Overview
This section prescribes the procedures, documentation requirements, and methods for finalizing a termination settlement between the Government and a contractor. It outlines how to formalize negotiated agreements, handle unresolved items through reservations, and issue unilateral determinations when mutual agreement cannot be reached.
Key Rules
- Formalization: All negotiated settlements must be executed on Standard Form 30 (Amendment of Solicitation/Modification of Contract) and must account for Government setoffs and subcontractor settlement proposals.
- Reservations: The Termination Contracting Officer (TCO) must explicitly reserve any excepted rights or demands in the agreement, ensuring no new rights are created and sufficient funds are retained to cover those reserved items.
- Government Property: Before closing, the TCO must verify the Government property account; any missing property must result in a reserved right for the Government or a financial deduction from the settlement.
- No-Cost Settlements: These are executed if the contractor has incurred no costs, is willing to waive incurred costs, and owes no money to the Government.
- Partial and Joint Settlements: Partial settlements are discouraged unless issues are clearly severable, while joint settlements covering multiple contracts are permitted (with contractor consent) to streamline accounting and administration.
- Settlement by Determination: If negotiations fail, the TCO issues a unilateral decision. The contractor has the burden of proof to substantiate their claim and must be given 15 days' notice to submit evidence before the determination is finalized.
- Appeals: A settlement by determination is considered a final decision appealable under the Disputes clause, unless the contractor failed to submit their proposal within the required timeframe.
Practical Implications
- Documentation Burden: Contractors bear the primary responsibility for proving their costs; failure to maintain meticulous records or meet submission deadlines can lead to a unilateral TCO determination that limits the contractor's right to appeal.
- Risk of Waiver: Anything not explicitly listed as a "reservation" in the SF 30 settlement agreement is generally considered settled, meaning contractors must be vigilant in identifying and excluding pending claims or third-party liabilities before signing.
- Administrative Efficiency: The ability to consolidate multiple settlement proposals across different agencies into a single negotiation allows both the Government and the contractor to reduce overhead and audit costs.