Overview
FAR 49.105 outlines the procedural responsibilities and administrative actions a Termination Contracting Officer (TCO) must undertake to settle a contract following a termination notice. It establishes a framework for negotiation, financial management of excess funds, and the coordination of technical and legal specialists to ensure an orderly and timely closeout.
Key Rules
- Primary Duties: The TCO is required to direct the prime contractor’s post-termination actions, review settlement proposals from both prime and subcontractors, and prioritize negotiated settlements over unilateral determinations.
- Settlement Conference: The TCO should promptly conduct a conference with the contractor to establish a "definite program" for settlement, covering 15 specific areas including work stoppage status, subcontractor management, inventory disposal, and accounting practices.
- Use of Specialists: To expedite the process, the TCO is authorized to enlist experts for legal advice, accounting reviews, and the verification and disposition of termination inventory.
- Financial Management:
- The TCO must recommend the release of excess funds to the contracting officer within 30 days of the termination notice.
- Deobligation is generally not recommended for amounts under $1,000.
- If a shortage occurs after the release of funds, the contracting officer must reinstate the necessary funds within 30 days.
- Reporting and Documentation: The TCO must maintain a separate case file for each termination and, if the TCO and PCO (Procuring Contracting Officer) are in different activities, provide periodic status reports upon request.
- Construction Specifics: For construction contracts, the CO must ensure site cleanup, hazard removal, and the protection of serviceable materials.
Practical Implications
- Early Alignment: The initial settlement conference is the most critical step for contractors to avoid delays, as it sets the timeline and clarifies expectations for cost or pricing data and inventory schedules.
- Fund Availability: The 30-day requirement for releasing excess funds provides a mechanism for agencies to "recover" unneeded obligated money quickly for other priorities, though it puts pressure on the TCO to accurately estimate final settlement costs early in the process.
- Audit Readiness: Because the TCO is directed to utilize accounting reviews and verify inventory, contractors must ensure their SF 1439 and inventory schedules are meticulously prepared to withstand specialist scrutiny.