |
| B: Termina |                                                         |
| ting for C |                                                         |
| onvenience |                                                         |
+------------+---------------------------------------------------------+
| **         | Terminate for convenience.                              |
| Sub-Duty** |                                                         |
+------------+---------------------------------------------------------+
| **         | Given a decision to terminate for convenience.          |
| Additional |                                                         |
| Co         |                                                         |
| nditions** |                                                         |
+------------+---------------------------------------------------------+
| **         | Terminate the items identified for termination and      |
| Sub-Duty** | negotiate a settlement that returns the contractor      |
|            | whole for its costs sustained in meeting the            |
| **         | requirement to the point of cancellation.               |
| Standard** |                                                         |
+------------+---------------------------------------------------------+
|            |                                                         |
+------------+---------------------------------------------------------+
| #          |                                                         |
| Part C: Te |                                                         |
| rminating  |                                                         |
| for Cause  |                                                         |
| or Default |                                                         |
+------------+---------------------------------------------------------+
| **         | Terminate for cause or default.                         |
| Sub-Duty** |                                                         |
+------------+---------------------------------------------------------+
| **         | Given a decision to terminate for cause or default.     |
| Additional |                                                         |
| Co         |                                                         |
| nditions** |                                                         |
+------------+---------------------------------------------------------+
| **         | Establish a case that meets the Government's legal and  |
| Sub-Duty** | factual burdens of proof and demonstrates that the      |
|            | cause/default termination is the best way of protecting |
| **         | the Government's interests. Reinstate the contract if   |
| Standard** | the contractor provides good reason for believing that  |
|            | reinstatement is the best way of meeting the            |
|            | requirement. Reprocure (if necessary) and de­mand        |
|            | recovery of all costs for which the contractor is       |
|            | liable.                                                 |
+------------+---------------------------------------------------------+

+----------+--------+-------------------------------------------------+
| #        |        |                                                 |
| Policies |        |                                                 |
+----------+--------+-------------------------------------------------+
| *        | ***Age | ***Subject***                                   |
| **FAR*** | ncy*** |                                                 |
|          |        |                                                 |
|          | ***Sup |                                                 |
|          | pl.*** |                                                 |
+----------+--------+-------------------------------------------------+
| 8.405-4  |        | Delinquent performance on Federal Supply        |
|          |        | Schedule orders.                                |
+----------+--------+-------------------------------------------------+
| 8.405-5  |        | Termination for default.                        |
+----------+--------+-------------------------------------------------+
| 8.405-6  |        | Termination for convenience.                    |
+----------+--------+-------------------------------------------------+
| 9.405-1  |        | Continuation of a current contract with a       |
|          |        | debarred or suspended firm.                     |
+----------+--------+-------------------------------------------------+
| 12.403   |        | Termination of contracts for commercial items.  |
+----------+--------+-------------------------------------------------+
| 1        |        | Termination of 8(a) contracts for convenience   |
| 9.812(d) |        | when the 8(a) concern transfers ownership or    |
|          |        | control.                                        |
+----------+--------+-------------------------------------------------+
| 32.109   |        | Termination financing.                          |
+----------+--------+-------------------------------------------------+
| 49       |        | Termination of contracts.                       |
+----------+--------+-------------------------------------------------+
| 52.      |        | Termination for the Government's convenience of |
| 212-4(l) |        | contracts for commercial items.                 |
+----------+--------+-------------------------------------------------+
| 52.      |        | Termination for cause of contracts for          |
| 212-4(m) |        | commercial items.                               |
+----------+--------+-------------------------------------------------+
| 52.      |        | Termination for the Government's convenience of |
| 213-4(f) |        | simplified acquisitions of other than           |
|          |        | commercial items.                               |
+----------+--------+-------------------------------------------------+
| 52.      |        | Termination for cause of simplified             |
| 213-4(g) |        | acquisitions of other than commercial items.    |
+----------+--------+-------------------------------------------------+
| 52.249-1 |        | Termination for convenience of the Government   |
|          |        | (fixed-price) (short form).                     |
+----------+--------+-------------------------------------------------+
| 52.249-2 |        | Termination for convenience of the Government   |
|          |        | (fixed-price).                                  |
+----------+--------+-------------------------------------------------+
| 52.249-4 |        | Termination for convenience of the Government   |
|          |        | (services) (short form).                        |
+----------+--------+-------------------------------------------------+
| 52.249-5 |        | Termination for convenience of the Government   |
|          |        | (educational and other nonprofit institutions). |
+----------+--------+-------------------------------------------------+
| 52.249-6 |        | Termination (cost-reimbursement).               |
+----------+--------+-------------------------------------------------+
| 52.249-8 |        | Default (fixed-price supply and service).       |
+----------+--------+-------------------------------------------------+
| 52.249-9 |        | Default (fixed-price research and development). |
+----------+--------+-------------------------------------------------+
| 5        |        | Termination (personal services).                |
| 2.249-12 |        |                                                 |
+----------+--------+-------------------------------------------------+

# Other KSA's

1\. Knowledge of commercial law, accounting, and quantitative analysis.

2\. Ability to identify rules and principles applicable to settling
contract terminations.

3\. Ability to solve complex mathematical problems associated with
reaching a termination settlement.

4\. Ability to thoroughly evaluate and administer the various aspects of
a contract termination.

5\. Ability to identify problems encountered in termination settlement
and use sound judgment to generate and evaluate alternative solutions.

6\. Ability to communicate orally and in writing concerning the variety
of issues involved in a termination settlement.

7\. Ability to maintain the honesty and integrity of the acquisition
process.

  -----------------------------------------------------------------------
  **Other Policies and References (Annotate As Necessary):**

  -----------------------------------------------------------------------

![](media/image1.wmf){width="2.607638888888889in"
height="4.303472222222222in"}

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 1\. Identify indicators of the | Examples include:                   |
| possible need to terminate a   |                                     |
| contract.                      | -   A cure or show cause notice     |
|                                |     being issued, because the       |
|                                |     contractor has failed to show   |
|                                |     the Govern­ment that it will     |
|                                |     complete the contract in        |
|                                |     accordance with its terms.      |
|                                |                                     |
|                                | -   The requiring activity          |
|                                |     signaling that:                 |
|                                |                                     |
|                                |     -   The contract requirement no |
|                                |         longer exists or has        |
|                                |         already been fully          |
|                                |         satisfied short of the      |
|                                |         contract quan­tity.          |
|                                |                                     |
|                                |     -   Funds are not available to  |
|                                |         complete the contract in    |
|                                |         accordance with its         |
|                                |         existing terms.             |
|                                |                                     |
|                                |     -   There has been a radical    |
|                                |         change in the needs of the  |
|                                |         Government that goes well   |
|                                |         beyond the scope of the     |
|                                |         current contract.           |
+--------------------------------+-------------------------------------+

+-------------------------------+--------------------------------------+
| **Tasks**                     | **Related Standards**                |
+===============================+======================================+
| 2\. With other members of the | Available alternatives and the       |
| Government acquisition team,  | related pros and cons will vary      |
| identify available            | depending on the contracting         |
| alternatives for action and   | situation. For example:              |
| the associated pros and cons. |                                      |
|                               | -   When faced with unacceptable     |
|                               |     contract performance,            |
|                               |     alternatives may include the     |
|                               |     following:                       |
|                               |                                      |
|                               | ```{=html}                           |
|                               | <!-- -->                             |
|                               | ```                                  |
|                               | -   Continuing the present contract  |
|                               |     using safeguards to protect the  |
|                               |     Government, such as:             |
|                               |                                      |
|                               |     -   Permitting performance by    |
|                               |         the contractor, surety, or   |
|                               |         guarantor under a revised    |
|                               |         deliv­ery schedule.           |
|                               |                                      |
|                               |     -   Permitting the contractor to |
|                               |         subcontract with or          |
|                               |         establish other business     |
|                               |         arrangements with an         |
|                               |         acceptable third party.      |
|                               |                                      |
|                               | ```{=html}                           |
|                               | <!-- -->                             |
|                               | ```                                  |
|                               | -   Changing delivery or other       |
|                               |     requirements to facilitate       |
|                               |     performance and obtaining        |
|                               |     compensation from the contractor |
|                               |     in return.                       |
|                               |                                      |
|                               |     -   Terminating part or all of   |
|                               |         the contract for cause or    |
|                               |         default.                     |
|                               |                                      |
|                               |     -   Terminating all or part of   |
|                               |         the contract for             |
|                               |         convenience.                 |
|                               |                                      |
|                               | ```{=html}                           |
|                               | <!-- -->                             |
|                               | ```                                  |
|                               | -   When faced with a significant    |
|                               |     change in requirements,          |
|                               |     alternatives may include:        |
|                               |                                      |
|                               | ```{=html}                           |
|                               | <!-- -->                             |
|                               | ```                                  |
|                               | -   Canceling a purchase order not   |
|                               |     yet accepted by the contractor.  |
|                               |                                      |
|                               | -   Permitting the contractor to     |
|                               |     complete the current contract,   |
|                               |     because that is more cost        |
|                               |     effective than terminating for   |
|                               |     convenience.                     |
|                               |                                      |
|                               | ```{=html}                           |
|                               | <!-- -->                             |
|                               | ```                                  |
|                               | -   Issuing a no-cost cancellation   |
|                               |     when:                            |
|                               |                                      |
|                               |     -   The supply or service can    |
|                               |         readily be obtained          |
|                               |         elsewhere,                   |
|                               |                                      |
|                               |     -   A no-cost settlement is      |
|                               |         acceptable to the            |
|                               |         con­tractor,                  |
|                               |                                      |
|                               |     -   Government property had not  |
|                               |         been furnished to the        |
|                               |         contractor, and              |
|                               |                                      |
|                               |     -   There are no outstanding     |
|                               |         payments, debts, or other    |
|                               |         obliga­tions due the          |
|                               |         Government.                  |
|                               |                                      |
|                               | ```{=html}                           |
|                               | <!-- -->                             |
|                               | ```                                  |
|                               | -   Terminating all or part of the   |
|                               |     contract for convenience when    |
|                               |     contract performance is          |
|                               |     unacceptable, but the contract   |
|                               |     cannot be terminated for         |
|                               |     cause/default (e.g., because the |
|                               |     Government is partially          |
|                               |     responsible).                    |
+-------------------------------+--------------------------------------+

  -----------------------------------------------------------------------
  **Tasks**                        **Related Standards**
  -------------------------------- --------------------------------------
  3\. Select the appropriate       Select the alternative that is in the
  alternative.                     best interest of the Govern­ment under
                                   the current contract and future
                                   contracts. Consider factors, such as
                                   the Government's needs, timeliness,
                                   and overall cost.

  -----------------------------------------------------------------------

![](media/image2.wmf){width="6.497222222222222in"
height="8.01388888888889in"}

![](media/image3.wmf){width="4.134722222222222in" height="8.3125in"}

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 1\. Document the need to       | Reasons include:                    |
| terminate a contract partially |                                     |
| or completely for convenience. | -   No longer a need for the        |
|                                |     requirement;                    |
|                                |                                     |
|                                | -   Funding for the contract is     |
|                                |     eliminated or cur­tailed;        |
|                                |                                     |
|                                | -   A Board of Contract Appeals     |
|                                |     (BCA) or court has overturned a |
|                                |     cause/default termination;      |
|                                |                                     |
|                                | -   Impossibility of performance    |
|                                |     (e.g., conflicting              |
|                                |     specifications); and            |
|                                |                                     |
|                                | -   Others.                         |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 2\. Issue a notice of          | For noncommercial item contracts,   |
| termination for convenience.   | prepare and issue the notice as     |
|                                | pre­scribed in FAR 49.102 and        |
|                                | 49.601. For commercial item         |
|                                | contracts and noncommercial item    |
|                                | simplified acquisitions, use the    |
|                                | guidance provided when it is        |
|                                | consistent with the appropriate     |
|                                | requirements and procedures in the  |
|                                | Contract Terms and Conditions -     |
|                                | Commercial Items clause (FAR        |
|                                | 52.212-4) or Terms and Conditions   |
|                                | -- Simplified Acquisitions (Other   |
|                                | Than Commercial Items) clause (FAR  |
|                                | 52.213-4).                          |
|                                |                                     |
|                                | Using one of the formats provided   |
|                                | in FAR 49.601, the notice must      |
|                                | state:                              |
|                                |                                     |
|                                | -   That the contract is being      |
|                                |     terminated for the convenience  |
|                                |     of the Government under the     |
|                                |     contract clause authorizing the |
|                                |     termination;                    |
|                                |                                     |
|                                | -   The effective date of           |
|                                |     termination;                    |
|                                |                                     |
|                                | -   The extent of termination       |
|                                |     (e.g., specific items or        |
|                                |     complete);                      |
|                                |                                     |
|                                | -   Any special instructions; and   |
|                                |                                     |
|                                | -   The steps the contractor should |
|                                |     take to minimize the impact on  |
|                                |     personnel if the termination,   |
|                                |     together with all other         |
|                                |     outstanding terminations, will  |
|                                |     result in a significant         |
|                                |     reduction in the contractor's   |
|                                |     work force.                     |
|                                |                                     |
|                                | Distribute the notice to:           |
|                                |                                     |
|                                | -   The contractor:                 |
|                                |                                     |
|                                |     -   When the notice is mailed,  |
|                                |         send it by certified mail,  |
|                                |         return receipt requested.   |
|                                |                                     |
|                                |     -   When the notice is hand     |
|                                |         delivered, obtain a written |
|                                |         acknowledgement from the    |
|                                |         contractor;                 |
|                                |                                     |
|                                |         -   The contract            |
|                                |             administration office;  |
|                                |             and                     |
|                                |                                     |
|                                |         -   Any known assignee,     |
|                                |             guarantor, or surety of |
|                                |             the contractor.         |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 3\. Conduct a conference with  | When appropriate, principal         |
| the prime contractor to        | subcontractors should be requested  |
| develop a definite program for | to attend. Topics that should be    |
| effecting the settlement.      | discussed and documented include:   |
|                                |                                     |
|                                | -   General principles relating to  |
|                                |     the settlement of any           |
|                                |     settlement proposal, including  |
|                                |     contractor duties under the     |
|                                |     termination clause;             |
|                                |                                     |
|                                | -   Contractor duties under FAR     |
|                                |     49.104;                         |
|                                |                                     |
|                                | -   Extent of the termination,      |
|                                |     point at which work is stopped, |
|                                |     and status of any plans,        |
|                                |     drawings, and information that  |
|                                |     would have been delivered had   |
|                                |     the contract been completed;    |
|                                |                                     |
|                                | -   Status of any continuing work;  |
|                                |                                     |
|                                | -   Obligation of the contractor to |
|                                |     terminate subcontracts and      |
|                                |     general principles to be        |
|                                |     followed in settling settlement |
|                                |     proposals;                      |
|                                |                                     |
|                                | -   Names of subcontractors         |
|                                |     involved and the dates          |
|                                |     termination notices were issued |
|                                |     to them;                        |
|                                |                                     |
|                                | -   Contractor personnel handling   |
|                                |     review and settlement of        |
|                                |     subcontractor settlement        |
|                                |     proposals and the methods being |
|                                |     used;                           |
|                                |                                     |
|                                | -   Arrangements for transfer of    |
|                                |     title and delivery of any       |
|                                |     material required by the        |
|                                |     Government;                     |
|                                |                                     |
|                                | -   General principles and          |
|                                |     procedures to be followed in    |
|                                |     the protection, preservation,   |
|                                |     and disposition of termination  |
|                                |     inventories;                    |
|                                |                                     |
|                                | ```{=html}                          |
|                                | <!-- -->                            |
|                                | ```                                 |
|                                | -   Contractor accounting practices |
|                                |     and preparation of related      |
|                                |     forms;                          |
|                                |                                     |
|                                | -   Form in which to submit         |
|                                |     settlement proposals;           |
|                                |                                     |
|                                | -   Accounting review of settlement |
|                                |     proposals;                      |
|                                |                                     |
|                                | -   Any requirement for interim     |
|                                |     financing in the nature of      |
|                                |     partial payments;               |
|                                |                                     |
|                                | -   Tentative time schedule for     |
|                                |     negotiation;                    |
|                                |                                     |
|                                | -   Actions taken by the contractor |
|                                |     to minimize the termination's   |
|                                |     impact upon employees; and      |
|                                |                                     |
|                                | -   Obligation of the contractor to |
|                                |     furnish accurate, complete, and |
|                                |     current cost or pricing data,   |
|                                |     and to certify to that effect   |
|                                |     when the amount of a settlement |
|                                |     agreement exceeds the cost or   |
|                                |     pricing data threshold.         |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 4\. Amend or rescind the       | Amend a termination notice to:      |
| termi­nation notice (when       |                                     |
| appropriate).                  | -   Correct nonsubstantive mistakes |
|                                |     in the notice;                  |
|                                |                                     |
|                                | -   Add supplemental data or        |
|                                |     instructions; or                |
|                                |                                     |
|                                | -   Rescind the notice if it is     |
|                                |     determined that items           |
|                                |     terminated had been completed   |
|                                |     or shipped before the           |
|                                |     contractor's receipt of the     |
|                                |     notice.                         |
|                                |                                     |
|                                | Upon written consent of the         |
|                                | contractor, reinstate the           |
|                                | terminated portion of a contract,   |
|                                | in whole or in part, by amending    |
|                                | the notice of termination when the  |
|                                | Contracting Officer determines in   |
|                                | writing that:                       |
|                                |                                     |
|                                | -   Circumstances clearly indicate  |
|                                |     a requirement for the           |
|                                |     terminated items; and           |
|                                |                                     |
|                                | -   Reinstatement is advantageous   |
|                                |     to the Government.              |
+--------------------------------+-------------------------------------+
| 5\. Determine the disposition  | Promptly after the effective date   |
| and termination treatment of   | of termination:                     |
| completed end items.           |                                     |
|                                | -   Have all undelivered completed  |
|                                |     end items inspected and         |
|                                |     accepted if they comply with    |
|                                |     the contract requirements; and  |
|                                |                                     |
|                                | -   Determine which accepted end    |
|                                |     items are to be delivered under |
|                                |     the contract.                   |
|                                |                                     |
|                                | For a termination under a           |
|                                | fixed-price contract, the           |
|                                | contractor must:                    |
|                                |                                     |
|                                | -   Invoice for accepted and        |
|                                |     delivered end items at the      |
|                                |     contract price in the usual     |
|                                |     manner and not include them in  |
|                                |     the settlement proposal.        |
|                                |                                     |
|                                | -   Include completed end items     |
|                                |     that are accepted and not       |
|                                |     delivered under the contract in |
|                                |     the settlement proposal at the  |
|                                |     contract price, adjusted for    |
|                                |     any saving of freight or other  |
|                                |     charges, together with any      |
|                                |     credits for their purchase,     |
|                                |     retention, or sale.             |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 6\. Assure the prime           | For a commercial item contract or   |
| contractor's termination       | simplified acquisition of a         |
| settle­ment proposal and, where | noncommercial item, the proposal:   |
| appropriate, the               |                                     |
| subcontractors' settlement     | -   Should reflect a termination    |
| proposals are acceptable for   |     settlement based on:            |
| settlement action.             |                                     |
|                                |     -   The percentage of work      |
|                                |         performed prior to          |
|                                |         termination; plus           |
|                                |                                     |
|                                |     -   Any reasonable charges that |
|                                |         the contractor demonstrates |
|                                |         resulted from the           |
|                                |         termination.                |
|                                |                                     |
|                                | -   Need not comply with the FAR    |
|                                |     contract cost principles or     |
|                                |     cost accounting standards.      |
|                                |                                     |
|                                | For a fixed-price noncommercial     |
|                                | item contract, the proposal must be |
|                                | presented using the inventory basis |
|                                | for settlement (FAR 49.206-2(a))    |
|                                | unless the Contracting Officer      |
|                                | approved in advance use of the      |
|                                | total cost basis for settlement     |
|                                | (FAR 49.209-2(b)). Use of the total |
|                                | cost basis should only be approved  |
|                                | when use of the inventory basis is  |
|                                | not practicable or will unduly      |
|                                | delay settlement, as in the         |
|                                | following examples:                 |
|                                |                                     |
|                                | -   Production has not commenced    |
|                                |     and the accumulated costs       |
|                                |     represent planning and          |
|                                |     preproduction or "get ready"    |
|                                |     expenses.                       |
|                                |                                     |
|                                | -   Under the contractor's          |
|                                |     accounting system, unit costs   |
|                                |     for work in process and         |
|                                |     finished products cannot        |
|                                |     readily be established.         |
|                                |                                     |
|                                | -   The contract does not specify   |
|                                |     unit prices.                    |
|                                |                                     |
|                                | -   The termination is complete and |
|                                |     involves a letter contract.     |
|                                |                                     |
|                                | For cost-reimbursement contracts,   |
|                                | the settlement proposal should      |
|                                | include any unvouchered costs and   |
|                                | any proposed fee. The proposal must |
|                                | not include costs that have been:   |
|                                |                                     |
|                                | -   Finally disallowed; or          |
|                                |                                     |
|                                | -   Previously vouchered and        |
|                                |     formally questioned by the      |
|                                |     Government but not yet decided  |
|                                |     as to allowability.             |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 7\. Execute a no-cost          | Execute a no-cost settlement        |
| settlement (when appropriate). | agreement (FAR 49.603-6 or          |
|                                | 49.603-7, as applicable) if:        |
|                                |                                     |
|                                | -   The contractor:                 |
|                                |                                     |
|                                | ```{=html}                          |
|                                | <!-- -->                            |
|                                | ```                                 |
|                                | -   Has not incurred costs for the  |
|                                |     terminated portion of the       |
|                                |     contract; or                    |
|                                |                                     |
|                                | -   Is willing to waive the costs   |
|                                |     incurred; and                   |
|                                |                                     |
|                                | ```{=html}                          |
|                                | <!-- -->                            |
|                                | ```                                 |
|                                | -   No amounts are due the          |
|                                |     Government under the contract.  |
+--------------------------------+-------------------------------------+
| 8\. Request any specialized    | To expedite the termination         |
| assistance to analyze the      | settlement, assistance may be       |
| contractor's settlement        | requested from specially qualified  |
| proposal.                      | personnel to:                       |
|                                |                                     |
|                                | -   Assist in dealings with the     |
|                                |     contractor;                     |
|                                |                                     |
|                                | -   Advise on legal and contractual |
|                                |     matters;                        |
|                                |                                     |
|                                | -   Conduct accounting reviews and  |
|                                |     advise and assist on accounting |
|                                |     matters (FAR 49.107); and       |
|                                |                                     |
|                                | -   Perform the following functions |
|                                |     regarding termination           |
|                                |     inventory:                      |
|                                |                                     |
|                                |     -   Verify its existence.       |
|                                |                                     |
|                                |     -   Determine qualitative and   |
|                                |         quantitative allocability.  |
|                                |                                     |
|                                |     -   Make recommendations        |
|                                |         concerning serviceability.  |
|                                |                                     |
|                                |     -   Undertake necessary         |
|                                |         screening and               |
|                                |         redistribution.             |
|                                |                                     |
|                                |     -   Assist the contractor in    |
|                                |         accomplishing other         |
|                                |         disposition.                |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 9\. Negotiate a settlement     | If a no-cost settlement is not      |
| based on a percentage of price | practicable, negotiate the          |
| plus any reasonable charges.   | settlement based on:                |
|                                |                                     |
|                                | -   A percentage of contract price  |
|                                |     calculated using the percentage |
|                                |     of contract work performed      |
|                                |     prior to termination; plus      |
|                                |                                     |
|                                | -   Any reasonable charges that the |
|                                |     contractor demonstrates         |
|                                |     resulted from the termination.  |
|                                |                                     |
|                                | In evaluating the settlement        |
|                                | proposal and negotiating the        |
|                                | settlement:                         |
|                                |                                     |
|                                | -   Require the contractor to       |
|                                |     demonstrate the method used to  |
|                                |     calculate:                      |
|                                |                                     |
|                                | ```{=html}                          |
|                                | <!-- -->                            |
|                                | ```                                 |
|                                | -   The percentage of contract work |
|                                |     completed; and                  |
|                                |                                     |
|                                | -   Any additional costs resulting  |
|                                |     from the termination using its  |
|                                |     standard record keeping system. |
|                                |                                     |
|                                |     -   Never require the           |
|                                |         contractor to comply with   |
|                                |         the FAR contract cost       |
|                                |         principles or cost          |
|                                |         accounting standards.       |
|                                |                                     |
|                                |     -   Remember that the           |
|                                |         Government has no           |
|                                |         contractual right to audit  |
|                                |         the contractor's records.   |
+--------------------------------+-------------------------------------+
| 10\. Determine whether to      | Provide such authorization under    |
| authorize con­tractors to       | the conditions prescribed in FAR    |
| settle subcontracts terminated | 49.108-4.                           |
| in whole or in part without    |                                     |
| approval or ratifi­cation.      |                                     |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 11\. Approve, ratify, or       | Promptly examine each subcontract   |
| disapprove subcon­tract         | settlement received to determine if |
| termination settlements.       | the:                                |
|                                |                                     |
|                                | -   Subcontract termination was     |
|                                |     made necessary by the           |
|                                |     termination of the prime        |
|                                |     contract.                       |
|                                |                                     |
|                                | -   Settlement was arrived at in    |
|                                |     good faith, is reasonable in    |
|                                |     amount, and is allocable to the |
|                                |     terminated portion of the       |
|                                |     contract (or, if allocable only |
|                                |     in part, that the proposed      |
|                                |     allocation is reasonable). In   |
|                                |     evaluating the reasonableness   |
|                                |     of any subcontract settlement,  |
|                                |     generally consider:             |
|                                |                                     |
|                                | ```{=html}                          |
|                                | <!-- -->                            |
|                                | ```                                 |
|                                | -   The requirements for the        |
|                                |     settlement of prime contract    |
|                                |     terminations;                   |
|                                |                                     |
|                                | -   The subcontract audit           |
|                                |     requirements at FAR 49.107; and |
|                                |                                     |
|                                | -   Agency review requirements in   |
|                                |     accordance with FAR 49.111.     |
|                                |                                     |
|                                | Based on the examination results,   |
|                                | notify the contractor in writing    |
|                                | of:                                 |
|                                |                                     |
|                                | -   Approval or ratification; or    |
|                                |                                     |
|                                | -   The reasons for disapproval.    |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 12\. When the prime contractor | Alternatives include:               |
| is unable to reach an          |                                     |
| acceptable negotiated          | -   Excepting the subcontractor     |
| settlement with a              |     settlement proposal in whole or |
| sub­contractor, resolve the     |     part from the remainder of the  |
| problem.                       |     settlement and reserving the    |
|                                |     rights of the Government and    |
|                                |     the prime contractor with       |
|                                |     respect to the subcontract      |
|                                |     settlement.                     |
|                                |                                     |
|                                | -   When a subcontractor obtains a  |
|                                |     final judgment against a prime  |
|                                |     contractor or wins an           |
|                                |     arbitration award, treat the    |
|                                |     amount of the judgment/award as |
|                                |     a cost of settling with the     |
|                                |     contractor, to the extent the   |
|                                |     judgment is properly allocable  |
|                                |     to the terminated portion of    |
|                                |     the prime contract, if the      |
|                                |     requirements at FAR 49.108-5    |
|                                |     have been met.                  |
|                                |                                     |
|                                | -   If the prime contractor         |
|                                |     consents and it is in the       |
|                                |     Government's interest to        |
|                                |     provide assistance to the prime |
|                                |     contractor in the settlement of |
|                                |     a particular subcontract, the   |
|                                |     Government, the prime           |
|                                |     contractor, and a subcontractor |
|                                |     may enter into an agreement     |
|                                |     covering the settlement of one  |
|                                |     or more subcontracts. In these  |
|                                |     settlements, the subcontractor  |
|                                |     must be paid through the prime  |
|                                |     contractor as part of the       |
|                                |     overall settlement with the     |
|                                |     prime contractor.               |
|                                |                                     |
|                                | -   The termination for convenience |
|                                |     clauses (except the short-form  |
|                                |     clauses) also provide the       |
|                                |     Government the right, at its    |
|                                |     discretion, to settle and pay   |
|                                |     any settlement proposal arising |
|                                |     out of the termination of       |
|                                |     subcontracts. When it is in the |
|                                |     Government's interest, the      |
|                                |     Contracting Officer can, after  |
|                                |     notifying the contractor,       |
|                                |     settle a subcontractor's        |
|                                |     proposal using the procedures   |
|                                |     for settlement of prime         |
|                                |     contracts. Direct settlements   |
|                                |     with subcontractors are not     |
|                                |     encouraged.                     |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 13\. Establish the             | In establishing a prenegotiation    |
| Government's prene­gotiation    | position:                           |
| position on the settlement and |                                     |
| negotiate.                     | -   For any fixed-price contract    |
|                                |     termination settlement, apply   |
|                                |     the principles at FAR 49.2 in   |
|                                |     determin­ing the settlement      |
|                                |     amount (including any           |
|                                |     deductions under 49.204). For   |
|                                |     incentive contracts, the        |
|                                |     settlement should conform to    |
|                                |     FAR 49.115(a).                  |
|                                |                                     |
|                                | -   For any cost-reimbursement      |
|                                |     termination settlement, apply   |
|                                |     the procedures and principles   |
|                                |     in FAR 49.3. For                |
|                                |     cost-plus-incentive-fee         |
|                                |     contracts, the settlement       |
|                                |     should conform to FAR           |
|                                |     49.115(b).                      |
|                                |                                     |
|                                | -   Consider the results of any     |
|                                |     audit of the prime contractor's |
|                                |     set­tlement proposal that was    |
|                                |     needed or required under FAR    |
|                                |     49.107 and the results of any   |
|                                |     other analysis by Government    |
|                                |     personnel.                      |
|                                |                                     |
|                                | -   Incorporate judgments or awards |
|                                |     as prescribed at FAR 29.108-5.  |
|                                |                                     |
|                                | -   Cover any setoffs that the      |
|                                |     Government has against the      |
|                                |     contractor that may be applied  |
|                                |     against the terminated          |
|                                |     contract.                       |
|                                |                                     |
|                                | -   Cover all settlement proposals  |
|                                |     of subcontrac­tors or identify   |
|                                |     those, ex­cepted and reserved    |
|                                |     for separate settlement.        |
|                                |                                     |
|                                | -   Cover any reservation following |
|                                |     the requirements prescribed at  |
|                                |     FAR 49.109-2.                   |
|                                |                                     |
|                                | -   Deduct an ap­propriate amount    |
|                                |     from the amount otherwise due   |
|                                |     the contractor for Government   |
|                                |     property for which the          |
|                                |     contrac­tor cannot account.      |
|                                |                                     |
|                                | -   Include any assignment of       |
|                                |     rights under subcontracts that  |
|                                |     are in the Government's         |
|                                |     interest.                       |
|                                |                                     |
|                                | -   Consider the use of a partial   |
|                                |     settlement using the criteria   |
|                                |     at FAR 49.109-5.                |
|                                |                                     |
|                                | -   Consider any request for        |
|                                |     partial payment using the       |
|                                |     criteria at FAR 49.112-1.       |
|                                |                                     |
|                                | Negotiate in good faith to obtain a |
|                                | reasonable settlement.              |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 14\. If no negotiated          | Settle by determination when:       |
| agreement can be reached,      |                                     |
| issue a unilateral settlement  | -   The Government and contractor   |
| by de­termination.              |     cannot reach a bilateral        |
|                                |     agreement on all elements of    |
|                                |     out­standing cost; or            |
|                                |                                     |
|                                | -   The contractor has not          |
|                                |     submitted a settlement proposal |
|                                |     within the period stipulated in |
|                                |     the termination clause.         |
|                                |                                     |
|                                | Give the contractor at least 15     |
|                                | days advance notice by certified    |
|                                | mail (return receipt requested) to  |
|                                | submit written proof substantiating |
|                                | its settlement proposal.            |
|                                |                                     |
|                                | -   Consider any proof provided by  |
|                                |     the contractor concerning its   |
|                                |     proposal, including vouchers,   |
|                                |     verified transcripts of books   |
|                                |     of account, affidavits, audit   |
|                                |     reports, and other documents.   |
|                                |                                     |
|                                | -   Request the contractor to       |
|                                |     submit any additional documents |
|                                |     and data (e.g., appropriate     |
|                                |     accountings, investigations,    |
|                                |     and audits) necessary to        |
|                                |     support its proposal.           |
|                                |                                     |
|                                | -   Accept copies of documents and  |
|                                |     records without requiring       |
|                                |     original documents unless there |
|                                |     is a question of authenticity.  |
|                                |                                     |
|                                | -   Hold any conferences considered |
|                                |     appropriate:                    |
|                                |                                     |
|                                |     -   To confer with the          |
|                                |         contractor;                 |
|                                |                                     |
|                                |     -   To obtain additional        |
|                                |         information from Government |
|                                |         personnel or from           |
|                                |         independent experts; or     |
|                                |                                     |
|                                |     -   To consult persons who have |
|                                |         submitted affidavits or     |
|                                |         reports.                    |
|                                |                                     |
|                                | Prepare the determination following |
|                                | the requirements at FAR             |
|                                | 49.109-7(d).                        |
|                                |                                     |
|                                | Retain all written evidence and     |
|                                | other data relied upon in making a  |
|                                | determination, except that copies   |
|                                | of original books of account need   |
|                                | not be made. Return books of        |
|                                | account, together with other        |
|                                | original papers and documents, to   |
|                                | the contractor within a reasonable  |
|                                | time.                               |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 15\. Prepare a settlement      | At the conclusion of negotiations,  |
| negotiation memorandum.        | prepare a settlement negotiation    |
|                                | memorandum describing the principal |
|                                | elements of the settlement for      |
|                                | inclusion in the termination case   |
|                                | file and for use by reviewing       |
|                                | authorities.                        |
|                                |                                     |
|                                | -   Document the pricing aspects of |
|                                |     the settlement following the    |
|                                |     requirements of FAR 15.406-3.   |
|                                |                                     |
|                                | -   If the settlement was           |
|                                |     negotiated on the basis of      |
|                                |     individual items, specify the   |
|                                |     factors considered for each     |
|                                |     item.                           |
|                                |                                     |
|                                | -   If the settlement was           |
|                                |     negotiated on an overall        |
|                                |     lump-sum basis, it is not       |
|                                |     necessary to evaluate each item |
|                                |     or group of items individually, |
|                                |     but the memorandum must support |
|                                |     the total amount of the         |
|                                |     recommended settlement in       |
|                                |     reasonable detail.              |
|                                |                                     |
|                                | -   Include explanations of matters |
|                                |     involving differences and       |
|                                |     doubtful questions settled by   |
|                                |     agreement, and the factors      |
|                                |     considered.                     |
|                                |                                     |
|                                | -   Include any other matters that  |
|                                |     will assist reviewing           |
|                                |     authorities in understanding    |
|                                |     the basis for the settlement.   |
|                                |                                     |
|                                | Distribute the memorandum in        |
|                                | accordance with the requirements of |
|                                | FAR 15.406-3.                       |
+--------------------------------+-------------------------------------+
| 16\. Obtain reviews and        | Each agency must establish          |
| clearances of the proposed     | procedures, when necessary, for the |
| settlements.                   | administrative review of proposed   |
|                                | termination settlements. When one   |
|                                | agency provides termination         |
|                                | settlement services for another     |
|                                | agency, the agency providing the    |
|                                | services must also perform the      |
|                                | settlement review function.         |
+--------------------------------+-------------------------------------+
| 17\. Make final payment or,    | Accomplish final payment or         |
| where the par­tial payment was  | repay­ment in compliance with FAR    |
| in excess of the final amount  | 49.112-1(g) and 49.112-2.           |
| of the settlement, demand      |                                     |
| repay­ment.                     |                                     |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+================================+=====================================+
| 18\. Calculate and release     | Follow agency procedures for        |
| excess funds.                  | releasing excess funds.             |
+--------------------------------+-------------------------------------+
| 19\. Given a contractor's      | After partial termination, a        |
| request for an equitable       | contractor may request an equitable |
| adjustment on the remainder of | adjustment in the price or prices   |
| a fixed-price contract         | of the continued portion of a       |
| partially terminated for       | fixed-price contract.               |
| convenience, make an equitable |                                     |
| adjustment (when appropriate). | -   The Termination Contracting     |
|                                |     Officer (TCO) must forward the  |
|                                |     proposal to the Contracting     |
|                                |     Officer except when negotiation |
|                                |     authority is delegated to the   |
|                                |     TCO.                            |
|                                |                                     |
|                                | -   The contractor must submit the  |
|                                |     proposal in the format of Table |
|                                |     15-2 of FAR 15.408.             |
|                                |                                     |
|                                | -   When the Contracting Officer    |
|                                |     retains responsibility for      |
|                                |     negotiating the equitable       |
|                                |     adjustment and executing a      |
|                                |     supplemental agreement, the     |
|                                |     Contracting Officer must ensure |
|                                |     that no portion of an increase  |
|                                |     in price is included in a       |
|                                |     termination settlement made or  |
|                                |     in process.                     |
|                                |                                     |
|                                | -   The TCO must also ensure that   |
|                                |     no portion of the costs         |
|                                |     included in the equitable       |
|                                |     adjustment are included in the  |
|                                |     termination settlement.         |
+--------------------------------+-------------------------------------+

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![](media/image5.wmf){width="3.035416666666667in"
height="7.507638888888889in"}

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 1\. Document the case for      | The Government may terminate a      |
| terminating a contract         | commercial item contract or         |
| partially or completely for    | noncommercial item simplified       |
| cause or default.              | acquisition, or any part thereof,   |
|                                | for cause:                          |
|                                |                                     |
|                                | -   In the event of any default by  |
|                                |     the contractor; or              |
|                                |                                     |
|                                | -   If the contractor fails to:     |
|                                |                                     |
|                                | ```{=html}                          |
|                                | <!-- -->                            |
|                                | ```                                 |
|                                | -   Comply with any contract terms  |
|                                |     and conditions; or              |
|                                |                                     |
|                                | -   Provide the Government, upon    |
|                                |     request, with adequate          |
|                                |     assurances of future            |
|                                |     performance.                    |
|                                |                                     |
|                                | The Government may terminate a      |
|                                | noncommercial item contract, or any |
|                                | part thereof, for default if the    |
|                                | contractor fails to:                |
|                                |                                     |
|                                | -   Deliver the supplies or to      |
|                                |     perform the services within the |
|                                |     time specified in the contract  |
|                                |     or any extension;               |
|                                |                                     |
|                                | -   Make progress or prosecute the  |
|                                |     work, so as to endanger         |
|                                |     performance of the contract; or |
|                                |                                     |
|                                | -   Perform any of the other        |
|                                |     provisions of the contract of   |
|                                |     this clause).                   |
|                                |                                     |
|                                | Assure that all applicable          |
|                                | procedural requirements for default |
|                                | at FAR 49.402-3(a) to (f) have been |
|                                | met.                                |
+--------------------------------+-------------------------------------+
| 2\. Discuss the propriety of   | Do not terminate for cause/default  |
| terminating a contract for     | unless:                             |
| cause/default with technical   |                                     |
| personnel and legal counsel.   | -   Such action is in the           |
|                                |     Government's best interest; and |
|                                |                                     |
|                                | -   The facts support a termination |
|                                |     for default.                    |
|                                |                                     |
|                                | If there is a question about either |
|                                | point above, identify additional    |
|                                | facts necessary to support a        |
|                                | decision.                           |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 3\. Issue notice of            | If terminating a commercial item    |
| termination for cause/default. | contract or a noncommercial item    |
|                                | simplified acquisition for cause,   |
|                                | at a minimum the notice must:       |
|                                |                                     |
|                                | -   Indicate the contract is        |
|                                |     terminated for cause;           |
|                                |                                     |
|                                | -   Specify the reasons for the     |
|                                |     termination;                    |
|                                |                                     |
|                                | -   Indicate which remedies the     |
|                                |     Government intends to seek or   |
|                                |     provide a date by which the     |
|                                |     Government will inform the      |
|                                |     contractor of the remedy; and   |
|                                |                                     |
|                                | -   State that the notice           |
|                                |     constitutes a final decision of |
|                                |     the Contracting Officer and     |
|                                |     that the contractor has the     |
|                                |     right to appeal under the       |
|                                |     Disputes clause.                |
|                                |                                     |
|                                | For other noncommercial item        |
|                                | contracts, prepare and distribute   |
|                                | the notice as prescribed in FAR     |
|                                | 49.102, 49.402-3(g), 49.402-3(h)    |
|                                | and 49.601. The notice must state:  |
|                                |                                     |
|                                | -   The contract number and date;   |
|                                |                                     |
|                                | ```{=html}                          |
|                                | <!-- -->                            |
|                                | ```                                 |
|                                | -   The acts or omissions           |
|                                |     constituting the default;       |
|                                |                                     |
|                                | -   That the contractor's right to  |
|                                |     proceed further under the       |
|                                |     contract (or a specified        |
|                                |     portion of the contract) is     |
|                                |     terminated;                     |
|                                |                                     |
|                                | -   That the supplies or services   |
|                                |     terminated may be purchased     |
|                                |     against the contractor's        |
|                                |     account, and that the           |
|                                |     contractor will be held liable  |
|                                |     for any excess costs            |
|                                |     (fixed-price only, however see  |
|                                |     FAR 52.246-3(g) with respect to |
|                                |     failure to replace or correct   |
|                                |     defective supplies);            |
|                                |                                     |
|                                | -   If the Contracting Officer has  |
|                                |     determined that the failure to  |
|                                |     perform is not excusable, that  |
|                                |     the notice of termination       |
|                                |     constitutes such decision, and  |
|                                |     that the contractor has the     |
|                                |     right to appeal such decision   |
|                                |     under the Disputes clause;      |
|                                |                                     |
|                                | -   That the Government reserves    |
|                                |     all rights and remedies         |
|                                |     provided by law or under the    |
|                                |     contract, in addition to        |
|                                |     charging excess costs; and      |
|                                |                                     |
|                                | -   That the notice constitutes a   |
|                                |     decision that the contractor is |
|                                |     in default as specified and     |
|                                |     that the contractor has the     |
|                                |     right to appeal under the       |
|                                |     Disputes clause.                |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 4\. Inform parties who may be  | When issuing the notice of          |
| involved in or affected by the | termination;                        |
| termination.                   |                                     |
|                                | -   Make the same distribution of   |
|                                |     the termination notice as was   |
|                                |     made of the contract.           |
|                                |                                     |
|                                | -   Furnish a copy to the           |
|                                |     contractor's surety (if any)    |
|                                |     when the notice is furnished to |
|                                |     the contractor. Request the     |
|                                |     surety to advise if it desires  |
|                                |     to arrange for completion of    |
|                                |     the work.                       |
|                                |                                     |
|                                | -   Notify the disbursing officer   |
|                                |     to withhold further payments    |
|                                |     under the terminated contract,  |
|                                |     pending further advice, which   |
|                                |     should be furnished at the      |
|                                |     earliest practicable time.      |
|                                |                                     |
|                                | Also notify other organizations of  |
|                                | the termination when appropriate    |
|                                | (e.g., the program office or        |
|                                | inspector general).                 |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 5\. Conduct a conference with  | Only conduct a conference when it   |
| the prime contractor to review | will facilitate the termination     |
| the termination process (when  | process. When appropriate,          |
| appropriate).                  | principal subcontractors should be  |
|                                | requested to attend. Consider       |
|                                | discussing the following topics     |
|                                | when applicable:                    |
|                                |                                     |
|                                | -   Contractor duties under FAR     |
|                                |     49.104;                         |
|                                |                                     |
|                                | -   Extent of the termination,      |
|                                |     point at which work is stopped, |
|                                |     and status of any plans,        |
|                                |     drawings, and information that  |
|                                |     would have been delivered had   |
|                                |     the contract been completed;    |
|                                |                                     |
|                                | -   Status of any continuing work;  |
|                                |                                     |
|                                | -   Arrangements for transfer of    |
|                                |     title and delivery of any       |
|                                |     material required by the        |
|                                |     Government;                     |
|                                |                                     |
|                                | -   General principles and          |
|                                |     procedures to be followed in    |
|                                |     the protection, preservation,   |
|                                |     and disposition of termination  |
|                                |     inventories, including the      |
|                                |     preparation of termination      |
|                                |     inventory schedules;            |
|                                |                                     |
|                                | ```{=html}                          |
|                                | <!-- -->                            |
|                                | ```                                 |
|                                | -   Contractor accounting practices |
|                                |     and preparation of related      |
|                                |     forms;                          |
|                                |                                     |
|                                | -   Form in which to submit         |
|                                |     settlement proposals;           |
|                                |                                     |
|                                | -   Accounting review of settlement |
|                                |     proposals;                      |
|                                |                                     |
|                                | -   Any requirement for interim     |
|                                |     financing in the nature of      |
|                                |     partial payments;               |
|                                |                                     |
|                                | -   Tentative time schedule for     |
|                                |     negotiation;                    |
|                                |                                     |
|                                | -   Actions taken by the contractor |
|                                |     to minimize the termination's   |
|                                |     impact upon employees; and      |
|                                |                                     |
|                                | -   Obligation of the contractor to |
|                                |     furnish accurate, complete, and |
|                                |     current cost or pricing data,   |
|                                |     and to certify to that effect   |
|                                |     when the amount of a settlement |
|                                |     agreement exceeds the cost or   |
|                                |     pricing data threshold.         |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 6\. Amend or rescind the       | Amend a termination notice to:      |
| termi­nation notice (when       |                                     |
| appropriate).                  | -   Correct nonsubstantive mistakes |
|                                |     in the notice;                  |
|                                |                                     |
|                                | -   Add supplemental data or        |
|                                |     instructions; or                |
|                                |                                     |
|                                | -   Rescind the notice if it is     |
|                                |     determined that items           |
|                                |     terminated had been completed   |
|                                |     or shipped before the           |
|                                |     contractor's receipt of the     |
|                                |     notice.                         |
|                                |                                     |
|                                | Upon written consent of the         |
|                                | contractor, reinstate the           |
|                                | terminated portion of a contract,   |
|                                | in whole or in part, by amending    |
|                                | the notice of termination when the  |
|                                | Contracting Officer determines in   |
|                                | writing that:                       |
|                                |                                     |
|                                | -   Circumstances clearly indicate  |
|                                |     a requirement for the           |
|                                |     terminated items; and           |
|                                |                                     |
|                                | -   Reinstatement is advantageous   |
|                                |     to the Government.              |
+--------------------------------+-------------------------------------+
| 7\. Settle a                   | When terminating a                  |
| cost-reimbursement contract    | cost-reimbursement contract for     |
| termination for default.       | default, follow the procedures for  |
|                                | settling a cost-reimbursement       |
|                                | contract termination for            |
|                                | convenience. Comply with FAR        |
|                                | 49.403.                             |
|                                |                                     |
|                                | In general, fol­low the steps in     |
|                                | terminating for convenience,        |
|                                | except:                             |
|                                |                                     |
|                                | -   Do not allow the costs of       |
|                                |     preparing the con­tractor's      |
|                                |     settlement proposal.            |
|                                |                                     |
|                                | -   Reduce the total fee as         |
|                                |     provided in the Termination     |
|                                |     (Cost-Reimbursement) clause at  |
|                                |     (FAR 52.249-6(h)(4)(ii)).       |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 8\. Determine whether to       | When it is in the Government's      |
| accept completed supplies      | interest to do so:                  |
| and/or manufacturing           |                                     |
| materials.                     | -   Accept completed supplies;      |
|                                |     and/or                          |
|                                |                                     |
|                                | -   Require the contractor to       |
|                                |     transfer the title for and      |
|                                |     deliver manufacturing materials |
|                                |     that the contractor             |
|                                |     specifically produced or        |
|                                |     acquired for the terminated     |
|                                |     portion of this contract.       |
|                                |     Manufacturing materials include |
|                                |     partially completed supplies    |
|                                |     and materials, parts, tools,    |
|                                |     dies, jigs, fixtures, plans,    |
|                                |     drawings, information, and      |
|                                |     contract rights.                |
|                                |                                     |
|                                | The Government must pay the         |
|                                | contract price for completed        |
|                                | supplies delivered and accepted.    |
|                                | The price for manufacturing         |
|                                | materials is negotiable.            |
+--------------------------------+-------------------------------------+
| 9\. Review the contractor's    | Request assistance from other       |
| proposal on the amount of      | members of the Government           |
| payment for manufacturing      | acquisition team as necessary.      |
| ma­terials delivered and        |                                     |
| accepted, and for the          |                                     |
| protection and preservation of |                                     |
| the property in its            |                                     |
| possession.                    |                                     |
+--------------------------------+-------------------------------------+
| 10\. Negotiate an agreement on | The Government position for         |
| the amount of payment for      | negotiation should be based on the  |
| manufacturing materials        | contractor's proposal, Government   |
| de­livered and accepted, and    | analysis of the proposal, and any   |
| for the protection and         | other available information.        |
| preservation of the property.  |                                     |
|                                | Negotiate in good faith to obtain a |
|                                | reasonable agreement.               |
+--------------------------------+-------------------------------------+
| 11\. Issue a final decision,   | Failure to agree will be a dispute  |
| if no agreement is reached on  | under the Disputes clause.          |
| the payment amount for any     |                                     |
| manufacturing ma­terials        |                                     |
| delivered and accepted, and    |                                     |
| for any protection and         |                                     |
| preservation of the property.  |                                     |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 12\. Determine the amount owed | In calculating the total amount     |
| the con­tractor (if any).       | owed the contractor in a            |
|                                | fixed-price termination for         |
|                                | default, consider the following:    |
|                                |                                     |
|                                | -   The contract price for          |
|                                |     completed supplies that have    |
|                                |     been delivered and accepted.    |
|                                |                                     |
|                                | -   The price negotiated or set by  |
|                                |     the Contracting Officer's final |
|                                |     decision for manufacturing      |
|                                |     materials that have been        |
|                                |     deliv­ered and accepted by the   |
|                                |     Government, and for any         |
|                                |     protection and preservation of  |
|                                |     the property.                   |
|                                |                                     |
|                                | -   Any deductions necessary to     |
|                                |     protect the Govern­ment against  |
|                                |     loss because of outstand­ing     |
|                                |     liens or claims of former lien  |
|                                |     holders.                        |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 13\. Select and apply one or   | The Default (Fixed-Price Supply and |
| more available remedies.       | Service) clause (FAR 52.249-8):     |
|                                |                                     |
|                                | -   Gives the Government the right  |
|                                |     to acquire the contract items   |
|                                |     under the terms and in the      |
|                                |     manner that the Contracting     |
|                                |     Officer considers appropriate;  |
|                                |                                     |
|                                | -   Makes the contractor            |
|                                |     responsible for any excess      |
|                                |     costs of reprocurement; and     |
|                                |                                     |
|                                | -   Reserves any other Government   |
|                                |     rights under law or the         |
|                                |     contract.                       |
|                                |                                     |
|                                | The default guidelines for          |
|                                | commercial item contracts and       |
|                                | noncommercial item simplified       |
|                                | acquisitions state that the         |
|                                | Government is not liable to the     |
|                                | contractor for any amount and the   |
|                                | contractor is liable to the         |
|                                | Government for any and all rights   |
|                                | and remedies provided by law. The   |
|                                | UCC provides a variety of remedies. |
|                                | For example, the buyer may:         |
|                                |                                     |
|                                | -   "Cover" by making in good faith |
|                                |     and without delay any           |
|                                |     reasonable purchase or contract |
|                                |     to purchase goods in            |
|                                |     substitution of those due from  |
|                                |     the seller (UCC 2-712);         |
|                                |                                     |
|                                | -   Recover as damages for any      |
|                                |     nonconformity or tender the     |
|                                |     loss resulting in the ordinary  |
|                                |     course of events from the       |
|                                |     seller's breach as determined   |
|                                |     by any manner which is          |
|                                |     reasonable (UCC 2-714); or      |
|                                |                                     |
|                                | -   Recover incidental or           |
|                                |     consequential damages related   |
|                                |     to the seller's failure to      |
|                                |     perform (UCC 2-715).            |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 14\. Reprocure the remaining   | For noncommercial item contracts,   |
| requirement (when              | comply with the requirements of FAR |
| appropriate).                  | 49.402-6 when reprocuring.          |
|                                |                                     |
|                                | When terminating a commercial item  |
|                                | contract or a noncommercial item    |
|                                | simplified acquisition for cause:   |
|                                |                                     |
|                                | -   Consider the requirements of    |
|                                |     both FAR 49.402-6 and the UCC;  |
|                                |                                     |
|                                | -   Mitigate or reduce damages to   |
|                                |     the Government (e.g., by        |
|                                |     promptly reprocuring at a fair  |
|                                |     and reasonable price); and      |
|                                |                                     |
|                                | -   Compute excess reprocurement    |
|                                |     costs and incidental or         |
|                                |     consequential damages incurred  |
|                                |     because of the termination.     |
+--------------------------------+-------------------------------------+
| 15\. Demand payment by the     | Calculate the amount due the        |
| contractor for any amount owed | Government considering the          |
| the Government.                | following:                          |
|                                |                                     |
|                                | -   Add:                            |
|                                |                                     |
|                                |     -   The reprocurement costs     |
|                                |         described in FAR 49.402-6;  |
|                                |         and                         |
|                                |                                     |
|                                |     -   Any other damages           |
|                                |         (including administrative   |
|                                |         costs) per FAR 49.402-7     |
|                                |         after considering any legal |
|                                |         advice on the propriety of  |
|                                |         adding such costs.          |
|                                |                                     |
|                                | -   Subtract any amount owed the    |
|                                |     contractor, such as:            |
|                                |                                     |
|                                |     -   The contract price for      |
|                                |         completed supplies that     |
|                                |         have been delivered and     |
|                                |         accepted;                   |
|                                |                                     |
|                                |     -   The negotiated price or     |
|                                |         price set by Contracting    |
|                                |         Officer's final decision    |
|                                |         for manufacturing materials |
|                                |         that have been deliv­ered    |
|                                |         and accepted by the         |
|                                |         Government and for any      |
|                                |         protection and preservation |
|                                |         of the property; and        |
|                                |                                     |
|                                |     -   The amount necessary to     |
|                                |         protect the Govern­ment      |
|                                |         against loss because of     |
|                                |         outstand­ing liens or claims |
|                                |         of former lien holders.     |
|                                |                                     |
|                                |         -   The difference is the   |
|                                |             amount due the          |
|                                |             Government.             |
+--------------------------------+-------------------------------------+

+--------------------------------+-------------------------------------+
| **Tasks**                      | **Related Standards**               |
+--------------------------------+-------------------------------------+
| 16\. Prepare a memorandum for  | Document the case for terminating a |
| the contract file explaining   | contract partially or completely    |
| the reasons for the actions    | for cause or default. To clarify    |
| taken.                         | the actions taken, consider         |
|                                | attaching or specifically           |
|                                | referencing:                        |
|                                |                                     |
|                                | -   A copy of the termination       |
|                                |     notice;                         |
|                                |                                     |
|                                | -   Any agreements negotiated with  |
|                                |     the contractor;                 |
|                                |                                     |
|                                | -   The reprocurement file; and     |
|                                |                                     |
|                                | -   Calculation of the amount due   |
|                                |     the Government as a result of   |
|                                |     the termination.                |
+--------------------------------+-------------------------------------+