Overview
FAR 42.902 outlines the mandatory administrative and protective steps a federal agency must take immediately upon receiving notice that a contractor has filed for bankruptcy. It emphasizes internal coordination, financial risk assessment, and legal consultation to protect the Government's interests as a creditor.
Key Rules
- Mandatory Notification: The agency must distribute the bankruptcy notice to all relevant stakeholders, including legal counsel, financial offices, property management, and any affected buying activities.
- Comprehensive Claim Assessment: Agencies must determine the total value of potential Government claims by reviewing all open, physically completed, or terminated contracts that have not yet been formally closed out.
- Asset and Interest Protection: The agency is required to take proactive measures to safeguard Government-furnished property and protect financial interests (such as outstanding progress payments or debts).
- Legal Coordination: Contracting officers are mandated to consult with legal counsel, whenever possible, before taking any action regarding the contractor’s bankruptcy proceedings.
Practical Implications
- Shift to Creditor Status: Once bankruptcy is filed, the Government’s relationship with the contractor shifts from standard contract management to debt collection and asset protection under the oversight of a bankruptcy court.
- Reduced CO Autonomy: The requirement to consult legal counsel before taking action limits a Contracting Officer's independent authority, ensuring that the agency does not inadvertently violate "automatic stay" provisions of bankruptcy law.