Overview
This section prescribes the requirement for the Termination Contracting Officer (TCO) to document the final results of a termination settlement in a formal memorandum. It serves as the official record for the case file and provides the necessary justification for reviewing authorities to approve the settlement.
Key Rules
- Mandatory Documentation: The TCO must prepare a settlement negotiation memorandum (SNM) at the conclusion of negotiations, adhering to the pricing and distribution standards set forth in FAR 15.406-3.
- Negotiation Methods:
- Individual Items: If negotiated item-by-item, the TCO must specify the factors considered for each specific element.
- Lump-Sum: If negotiated as a total amount, the TCO does not need to evaluate every item individually but must provide reasonable detail to support the total recommended settlement.
- Resolution of Disputes: The memorandum must explicitly explain how differences, "doubtful questions," and conflicting matters were resolved through agreement.
- Context for Review: The TCO is required to include any additional information that assists reviewing authorities in understanding the underlying basis and rationale for the settlement.
Practical Implications
- Audit Trail: Contractors should ensure their settlement proposals are granular and well-supported, as the TCO must be able to justify the final figures to auditors and oversight boards.
- Settlement Efficiency: The allowance for lump-sum justifications provides TCOs with the flexibility to reach a "fair and reasonable" total settlement without getting bogged down in exhaustive line-item disputes, provided the overall total is substantiated.