Overview
FAR 49.301 establishes the foundational framework for settling cost-reimbursement contracts following a termination, specifying that the process must address both the reimbursement of costs and the payment of applicable fees.
Key Rules
- Scope of Settlement: Termination settlements for cost-reimbursement contracts must account for both allowable costs incurred and any applicable earned fee.
- Governing Standards: The determination of which costs are "allowable" is dictated by the specific cost-principle clauses already embedded in the contract (typically FAR Part 31).
- Regulatory Reference: This section points to FAR 49.503(a) for the specific termination clauses required for cost-reimbursement agreements.
Practical Implications
- Audit Importance: Because allowability is governed by existing contract cost clauses, contractors should expect a rigorous audit of actual costs incurred rather than a negotiation based on a fixed percentage of completion.
- Fee Adjustments: Contractors must be prepared to justify the portion of the fee earned based on the work performed up to the point of termination.