Last revised (Transmittal 14-021) December 1, 2023

Guide to Judiciary Policy

Vol. 14: Procurement

Ch. 7: Contract Administration

§ 710 Maintaining Records

§ 710.10 Procurement Files (Purchase/Delivery/Task Order or Contract Files)

§ 715 Responsibilities

§ 715.10 Contract Administration Process

§ 715.15 Participants in the Contract Administration Process

§ 715.20 Distinctions between Contracting Officer (CO) and Contracting Officer’s 

Representative (COR)

§ 715.25 Functions of the CO and COR

§ 715.30 COR Responsibilities to the Judiciary End User

§ 715.35 Role of COR Supervisor

§ 715.40 Becoming a COR

§ 715.45 Use of Contractors to Monitor Contract Performance

§ 715.50 Relationship Between Judiciary and Contractor Representatives

§ 715.55 Clauses/Provisions

§ 720 Judiciary Property

§ 720.10 In General

§ 720.20 Property Records

§ 725 Subcontracting

§ 725.10 In General

§ 730 Contract Performance

§ 730.10 Postaward Orientation

§ 730.20 Performance Record Keeping

§ 730.30 Performance Monitoring

§ 735 Quality Assurance

§ 735.10 In General

§ 735.15 Contract Remedies

§ 735.20 Types of Remedies

§ 735.25 Assessing Liquidated Damages

§ 735.30 Nonconforming Products or Services

§ 735.35 Acceptance

§ 735.40 Responsibility for Acceptance

§ 735.45 Place of Acceptance

§ 735.50 Express Warranties

§ 735.55 Fraud, Gross Mistake, or Latent Defects

§ 735.60 Bankruptcy
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 2 

§ 740 Payments

§ 740.10 In General

§ 740.20 Invoices

§ 740.30 Payment

§ 740.40 Withholding Payments

§ 740.50 Assignment of Claims

§ 745 Contract Modifications

§ 745.10 Policy

§ 745.15 Types of Modifications

§ 745.20 Notification of Contract Changes

§ 745.25 Availability of Funds

§ 745.30 Exercise of Options

§ 745.35 Correction of Mistakes

§ 745.40 Changes

§ 745.45 Equitable Adjustments

§ 745.50 Acceleration of Performance

§ 745.55 Novation and Change of Name Agreements

§ 750 Claims and Disputes

§ 750.10 Policy

§ 750.20 Decisions and Appeal

§ 755 Contract Termination

§ 755.10 In General

§ 755.15 Notice of Termination

§ 755.20 Termination for Convenience

§ 755.25 Termination for Default

§ 755.30 Termination for Default Procedures

§ 755.35 Termination for Default Notice

§ 755.40 Procedure in Lieu of Termination for Default

§ 755.45 Actions Following Issuance of Termination

§ 755.50 Remedies and Damages Following Termination for Default

§ 760 Contract Closeout

§ 760.10 Closeout of Contract Files

§ 760.20 Contract Closeout Procedures

§ 760.30 Disposition of Contract Files

Appendices

Appx. 7A Sample Notice of Assignment

Appx. 7B Sample Novation Agreement

Appx. 7C Sample Change of Name Agreement

Appx. 7D Sample Contract Termination Notices

Appx. 7E Sample Contracting Officer Representative Appointment Memo
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 3 

§ 710 Maintaining Records

§ 710.10 Procurement Files (Purchase/Delivery/Task Order or Contract 

Files)

§ 710.10.10 In General

(a) A file must be established and maintained for every purchase action, 

solicitation, and contract.

(1) Procurement files may be retained in any medium (paper, 

electronic, microfilm, etc.) or any combination of media, as long as 

the requirements of this chapter are satisfied.

(2) When the original medium is changed to facilitate storage, the 

process used to create and store records must record and 

reproduce the original document, including signatures and other 

written and graphic images completely, accurately, and clearly. 

Data transfer, storage, and retrieval procedures must protect the 

original data from alteration. Signed originals may be destroyed 

after verification by the Procurement Liaison Officer (PLO) (or 

designee) that record copies on alternate media and copies 

reproduced from the record copy are accurate, complete, and clear 

representations of the originals.

(3) Procedures for contract file disposal must ensure that the 

documents specified in this chapter may not be destroyed before 

the times indicated in § 760.30 (Disposition of Contract Files), and 

may be retained longer if the PLO determines that the files have 

future value to the judiciary. When original documents have been 

converted to alternate media for storage, the requirements of 

§ 760.30 (Disposition of Contract Files) also apply to the record 

copies in the alternate media.

(b) Procurement file content deemed to be sensitive information, e.g., 

proposal information or proposal evaluation information, must be 

maintained in a secured area and otherwise not left unattended nor in 

open view when personnel without a need-to-know are present.

(c) Access to procurement file content deemed to be sensitive, e.g., proposal 

information or proposal evaluation information, must be limited to 

authorized judiciary procurement and audit personnel. For a discussion 

on obtaining and disclosing procurement documents according to the 

Procurement Integrity Act, see: Guide, Vol. 14, § 150.20 (Procurement 

Integrity Act). 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 4

(d) Proprietary data furnished by contractors or offerors must be secured at all 

times and made available on a need-to-know basis only.

(e) Purchases made with the purchase card are exempt from the requirement 

to establish files for each individual transaction, since there is generally 

minimal documentation — either pre-award or post-award — associated 

with these procurements. However, each purchase must be recorded as 

an obligation in JIFMS and records maintained consistent with the

Judiciary Purchase Card Program Manual.

(f) Files for each procurement must contain the documentation identified 

below in § 710.10.20 (Required Documentation). See also: Guide, 

Vol. 11, § 340.30 (Appropriate Records and Documentation).

(g) Access to the purchase card and related documents and information (e.g., 

monthly billing statements, summary statements of accounts) must be 

restricted to authorized individuals, including audit personnel.

§ 710.10.20 Required Documentation

(a) Purchases Below the Applicable Competition Threshold (Judiciary open 

market, GSA Schedule, etc.), require the following documentation:

(1) Requisition (electronic or hard copy) or statement of need with the 

authorizing official’s signature or reference to the judiciary 

organization’s approved spending plan for certain types of 

purchases such as office supplies;

(2) Signed purchase/delivery/task order and any signed modifications;

(3) Supporting documentation for each purchase/delivery/task order 

modification (see: § 745 (Contract Modifications));

(4) Documentation that products or services have been received and 

accepted, e.g., copies of receiving reports for products with 

annotation indicating inspection and acceptance, or contracting 

officer’s representative (COR) signature on invoices signifying 

services were performed satisfactorily;

(5) Copies of all invoices or vouchers;

(6) Any other pertinent information, e.g., documented phone 

conversations with offerors/contractors, evaluation worksheets, 

correspondence to and from offerors, commercial agreements, 

documentation of follow-up on late deliveries or unsatisfactory 

performance, etc.; and
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 5

(7) Copies of any applicable one-time delegations of procurement 

authority from the Procurement Management Division (PMD) of the 

AO’s Finance and Procurement Office (FPO).

(b) Purchases Greater than the Applicable Competition Threshold (Judiciary, 

GSA Schedule, etc.) require the following documentation:

(1) Requisition (electronic or hard copy) or statement of need with the 

authorizing official’s signature or reference to the judiciary 

organization’s approved spending plan for certain types of 

purchases, such as office supplies;

(2) Rationale for selection of the source of supply (low price/technically 

acceptable or best value, including documentation of evaluation 

process);

(3) For competitively awarded delivery orders or task orders under 

judiciary or non-judiciary contracts, including GSA schedule 

contracts or other executive branch contracts, such as NASA’s 

Solutions for Enterprise-Wide Procurement (SEWP) contracts, 

evidence of the level of competition required for use of the specific 

contract;

(4) Where competition was not obtained, a copy of the approved:

(A) Form AO 370A (Justification for Limiting Open Market 

Competition (JLOC)), including copy of the one-time 

delegation from PMD (see: Guide, Vol. 14, § 335 

(Justifications and Approvals for Limiting Competition));

(B) Form AO 370B (Justification for an Exception to Fair 

Opportunity (JEFO)), including copy of the one-time 

delegation from PMD, when required (see: Guide, Vol. 14, 

§ 410.30.73 (Documenting Exceptions to Fair Opportunity 

Requirement)); or

(C) Form AO 370C (Limited Sources Justification (LSJ)) (see: 

Guide, Vol. 14, § 310.50.63 (Limiting Sources on Orders 

Placed under Federal Supply Schedules) and § 310.50.66

(Limiting Sources Based on Items Particular to One 

Manufacturer (Brand Name))).

(5) Copy of any other applicable one-time delegation of procurement 

authority from PMD;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 6

(6) Copies of the advertisement of the requirement and/or 

documentation that the requirement was advertised locally or on

SAM.gov (or the approved exception from advertising);

(7) Copies of any written solicitation, amendments, questions, 

clarifications, all correspondence with prospective offerors and their 

replies;

(8) Copies of unsuccessful offers, or, where award is based on oral 

quotes, a record of each quote obtained and who provided it;

(9) Determination of fair and reasonable price and basis of selection.

Note: If price is not the basis of selection, the required PMD 

written approvals — the pre-solicitation approval to use best value 

source selection as well as the one-time delegation granted after 

review of the evaluation of offers — must be included.

(10) Signed award (contract or purchase/delivery/task order) and any 

signed modifications with the supporting documentation (see: 

§ 745 (Contract Modifications));

(11) For Blanket Purchase Agreements (BPAs), indefinite 

delivery/indefinite-quantity (IDIQ) or requirements contracts, copies 

of all BPA calls or delivery/task orders and all other documents 

supporting them (e.g., copies of task order solicitations, competitive 

range determinations, memo of negotiations, pre-negotiation 

positions, post-performance assessment, contractor reports and 

copies of deliverables, as applicable);

(12) Documentation that products or services have been received and 

accepted, e.g., copies of receiving reports for products with 

annotation indicating inspection and acceptance, or COR signature 

on invoices signifying services were performed satisfactorily;

(13) Copies of all invoices or vouchers;

(14) Any other pertinent information (e.g., documented phone 

conversations with offerors, evaluation worksheets, commercial 

agreements, records of site visits by or to prospective offerors, 

post-award correspondence, documentation of follow-up on late 

deliveries or unsatisfactory performance);

(15) Copies of debriefing requests and documentation of debriefing, if 

any; and
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 7

(16) Documentation of protests, if any, and of required coordination with 

the PE (see: Guide, Vol. 14, § 350 (Judiciary Protest Procedures)).

§ 715 Responsibilities

§ 715.10 Contract Administration Process

§ 715.10.10 In General

Once a contract is awarded, the contract administration process begins. Every 

contract-related issue that arises after the contract is awarded becomes part of the 

contract administration process. Contract administration encompasses a broad range 

of functions that, together, ensure that the judiciary obtains exactly what it has 

contracted to purchase. For contract administration involving sureties, see: Guide, 

Vol. 14, § 620.30 (Irrevocable Letter of Credit). The contract administration process 

includes:

(a) receiving, inspecting, and either accepting or rejecting contractor 

deliverables in a timely manner;

(b) monitoring the contractor’s progress, making sure contractual delivery 

dates are met and that products and services are of acceptable quality;

(c) ensuring that the judiciary is meeting its own contractual obligations, such 

as timely review of deliverables or providing the contractor data that it may 

need;

(d) placing orders under indefinite-delivery contract types and treating those 

orders as contracts that must be separately administered (see: Guide, 

Vol. 14, § 410.30 (Indefinite-Delivery Contracts));

(e) answering questions and addressing contractor issues;

(f) changing or modifying the contract as necessary;

(g) ensuring that the contractor is paid only the amount to which it is entitled, 

but is not paid before delivery and fulfillment of acceptance criteria of each 

procurement, unless advance payment terms have been included in the 

contract;

(h) obtaining assistance from other offices in addressing unusual contract 

actions when necessary, such as protests, disputes or terminations; and

(i) closing out the contract and orders (for closing out purchase orders, see: 

§ 760 (Contract Closeout)).
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 8

§ 715.15 Participants in the Contract Administration Process

There are many individuals involved in the contract administration process. Each of 

these individuals or groups has specific functions, responsibilities, and accountability.

§ 715.15.10 Contracting Officer

(a) The contracting officer (CO) is the only judiciary employee who is 

delegated authority to legally commit the judiciary to the purchase of 

products and services.

(b) The CO is supported by other individuals in the judiciary. One of the 

support individuals is the COR.

(c) CO appointments are evidenced by a signed Form AO 375 (Procurement 

Liaison Officer's Appointment of Contracting Officer) or a signed certificate 

(applicable to PMD).

(d) COCP Level 3 appointments are subject to continuing education training 

requirements and are valid until rescinded or until a new PLO is 

appointed. See: Guide, Vol. 14, § 120.20.60(c) (When Delegations Must 

be Re-Issued).

§ 715.15.20 Designation of COR

(a) The CO delegates specific contract administration responsibilities to the 

COR through a written designation. Through this memo of designation, 

the COR is empowered to fulfill the delegated responsibilities on a specific 

contract and/or delivery or task order, as appropriate. For a sample COR 

designation memo, see: Appx. 7E (Sample Contracting Officer 

Representative Appointment Memo). For more detail on the respective 

roles of the CO and COR, see: § 715.25 (Functions of the CO and COR).

(b) To be eligible for designation as a COR by the CO, prospective CORs 

must complete, at a minimum, the online COR training available through 

CourtsLearn University.

(c) For routine purchases of non-complex, off-the-shelf products, e.g., office 

supplies, formal appointment of a COR is not required and acceptance 

may consist of merely confirming receipt of the ordered items in 

undamaged condition. Formal appointment of a COR is recommended for 

more complex purchases, such as IT hardware or software that must be 

tested before acceptance, or installation of furniture, or complex, nonroutine types of services performed on a labor-hour or time-and-materials 

basis, where there may be extended communications between the 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 9

contractor and the judiciary during installation, testing, or over the period 

of performance.

(d) The contractor must be provided a copy of any formal appointment of a 

COR to ensure the contractor understands the limits of the COR’s 

authority.

§ 715.15.30 Other Participants

(a) AO’s Office of the General Counsel (OGC) staff provides requested 

essential legal reviews and guidance.

(b) Financial and budget officials establish budgets and reprogram funds 

when necessary to exercise options, make changes, and settle claims.

(c) The CO, or the COR when authorized, tracks expenditures against 

contracts/orders, determines the adequacy and accuracy of vouchers and 

invoices, and ultimately approves payments to the contractor.

(d) Other financial officials ultimately process payments to the contractor after 

written approval from the CO or COR. They may also track expenditures 

against contracts/orders and provide advice to the CO as to the adequacy 

and accuracy of vouchers and invoices.

§ 715.15.40 Authority of Other Participants

With the single exception of the COR, all support personnel operate under their own 

authorities derived through their organizations. It is only the COR who, through formal 

appointment and designation, shares authorities otherwise reserved exclusively for the 

CO.

§ 715.20 Distinctions between Contracting Officer (CO) and Contracting 

Officer’s Representative (COR)

(a) The CO is the only person with the legal authority to commit the judiciary 

to a legally binding contract and obligate appropriated funds for that 

purpose. This legal authority cannot be delegated to the COR. Although 

certain contract administration functions may be delegated to the COR, 

the CO remains ultimately responsible for the administration of each 

contract.

(b) The COR assists the CO by providing specific services as directed by the 

CO. However, the CO makes the final decisions and retains signature 

authority in the contracting matter.

(c) The CO and the COR are the primary members of a team that provides 

proper contract administration and oversight. This team’s efforts ensure 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 10

that tax dollars are being wisely and efficiently expended, and that the 

judiciary and, in particular, the customer organization that generates each 

requirement, are receiving the full measure of the products and/or services 

purchased.

§ 715.25 Functions of the CO and COR

§ 715.25.10 Monitoring Progress

Monitoring the progress of a contractor and making sure contractual due dates are met 

are shared responsibilities. However, the CO and the COR often look at different 

aspects of the contractor’s performance.

(a) The CO will examine delivery and reporting due dates and consult with the 

COR to determine if the contractor is making all deliveries according to the 

contract delivery schedule.

(b) Since the COR is more closely involved in the contractor’s day-to-day 

activities, the COR acts as the eyes and ears of the CO and customer. 

The COR is, in effect, an early-warning system. For instance, the COR 

will be the first one to know when a contractor does not understand or 

meet a contract requirement, is making inaccurate assumptions, or is 

asking questions that suggest that it is not making adequate contract 

performance progress.

§ 715.25.15 Ensuring Judiciary Contractual Commitments Are Met

(a) Making sure that the judiciary is meeting its contractual commitments is a 

shared responsibility. For example, when performance of the work 

requires the use of judiciary property, or access to judiciary data or 

information technology, etc., such property or access must be provided 

within the time frame provided in the contract. This is generally a COR 

responsibility.

(b) If the judiciary is failing to meet its responsibilities in making data, 

property, physical or virtual access, etc. available within the contractually 

required time frames, the contractor may be entitled to an equitable 

adjustment. The CO is responsible for negotiating any such adjustment 

with the contractor, which may ultimately cause the expenditure of further 

judiciary funds and/or a delay in delivery or other contract performance.

§ 715.25.20 Placing Orders

The CO is responsible for the placement of orders, since it normally involves a binding 

contract and obligating judiciary funds. Administering each of these orders requires 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 11

similar actions as the administration for the contracts under which the orders were 

issued. See: Guide, Vol. 14, § 410.30.60 (Delivery Orders or Task Orders).

§ 715.25.25 Receipt, Inspection, and Acceptance of Performance

The COR accepts or rejects performance of services, including any deliverables 

required. If applicable, the COR will normally consult with customer organizations to 

confirm the contractor has performed consistent with the contract before accepting or 

rejecting performance. The COR performs this function because he or she is generally 

on-site and either observes the performance of services first-hand or is the delivery 

point for material deliveries.

§ 715.25.30 Providing Technical Direction

(a) The COR provides technical direction, including answering questions, and 

addressing other issues that the contractor may have.

(b) The COR may provide technical direction only within the general scope of 

the contract and only if the direction does not alter any of the contract 

specifications or the statement of work, or terms and conditions of the 

contract.

(c) Only the CO can change a contract. This is a vital area for both the CO 

and the COR to understand, since open communication between the 

contractor and the judiciary can mean the difference between success and 

failure.

(d) Requesting changes that are outside the scope of the contract or that alter 

the specifications, terms, or conditions would be considered new work, 

and subject to competition and advertising requirements.

(e) Only the CO is empowered to change a contract, whether any adjustment 

in the contract price will result or not.

(f) The CO and COR must work together closely in this area as it is often 

quite difficult to distinguish between “technical direction” and “changes.”

§ 715.25.35 Changing or Modifying the Contract

As discussed above, this is a function strictly reserved for the CO and it may not be 

delegated. However, the COR may be asked to support this process in, for example, 

evaluating change order price proposals or technical aspects of proposed changes.

§ 715.25.40 Ensuring that the Contractor Is Paid

This is primarily a COR function, which requires the COR to work closely with 

accounting/disbursement personnel to ensure that payments are made in proper 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 12

amounts and within reasonable or contract specified time frames for services or 

products that have been delivered and accepted. If it is appropriate to refuse payment 

of an invoice, in whole or in part, the COR must notify the CO promptly of the reasons, 

and CO must provide appropriate notification to the contractor. For additional guidance 

on withholding payment, see: § 740.40 (Withholding Payments).

§ 715.25.45 Maintaining Procurement Files

(a) Both the CO and the COR must maintain files for every purchase action, 

solicitation, and contract. For file requirements for the CO, see: § 710.10 

(Procurement Files (Purchase Delivery/Task Order or Contract Files)). 

The COR must maintain a contract work file.

(b) Any procurement documents relating to offer evaluation, including the 

offers themselves, must be maintained in a secured area and otherwise 

not left unattended nor in open view when personnel without a need-toknow are present. Access to pre-award procurement files and related 

documents, as well any post-award documents that contain confidential 

contractor information (e.g., invoices that include indirect rates), must be 

limited to authorized judiciary procurement and audit personnel. Preaward disclosure of offeror information can result in penalties under the 

Procurement Integrity Act. For additional information, see: Guide, Vol. 

14, § 150.20 (Procurement Integrity Act) and Guide, Vol. 14, § 170 

(Release of Information).

(c) The contract work file must contain all relevant documentation, such as 

notes of conversations with the contractor, written instructions given to the 

contractor and similar items, as called for by the CO. The COR must 

document all significant actions, including any technical directions given to 

the contractor, in an action file. This file must contain enough detail so 

that if a contract dispute or claim occurs, the CO can reconstruct what the 

COR did or did not do. Because it is often difficult to determine what 

might be the subject of a dispute or claim, the COR must adequately 

document significant actions that might develop into a problem later.

(d) The file must also contain copies of the contract, all modifications, the 

COR delegation letter, and all correspondence between the COR and the 

contractor or the CO.

(e) The file must be maintained intact and updated by each successor COR 

until the contract ends.

§ 715.25.50 Closing out Contracts and Orders

(a) This is a shared function. First, the COR confirms final receipt and 

acceptance of all products and services, ensures the return of contractor 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 13

employee badges and judiciary property, if applicable, and recommends 

that the contractor be relieved of any further performance responsibilities 

under the contract.

(b) Fixed-price awards under the small purchase threshold are considered 

closed following the CO’s receipt of confirmation of acceptance of the 

products or services and issuance of final payment.

(c) For awards over the small purchase threshold or awards made on a basis 

other than fixed-price, the CO must determine if a release of claims is 

required before final payment.

(d) The CO negotiates any final payment issues or actions for the closeout of 

the contract. See: § 740.30.40 (Final Payment) and § 760 (Contract 

Closeout).

§ 715.25.55 Supporting Contract Actions Such As Disputes or Terminations

These types of contract actions are always a joint function of the CO and COR, but with 

a clear separation of responsibilities. The COR plays a major part in the program 

related aspects of the action, including providing supporting information that relates to 

the specifications or statement of work. The CO has sole responsibility for any 

negotiations and the business and financial aspects of the transaction, such as deciding 

whether any payments will be made to the contractor. The CO also has responsibility 

for ensuring any required coordination with the PE on such matters is done.

§ 715.30 COR Responsibilities to the Judiciary End User

§ 715.30.10 In General

(a) Aside from the COR responsibilities to the CO, the COR also has 

concurrent responsibilities to the judiciary end user, if the COR is not the 

end user. The COR must work closely with end users during contract 

delivery or performance to ensure that the end user is receiving 

satisfactory products and services according to the contract.

(b) Moreover, the COR needs to be involved closely enough with the project 

to anticipate newly evolving requirements that may result in the need to 

change the contract.

(c) Under certain types of contracts, the COR will also be responsible to draft 

work requirements, which will be awarded by the CO through task orders.

(d) As requested by the CO, the COR may review and approve technical 

offers and quotations and participate in negotiations.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 14

§ 715.30.20 Acceptance Responsibilities

The COR also has the critical responsibility to recommend acceptance or rejection of 

contract/order deliverables and/or performance. If there is premature acceptance of the 

performance or deliverables, the judiciary may inadvertently waive many of its rights to 

require the contractor to perform remedial activities or modify the deliverables. Thus, 

the COR must closely observe the contractor’s performance or delivery and consult 

often with management within the customer organization and with the CO before 

deciding whether or not to accept performance or deliverables.

§ 715.35 Role of COR Supervisor

(a) The COR’s direct supervisor must provide as much of the individual’s time 

and resources as needed to allow the COR to fulfill all of the delegated 

COR responsibilities.

(b) Formal COR appointment and designation comes from the CO. 

Therefore, the COR will have contract responsibilities to the CO, as well 

as having contract and non-contract responsibilities to the COR’s direct 

supervisor.

(c) If a COR’s work conflicts in fulfilling these concurrent responsibilities, the 

COR’s direct supervisor must confer with the CO to resolve the conflict.

(d) Finally, in evaluating job performance, the COR’s direct supervisor must 

take into account performance as a COR by gathering input from the CO 

before issuing a rating.

§ 715.40 Becoming a COR

§ 715.40.10 Nomination

Judiciary employees are normally nominated in writing by the customer organizations. 

Provided that the individual has completed the required training and is otherwise 

capable, the CO may appoint the employee as a COR. For information on the required 

COR training, see: JNet Procurement page.

§ 715.40.20 Designation is for Specific Contracts

(a) The CO designates a COR for specific contracts, delivery orders, and task 

orders. Formal designation to act as a COR on a specific contract, 

delivery order, and/or task order is evidenced by a letter of designation, 

signed by the CO. A copy of this designation will be furnished to the 

COR’s immediate supervisor, and to the contractor.

(b) The designation letter will describe the exact functions the COR will be 

required to perform on the particular contract or order. Separate letters of 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 15

designation are required for each contract, delivery order, or task order 

assigned to the COR. COR designations expire automatically at the 

conclusion of the specific contract, delivery order, or task order for which 

the COR was appointed.

§ 715.45 Use of Contractors to Monitor Contract Performance

The judiciary may contract with third parties to perform contract administration 

responsibilities such as testing for contract conformance (but not acceptance); 

reviewing contractor submittals, construction shop drawings, written requests for design 

approval; developing negotiation positions; reviewing offers; advising panels; drafting 

modifications. However, the CO remains as the signature authority for any contract 

actions.

§ 715.50 Relationship Between Judiciary and Contractor Representatives

§ 715.50.10 Objective of Purchase Actions

(a) The objective of any purchase action is performance or delivery of the 

contract requirements, not control of the contractor's business. Judiciary 

personnel must devote their efforts to tasks associated with that 

requirement, such as:

• quality assurance,

• cost monitoring, and

• other activities intended to ensure compliance with contract terms.

(b) Judiciary personnel may not:

• direct the contractor's activities, or

• intervene to supervise, train, or discipline contractor personnel (see: 

Guide, Vol. 14, § 510 (Personal Services Contracts)).

§ 715.50.20 Disputes with Contractors

Disputes with contractors are an obstacle to contract performance or delivery. CO’s 

and their supporting staffs must seek to resolve contract disputes through businesslike 

approaches that promote efficiency and cost-effectiveness and enforce the judiciary's 

interests.

§ 715.55 Clauses/Provisions

Clause or Provision Include in ...

(a) Clause 7-1, Contract 

Administration

all formal solicitations and contracts. (The CO will provide 

the CO’s name, business address, e-mail address and 

telephone number in a cover letter accompanying the 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 16

solicitation or contract or by incorporating this information at 

the end of the clause.)

(b) Clause 7-5, Contracting 

Officer’s Representative

all formal solicitations and contracts.

(c) Clause 7-10, Contractor 

Representative

all formal solicitations and contracts.

(d) Clause 7-15, Observance of 

Regulations/Standards of 

Conduct

all formal solicitations and contracts.

(e) Clause 7-20, Security 

Requirements

all solicitations and contracts that require unescorted access 

to judiciary buildings or access to the judiciary IT network. 

(For additional information on the types of background 

checks, procedures for obtaining background checks, and 

appropriate forms to use, see: Guide, Vol. 12, § 570 

(Background Checks and Investigations).)

(f) Clause 7-25, Indemnification all solicitations and contracts.

(g) Clause 7-30, Public Use of 

the Name of the Federal 

Judiciary

all solicitations and contracts.

(h) Clause 7-35, Disclosure or 

Use of Information

all solicitations and contracts.

(i) Clause 7-40, JudiciaryContractor Relationshipsall solicitations and contracts for non-personal services. 

(The CO will not include this clause in PE-authorized 

personal services contracts using judiciary information 

technology funds.)

(j) Clause 7-45, Travel all solicitations and contracts when travel is reimbursable 

either as a separate line item in an award that is otherwise 

fixed-price or as part of cost-reimbursement or labor-hour 

contract.

(k) Clause 7-50, Parking all solicitations and contracts when performance will be at 

the Thurgood Marshall Federal Judiciary Building.

(l) Clause 7-55, Contractor Use 

of Judiciary Networks

all solicitations and contracts when the contractor will use 

judiciary computer networks during performance.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 17

§ 720 Judiciary Property

§ 720.10 In General

§ 720.10.10 Policy

(a) Contractors are ordinarily required to furnish all property necessary to the

performance of judiciary contracts. The CO will provide property to 

contractors only when it is clearly demonstrated:

• to be in the judiciary’s best interest;

• that the overall benefit to the procurement significantly outweighs the 

increased cost of administration, including ultimate property disposal;

• that providing the property does not substantially increase the 

judiciary’s assumption of risk; and

• that judiciary requirements cannot otherwise be met.

(b) The contractor’s inability or unwillingness to supply its own resources is 

not sufficient reason for the furnishing of judiciary property.

§ 720.10.20 Property Liability and Contract Type

Generally, contractors are not held liable for loss, damage, destruction or theft of 

judiciary property under the following contract types, absent evidence of gross 

negligence on the part of the contractor:

• cost-reimbursement contracts

• time-and-material contracts

• labor-hour contracts

§ 720.10.30 Judiciary Property Used Outside Judiciary Facilities

(a) The CO must obtain approval from the PE before the award of any 

contract that authorizes judiciary property to be provided for contractor to 

use in performance of a contract outside of judiciary facilities. The CO 

must obtain and provide to the PE information on the contractor’s property 

control system to ensure compliance with the contract's property clauses.

(b) In the event that the PE finds deficiencies in the contractor’s property 

control system, the CO must notify the contractor in writing, requesting 

prompt correction of deficiencies. If the contractor does not correct the 

deficiencies within a reasonable period, the CO may, subject to PE 

approval:
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 18

(1) notify the contractor in writing of any required corrections and 

establish a schedule for completion,

(2) caution the contractor that failure to take the required corrective 

action within the time specified will result in withholding or 

withdrawing system approval, and

(3) advise the contractor that its liability for loss of or damage to 

judiciary property may increase if approval is withheld or withdrawn.

(c) Where judiciary property is authorized for removal from and use outside 

judiciary facilities, the contractor’s records of the property, established and 

maintained under the terms of the contract, constitute the judiciary’s 

official property records.

§ 720.10.40 Clauses

Clause or Provision Include in ...

(a) Provision 7-60, Judiciary Furnished 

Property or Services

all solicitations.

(b) Clause 7-65, Protection of Judiciary 

Buildings, Equipment, and Vegetation

solicitations and contracts for services to be 

performed in judiciary buildings.

(c) Clause 7-70, Judiciary Property Furnished 

“As Is”

solicitations and contracts when judiciary 

property is to be furnished "as is."

§ 720.20 Property Records

§ 720.20.20 Judiciary Maintenance of Official Records

The judiciary will maintain the official property records when judiciary property is 

furnished to a contractor:

(a) for repair or servicing and return to the judiciary;

(b) for use at a judiciary facility/office;

(c) under a contract with a short performance period or involving judiciary 

property having a contract cost of $50,000 or less; or

(d) when otherwise determined by the CO to be in the judiciary’s interest.

§ 720.20.30 Inventory

A detailed inventory list of judiciary-furnished products, material or services must be 

maintained in the contract file and kept current at all times, specifying, as applicable:
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 19

• quantity

• nomenclature

• serial number

• model number

• general condition

§ 725 Subcontracting

§ 725.10 In General

§ 725.10.10 Notification Requirement

When a contract contains Clause 7-75, Subcontracts, the contractor must give the CO 

advance notice of its intent to subcontract. The clause authorizes the contractor to 

proceed to enter into a subcontract unless notice of disapproval is received from the CO 

within 15 days from the date the CO was notified. The CO must:

(a) promptly evaluate contractor notices of intent to subcontract;

(b) obtain assistance in this evaluation, as necessary, from audit, technical, or 

other specialists; and

(c) notify the contractor in writing if the subcontract is disapproved.

§ 725.10.20 Subcontract Review Considerations

The CO must review the notice of intent to subcontract with any supporting data and 

consider the following:

(a) whether the subcontract is for the purchase of equipment or facilities that 

are available from judiciary sources;

(b) whether the contractor’s selection of the particular products, equipment, or 

services being purchased under the subcontract is technically justified;

(c) whether adequate price competition was obtained for the subcontract or 

its absence is justified;

(d) whether the contractor adequately assessed alternate subcontractor 

offers;

(e) whether the contractor had a sound basis for selecting and determining 

the responsibility of the subcontractor;

(f) whether the contractor performed adequate price or cost analysis;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 20

(g) whether the contract type (see: Guide, Vol. 14, § 410 (Contract Types)) 

for the proposed subcontract is appropriate;

(h) whether the contractor has adequately and reasonably translated prime 

contract technical requirements into subcontract requirements;

(i) whether the proposed subcontractor is on the list of debarred, suspended, 

and ineligible contractors; and

(j) whether the contractor has incorporated terms and conditions contained in 

the prime contract that are expressly applicable to subcontracts.

§ 725.10.30 Subcontracting Situations Requiring Special Care

Particularly careful and thorough consideration is necessary when:

(a) the prime contractor's purchasing system or performance is inadequate;

(b) close working relationships or ownership affiliation between the prime and 

subcontractor may preclude competition or result in higher prices;

(c) subcontracts are proposed on a noncompetitive basis, at prices that 

appear unreasonable, or at prices higher than those offered the judiciary 

in comparable circumstances; or

(d) subcontracts are proposed on other than a fixed-price basis.

§ 725.10.40 Clauses

Clause or Provision Include in ...

(a) Clause 7-75, 

Subcontracts

solicitations and contracts when awarding:

(1) a cost-reimbursement contract;

(2) a letter contract that exceeds the judiciary’s small purchase 

threshold;

(3) a fixed-price contract that exceeds the judiciary’s small purchase 

threshold under which unpriced contract actions (including unpriced 

modifications or unpriced delivery orders) are anticipated;

(4) a time-and-materials contract that exceeds the judiciary’s small 

purchase threshold; or

(5) a labor-hour contract that exceeds the judiciary’s small purchase 

threshold.

The CO will fill in the clause’s blank spaces as appropriate.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 21

§ 725.10.40 Clauses

Clause or Provision Include in ...

(b) Clause 7-80, 

Competition in 

Subcontracting

solicitations and contracts when the contract amount is expected to 

exceed the judiciary’s small purchase threshold, except when awarding:

(1) a firm-fixed-price contract awarded on the basis of adequate price 

competition or whose prices are set by law or regulation, or

(2) a time-and-materials, labor-hour, or architect-engineer contract.

§ 730 Contract Performance

§ 730.10 Postaward Orientation

§ 730.10.10 In General

Postaward orientation is conducted by the CO. It is optional and is recommended in 

cases of complex service contracts. It is a planned and structured discussion between 

judiciary and contractor representatives that focuses on:

(a) introducing judiciary and contractor representatives;

(b) ensuring mutual understanding of the technical aspects of the contract;

(c) discussing judiciary oversight approach;

(d) preventing problems;

(e) averting misunderstandings;

(f) establishing a methodology to solve problems that may occur later; and

(g) reaching agreement on communication issues.

§ 730.10.20 When to Schedule a Postaward Orientation

The CO decides whether postaward orientation is necessary. The CO must consider 

the following factors:

(a) contract type, value, and complexity;

(b) procurement history of the required products or services;

(c) requirements for judiciary-provided property, if applicable;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 22

(d) urgency of the contract delivery schedule and relationship of the products 

or services to critical judiciary programs;

(e) extent of subcontracting;

(f) contractor's performance history and experience with the products or 

services;

(g) safety precautions required for hazardous materials or operations; and

(h) any financing arrangements contemplated.

§ 730.10.30 Timing of Postaward Orientation

When the CO decides a postaward orientation is appropriate, it must be held promptly 

after award. The CO must prepare an agenda before the orientation, provide copies to 

all appropriate parties, and summarize by memorandum the actual topics covered in the 

orientation session. The CO and the contractor, and, whenever possible, all other 

principal parties, for example, CORs, project officers, program managers, and other 

appropriate subject matter experts, must attend any postaward orientation.

§ 730.10.40 Contract Changes

A postaward orientation may not be used to change the contract. However, if any 

changes are identified in a postaward orientation, and are determined by the CO to be 

necessary, they must be confirmed by the CO by issuance of a contract modification.

§ 730.20 Performance Record Keeping

Maintenance of complete records on contract performance is essential in monitoring 

contractor performance.

§ 730.20.10 In General

§ 730.20.20 Contractor Record Retention

The contractor must maintain records for three years after final payment on the contract. 

Clause 7-85, Examination of Records, is required to be included in all solicitations and 

contracts.

§ 730.20.30 Judiciary Contract Files

The CO and COR both maintain records on each contract assigned to them. Records 

must be maintained by the CO in a separate official contract file (see: § 710.10 

(Procurement Files (Purchase/Delivery/Task Order or Contract Files)) and by the COR 

in a contract work file (see: § 715.25.45 (Maintaining Procurement Files)).
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 23

§ 730.30 Performance Monitoring

§ 730.30.10 In General

Performance monitoring involves those contract administration activities that COs, 

CORs, and support personnel use to ensure that the products and services received 

conform to the contract requirements in quality, quantity, and all other specifics.

§ 730.30.20 Judiciary Policy on Performance Monitoring

Judiciary policy requires that the CO ensure that:

(a) procured products or services meet contract requirements and are 

delivered/performed according to contract delivery schedules;

(b) procedures for assuring that the contract requirements are fulfilled are 

followed before acceptance of products or services under the contract; 

and

(c) no contract clause or term precludes the judiciary from performing 

inspection.

§ 730.30.30 CO Responsibilities

The CO is responsible for the actions of all other personnel involved in the 

administration of the contract. The CO must instruct judiciary officials not to require the 

contractor to do anything that is not specified in the contract.

§ 730.30.40 Monitoring and Inspection Objectives

When a contract is signed, it is the intent of both parties to perform their respective 

obligations. Poor performance or late deliveries may cause costly delays in the 

program that the contract supports. The judiciary monitors contract performance closely 

to ensure that required end items are delivered on time. Monitoring and inspection 

supports many objectives, including:

(a) identifying potential delinquencies;

(b) isolating specific performance problems;

(c) supporting contractor requests;

(d) pointing out the need for judiciary assistance;

(e) revealing actual or anticipated default; and

(f) identifying judiciary-caused delays.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 24

§ 730.30.50 Review of Contractor Deliverables

(a) Review of contractor deliverables is an important method of enforcing 

contract requirements. Contract terms that require submission and written 

approval of interim deliverables before proceeding with subsequent 

performance, for example, a requirement for approval of a design before 

proceeding with installation of equipment for a courtroom technology 

project, must be strictly enforced.

(b) The CO will ensure that contractor deliverables are disapproved only for 

failure to meet a material requirement of the contract.

(c) If a contractor deliverable fails to meet judiciary expectations because the 

contract specifications are inadequate, the CO must determine the 

appropriate correction to the specifications with the assistance of technical 

personnel and modify the contract to reflect those revised specifications.

§ 730.30.60 Approval Process

(a) COs and their representatives will approve, conditionally approve, or 

disapprove contractor deliveries promptly and according to any time limits 

provided in the contract.

(b) Disapprovals and conditional approvals will clearly indicate what the 

contractor must do to comply with the contract requirements.

(c) Approval of late deliveries or deliveries of less than fully conforming 

products or services may constitute relaxation of contract performance or 

delivery requirements.

(d) When such relaxation occurs for reasons other than conditions caused by 

the judiciary, they constitute changes to the contract that require the 

negotiation of consideration. For types of contract remedies, see:

§ 735.20 (Types of Remedies).

§ 735 Quality Assurance

§ 735.10 In General

The CO is responsible for ensuring that products and services received under each 

contract conform to the quality and quantity requirements of the contract, including 

inspection, acceptance, warranty, and any other measures associated with quality 

assurance. The COR assists the CO by performing this function because the COR is 

generally on-site and either observes the performance of services first-hand or is the 

delivery point for material deliveries.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 25

§ 735.15 Contract Remedies

Contract remedies are forms of relief that the judiciary can pursue to compensate for a 

contractor’s nonperformance or noncompliance with a contract term or condition. These 

forms of relief can be provided by clauses or from basic rights provided in government 

contract law and, occasionally, in commercial contract law.

§ 735.20 Types of Remedies

§ 735.20.10 Remedies Other than Termination

The judiciary has several methods at its disposal to remedy a given situation without 

resorting to terminating the contract. Remedies include:

(a) rejecting nonconforming products and services;

(b) invoking written warranties, if provided for in the contract;

(c) invoking implied warranties;

(d) proving the existence of latent defects, fraud, or gross mistakes amounting 

to fraud;

(e) imposing liquidated damages if provided for in the contract (see: Guide, 

Vol. 14, § 220.30 (Liquidated Damages) and § 735.25 (Assessing 

Liquidated Damages)); and

(f) modifying contracts to relax or delete requirements provided that 

consideration is obtained from the contractor.

§ 735.20.20 Remedies Involving Cure Notice or Show Cause

The PE must review all proposed application of remedies involving a cure notice or 

show cause letter. The PE may seek the advice of OGC. For further guidance on the 

use of cure notices or show cause letters, see: § 755 (Contract Termination).

§ 735.25 Assessing Liquidated Damages

§ 735.25.10 In General

When the contract includes a liquidated damages clause, such as Clause 2-75, 

Liquidated Damages, assessment of liquidated damages must be reasonable and 

considered in light of contract requirements and done on a case-by-case basis. Any 

amount established without reference to probable actual damages may be interpreted 

as punitive and thus unenforceable. Before making any assessment of liquidated 

damages, the CO must obtain PE approval of the action.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 26

§ 735.25.15 Documentation Required

The CO must document any evidence of the contractor’s failure to deliver the products 

or perform the services within the time specified in the contract. This documentation will 

focus on the:

(a) stage of completion;

(b) probable amount of damages sustained by the judiciary;

(c) reason and excusability for a delay; and

(d) contractor’s ability to complete the contract.

§ 735.25.20 Computation of Assessment Amount

When assessment of liquidated damages is appropriate, the CO must withhold payment 

based on an accurate computation of the amount due. The actual computation will 

depend on the specific amount or specific formula in the contract.

§ 735.25.25 Discussion with the Contractor

After the CO has determined the judiciary is entitled to assess liquidated damages, the 

CO must discuss the situation with the contractor. Before the actual assessment of 

liquidated damages, the CO will advise the contractor of the:

(a) judiciary’s intention to assess liquidated damages unless the contractor 

provides evidence to the judiciary by a specified date that such an 

assessment would be improper;

(b) basis or bases for the judiciary’s assessment of these damages; and

(c) amount of the planned liquidated damages assessment, including the 

reasons for any reduction in the specified amount for liquidated damages 

stated in the contract.

§ 735.25.30 Liquidated Damages Notice

A liquidated damages notice must indicate:

(a) the specific reason for assessing the damages provided in the clause;

(b) the dollar amount of the damages; and

(c) any steps the contractor may be able to take to avoid further assessment 

of liquidated damages.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 27

§ 735.25.35 Waiver of Liquidated Damages

Liquidated damages may occasionally be waived by the CO. A decision to grant a 

waiver should be based on one of the following reasons:

(a) the contractor documents a reasonable case for an excusable delay;

(b) the contractor claims impossibility of performance; or

(c) the contractor claims the work is substantially complete.

§ 735.25.40 Determination of “Substantial Completion”

Assessment of liquidated damages is generally not appropriate after the work can be 

considered substantially complete.

§ 735.25.45 CO Actions

Based on the evidence, the CO, with approval from the PE, may:

(a) forego or waive assessing liquidated damages (see: § 735.25.35 (Waiver 

of Liquidated Damages));

(b) assess a reduced amount; or

(c) assess maximum allowable liquidated damages.

§ 735.25.55 Alternative Actions

The CO also may consider terminating for default (see: § 755 (Contract Termination)) 

or taking other appropriate action in lieu of or following an earlier assessment of 

liquidated damages.

§ 735.30 Nonconforming Products or Services

§ 735.30.10 In General

COs must normally reject products or services not conforming in all respects to contract 

requirements. Rejection is mandatory when nonconformance adversely affects safety, 

health, reliability, durability, performance, or any other basic objective of the 

specification. In addition, products or services that do not conform to the terms of the 

contract must be rejected before any acceptance takes place. Products or services that 

have been accepted cannot be rejected later, except for:

(a) latent defects;

(b) fraud; and
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 28

(c) gross mistakes amounting to fraud.

See: § 735.55 (Fraud, Gross Mistake, or Latent Defects)

§ 735.30.20 Opportunity to Correct or Replace

Contractors may be given an opportunity to correct or replace nonconforming products 

or to re-perform non-conforming services. Unless the CO specifies otherwise, 

correction, replacement or re-performance must be at no additional cost to the judiciary. 

In addition, the CO must reserve the right of the judiciary to charge the contractor the 

cost of reinspection and retesting needed because of a previous rejection.

(a) For Products

(1) The judiciary’s rights when delivered products are defective are 

provided in Clause 2-5A, Inspection of Products. Similar language 

appears in paragraph (d) of Clause 3-3, Provisions, Clauses, Terms 

and Conditions – Small Purchases.

(2) Notice of rejection of defective products must be provided by the 

CO in writing, at which time the CO must inform the contractor 

whether the judiciary requires replacement or correction of the 

defects; will acquire replacement products from another source and 

charge the contractor for any excess costs incurred by the judiciary; 

or will accept the products at a reduced price.

(3) Corrected or replaced products may not be re-delivered for 

acceptance unless the contractor discloses the previous rejection 

and correction action taken.

(4) If the contractor fails to proceed with reasonable promptness to 

perform replacement or correction, the CO may, by contract or 

otherwise, remove, replace, or correct the products and charge the 

cost to the contractor, or terminate the contract for default.

(b) For Services

(1) The judiciary’s rights when services do not meet contract 

requirements are provided in Clause 2-5B, Inspection of Services. 

Similar language appears in paragraph (d) of Clause 3-3, 

Provisions, Clauses, Terms and Conditions – Small Purchases.

(2) Notice of rejection of defective services must be provided by the 

CO in writing, at which time the CO may require the contractor to 

perform the services again in conformity with the requirements at 

no increase in contract amount.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 29

(3) When the services are of such a nature that they cannot be 

corrected by re-performance, the CO may require the contractor to 

take necessary action to ensure that future performance conforms 

to contract requirements and reduce the contract price to reflect the 

reduced value of the services performed.

(4) If the services are of a nature that can be corrected by reperformance and the contractor fails to promptly perform the 

services again, the CO may, by contract or otherwise, obtain 

performance of the services and charge to the contractor any cost 

incurred by the judiciary that is directly related to the performance 

of such service or terminate the contract for default.

(c) For either products or services, the choice of remedy — replacement or 

correction of products, re-performance of services, negotiation of a 

reduced price, or reprocurement from another source — is generally within 

the discretion of the CO. Where the rejected products or services 

constitute the majority of the contract’s required deliveries, acquiring 

replacement products or re-performance of services should follow 

termination of the contract for default, which requires the PE’s approval. 

For additional information about termination procedures, see: § 755 

(Contract Termination).

§ 735.30.30 Minor Nonconformances

(a) The CO may accept a nonconforming product or service when the 

nonconformance is minor. In such instances, when the savings realized 

by the contractor by not conforming does not exceed the administrative 

cost to the judiciary for processing a formal modification, the 

nonconformance may be accepted without consideration. For example, 

there may be no cost variance based on the color of a product, so the 

contractor realized no savings in delivering an incorrect color. The 

incorrect color may be either rejected or accepted, at the discretion of the 

CO, without requiring consideration for acceptance of the 

nonconformance. See: § 735.30.50 (Consideration for Acceptance of 

Defective Performance).

(b) The CO will consult with technical personnel as necessary in making a 

determination to accept a minor nonconformance. Generally, a minor 

nonconformance does not adversely affect:

(1) safety;

(2) health;

(3) reliability;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 30

(4) durability;

(5) performance;

(6) interchangeability of parts or assemblies;

(7) weight (if a contract requirement);

(8) appearance (if a contract requirement); or

(9) any other basic requirement of the contract.

§ 735.30.40 Substantial Nonconformance

The CO may not accept products or services whose nonconformance is substantial and 

adversely affects satisfaction of a basic contract requirement, unless acceptance is 

clearly in the judiciary’s interest. The CO's determination to accept the products or 

services must be in writing and must be based on:

(a) information on the nature and extent of the nonconformance;

(b) advice of the technical activity that products or services are safe and will 

perform or meet the intended purpose;

(c) the contractor’s request for acceptance of the nonconforming products or 

service;

(d) a recommendation for acceptance by the organization on whose behalf 

the products or services are being purchased (i.e., the end user), with 

supporting rationale; and

(e) appropriate monetary or other consideration.

§ 735.30.50 Consideration for Acceptance of Defective Performance

(a) COs must discourage the repeated delivery of nonconforming products or 

services, including those with only minor nonconformances.

(b) In such cases, the CO must take appropriate action, such as rejection and 

documentation of the contractor's performance record or acceptance with 

consideration required from the contractor for the nonconformance.

(c) A downward price adjustment is the most common form of consideration, 

though consideration may take many other forms, such as additional 

quantities of items, accelerated deliveries, etc.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 31

(d) In all instances where the savings realized by the contractor by a 

nonconforming delivery exceed the administrative cost to the judiciary for 

processing a formal modification, the nonconformance may not be 

accepted without consideration and the CO must modify the contract.

§ 735.30.60 Notice of Rejection

(a) Contractors must be given prompt written notice of rejection, including the 

reasons for rejection when:

(1) the products or services have been rejected at a place other than 

the contractor's facility;

(2) the contractor persists in offering nonconforming products or 

services for acceptance; or

(3) delivery or performance was late without excusable cause.

(b) A rejection notice does not extend the delivery period. The contractor is 

still required to provide products and services that conform to the 

contract’s delivery schedule.

(c) Products or services that are otherwise in compliance with the contract are 

nonconforming when they are late in delivery or performance, and 

consideration may be required for acceptance of a late delivery.

§ 735.30.70 Contractor Response

A contractor may respond to a notice of rejection by:

(a) offering to correct the work;

(b) offering to provide a downward price adjustment for acceptance;

(c) offering to negotiate a revised delivery schedule for a conforming product 

with consideration; or

(d) alleging the judiciary specifications were ambiguous or defective.

§ 735.35 Acceptance

§ 735.35.10 Definition

(a) Acceptance constitutes acknowledgment that products or services 

conform with the quality, quantity, and packaging requirements provided in 

the contract.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 32

(b) The acceptance of products or services that do not conform with the 

contract requirements may only be performed by the CO and, if the nonconformance is significant, must be accompanied by a contract 

modification and negotiation of an equitable price reduction or other 

consideration from the contractor. See: § 735.30 (Nonconforming 

Products or Services).

(c) Acceptance may take place at delivery or after delivery, depending on the 

contract’s requirements.

§ 735.35.20 Evidence of Acceptance

Acceptance may be evidenced by execution of an acceptance certificate on an 

inspection form, receiving report, or commercial shipping document or packing list, or, in 

the case of services, by the COR’s approval of the contractor’s invoice. Electronic 

receiving reports may also be used.

§ 735.40 Responsibility for Acceptance

(a) Product or service acceptance is the responsibility of the CO.

(b) When this responsibility is delegated to a COR or another judiciary 

employee, acceptance by that person is binding on the judiciary.

§ 735.45 Place of Acceptance

(a) Each contract must specify the time and place of acceptance. Contracts 

providing for judiciary inspection at source (i.e., contractor’s place of 

business) ordinarily provide for acceptance at source.

(b) Those providing for inspection at destination (i.e., judiciary’s facilities) 

ordinarily provide for acceptance at destination.

(c) Products accepted at a place other than destination may not be 

reinspected at destination for acceptance purposes. However, they must 

be examined at destination to confirm quantity and that there has been no 

damage in transit. Destination examination also includes ensuring that 

there has been no substitution or fraud following acceptance, which would 

invalidate such acceptance.

§ 735.50 Express Warranties

§ 735.50.10 Definition

An express warranty is a written promise or affirmation given by a contractor to the 

judiciary regarding the nature, usefulness, or conditions of the products or performance 

of services furnished under the contract.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 33

§ 735.50.20 Purpose

(a) Written warranties can limit the judiciary’s risk when relying on the 

contractor’s own inspection methods to ensure the quality of the work. For 

clauses and other requirements for inclusion of warranties, see: Guide, 

Vol. 14, § 220.20 (Warranties).

(b) Express warranties are the contractor’s way of assuring the judiciary that 

the product or service:

(1) is free from defects in workmanship, and

(2) will conform to the requirements of the contract.

§ 735.50.30 Required Information

Express warranties must:

(a) state the duration of the warranty, and

(b) specify a period during which notice of any defect must be given to the 

contractor.

§ 735.50.40 Remedies Provided by Warranties

The CO must accurately determine the contractor’s responsibilities and the judiciary’s 

rights under the terms and conditions of the warranty and must verify that the warranty 

does not erode nor limit any of the judiciary’s rights conferred elsewhere in the contract. 

Warranties may provide alternate remedies such as:

(a) repair the defect;

(b) replace the item;

(c) reperform the service;

(d) make an equitable adjustment; or

(e) pay for repairs, replacements, or reperformance when the judiciary has 

obtained the products or services from other sources.

§ 735.55 Fraud, Gross Mistake, or Latent Defects

§ 735.55.10 In General

The judiciary’s acceptance of contractor products and services is final unless:

(a) the defect is latent;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 34

(b) it is proven in litigation in a court of law there was fraud involved; or

(c) it is proven in litigation in a court of law there was a gross mistake 

amounting to fraud.

Note: Any situation involving suspected fraud or gross mistake amounting to fraud 

must be referred to the PE for review and appropriate action.

§ 735.55.20 Latent Defect

For a defect to be latent it must:

(a) not be susceptible to discovery using inspection methods that are 

reasonable under the circumstances, and

(b) be in existence at the time of acceptance.

§ 735.55.30 Proving Fraud or Gross Mistake Amounting to Fraud

(a) The only difference between fraud and gross mistake is intent.

(b) To prove a gross mistake, the judiciary need only prove that the mistake 

was truly irresponsible.

(c) Proving fraud requires a showing that the misrepresentation or 

concealment of fact was made with the intent to mislead.

§ 735.55.40 Evidence of Fraud

To prove fraud, the judiciary must show evidence of:

(a) a misrepresentation of fact (actual or implied), or a concealment of 

material fact;

(b) contractor knowledge of the fact concealed or misrepresented;

(c) an intent to mislead the judiciary into relying on its misrepresentation or 

concealment; and

(d) judiciary injury suffered as a result of the concealment or 

misrepresentation.

§ 735.55.50 Remedies if Fraud is Proven

If fraud or gross mistake amounting to fraud is proven in a court of law, the contractor 

can be forced to repair or replace the product or reperform the service at its own cost 

any time after acceptance.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 35

§ 735.60 Bankruptcy

§ 735.60.10 In General

Once a contractor declares bankruptcy, the right of the judiciary to take unilateral action 

with respect to the contractor is limited. COs need to monitor the financial strength of 

the contractor to anticipate possible problems that could arise in this area and take

prompt action to protect the interests of the judiciary following notification of a 

contractor's bankruptcy.

§ 735.60.20 Procedures

Following notification that a contractor is in bankruptcy proceedings, the CO must:

(a) furnish the notice of bankruptcy to PMD with a copy to the Procurement 

Liaison Officer (PLO);

(b) determine the amount of any claims that the judiciary may have against 

the contractor on any contracts that have not been closed out;

(c) take actions necessary to protect the judiciary's financial interests;

(d) safeguard judiciary property; and

(e) furnish pertinent contract information to the PE.

§ 735.60.30 Consultation with Office of the General Counsel

The PE will consult with OGC as necessary before taking any action regarding the 

contractor's bankruptcy proceedings.

§ 735.60.40 Clause

Clause 7-110, Bankruptcy must be included in all solicitations and contracts exceeding 

the judiciary’s small purchase threshold.

§ 740 Payments

§ 740.10 In General

§ 740.10.10 Payment Categories

Payments fall into two general categories:

(a) Delivery Payment
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 36

A payment made once delivery has been made and the product or service 

has been accepted;

(b) Partial Payment

A partial payment is a method of payment based on acceptance of a 

particular individually priced portion of the contract deliverables.

§ 740.10.20 Partial Payments

(a) A partial payment is any payment for accepted products or services that 

are only a part of the total requirement (e.g., payment for delivery of less 

than the full quantity of computers ordered, or for completion of one month 

of 12 in a fixed price service contract). Contractors may be paid for partial 

delivery of products or performance of services unless the contract 

specifically prohibits partial payments. Partial payment is a method of 

payment, not a method of contract financing. Partial payments can assist 

contractors to participate in judiciary contracts with minimal or no contract 

financing. For contract financing, see: Guide, Vol. 14, § 220.55 (Contract 

Financing).

(b) When delivery or performance is authorized in installments or when a 

number of items of work are called for by the contract, partial payment of a 

portion of the price may be made for the items delivered or performed and 

accepted.

(c) In firm-fixed-price contracts, the pricing section of the contract establishes 

unit prices for each ordered product or service, and payment may be 

made for any product or services listed in the pricing section that has been 

delivered and accepted. However, contracts should generally not 

authorize payment more often than monthly.

(d) A payment should reflect the complete value of the product or service 

accepted, so that if the contract is terminated the CO will know the value 

of the payments for finished work, as well as the value of the terminated 

work.

(e) Contracts should not authorize contractors to invoice partial performance 

based on the contractor’s expenditures, since this may or may not reflect 

the value of the partial delivery. For example, the contractor may have 

underestimated the labor required for performance and incur expenditures 

of 50 percent of the contract price when only 25 percent of the contract 

work has been performed.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 37

§ 740.10.30 Advance or Pre-payments

The judiciary has limited authority to make advance or pre-payments. In addition to 

commercial advance payment, the judiciary may make payment in advance for the 

purchase of publications, when making payment to other federal agencies, and when 

paying state and local governments, where these entities are furnishing products or 

services that are reasonably available only from the state/local government 

organization. See: Guide, Vol. 14, § 550 (Interagency Agreements, MOAs, and MOUs)

and Guide, Vol. 14, § 220.55 (Contract Financing).

§ 740.10.40 Nonpayment or Payment Delays

Nonpayment and delays in payment have harmful effects on contractors, especially 

small businesses. COs and financial personnel must ensure that payments legitimately 

due are made promptly. If a dispute arises regarding the contractor's entitlement to 

payment, the CO must pay the contractor any amount not in dispute, except for 

withholding as allowed under § 740.40 (Withholding Payments).

§ 740.10.50 Approving Partial Payments

If partial payments are specified in the payment provisions of the contract, the CO will 

generally approve requests for partial payment following partial delivery of products or 

services that fulfill contract requirements. When the contract does not provide unit 

prices, the CO may determine an appropriate formula for payment.

§ 740.10.60 Payment Under Cost-Reimbursement Contracts

Requests for payment under cost-reimbursement type contracts must be reviewed and 

approved for payment by the CO, with the assistance of technical personnel, to 

determine that such requests comply with the requirements for allowability, allocability, 

and reasonableness. See: Guide, Vol. 14, § 470 (Cost Allowability).

§ 740.20 Invoices

§ 740.20.10 In General

Payment will be made only after receipt of an invoice that complies with the applicable 

Invoices clause of the contract.

§ 740.20.20 Submission

Invoices must be sent to the invoice address specified in the contract. A copy is sent to 

the CO, if required by the contract. Invoices sent to any other person or office are not

considered properly submitted.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 38

§ 740.20.30 Clause

Include Clause 7-125, Invoices in all solicitations and contracts unless another 

“Invoices” clause is appropriate. The CO will include a schedule of payments in the 

contract whenever payment is not on a unit price basis (e.g., completion of milestones). 

For experts and consultant services solicitations and contracts, include the clause with 

its Alternate I.

§ 740.30 Payment

§ 740.30.10 Means of Payment

(a) Payment may be made by check or electronic funds transfer (EFT) (if 

available). Use of an online payment platform (e.g., PayPal, Venmo) for 

making contract payments is not authorized.

(b) An exception may be made where there is only one source of a needed

product or service that will not accept payment by any method except the 

online payment platform. In such cases, the file must be thoroughly 

documented to show the efforts made to reach agreement with the 

contractor to pay by other methods before resorting to the online payment 

platform. Payments made using this method may not exceed the 

purchase cardholder’s single-purchase limit.

§ 740.30.20 Time of Payment

As a matter of judiciary policy, payment must be made as close as possible to, but not 

later than, the 30th calendar day after receipt of an invoice or product/service 

acceptance, whichever occurs later.

§ 740.30.30 Payment of Interest

The Prompt Payment Act of 1982 is not applicable to the judiciary. Include Clause 7-

130, Interest (Prompt Payment) in all solicitations and contracts.

§ 740.30.40 Final Payment

(a) Final payment may be made after acceptance of all products or services 

covered by the contract.

(b) However, final payment may not be made under any contract involving 

retainage (e.g., liquidated damages, or withholding pending final audit 

under certain contracts), or under any contract involving payment or 

performance guarantees, until the CO receives a release of claims from 

the contractor discharging the judiciary from any further obligations under 

the contract.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 39

(c) Contract closeout may not be finalized until all delivery and payment 

issues are settled.

§ 740.30.50 Clauses 

Clause Include in ...

(a) Clause 7-135, Payments solicitations and contracts for fixed-price products or 

services, unless another “Payments” clause is 

appropriate (e.g., Clause 5-1, Payments under Personal 

and Professional Services Contracts). When the CO 

uses a “Payments” clause and an “Inspection” clause is 

not included in the contract, then payment signifies 

acceptance.

(b) Clause 7-140, Discounts for 

Prompt Payment

solicitations and contracts for fixed-price products or 

services

(c) Clause 7-145, Government 

Purchase Card

solicitations and contracts when the CO determines that 

a purchase card can be used to make payments on the 

contract

(d) Clause 7-150, Extras solicitations and contracts for fixed-price products, 

services, or transportation

(e) Clause 7-155, Certification of 

Final Indirect Costs

solicitations and contracts that provide for establishment 

of final indirect cost rates

§ 740.40 Withholding Payments

§ 740.40.10 In General

The CO may refuse to pay a contractor, may suspend payments until resolution of an 

issue, may disallow a cost, or may withhold payments otherwise due, in whole or in part, 

when:

(a) the contract provides for withholding, such as for cost-plus-fixed-fee or 

incentive fee contracts when retainage is authorized according to the 

applicable fee clause;

(b) the CO determines that elements of the amount invoiced by the contractor 

under a cost-reimbursement contract are not allowable (see: Guide, Vol. 

14, § 470.10 (Determining Cost Allowability)), allocable (see: § 470.30 

(Determining Allocability)), or reasonable (see: § 470.20 (Determining 

Reasonableness));

(c) the contractor has been overpaid or otherwise owes the judiciary money 

as a result of the contractor's actions or inactions under the contract;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 40

(d) the contractor owes the judiciary money for reasons unrelated to the 

contract under which payment will be withheld; or

(e) as a result of judicial action or applicable law, parties other than the 

contractor have made claims against the judiciary, or have not waived 

rights exercisable against the judiciary. Any time a CO receives a claim 

from a third party for compensation otherwise due a contractor, the PE 

must be notified immediately.

§ 740.40.20 Impact of Withholding Payment

Nonpayment may be damaging to a contractor's business and may jeopardize 

performance. Therefore, the CO must carefully consider the reasons for withholding or 

refusing payment and process disputes regarding payment expeditiously.

§ 740.40.30 Notice to Contractor

(a) The CO must notify the contractor of any intended withholding or of the 

CO’s intent to disallow specified costs incurred or planned under a costreimbursement or fixed-price incentive contract.

(b) However, before issuing the notice, the CO must make a reasonable effort 

to reach a satisfactory settlement through discussions with the contractor 

and must provide an opportunity for the contractor to respond.

(c) If time permits, notice must be in writing.

§ 740.40.40 Contractor Response

If the contractor disagrees with the deduction from current payments, the contractor 

may:

(a) request in writing that the CO reconsider the deduction; and/or

(b) file a claim under Clause 7-235, Disputes.

§ 740.40.50 Withholding Under Different Clauses

Some contract clauses, such as Clause 2-75, Liquidated Damages, provide for 

withholding payment in certain circumstances. In addition, some clauses provide for 

withholding a percentage or portion of payments otherwise due to induce continued 

acceptable performance. The CO must strictly enforce such clauses and maintain a 

complete record of the amounts withheld under any clause, the basis for withholding, 

and the disposition of funds withheld.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 41

§ 740.40.50 Clauses

Clause Include in ...

(a) Clause 7-160, Limitation 

on Withholding of 

Payments

solicitations and contracts for products or services whenever 

the contract specifies two or more circumstances authorizing 

the temporary withholding of amounts otherwise payable to the 

contractor for products delivered or services performed

(b) Clause 7-165, Penalties 

for Unallowable Costs

all solicitations and contracts over $500,000, except fixed-price 

contracts without cost incentives

(c) Clause 7-170, Notice of 

Intent to Disallow Costs

solicitations and contracts when a cost-reimbursement contract 

or a fixed-price incentive contract is contemplated

§ 740.50 Assignment of Claims

§ 740.50.10 In General

A contractor may assign monies coming due under a judiciary contract to a bank, trust

company or other financial institution with the written approval of the CO. Any other 

attempted assignment may be treated as a breach of contract.

§ 740.50.20 Approval

COs may approve in writing any authorized assignment that does not jeopardize 

contract performance.

§ 740.50.30 Assignments by Law

This part does not govern assignments ordered by a court or by operation of law. COs 

must notify the PE, who will consult with OGC, in such cases.

§ 740.50.40 Clauses

Clause Include in ...

(a) Clause 7-175, Assignment of 

Claims

solicitations and contracts expected to exceed the 

judiciary’s small purchase threshold unless the contract will 

prohibit the assignment of claims

(b) Clause 7-180, Prohibition of 

Assignment of Claims

solicitations and contracts for which a determination has 

been made that the prohibition of assignment of claims is in 

the judiciary's interest

§ 740.50.50 Assignments

(a) Assignments by corporations must be:
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 42

(1) executed by an authorized representative;

(2) attested by the secretary or the assistant secretary of the 

corporation; and

(3) impressed with the corporate seal or accompanied by a true copy 

of the resolution of the corporation’s board of directors authorizing 

the signing representative to execute the assignment.

(b) Assignment by a partnership may be signed by one partner, if the 

assignment is accompanied by adequate evidence that the signer is a 

general partner of the partnership and is authorized to execute 

assignments on behalf of the partnership.

(c) Assignments by an individual must be signed by that individual and the 

signature acknowledged before a notary public or other person authorized 

to administer oaths.

§ 740.50.60 Filing

(a) The assignee must file the notice of assignment and copy of the 

instrument of assignment with:

(1) the CO; and

(2) the surety on any bond applicable to the contract.

(b) The assignee must forward to each party specified above an original and 

three copies of the notice of assignment together with one true copy of the 

instrument of assignment. The true copy must be a certified duplicate or 

photostat copy of the original assignment. The CO must provide a copy of 

the notice of assignment to the payment office.

§ 740.50.70 Format for Notice of Assignment

Appx. 7A (Sample Notice of Assignment) is a suggested format for use by an assignee 

in providing the notice of assignment.

§ 745 Contract Modifications

§ 745.10 Policy

§ 745.10.10 In General

Only COs are authorized to sign contract modifications on behalf of the judiciary. Other 

judiciary personnel may not:
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 43

(a) sign contract modifications;

(b) act in such a manner as to cause the contractor to believe that they have 

authority to bind the judiciary;

(c) direct or encourage the contractor to perform work that must be the 

subject of a contract modification but has not yet been executed; or

(d) accept products and/or services that are in any way dependent on a 

contract modification that has not been executed.

§ 745.10.20 Pricing of Contract Modifications

(a) Contract modifications, including changes that may be issued unilaterally, 

will be priced before their execution, if doing so can be done without 

adversely affecting the interest of the judiciary.

(b) If a significant price increase could result from a contract modification and 

time does not permit negotiation of a definitive price, at least a maximum 

cost ceiling must be established in the modification.

(c) For additional guidance on analyzing contractor requests for price 

adjustments, see: § 745.45 (Equitable Adjustments).

§ 745.10.30 Unpriced Contract Modifications

If an unpriced contract modification is issued (e.g., a unilateral change order under 

Clause 7-185, Changes), the CO must justify, in writing, the reasons for the issuance of 

the unpriced modification.

§ 745.10.40 Funds Availability

The CO cannot execute a contract modification, including a change order, if doing so 

will cause an increase in the funding level of the contract without having first ensured 

that sufficient funds are available in the judiciary’s financial system of record. See also:

§ 745.25 (Availability of Funds). The CO may not perform any related reprogramming 

of funds that must be done in the financial system. See also: Guide, Vol. 11, § 320 

(Separation of Duties).

§ 745.10.50 Modifications

Modifications may be:

(a) initiated by either party;

(b) bilateral within scope changes;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 44

(c) a unilateral change (such as an administrative change of the accounting 

and appropriation data, or a change under Clause 7-185, Changes);

(d) new work within the scope of the contract; or

(e) new work outside the scope of the contract (although this requires either 

competition or a justification for other than full and open competition (see:

Guide, Vol. 14, § 335 (Justifications and Approvals for Limiting 

Competition)).

§ 745.10.60 Contractor-Requested Modifications

The contractor may request a contract modification. Examples of reasons for a 

contractor-requested change include:

(a) adjustments to the contract based on circumstances or events beyond the 

contractor’s control (e.g., excusable delay, stop work order issued, 

constructive change, settlement for contract termination for convenience);

(b) adjustments due to action by the contractor (e.g., name changed, 

consideration offered for nonexcusable delay, novation agreement); and

(c) adjustments required by or authorized by the terms of the contract (e.g., 

economic price adjustment, price redeterminations, Department of Labor 

wage rate increases for an exercised option).

Note: Any contractor request for a price increase must have some legal basis for the 

requested increase, especially when the contract is firm-fixed-price. A mere notification 

from the contractor after award that a mistake was made in the price is generally not 

sufficient legal basis for agreeing to a requested increase.

§ 745.10.70 Submission of Modification Requests

Contractor requests for modification must provide all necessary documentation as 

required by the CO. The CO will review the request and related documentation, and 

either process a modification or make a determination that the change is not warranted.

§ 745.15 Types of Modifications

§ 745.15.10 Bilateral Modification

(a) A bilateral modification (also known as a supplemental agreement) is a 

modification that is signed by both the contractor and the CO and is the 

preferred type of modification for accomplishing changes. The contractor 

should always be asked to execute the modification first, with the CO 

signature being second. Most supplemental agreements involve 

negotiation of price and other terms, usually relating to tasks that are 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 45

similar to the award of the basic contract. A bilateral agreement is used 

when:

(1) the change has an effect on the substantive rights of either party;

(2) there is sufficient time to negotiate a supplemental agreement; or

(3) there is no basis in the contract’s terms for issuing a unilateral 

modification.

(b) Bilateral modifications are used to:

(1) incorporate changes to the contract made under Clause 7-185, 

Changes;

(2) incorporate negotiated equitable adjustments resulting from the 

issuance of a unilateral change order;

(3) reflect other agreements of the parties that modify the original 

contract terms;

(4) definitize a letter contract;

(5) approve changes required by or authorized by the contract, such as 

economic price adjustments;

(6) incorporate novation agreements where the judiciary is the 

responsible agency (see: § 745.55 (Novation and Change of 

Name Agreements));

(7) incorporate name-change agreements where the judiciary is the 

responsible agency (see: § 745.55 (Novation and Change of 

Name Agreements)); or

(8) recognize when a sole proprietor originally doing business under a 

social security number (SSN) changes to a sole proprietor doing 

business under an Employer Identification Number (EIN).

§ 745.15.20 Unilateral Modification

(a) A unilateral modification is a modification that is signed only by the CO as 

permitted within the operation of an existing contract clause. Unilateral 

modifications are of three basic types:

(1) Administrative Changes
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 46

These are changes that are minor in nature and do not materially 

affect contract performance or the substantive rights of the parties. 

Examples include:

(A) correcting a fund citation;

(B) adding a zip code on a delivery address;

(C) designating a change in COR or other contract 

administrators;

(D) recognizing a novation agreement executed by another 

agency on behalf of the government (see: § 745.55 

(Novation and Change of Name Agreements)); and

(E) recognizing name-change agreements executed by another 

agency on behalf of the government (see: § 745.55 

(Novation and Change of Name Agreements)).

(2) Change Orders

The term “change order” refers to the actual issuance of a change 

authorized by Clause 7-185, Changes, usually as a unilateral 

modification. It directs the contractor to make a change, without the 

contractor’s earlier consent, within the general scope of the 

contract. See: § 745.20.20 (Determination of “Within Scope”). 

Clause 7-185, Changes, authorizes the CO to change the following 

things in this manner:

(A) drawings, designs, or specifications, when the products to be 

furnished are to be specially manufactured for the judiciary 

according to the drawings, designs, or specifications;

(B) method of shipment or packing;

(C) place of delivery (e.g., changing the delivery address from 

one state to another);

(D) statement of work or description of services to be performed;

(E) delivery or performance schedule with regard to time (i.e., 

hours of day, days of the week, etc), or place of performance 

of services; and

(F) judiciary-furnished property.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 47

Note: A change order is the least preferred method of 

changing a contract. A supplemental agreement is the 

preferred method. See: § 745.15.10 (Bilateral Modification). 

The Changes clause is cited as the authority for the 

modification in Block 13.A of the Standard Form (SF) 30 

(Amendment of Solicitation/Modification of Contract). 

Change orders may be used only when there is not enough 

time to negotiate with the contractor and/or the change must 

be put into effect immediately. Clause 7-185, Changes

requires that the contractor assert its right to an equitable 

adjustment within 30 days after receipt of a change order. 

See: § 745.40 (Changes) and § 745.45 (Equitable 

Adjustments).

(3) Changes Authorized by Other Contract Clauses

Although these are not termed change orders, unilateral 

modifications may be issued under other contract clauses. 

Examples are the issuance of a stop work order or termination 

notice, obligation of additional funding for a contract that is being 

funded incrementally, or exercise of an option. Clause 7-185, 

Changes, only authorizes change orders within the scope of the 

contract and within the conditions specified in the clause. For 

additional information on contract modifications in general, see:

§ 745.20.10 (In General) and § 745.40 (Changes).

(b) The CO will issue a unilateral modification when:

(1) the change has no effect on the substantive rights of the contractor 

or the judiciary;

(2) the change can be made unilaterally under a specific contract term 

(e.g., Stop Work, Termination or Option clauses);

(3) the contractor’s agreement with the change is not required; or

(4) in the case of a change order, the time required to negotiate a 

bilateral agreement would cause a delay that would adversely 

affect the judiciary’s interest.

§ 745.20 Notification of Contract Changes

§ 745.20.10 In General

Under the “Changes” clause, when a contractor considers that any written or oral order 

(including direction, interpretation, instruction, or determination) from the CO, or another 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 48

judiciary representative, constitutes a change in the contract, the contractor must notify 

the CO in writing that the contractor regards the order as a change order. The CO must 

then evaluate the order and:

(a) confirm that it is a change, in which case the CO will also:

(1) direct the mode of further delivery or performance,

(2) plan for its funding, and

(3) issue a formal change order;

(b) countermand the alleged change; or

(c) notify the contractor that no change is considered to have been ordered.

§ 745.20.20 Determination of “Within Scope”

(a) Before issuing any contract modification, the CO must determine whether 

the contract change, initiated by either the judiciary or the contractor, is 

“within the scope” of the contact. A “within scope” change does not 

materially change the contract. The types of factors examined when 

determining whether a modification is “within scope” include:

(1) whether there is a change to the type of work required;

(2) whether there is a major cost impact to make the change;

(3) whether the change impacts the period of performance, and the 

length of the extension period relative to the original period of 

performance; and

(4) whether the solicitation for the original contract adequately advised 

offerors of the potential for the type of changes found in the 

modification, and thus whether the modification would have 

materially changed the field of competition.

(b) Another way of analyzing whether a change is within scope is to ask the 

following questions. If all these questions can be answered in the 

affirmative, the change can be considered within scope.

(1) Is the changed work within what both parties would have 

reasonably contemplated at the time of award? For example, at the 

time of award, parties would likely contemplate a change to a 

component in a courtroom technology upgrade involving many 

components; however, parties would not reasonably contemplate 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 49

adding an upgrade to another courtroom not identified in the 

solicitation.

(2) Is the changed work essentially the same as the original 

agreement?

(3) Is the nature of the requirement altered by the change?

(4) Would this type of change normally be expected for this kind of 

requirement? For example, more changes would be expected for 

complex requirements, such as development of a software system 

such as the Jury Management System than would be expected for 

a requirement for copier maintenance.

§ 745.20.30 Out of Scope Changes

If the CO determines that the contemplated action is not in scope, the change must be 

regarded as a cardinal change, i.e., new work (possibly subject to further competition). 

The contractor is not obligated to perform work that constitutes a cardinal change. See: 

§ 745.40.30 (Contractor’s Obligation to Perform).

§ 745.25 Availability of Funds

§ 745.25.10 In General

The CO may not execute a modification that causes or will cause an increase in 

required funds without first ensuring that funds are available in the judiciary’s financial 

system of record, except for modifications to contracts that:

(a) are conditioned on availability of funds, or

(b) contain a limitation of cost or funds clause.

See also: § 745.10.40 (Funds Availability) and Guide, Vol. 11, § 320 (Separation of 

Duties).

§ 745.30 Exercise of Options

§ 745.30.10 In General

(a) Options provide the judiciary with firm prices for additional quantities or 

periods of performance. Depending on the terms of the solicitation 

leading to the contract, certain options may only be exercised at the time 

of contract award. For example, additional items of furniture identified in a 

solicitation as optional, to be awarded depending on available funds at the

time of award. For additional information on options exercised at the time 

of award, see: Guide, Vol. 14, § 220.40 (Options).
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 50

Examples of options that may be exercised after award include:

(1) options for additional periods of performance for service contracts;

(2) options to extend the ordering period for indefinite contracts (see:

Guide, Vol. 14, § 410.30 (Indefinite-Delivery Contracts)); and

(3) options for additional work, such as adding another courtroom to a 

courtroom technology contract.

(b) The judiciary is under no legal obligation to exercise an option and the 

contractor has no recourse against the judiciary when an option is not 

exercised. Options may be exercised by issuance of a unilateral 

modification, i.e., without the contractor’s signature, but only if the option is 

exercised exactly consistent with the terms of the contract.

§ 745.30.20 Notice Requirement

(a) The option clause to extend service contracts or indefinite delivery 

ordering contracts requires that the CO provide advance notification of the 

judiciary’s intent to exercise an option no later than a specified time, 

usually 60 days before the current period of performance expires.

(b) In the event that the CO fails to provide the notice of intent by the 

specified time, the judiciary forfeits its right to exercise the option without 

the contractor’s agreement or signature on the modification. The notice 

requirement is for the benefit of the contractor, and may be waived by the 

contractor either expressly or by its conduct in performing in response to a 

unilateral option exercise. However, it is recommended that the CO obtain 

the contractor’s signature on the modification if the notice was late.

(c) The notification of intent does not bind the judiciary to exercise the option.

(d) In addition to the required time for providing the advance notice of intent to 

exercise an option, every option clause must state a “no later than” time 

by which the judiciary must exercise the option.

§ 745.30.30 Exercising Options

Options must be exercised exactly as they are stated in the contract. The CO may not 

change quantities, for instance, unless the option itself authorizes the specific change. 

Changes to a Statement of Work also cannot be combined with the unilateral exercise 

of an option. Unilateral exercise of an option is considered to be a best practice, where 

the CO has provided the advance notice in a timely manner and issues the modification 

exercising the option within the required time frame.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 51

§ 745.30.40 Written Determinations

Before exercising an option, the CO must sign and place a written determination in the 

official contract file. This written determination must show that:

(a) the judiciary has a need for the products or services covered by the 

option;

(b) exercise of the option is the most advantageous alternative, price and 

other factors considered (e.g., a need for continuity of operations and 

potential costs to the judiciary of disrupting operations);

(c) the option exercise complies with the terms of the contract;

(d) funds are available (or will be available); and

(e) the contractor remains a responsible source (see: Guide, Vol. 14, § 320 

(Contractor Qualifications)).

§ 745.30.50 Reviewing Option Prices

A determination that the option price is fair and reasonable must be based on one of the 

following:

(a) an informal investigation of prices, or other examination of the market, 

indicates that the option pricing is more advantageous than market prices;

(b) the time between the award of the contract containing the option and the 

exercise of the option is so short that it indicates the option price is the 

lowest price obtainable under the conditions. The CO may take into 

consideration such factors as market stability and a comparison of the 

time since award with the usual duration of contracts for such products 

and services; or

(c) a new solicitation fails to produce a better price than that offered by the 

option.

§ 745.30.60 Economic Price Adjustments

If the contract provides for economic price adjustment, the effect of such adjustment on 

prices under the option must be determined when considering whether or not to 

exercise the option.

§ 745.30.70 Option Procedures

When an option is to be exercised, the CO must:
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 52

(a) make a written determination that the option may properly be exercised 

according to the availability of funds (see: § 745.25 (Availability of 

Funds));

(b) give written advance notification of intent to the contractor within the time 

period specified in the contract; and

(c) give the contractor written notification of the exercise of the option by 

executing a modification, citing the option clause as authority for the 

modification.

§ 745.35 Correction of Mistakes

§ 745.35.10 In General

A contract may be modified to correct or mitigate the effect of a mistake such as the 

following:

(a) a mistake, ambiguity, or unclear expression in a written contract of the 

contract terms as both parties understood them;

(b) a contractor's mistake so obvious that it was or must have been apparent 

to the CO; and

(c) a mutual mistake as to a material fact.

§ 745.35.20 Procedure

A claim of mistake asserted by the contractor after award is a claim subject to the 

procedures of Clause 7-235, Disputes. A decision by the CO to deny, in whole or in 

part, a claim of mistake asserted after award is a final decision under the clause.

§ 745.40 Changes

§ 745.40.10 In General

The “Changes” clause permits the CO to make unilateral changes, as specified in the 

clause, within the general scope of the contract. These changes are accomplished by 

issuing written change orders. See also: § 745.15.20(a)(2) (Change Orders).

§ 745.40.20 Constructive Change

A constructive change is an implied change. It occurs when judiciary officials, who are 

not appointed as a CO, change the contract via verbal or written action. Constructive 

changes are considered unauthorized commitments. If the unauthorized commitment is 

ratified, the CO may issue a modification to the contract confirming the change and 

making an appropriate equitable adjustment.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 53

For procedures concerning ratifying unauthorized acts, see: Guide, Vol. 14, § 160 

(Ratification).

§ 745.40.30 Contractor’s Obligation to Perform

Under a change order issued by the CO under Clause 7-185, Changes, the contractor 

must continue performance of the contract as changed, except that in costreimbursement or incrementally-funded contracts the contractor is not obligated to 

continue performance or incur costs beyond the amount incrementally funded, or limits 

established in Clause 4-85, Limitation of Cost or Clause 4-90, Limitation of Funds.

§ 745.40.40 Clauses

Clause Include in ...

(a) Clause 7-185, Changes all firm-fixed-price solicitations and contracts

(b) Clause 7-185, Changes Alternate I all cost-reimbursement solicitations and contracts

(c) Clause 7-185, Changes Alternate II all time-and-materials or labor-hour solicitations 

and contracts

(d) Clause 7-185, Changes Alternate III all fixed-price architect-engineer contracts

(e) Clause 7-190, Change Order 

Accounting

solicitations and contracts for products of 

significant technical complexity if numerous 

changes are anticipated

§ 745.45 Equitable Adjustments

§ 745.45.10 In General

Change orders are not required to be priced before performance. They usually require 

two documents: the change order, and a supplemental agreement reflecting a resulting 

equitable adjustment.

(a) If an equitable adjustment in the price or delivery terms, or both, can be 

agreed on in advance, only a supplemental agreement need be issued.

(b) If the change order has no effect on price or delivery, no equitable 

adjustment is needed and there will be no related supplemental 

agreement.

(c) Administrative changes (such as a change in an accounting citation) and 

changes issued under a clause giving the judiciary a unilateral right to 

make a change (such as an option clause) require only one document, 

signed only by the CO.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 54

§ 745.45.15 Judiciary Policy

COs must promptly negotiate equitable adjustments resulting from change orders and 

follow up when claims for equitable adjustment are not received within 30 days after 

issuance of any change order.

§ 745.45.20 Price and/or Cost Analysis

Before negotiating an equitable adjustment, the CO must ensure that a price and/or cost 

analysis, as appropriate, is accomplished to also consider the contractor’s segregable 

costs of the change. See also: Guide, Vol. 14, § 440 (Price Analysis) and § 450 (Cost 

Analysis). If additional funds are required as a result of the change, the funds must be 

available before the supplemental agreement accomplishing the equitable adjustment is 

executed. In fixed-price contracts, analysis should include ensuring that the proposed 

equitable adjustment does not include recovery of overruns on the original work that the 

contractor is not entitled to recover.

§ 745.45.25 Settlement of Change Orders

To avoid controversies that may arise after a supplemental agreement making an 

equitable adjustment, the CO must ensure:

(a) that all elements of the equitable adjustment have been presented and 

resolved, and

(b) a release of claims is included in the supplemental agreement, similar to 

the following, stating sufficient information to identify the specific proposals 

and any exceptions to the settlement. If it is not possible to resolve all 

issues, the CO should add the statement “This release is final except for 

_________.” and list the specific issues that could not be resolved and are 

excepted from the release.

Contractor’s Statement of Release

In consideration of the modification(s) agreed to herein as complete equitable adjustments for 

the Contractor’s “proposal(s) for adjustment” dated _____, subject ________, the Contractor 

hereby releases the Government from any and all liability under this contract for further 

equitable adjustments attributable to such facts or circumstances giving rise to the “proposal(s) 

for adjustment.”

§ 745.45.30 Equitable Adjustments for Delays

(a) The contractor bears the risk of schedule and cost effects for delays it 

causes or for delays within its control.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 55

(b) Generally, the contractor is excused from nonperformance due to delays 

caused by factors for which neither the contractor nor the judiciary is

responsible.

(c) However, the contractor must bear the cost impact of such delays.

(d) The judiciary is responsible for the schedule and cost effects of delays it 

causes, delays that are under its control, or delays for which it has agreed 

to compensate the contractor.

§ 745.45.35 Excusable Delays

(a) A contractor may be granted an extension of the delivery or performance 

schedule for an excusable delay.

(b) A contractor's failure to perform may be considered due to an excusable 

delay when it arises out of either of the following types of causes:

(1) causes beyond the control and without the negligence of the 

contractor, including:

• acts of God or of the public enemy;

• acts of the judiciary in its sovereign capacity or its contractual 

capacity; and

• fires, floods, epidemics, quarantine restrictions, strikes, freight 

embargoes, or unusually severe weather; or

(2) a subcontractor default due to causes beyond the control and 

without the fault or negligence of both the contractor and the 

subcontractor, unless the products or services were obtainable 

from other sources in time to permit the contractor to meet the 

delivery schedule.

§ 745.45.40 Compensable Delays

A contractor may be granted an extension of the contract delivery or performance 

schedule, a price adjustment, or both, as the CO deems appropriate, when an 

unreasonable delay in performance is caused by the judiciary or is under its control. 

Situations that may entitle the contractor to an equitable adjustment (schedule, cost, or 

both) include:

(a) delay in issuing a notice to proceed;

(b) delay in availability of the site;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 56

(c) differing site conditions;

(d) actual or constructive changes or delays;

(e) delay in providing funding;

(f) delay in inspections;

(g) delay in issuing changes;

(h) delay in providing judiciary-furnished equipment; and

(i) failure of performance of other judiciary contractors.

§ 745.45.45 Contractor’s Burden of Proof

The contractor has the burden of proof in establishing the basis for the equitable 

adjustment to which it is entitled as compensation for the delay, both in terms of a price 

increase and in terms of a revised delivery date.

§ 745.45.50 Concurrent Causes

When a delay is attributable to both the judiciary and the contractor, a delivery or 

performance schedule adjustment must not normally be granted for a period of delay 

caused at least in part by actions or failures on the part of the contractor. Damages 

may not be assessed against the contractor in such situations.

§ 745.45.55 Clauses

Clause Include in ...

(a) Clause 7-195, Excusable 

Delays

all solicitations and contracts for products and services, 

when using a cost-reimbursement contract, time-andmaterials contract or labor-hour contract

(b) Clause 7-200, Judiciary 

Delay of Work

solicitations and contracts for products. The clause may 

also be used in solicitations and contracts for fixed-price 

services

(c) Clause 7-205, Payment for 

Judiciary Holidays

all solicitations and contracts when awarding a time-andmaterials or labor-hour contract

(d) Clause 7-210, Payment for 

Emergency Closures

all solicitations and contracts
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 57

§ 745.50 Acceleration of Performance

§ 745.50.10 In General

The judiciary has the right to require accelerated performance under Clause 7-185, 

Changes. However, acceleration can be very costly. Therefore, this right must be 

exercised only when required to maintain the operational capability of the judiciary or 

when the CO otherwise determines acceleration is necessary.

§ 745.50.20 Documentation

COs must document the specific facts that require acceleration of performance and the 

estimated impact on price. Whenever possible, the CO must negotiate acceleration 

actions as supplemental agreements rather than by issuance of change orders.

§ 745.50.30 Constructive Acceleration

COs must be alert to constructive acceleration situations. Constructive acceleration 

occurs when the judiciary does not agree to a delivery or performance schedule 

extension to which the contractor is entitled, or is later determined to be entitled. This 

has the effect of causing the contractor to accelerate performance. Such acceleration 

may form the basis for a claim against the judiciary for an increase in price.

§ 745.55 Novation and Change of Name Agreements

§ 745.55.10 Policy

(a) The government, including the judiciary, generally prohibits the transfer of 

government contracts from the contractor to a third party by contract 

novation. However, when it is in its interest, the government may 

recognize a third party as the successor in interest when the third party's 

interest arises out of the transfer of:

(1) all the contractor's assets, or

(2) the entire portion of the assets involved in performing the contract.

(b) If the judiciary agrees to recognize a successor in interest, the procedures 

of this chapter must be followed to ensure that payments are made to the 

proper party. Failure to follow the procedures at § 745.55.20 (Recognizing 

Novation/Change of Name Executed by Another Agency) or § 745.55.30 

(Procedures When Judiciary Is Responsible Contracting Officer), may 

result in making payment to the wrong party, for which the Certifying 

Officer may be personally liable. See: Guide, Vol. 13, § 1310.40(b) 

(Improper Payment).
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 58

(c) Examples of situations in which novation may be permitted include, but 

are not limited to:

(1) sale of the contractor's assets with a provision for assuming 

liabilities;

(2) transfer of assets as part of a merger or corporate consolidation; 

and

(3) incorporation of a sole proprietorship or partnership, or formation of 

a partnership.

Note: The decision of a sole proprietor to obtain a Employer 

Identification Number (EIN) from the IRS for business purposes 

instead of using a Social Security Number (SSN) is not considered 

to require a novation agreement, although it may require a change 

to the financial system’s vendor table record, provided that the 

business entity remains a sole proprietorship.

(d) Federal policy is that contractors should deal with a single contracting 

officer when executing novation and change-of-name agreements, who 

will execute them on behalf of all affected agencies. The specific agency 

responsible for processing and executing novation and change-of-name 

agreements for an individual contractor is determined as follows:

(1) If administration of any of the contractor’s affected contracts —

regardless of awarding agency — has been assigned to an 

Administrative Contracting Officer (ACO), usually in an agency 

such as the Defense Contract Management Agency, that agency 

contracting office is responsible for executing novation and changeof-name agreements for the contractor.

(2) If none of the contractor’s affected contracts have been assigned to 

an ACO, the contracting office responsible for the largest unsettled 

(unbilled plus billed but unpaid) dollar balance of contracts will be 

the responsible contracting office. This will often be an executive 

agency contracting office, rather than the judiciary CO.

§ 745.55.20 Recognizing Novation/Change of Name Executed by Another Agency

If, under § 745.55.10(b) (Policy), an executive agency is responsible for executing the 

novation or change of name agreement, the judiciary CO, following receipt of a copy of 

the executed agreement signed by the executive agency CO, will recognize such 

agreement by modification of the judiciary contract incorporating the agreement. This 

may be accomplished as an administrative change order issued with only the signature 

of the judiciary CO, and does not require review or approval by the PE.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 59

§ 745.55.30 Procedures When Judiciary Is Responsible Contracting Officer

If, under § 745.55.10(b) (Policy), the judiciary CO is determined to be the responsible 

CO for executing a novation or change of name agreement with a specific contractor, 

then, following a request by that contractor for novation or change of name recognition,

the CO will:

(a) identify and request from the contractor the information necessary to 

evaluate the proposed agreement for recognizing a successor in interest 

or a name change (see: § 745.55.40 (Novation Agreements) and 

§ 745.55.50 (Change of Name Agreements));

(b) notify every other federal contract administration office and contracting 

office, including non-judiciary offices, affected by a proposed agreement 

for recognizing a successor in interest, and provide those offices with a list 

of all affected contracts;

(c) request submission of any comments or objections to the proposed 

transfer within 30 days after notification; and

(d) following receipt of all information above, the CO will determine whether it 

is in the Government’s best interest to recognize the proposed successor 

in interest on the basis of:

(1) the comments received from the other affected federal agencies;

(2) the proposed successor’s responsibility (see: Guide, Vol. 14, 

§ 320.10 (Responsible Prospective Contractors)); and

(3) any factor relating to the proposed successor’s performance of 

contracts with the Government that the Government determines 

would impair the proposed successors’ ability to perform the 

contract satisfactorily.

§ 745.55.40 Novation Agreements

(a) Any contractor’s request for recognition of a successor in interest, must 

include three signed copies of the proposed novation agreement (see: 

Appx. 7B (Sample Novation Agreement)) and one copy each, as 

applicable, of the following:

(1) the document describing the proposed transaction, e.g., 

purchase/sale agreement or memorandum of understanding;

(2) a list of all affected contracts between the transferor and the 

Government, including non-judiciary contracts, as of the date of 

sale or transfer of assets, showing for each, as of that date, the:
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 60

• contract number and contract type,

• name and address of the CO,

• total dollar value, as amended, and

• approximate remaining unpaid balance;

(3) evidence of the transferee’s capability to perform; and

(4) any other relevant information requested by the CO.

(b) Except as provided in § 745.55.40(c), the contractor must submit to the 

CO one copy of each of the following applicable documents as the 

documents become available:

(1) an authenticated copy of the instrument effecting the transfer of 

assets; e.g., bill of sale, certificate of merger, contract, deed, 

agreement, or court decree;

(2) a certified copy of each resolution of the corporate parties’ boards 

of directors authorizing the transfer of assets;

(3) a certified copy of the minutes of each corporate party’s stockholder 

meeting necessary to approve the transfer of assets, or, if no 

minutes were kept, other certified documentation demonstrating the 

respective stockholder approval of such transfer;

(4) an authenticated copy of the transferee’s certificate and articles of 

incorporation, if a corporation was formed for the purpose of 

receiving the assets involved in performing the judiciary contracts;

(5) the opinion of legal counsel for the transferor and transferee stating 

that the transfer was properly effected under applicable law and the 

effective date of transfer;

(6) balance sheets of the transferor and transferee as of the dates 

immediately before and after the transfer of assets, audited by 

independent accountants;

(7) evidence that any security clearance requirements have been met; 

and

(8) the consent of sureties on all contracts listed under 

§ 745.55.40(a)(2) if bonds are required, or a statement from the 

transferor that none are required.

(c) If the judiciary CO has acquired the documents listed under 

§ 745.55.40(b) during participation in the pre-merger or pre-contract 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 61

review process, or the government’s interests are adequately protected 

with an alternative formulation of the information, the CO may modify the 

list of documents to be submitted by the contractor.

(d) When recognizing that a successor in interest to a government contract is 

consistent with the government’s interest, the judiciary CO will execute a 

novation agreement with the transferor and the transferee. It will ordinarily 

provide in part that:

(1) the transferee assumes all the transferor’s obligations under the 

contract;

(2) the transferor waives all rights under the contract against the 

judiciary;

(3) the transferor guarantees performance of the contract by the 

transferee (a satisfactory performance bond may be accepted 

instead of the guarantee); and

(4) nothing in the agreement will relieve the transferor or transferee 

from compliance with any federal law.

(e) The CO will use the Novation Agreement format (see: Appx. 7B (Sample 

Novation Agreement)) when the transferor and transferee are corporations 

and all the transferor’s assets are transferred. This format may be 

adapted to fit specific cases, such as when the transferor or transferee is

not a corporate entity or not all the transferor’s assets are transferred.

(f) Before executing a contract novation as the responsible agency on behalf 

of the government, the CO must determine that the successor in interest is 

a responsible contractor (see: Guide, Vol. 14, § 320.10 (Responsible 

Prospective Contractors)) and obtain PE approval with OGC concurrence.

If, for any reason, it is determined not to be in the government’s interest to 

concur in the transfer of a contract from one company to another company 

via a contract novation, the original contractor remains responsible for 

contract performance and the contract may be terminated for default 

should the original contractor fail to perform.

(g) A novation agreement must be signed by:

(1) the contractor (transferor)

(2) the successor in interest (transferee), and

(3) the judiciary CO.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 62

(h) After execution by all three parties, the CO will:

(1) forward a fully signed copy of the executed novation or change of 

name agreement to both the transferor and the transferee;

(2) retain a fully signed copy in the contract file;

(3) prepare an SF 30 (Amendment of Solicitation/Modification of 

Contract), incorporating a summary of the agreement and attaching 

a complete list of contracts affected, including non-judiciary 

contracts;

(4) retain the original SF 30 with the attached list in the contract file;

(5) send a signed copy of the SF 30, with the attached list, to the 

transferor and the transferee; and

(6) send a copy of the signed SF 30, with attached list, to each other 

agency contracting office involved, which will be responsible for any 

further appropriate distribution.

(i) Clause 7-215, Notification of Ownership Changes is included in all open 

market solicitations and contracts.

§ 745.55.50 Change of Name Agreements

(a) If only a change of the contractor’s name is involved and the government’s 

and contractor’s rights and obligations remain unaffected, the parties must 

execute an agreement to reflect the name change. For guidance on 

determining which federal contracting office is responsible for executing a 

change of name agreement for a specific contractor on behalf of the 

government, see: § 745.55.10(b) (Policy). If the judiciary is the 

responsible contracting office, the proposed change of name agreement 

must be reviewed by the PE, who will consult with OGC. The contractor 

must forward to the responsible contracting officer three signed copies of 

the proposed Change-of-Name Agreement, and one copy each of the 

following:

(1) the document effecting the name change, authenticated by a 

proper official of the state having jurisdiction;

(2) the opinion of the contractor’s legal counsel stating that the change 

of name was properly effected under applicable law and showing 

the effective date; and

(3) a list of all affected contracts and purchase orders remaining 

unsettled between the contractor and the government, showing for 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 63

each the contract number and contract type, and name and 

address of the contracting office. If there is any question as to 

which federal contracting office is responsible for executing the 

agreement, the contracting officer may also request the total dollar 

value as modified and the remaining unpaid balance for each 

contract.

(b) When the judiciary is the responsible contracting office, following approval

by the PE and concurrence by OGC, the CO is responsible for:

(1) processing and signing the change-of-name agreements (see:

Appx. 7C (Sample Change of Name Agreement));

(2) processing and signing the contract modification specifying that the 

name has been changed using the following language; and

“The purpose of this modification is to incorporate the attached 

Change-of-Name Agreement between the contractor and the 

government. This contract is modified by substituting the name 

(contractor’s previous name) for the name (contractor’s changed 

name) wherever it appears in the contract. All other terms and 

conditions remain unchanged.”

(3) distributing a copy of the executed change of name agreement to 

all other affected federal agencies that will be responsible for any 

further appropriate distribution.

§ 750 Claims and Disputes

§ 750.10 Policy

§ 750.10.10 In General

It is the policy of the judiciary to resolve contractual issues by mutual agreement at the 

level of the CO whenever possible. The CO must consider holding informal discussions 

to resolve differences before issuing a final decision on a claim.

§ 750.10.20 Initiation of Contract Disputes

A contract dispute is initiated by:

(a) a written claim, demand or assertion by a contracting party for:

(1) the payment of money in a sum certain,

(2) the adjustment or interpretation of contract terms, or
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 64

(3) other specific relief arising under or relating to the contract;

(b) any termination for convenience settlement proposal that is denied in 

whole or in part; and

(c) any request for an equitable adjustment that is denied in whole or in part.

§ 750.10.30 Submission of a Claim

(a) The contract claim must be submitted in writing to the CO and must be 

filed within 12 months of its accrual unless superseded by a different time 

period as specified in the contract’s terms and conditions. The CO must 

document the contract file with evidence of the date of receipt of any 

submission that the CO deems to be a claim.

(b) The claim must contain a detailed statement of the legal and factual basis 

of the claim with any accompanying documents to support the claim.

(c) The claimant must specify the specific relief requested as provided above 

in § 750.10.20(a)-(c) (Initiation of Contract Disputes).

(d) If the CO requires additional information the CO will promptly request the 

claimant to provide such information.

(e) The contractor must proceed with performance of the contract pending 

resolution of the claim.

§ 750.20 Decisions and Appeal

§ 750.20.10 CO Authority and Responsibility

(a) Judiciary COs are authorized to decide or settle disputes under the 

Disputes clause, within the limits of their COCP appointment. This 

authority does not extend to:

(1) A claim or dispute for penalties or forfeitures prescribed by statute 

or regulation that another federal agency is specifically authorized 

to administer, settle, or determine; or

(2) The settlement, compromise, payment, or adjustment of any claim 

involving potential fraud. See: § 735.55 (Fraud, Gross Mistake, or 

Latent Defects).

(b) The CO must issue a written determination on any contractor claim 

against the judiciary within 60 days of receipt of all the requested 

information from the contractor.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 65

(c) If the CO is unable to render a determination within 60 days, the CO will 

notify the contractor of the date on which a determination will be made.

(d) The claim may be denied when the CO determines that the contractor is 

unable to support any part of the claim and/or there is evidence that the 

inability is attributable to either misrepresentation of fact or potential fraud 

on the contractor's part. CO decisions to deny a claim, in whole or in part, 

must be coordinated with the PE, who will consult with OGC as to the 

legal basis of the claim and its denial.

(e) The determination of the CO will be considered the final determination of 

the judiciary.

§ 750.20.20 Issuance of CO Determination

When a claim by or against a contractor cannot be resolved by agreement and a 

determination to deny or assert the claim, in whole or in part, under Clause 7-235, 

Disputes is necessary, the CO must:

(a) review the facts pertinent to the claim;

(b) obtain assistance from the PE, who will consult with OGC and other 

advisors; and

(c) issue a final determination in writing.

§ 750.20.30 Contents of Final Determination

The final determination must include:

(1) a description of the claim or dispute with references to the pertinent 

contract provisions;

(2) a statement of the factual areas of agreement and disagreement;

(3) a statement of the CO's determination with supporting rationale; and

(4) the following paragraph:

This is the final determination of the contracting officer under the 

clause of your contract entitled Disputes. This determination may 

be appealed to a court of competent jurisdiction.

§ 750.20.40 Evidence of Contractor Receipt

The CO must furnish a copy of the determination to the contractor by:
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 66

• certified mail,

• return receipt requested, or

• another method that provides evidence of receipt.

§ 750.20.50 Modification of Contract

If the CO is able to resolve the claim through discussions and negotiation, the 

settlement agreement must be incorporated in a bilateral modification to the contract. 

Contract modifications should be executed on an SF 30 (Amendment of 

Solicitation/Modification of Contract). The modification must include the following 

statement:

“This modification is intended to and does constitute a full and final 

settlement and disposition of all matters relating to the claim dated (insert 

date) and is a full release, accord, and satisfaction of any and all claims,

demands or causes of action that the contractor has against the judiciary 

arising out of or related to this claim.”

§ 750.20.60 Appeal

Contractors may appeal the CO’s final determination to a court of competent 

jurisdiction. The contractor must comply with the final determination of the CO unless 

such determination is overturned by a court of competent jurisdiction. If the contractor 

fails to continue contract performance while the claim is being settled or fails to comply 

with the final determination of the CO, the CO may terminate the contract for default 

and/or impose other available remedies.

§ 750.20.70 Clause

Include Clause 7-235, Disputes in all open market solicitations and contracts over the 

judiciary small purchase threshold.

§ 755 Contract Termination

§ 755.10 In General

§ 755.10.10 Termination for Default or Convenience

(a) Contracts may be terminated for default or convenience only when such 

action is in the interest of the judiciary. The CO should consider a no-cost 

termination settlement of the contract when:

(1) the contractor will accept it;

(2) there is no judiciary furnished property; and
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 67

(3) there are no outstanding payments, debts due to government or 

other contractor obligations, such as warranty or data rights issues.

(b) The potentially high price to pay for a wrongful termination requires the 

CO to carefully review the clauses and surrounding circumstances before 

making a decision to recommend termination.

§ 755.10.20 Applicability

This section applies to contracts that contain Clause 3-3, Provisions, Clauses, Terms 

and Conditions – Small Purchases, or other clauses permitting termination for the 

convenience of the judiciary or for contractor default. For other clauses and when they 

should be included in a contract, see: § 755.20.60 (Clauses) and § 755.25.60 (Clause). 

This section establishes uniform procedures for the complete or partial termination of 

such contracts.

§ 755.10.40 Review and Approval

The PE must review and approve, in writing, all proposed contract terminations whether 

for convenience or default.

§ 755.15 Notice of Termination

§ 755.15.10 In General

(a) The CO may terminate contracts only by written notice to the contractor. 

For a sample notice, see: Appx. 7D (Sample Contract Termination 

Notices).

(b) Notice of termination for convenience may be done at any time.

(c) Notice of termination for default should be done only after following the 

termination procedures at § 755.30 (Termination for Default Procedures).

(d) Issuance of any termination notice must be by certified mail, return receipt 

requested or any other method that provides evidence of receipt.

(e) The notice must state:

(1) the type of termination contemplated (convenience or defaults) and 

the contract clause authorizing the termination;

(2) the effective date of termination;

(3) the extent of the termination and, if a partial termination, the portion 

of the contract to be continued; and
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 68

(4) any special instructions.

(f) For additional information required to be included in a notice of termination 

for default, see: § 755.35 (Termination for Default Notice).

§ 755.15.20 Distribution

When the termination notice is sent to the contractor, the CO must also distribute a copy 

of the notice to any known assignee, guarantor, or surety of the contractor.

§ 755.15.30 Amendment of Notice

The CO may amend a termination notice to:

(a) correct nonsubstantive mistakes in the notice;

(b) add supplemental data or instructions;

(c) rescind the notice if the items of work terminated have been completed or 

shipped before the contractor receives the notice; and/or

(d) reinstate the terminated portion of a contract.

§ 755.15.40 Reinstatement

The CO may, with the consent of the contractor, reinstate the terminated portion of a 

contract in whole or in part by amending the notice of termination when:

(a) circumstances clearly indicate a requirement for the terminated items, or

(b) reinstatement is otherwise advantageous to the judiciary.

§ 755.20 Termination for Convenience

§ 755.20.10 In General

Termination for convenience is appropriate when the judiciary no longer requires the 

contracted products or services.

§ 755.20.15 Applicability

The provisions of this part apply to all contracts containing Clause 3-3, Provisions, 

Clauses, and Terms – Small Purchases, Clause 7-220; Termination for Convenience of 

the Judiciary (Fixed-price); Clause 7-223, Termination for the Convenience of the 

Judiciary (Short Form); or Clause 7-225, Termination (Cost-Reimbursement).
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 69

§ 755.20.20 Settlement Methods

The CO may settle contracts terminated for convenience by:

(a) negotiated agreement (including a no-cost settlement);

(b) CO determination (used only when a negotiated agreement cannot be 

reached);

(c) costing vouchers, if the contract is a cost-reimbursement contract; or

(d) a combination of these methods.

§ 755.20.25 Policy

When possible, the CO must negotiate a fair and prompt settlement with the contractor 

according to the applicable clause and within the appropriate allocable, allowable, and 

reasonable amounts. See also: Guide, Vol. 14, § 470 (Cost Allowability).

§ 755.20.30 Contractor’s Duties

After receiving a termination notice and, except as otherwise directed by the CO, the 

contractor must comply with the clause and the termination notice, which generally 

require the contractor to:

(a) stop work immediately on the terminated portion of the contract and stop 

placing subcontracts under that portion;

(b) terminate all subcontracts related to the terminated portion of the contract;

(c) immediately advise the CO of any special circumstances precluding the 

stoppage of work;

(d) perform the continued portion of the contract, if any, and promptly submit 

any request for an equitable adjustment of price with respect to the 

continued portion, supported by evidence of any increase in the cost;

(e) take necessary actions to protect and preserve property in which the 

judiciary has or may acquire an interest, and, as directed by the CO:

(1) deliver the property to the judiciary, or

(2) otherwise dispose of it;

(f) promptly notify the CO in writing of any legal proceedings growing out of a 

subcontract or other commitment related to the terminated portion of the 

contract;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 70

(g) settle outstanding liabilities and claims arising out of subcontract 

terminations, with written pre-approval or ratification as required by the 

CO;

(h) promptly submit a settlement offer, supported by appropriate 

documentation; and

(i) dispose of any termination inventory, as the CO directs or authorizes.

§ 755.20.35 Settlement of Subcontractor Claims

(a) Subcontractor Rights

A subcontractor has no contractual rights against the judiciary, since it 

lacks what is known as “privity of contract.” However, the subcontractor 

may have rights against the prime contractor or the immediate 

subcontractor with which it has contracted. Following termination of a 

judiciary contract, or a change that necessitates subcontract termination, 

the contractor is responsible for prompt settlement of the termination 

claims of all their immediate subcontractors. The subcontractors have 

responsibility for settlement of any of their next lower tier subcontractors.

(b) Prime Contractor Rights and Obligations

The termination clauses provide that, following contract termination, the 

contractor must, except as otherwise directed by the CO, terminate all 

subcontracts to the extent that they relate to performance of the 

terminated work.

§ 755.20.40 Subcontractor Settlements

The reasonableness of the contractor's settlement with a subcontractor must be 

measured by the aggregate amount that would be due under an equivalent judiciary 

termination clause. The CO may allow reimbursement to the prime in excess of that 

amount only in unusual cases, and then only when satisfied that the subcontract terms 

were negotiated in good faith and did not unreasonably increase the subcontractor's 

rights. The provisions of this section must be used as a guide in evaluating settlement 

of a subcontract terminated for the convenience of a contractor whenever the settlement 

could be the basis of a prime contractor claim for reimbursement by the judiciary.

§ 755.20.45 Delay in Settlement of Subcontractor Claims

When a contractor's inability to reach settlement with a subcontractor delays the 

settlement of the judiciary contract, the CO may settle with the prime contractor for all 

amounts except the subcontractor settlement offer, and reserve judiciary and contractor 

rights as to the subcontractor settlement offer.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 71

§ 755.20.50 Assistance in Subcontract Settlements

In unusual cases, the CO may determine that it is in the interest of the judiciary to offer 

to assist the prime contractor in the settlement of a particular subcontract. The 

judiciary, the prime contractor, and the subcontractor may then enter into an agreement 

covering settlement of the subcontract. In such case, the subcontractor must be paid by 

the prime contractor as part of the overall settlement.

§ 755.20.55 Direct Settlement with Subcontractors

(a) Clause 7-220, Termination for Convenience of the Judiciary (Fixed-Price)

clause gives the judiciary the right, but not the obligation, to settle and pay 

any claims arising out of subcontract terminations.

(b) Direct settlements with subcontractors are not encouraged, since the 

judiciary contractor is obligated to settle and pay subcontractor termination 

claims.

(c) However, when the CO determines that it is in the interest of the judiciary 

to settle a subcontractor claim directly and such direct settlement has 

been approved by the PE, the CO may, after notifying the contractor, 

direct the assignment of all contractor rights to the judiciary, and settle the 

subcontractor claim using the termination procedures for settlement of 

judiciary contracts. An example in which the interest of the judiciary would 

be served is when a subcontractor is the sole source of a product and it 

appears that a delay by the contractor in settling the subcontractor's claim 

will jeopardize the subcontractor's financial position.

§ 755.20.60 Clauses

Clause Include in ...

(a) Clause 7-220, 

Termination for 

Convenience of 

the Judiciary 

(Fixed-Price)

open market solicitations and contracts when a fixed-price contract is 

contemplated and the contract amount is expected to be over the 

judiciary’s small purchase threshold, except in contracts for architectengineer services, which are required to include Clause 5-70, 

Termination (Fixed-Price Architect-Engineer).

(b) Clause 7-223, 

Termination for 

Convenience of 

the Judiciary 

(Short Form)

open market solicitations and contracts when the contract is expected 

to be at or less than the judiciary’s small purchase threshold, except 

when the contracting officer has determined that another termination 

for convenience clause is appropriate (i.e., Clause 3-3, Provisions, 

Clauses, Terms and Conditions – Small Purchases, Clause 5-70, 

Termination (Fixed-Price Architect-Engineer), or Clause 7-220, 

Termination for Convenience of the Judiciary (Fixed-Price) when a CO 

believes the longer form is more appropriate, or Clause 7-225, 

Termination (Cost-Reimbursement) for cost reimbursement contracts).
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 72

§ 755.20.60 Clauses

Clause Include in ...

(c) Clause 7-225, 

Termination 

(CostReimbursement)

open market solicitations and contracts when a cost-reimbursement 

contract is contemplated.

(d) Clause 7-225, 

Termination 

(CostReimbursement)

Alternate I

open market solicitations and contracts when a time-and-materials or 

labor-hour contract is contemplated.

§ 755.25 Termination for Default

§ 755.25.10 In General

Termination for default is the exercise of the judiciary’s contractual right, under the 

applicable Termination for Default clause, to completely or partially terminate a contract 

by reason of the contractor's actual or anticipated failure to perform its contractual 

obligations. The judiciary’s right to terminate is subject to the notice requirements of the 

clause. The judiciary may terminate all or any part of a contract without regard to 

severability of contract obligations when the contractor fails to:

(a) complete any material requirement of the contract within the time specified 

in the contract (including any extensions);

(b) make progress to a degree that this failure endangers performance of the 

contract;

(c) perform any other contract provision; or

(d) give adequate assurances of performance after issuance of a delinquency 

notice.

§ 755.25.20 Waiver and Reinstatement of Termination Rights

(a) When termination for default is warranted, the total undelivered contract 

quantity, whether delinquent or not, may be terminated for default.

(b) Failure of the CO to terminate a contract within a reasonable time when a 

contractor fails to make timely delivery may result in a waiver of the right 

of the judiciary to terminate for default. In this event, a new delivery date 

must be established by contract modification. The new delivery date must 

be reasonable considering all the circumstances of contract performance. 

When the new date is established, the right to terminate for default is 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 73

reinstated. In extreme cases, where the judiciary and the contractor 

cannot agree on a new delivery date, or the contractor refuses to commit 

to a new date, the CO may unilaterally establish a new date.

§ 755.25.30 Conversion for Convenience Termination

If the contractor can establish that its failure to perform arose out of causes beyond its 

control and without its fault or negligence, the default termination clause provides that a 

termination for default will be deemed a termination for the convenience of the judiciary, 

and the rights and obligations of the parties will be so governed. For this reason, the 

CO should make every attempt to determine if the reason for the failure to perform is 

excusable before issuing a notice of termination for default.

§ 755.25.40 Mitigation of Liquidated Damages

If the contract includes a liquidated damages clause, the CO must take all reasonable 

steps to mitigate liquidated damages. If the CO is considering terminating the contract 

for default, the CO must seek expeditiously to obtain performance by the contractor or 

terminate the contract.

§ 755.25.50 Termination Factors to Consider

When a default termination is being considered, the CO must ensure that termination for 

default rather than for convenience is appropriate. The CO must consult with program 

officials, technical personnel, and the PE, and consider the following factors:

(a) the specific failure of the contractor and, unless time does not permit, the 

excuses for the failure;

(b) the availability of the products or services from other sources;

(c) the urgency of the need for the products or services, and whether they can 

be obtained sooner from sources other than the delinquent contractor;

(d) the degree to which the contractor is essential to the judiciary, and the 

effect of a termination for default on the contractor's capability as a 

supplier under other contracts;

(e) the effect of a termination for default on the ability of the contractor to 

liquidate progress payments; and

(f) any other pertinent facts and circumstances.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 74

§ 755.25.60 Clause

Clause Include in ...

Clause 7-230, Termination for 

Default (Fixed-Price – Products and 

Services)

open market fixed-price solicitations and contracts 

expected to exceed the judiciary’s small purchase 

threshold

§ 755.30 Termination for Default Procedures

§ 755.30.10 Issuing Delinquency and Termination Notices

The following table indicates which action by the CO is generally most appropriate 

based on the point in time at which a contractor’s performance becomes unsatisfactory.

§ 755.30.10 Issuing Delinquency and Termination Notices

If ... the CO should issue ...

(a) the contract’s required delivery date is in the future, but 

there is reason to believe that the contractor will not 

meet that date (failure to make progress so as to 

endanger performance); or if services being performed 

are not in conformance with the contract

a cure notice (see: § 755.30.20 

(Issuing a Cure Notice) and 

§ 735.20.20 (Remedies Involving 

Cure Notice or Show Cause))

(b) the contract’s required delivery date or date for 

completion of services has been passed without 

delivery or with delivery that has been rejected

a show cause notice (see: 

§ 755.30.40 (Issuing a Show 

Cause Notice))

(c) a cure notice has been issued, and the contractor has 

failed to correct the performance issue

a show cause notice (see: 

§ 755.30.40 (Issuing a Show 

Cause Notice))

(d) a show cause notice has been issued, and the 

contractor has failed to respond or to correct the 

performance issue, or the contractor’s response does 

not show that the failure to perform was excusable

a notice of termination (see: 

Appx. 7D (Sample Contract 

Termination Notices))

Note: While a cure notice or show cause notice is not mandatory when termination is 

based on failure to meet a contract delivery date(s), issuance of a show cause notice is 

advised to allow the contractor the opportunity to assert any alleged excusable delay. If 

the CO, after consultation with the PE to analyze any potential waiver of the right to 

terminate and any excusable delays asserted by the contractor, determines that 

termination for default is proper, the CO must issue a termination notice at once.

§ 755.30.20 Issuing a Cure Notice

(a) A written cure notice must be issued when the CO determines that the 

contractor is failing to make satisfactory progress to a degree that this 

failure endangers contract performance, or determines that some other 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 75

failure, under the contract or otherwise (other than failure to make timely 

delivery) is cause for concern. Coordination of the cure notice with the PE 

is required. See: § 735.20.20 (Remedies Involving Cure Notice or Show 

Cause).

(b) The notice must specify the failure and give the contractor 10 days (or 

longer, if necessary) to either correct the deficiency or provide written 

assurance to the judiciary of the steps that will be taken to cure the failure. 

A cure notice based on failure to make satisfactory progress may be 

issued before the contractually specified delivery date if the CO has cause 

to believe that the contractor is too far behind schedule to be able to 

deliver by the required date. A cure notice based on other causes (e.g., 

unsatisfactory quality of performance) may be issued at any time, provided 

that there is sufficient time remaining in the contract delivery schedule for 

the contractor to implement a correction.

(c) At a minimum, a cure notice must:

(1) specifically state the failure endangering performance as it relates 

to the corresponding requirement in the contract;

(2) allow the contractor at least 10 days to “cure” the failure;

(3) be in writing and sufficient to support a default termination; and

(4) follow the following format:

Subject: Cure Notice

You are notified that the judiciary considers your _____ (contracting officer specifies the 

contractor’s failure or failures) a condition that is endangering performance of the contract. 

Therefore, unless this condition is cured within 10 days after receipt of this notice (or the CO 

inserts any longer time that may be considered reasonably necessary), the judiciary may 

terminate for default under the terms and conditions of the ________ (insert clause title)

clause of this contract.

§ 755.30.30 Actions Following Issuance of Cure Notice

After a cure notice has been issued, the contract generally cannot be terminated until 

the 10 day “cure” period (or other time period specified in the cure notice) has elapsed.

§ 755.30.40 Issuing a Show Cause Notice

(a) When the CO makes a preliminary determination that termination for 

default is appropriate, a written show cause notice should be provided to 

the contractor of the judiciary’s intent to terminate. Issuance of a written 

show cause notice is particularly critical when termination is based on 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 76

causes other than failure to make timely delivery. Issuance of the show 

cause notice is optional when the proposed termination is based on failure 

to make timely delivery. Its use is, however, encouraged before any 

termination for default as it affords the contractor an opportunity to provide 

evidence the delinquency was beyond its control or was the fault of the 

judiciary, or other defenses should the termination result in contract 

litigation.

(b) A show cause notice is used:

(1) after a cure notice time elapses without a satisfactory response 

from the contractor;

(2) without a preceding cure notice when there is insufficient time 

remaining in the contract delivery schedule for the contractor to 

cure or correct the delinquency; or

(3) when the time for delivery or completion of services has passed 

without performance.

Note: The PE must approve a show cause notice in writing before it is 

issued. Usually a show cause notice is issued when there is less than 10 

days remaining in the contract delivery schedule, or when the delivery 

date has passed. However, it can be used at any time when it is 

determined there is an “insufficient amount of time left.”

(c) At a minimum, a show cause notice must:

(1) request the contractor to show cause why the contract should not 

be terminated for default (i.e., identify any waiver of delivery 

schedule or describe any action or inaction of the judiciary that has 

contributed to the failure to perform, or describe any other factors 

contributing to the delinquency that were beyond the control, and 

without the fault or negligence, of the contractor);

(2) inform the contractor that failure to explain the cause of the 

deficiency/delinquency may be taken as admission that no valid 

explanation exists;

(3) invite the contractor to discuss the matter at a conference, when 

appropriate; and

(4) inform the contractor of its liabilities in the event of contract default.

(d) A show cause notice must be in the following format:
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 77

Subject: Show Cause Notice

Since you have failed to ___________(insert “perform Contract No. _______) within the time 

required by its terms”, or “cure the conditions endangering performance under Contract No. 

_______as described to you in the judiciary’ s letter of ______(date),” the judiciary is 

considering terminating the contract under the provisions for default of this contract. Pending 

a final decision in this matter, it will be necessary to determine whether your failure to perform 

arose from causes beyond your control and without fault of negligence on your part. 

Therefore, you are given the opportunity to present, in writing, any facts bearing on the 

question to __________ (insert the name and complete address of the CO), within 10 days 

after receipt of this notice. Your failure to present any excuses within this time may be 

considered as an admission that none exist. Your attention is invited to the respective rights 

of the contractor and the judiciary and the liabilities that may be invoked if a decision is made 

to terminate for default.

Any assistance given to you on this contract or any acceptance by the judiciary of delinquent 

products or services will be solely for the purpose of mitigating damages, and it is not the 

intention of the judiciary to condone any delinquency or to waive any right the judiciary has 

under the contract.

§ 755.30.50 Evaluate Contractor’s Response

A contractor’s response to a delinquency notice can take several forms:

(a) Cure Notice Response

A contractor is not necessarily required to respond to a cure notice since 

the contractor is told to correct the problem before the contract becomes 

delinquent. Often, however, the contractor will respond in writing with its 

detailed plans to cure performance. Such a response does not absolve 

the contractor of actually curing the delinquency within the period specified 

in the cure notice. If the problem is not actually cured, the judiciary, 

following expiration of the cure period specified in the cure notice, has the 

option of issuing either a show cause notice or a termination notice. A 

show cause notice may also be issued if the contractor’s response to the 

cure notice is considered inadequate.

(b) Show Cause Notice Response

If the CO chooses to issue a show cause (either with or without an earlier 

cure notice), the contractor has 10 days to respond. The CO must 

evaluate the contractor’s response and take one of the following actions, 

based on that evaluation:

(1) defer termination action (appropriate when the contractor’s 

response shows that timely completion of the work is assured or 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 78

when the response adequately addresses other issues such as 

quality of work, which were the basis of the show cause notice);

(2) modify the contract (appropriate when the COs analysis shows 

there has been excusable delay or waiver, in which case a 

modification is required to establish a new delivery date and to 

reinstate the judiciary’s termination rights).

(3) issue a notice of termination when the response to a show cause 

notice is determined to be inadequate.

(c) The PE must review and approve all proposed terminations for default, as 

well as issuance of cure notices and show cause notices. When a CO 

proposes to initiate termination for default, the CO must prepare for the 

contract file a memorandum that fully explains the proposed action. This 

memorandum must be submitted to the PE for written concurrence before 

issuance of a cure notice, show cause notice or notice of termination. Any 

contractor response, and the court CO’s analysis of that response, must 

also be provided to the PE.

§ 755.35 Termination for Default Notice

§ 755.35.10 In General

Unless it is determined that the nonperformance will be cured, then, immediately 

following a determination that termination is proper under § 755 (Contract Termination), 

or after expiration of the 10-day period, or longer, if allowed by a delinquency notice, the 

CO may issue a notice of termination for default, provided that such termination has 

been reviewed and approved by the PE in consultation with OGC.

§ 755.35.20 Termination Notice Contents

The notice of termination for default must meet all the general requirements provided in 

§ 755.15 (Notice of Termination) and:

(a) provide the contract number and date;

(b) describe the acts or omissions constituting the default;

(c) state that the contractor's right to proceed with performance of the contract 

(or a specified portion of the contract) is terminated;

(d) state that the products or services terminated may be procured against the 

contractor's account, and that the contractor will be held liable for any 

excess repurchase costs;
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 79

(e) state that the judiciary reserves all rights and remedies provided by law or 

under contract, in addition to charging excess costs;

(f) inform the contractor that the termination is subject to Clause 7-235, 

Disputes; and

(g) when the CO has determined that the failure to perform is not excusable, 

state that the notice reflects that decision, and that the contractor has the 

right to appeal as specified in Clause 7-235, Disputes.

§ 755.35.30 Notice Distribution

The CO must make the same distribution of the termination notice as was made of the 

contract, and any surety must be furnished a copy of both the delinquency notices and 

the notice of termination at both its main and local offices and asked to advise whether it 

desires to arrange for completion of the work under a takeover agreement. See also:

Guide, Vol. 14, § 620.40 (Administration of Contracts Requiring Bonds).

§ 755.40 Procedure in Lieu of Termination for Default

When the CO determines that the contractor's failure to perform arose from causes 

beyond its control and without its fault or negligence, the CO may not terminate the 

contract for default. When it is in the interest of the judiciary to do so, the CO may, in 

lieu of termination for default:

(a) terminate the contract for convenience;

(b) permit the contractor, its surety, or its guarantor to continue performance 

of the contract under a revised delivery schedule;

(c) permit the contractor to continue performance of the contract by means of 

a subcontract or other business arrangement with an acceptable third 

party, if the rights of the judiciary are adequately preserved; or

(d) execute a no-cost termination settlement agreement (or terminate on 

notice if allowed under the contract), if the requirement for the products 

and services specified in the contract no longer exists and the contractor 

is not liable to the judiciary for damages, as provided below.

§ 755.45 Actions Following Issuance of Termination

§ 755.45.10 Payment Precautions

(a) The CO must notify the payment office to withhold further payments under 

the terminated contract.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 80

(b) The CO must also guard against the potential for overpayment resulting 

from outstanding lien rights of laborers and material suppliers against 

completed products that have been accepted and for which payment have 

been made to the contractor.

(c) The CO must take one or more of the following measures before making 

any payment following a termination:

(1) ascertain whether the payment bonds, if any, furnished by the 

contractor are adequate to satisfy all claims, or whether it is 

feasible to obtain similar bonds to cover outstanding liens;

(2) require the contractor to furnish appropriate statements from 

laborers and material suppliers disclaiming any lien rights they may 

have in the completed products;

(3) obtain appropriate agreement between the judiciary, the contractor, 

and any claimants to ensure release of the judiciary from any 

potential liability to the contractor or claimants;

(4) withhold from the amount otherwise due for the completed products 

an amount the CO determines necessary to protect the judiciary’s 

interest, according to § 740.40 (Withholding Payments); or

(5) take any other action that is appropriate in view of the contractor's 

degree of solvency and other circumstances.

§ 755.45.20 Determination Following Termination Notice

When the CO is unable to determine, before issuing the notice of termination, whether 

the contractor's failure to perform arose from causes beyond its control and without its 

fault or negligence, the CO must make a written decision on that point as soon as 

practicable after issuing the notice. This decision must be delivered promptly to the 

contractor, with a notification of the right to appeal as specified in Clause 7-235, 

Disputes.

§ 755.45.30 Undelivered Work

The judiciary is not liable for the contractor's costs on undelivered work and is entitled to 

repayment of any advance payments for undelivered work.

§ 755.45.40 Completed Products

The CO may direct the contractor to transfer title and deliver to the judiciary completed 

products. The judiciary must pay the contractor the contract price for any products 

completed, delivered and accepted.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 81

§ 755.45.50 Excess Costs of Reprocurement

The contractor is liable to the judiciary for any excess costs the judiciary incurs in 

acquiring products and services similar to those terminated for default, and any other 

damages, whether or not the repurchase is made.

§ 755.45.60 Mailing Checks to Surety

If requested by the surety, and agreed to by the contractor and any assignees, 

arrangements may be made to have future checks mailed to the contractor in care of 

the surety. In this case, the contractor must forward a written request to the designated 

disbursing officer, specifically directing a change in address for mailing of checks.

§ 755.50 Remedies and Damages Following Termination for Default

§ 755.50.10 Remedies

On rightful rejection or justifiable revocation of acceptance of products or services, the 

judiciary has a security interest in products delivered under the contract for any 

payments and expenses reasonably incurred in:

• inspection,

• receipt,

• transportation,

• care, and

• custody.

§ 755.50.20 Repurchase Against Contractor’s Account

(a) When products or services are still required after termination for default, 

the CO may repurchase the same or similar products or services against 

the contractor's account as soon as practicable. The repurchase must be 

at a reasonable price, considering the quality required by the judiciary and 

the time within which the products or services are required. Whenever 

practicable, the CO must make necessary repurchase decisions before 

issuing the termination notice.

(b) The CO may repurchase a quantity larger than the quantity terminated for 

default when needed, but the defaulting contractor may be charged for no 

more than the terminated quantity (including any variations in quantity 

permitted by the terminated contract).

(c) If the repurchase is for a quantity not larger than the terminated quantity, 

the CO may use any terms and contract methods deemed appropriate for 

the repurchase, following normal written approval or deviation procedures. 

If the repurchase is for a quantity larger than the terminated quantity, the 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 82

entire quantity must be treated as a new purchase, adhering to all 

applicable procedures.

(d) If repurchase is made at a price higher than the price of the terminated 

products or services, the CO must, after final payment of the repurchase 

contract, make a written demand on the defaulted contractor for the 

excess amount, taking into account any increases or decreases in cost 

due to transportation charges, discounts, and other factors.

§ 755.50.30 Damages

(a) Default

If a contract is terminated for default or if a procedure in lieu of termination 

for default is followed (other than termination for convenience or a no-cost 

settlement agreement), the CO must ascertain and demand any damages 

to which the judiciary may be entitled. These damages are in addition to 

any excess repurchase cost.

(b) When the CO has accepted defective products, and such acceptance has 

been revoked on the basis of latent defect, fraud, or gross mistake 

amounting to fraud (see: § 735.55 (Fraud, Gross Mistake, or Latent 

Defects)), the judiciary may recover as damages for any nonconformity 

the loss resulting in the ordinary course of events from the contractor's 

breach as determined in any reasonable manner.

(c) The measure of damages for breach of warranty is the difference at the 

time and place of acceptance between the value of the products or 

services accepted and the value they would have had if they had been as 

warranted, unless special circumstances show proximate damages of a 

different amount.

(d) The CO must obtain concurrence of the PE before any demand for 

damages following a termination for default.

§ 760 Contract Closeout

§ 760.10 Closeout of Contract Files

§ 760.10.10 In General

Contract closeout refers to the procedure of verifying that all administrative matters 

have been concluded on a contract that is physically complete. A contract is physically 

complete when the contractor has delivered the required products or performed the 

required services and the judiciary has inspected and accepted the products or 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 83

services. A physically complete contract may not have had the final payment made, in 

which case final payment would be part of the contract closeout.

§ 760.10.20 Closeout Time Frames

Standard times for closing out a contract vary depending on the contract type:

(a) files for orders using small purchase procedures are considered closed 

after receipt of property or services when the CO receives evidence of

final payment;

(b) files for firm-fixed-price contracts, other than those using small purchase 

procedures, must be closed within six months after the date on which the 

CO receives evidence of physical completion;

(c) files for contracts requiring settlement of indirect cost rates must be closed 

within 36 months of the month in which the CO receives evidence of 

physical completion; and

(d) files for all other contracts must be closed within 20 months of the month 

in which the CO receives evidence of physical completion.

§ 760.10.30 Closeout Actions

When closing out contract files, the CO must use the closeout procedures at § 760.20 

(Contract Closeout Procedures). However, these closeout actions may be modified to 

reflect the extent of administration that has been performed. A contract file must not be 

closed if:

(a) the contract is in litigation or under appeal;

(b) all termination actions have not been completed; or

(c) warranties or guarantees provided under the contract are still in effect.

§ 760.10.40 Physically Completed Contracts

(a) Except for rental, use, and storage agreements, a contract is physically 

complete when one of two events has occurred:

(1) all required products or services have been delivered or performed, 

as well as inspected and accepted; and all existing options have 

been exercised or have expired; or

(2) a contract termination notice has been issued to the contractor.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 84

(b) Rental, use, and storage agreements are considered to be physically 

completed when the:

(1) judiciary has given the contractor a notice of complete contract 

termination; or

(2) contract period has expired.

§ 760.20 Contract Closeout Procedures

§ 760.20.10 Administrative Closeout

The CO is responsible for initiating administrative closeout of the contract after receiving 

evidence of its physical completion. At the outset of this process, the CO must review 

the contract funds status and determine whether or not there are payments to be made, 

claims to be settled, or excess funds to be deobligated. When complete, the 

administrative closeout procedures must ensure that, as appropriate:

(a) a property clearance is received;

(b) all interim or disallowed costs are settled;

(c) a price revision is completed;

(d) subcontracts are settled by the prime contractor;

(e) all indirect cost rates are settled;

(f) the termination is settled;

(g) contractor's closing statement is completed;

(h) contractor's final invoice has been submitted;

(i) a contract funds review is completed;

(j) excess funds are deobligated;

(k) either a final release of claims has been obtained from the contractor or a 

bilateral modification has been completed to effect the final closeout with 

the contractor’s statement of release as follows; and

This modification is intended to and does constitute a full and final 

settlement and disposition of all matters relating to this contract 

(including all its modifications) and is a full release, accord, and 

satisfaction of any and all claims, demands, or causes of action that 
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 85

the contractor has against the judiciary arising out of or related to 

this contract.

(l) the contractor’s final invoice has been paid (where a release of claims is 

required, final payment must not be made until the release of claims has 

been received).

§ 760.20.20 Contract Completion Statement

(a) When the actions in the above section have been completed, the CO must 

ensure that a contract completion statement, containing the following 

information, is prepared:

(1) contract administration office name and address (if different from 

the purchasing office),

(2) purchasing office name and address,

(3) contract number,

(4) last modification number,

(5) last order number (if the contract is an IDIQ or requirements 

contract or a blanket purchase agreement (BPA)),

(6) contractor name and address,

(7) dollar amount of excess funds, if any,

(8) voucher number and date, if final payment has been made,

(9) invoice number and date, if the final written approved invoice has 

been forwarded to a disbursing office and the status of the payment 

is unknown,

(10) a statement that all required contract administration actions have 

been fully and satisfactorily accomplished,

(11) name and signature of the CO, and

(12) date.

(b) When the statement is completed, the CO must ensure that the signed 

statement is placed in the purchasing office contract file.
Guide to Judiciary Policy, Vol. 14, Ch. 7 Page 86

§ 760.20.30 Storage, Handling, and Disposal of Contract Files

(a) The process used to create and store records must record and reproduce 

the document, including signatures and other written and graphic images 

completely, accurately, and clearly.

(b) Data transfer, storage, and retrieval procedures must protect the data from 

alteration.

(c) Unless law or other regulations require signed documents to be kept, they 

may be destroyed after the responsible judiciary official verifies that record 

copies on alternate media and copies reproduced from the record copy 

are accurate, complete, and clear representations of the originals. For 

contents of contract files, see: § 710.10 (Procurement Files 

(Purchase/Delivery/Task Order or Contract Files)). For destruction of 

records after closeout, see: § 760.30 (Disposition of Contract Files), 

below.

§ 760.30 Disposition of Contract Files

§ 760.30.10 In General

Contract files and supporting documentation may be destroyed after final payment, 

cancellation, or settlement of related investigations, litigation (including protests), or 

similar matters, whichever is later, consistent with Guide, Vol. 10, § 620 (Records 

Disposition Schedules).

§ 760.30.20 Unsolicited Proposals

Unsolicited proposals that did not result in a contract award may be destroyed no earlier 

than one year after the decision not to award a contract. See: Guide, Vol. 14, § 340 

(Unsolicited Offers).

§ 760.30.30 Canceled Solicitations

Formal solicitations of quotations or offers may be canceled before award of a contract. 

The contracting officer should retain the presolicitation documentation on the 

requirement, any offers received before the cancellation, documentation on any 

judiciary action up to the time of cancellation, and evidence of the cancellation.