Overview
This section prescribes the procedures for handling, inspecting, and pricing finished products that are completed but undelivered at the time a contract is terminated for convenience. It distinguishes between items that will be delivered for use by the Government and those that will be handled through the termination settlement process.
Key Rules
- Mandatory Inspection: The Termination Contracting Officer (TCO) must promptly inspect and accept all undelivered end items that meet contract specifications.
- Disposition Choice: The TCO determines whether accepted items will be physically delivered to the Government or retained/sold by the contractor.
- Invoicing Delivered Items: Items selected for delivery are invoiced at the standard contract price and must be excluded from the termination settlement proposal.
- Settlement for Non-Delivered Items: Accepted items not slated for delivery are included in the settlement proposal at the contract price, adjusted for freight savings and any credits for disposal or retention.
- Construction Exception: "Work in place" under a construction contract is explicitly excluded from being classified as a "completed end item," regardless of whether it was previously paid for at unit prices.
Practical Implications
- Streamlined Payment: Contractors can receive faster payment for finished goods by invoicing them normally rather than waiting for the often lengthy termination settlement negotiation.
- Inventory Management: The rule prevents "double dipping" by ensuring that any item paid for at the full contract price in a settlement is credited back if the contractor retains the physical asset.