Overview
This section authorizes the use of FAR Part 32 contract financing procedures to cover costs associated with contract terminations, serving as an incentive for contractors to invest their own capital into performance despite the risk of a termination for convenience.
Key Rules
- Incentivization Strategy: The regulation is specifically designed to mitigate the financial risk contractors face regarding the Government's right to terminate a contract at its convenience.
- Flexible Application: Financing for terminations can be implemented either in conjunction with ongoing contract performance financing or as a standalone financial arrangement.
- Procedural Integration: The standard contract financing procedures detailed in FAR Part 32 are formally extended to apply to the termination phase.
- Regulatory Cross-Reference: This provision operates in alignment with FAR 49.112-1, which governs the settlement of termination costs.
Practical Implications
- This provision helps maintain contractor liquidity during the often lengthy period between a termination notice and the final settlement of a termination proposal.
- It allows Contracting Officers to provide partial payments or progress payments against termination claims, ensuring that the contractor is not unfairly penalized for investing resources in a project that the Government decides to end early.