Overview
FAR 49.104 outlines the mandatory immediate and follow-on actions a prime contractor must perform after receiving a termination notice to mitigate costs, manage subcontracts, and facilitate the settlement process. It serves as a checklist for transitioning from contract performance to the administrative winding-down of the terminated portion of the work.
Key Rules
- Immediate Cessation: The contractor must stop work and stop placing subcontracts on the terminated portion of the contract immediately, unless otherwise directed by the Termination Contracting Officer (TCO).
- Subcontract Management: All subcontracts related to the terminated work must be terminated, and the contractor is responsible for settling liabilities and proposals arising from these terminations (subject to TCO approval).
- Property Stewardship: The contractor must protect and preserve any property in which the Government has an interest and dispose of termination inventory as directed by the TCO.
- Administrative Reporting: The contractor must notify the TCO of any legal proceedings resulting from subcontract commitments and provide written notice of any circumstances preventing a full work stoppage.
- Financial Proposals: For partial terminations, the contractor must promptly submit a request for equitable adjustment (REA) for the remaining work and, for all terminations, submit a final settlement proposal supported by detailed schedules.
Practical Implications
- Cost Control: Failure to stop work immediately or terminate subcontracts promptly can result in the government refusing to reimburse costs incurred after the effective date of termination.
- Operational Transition: Contractors must maintain clear accounting and project management records to distinguish between the terminated work and any continued portion to ensure the accuracy of equitable adjustment requests and settlement proposals.