Overview
This section prescribes the specific contract clauses and alternates to be used for "Termination for Convenience" and "Default" in cost-reimbursement, time-and-materials, labor-hour, and fixed-price architect-engineer contracts. It provides instructions for tailoring these clauses based on the nature of the work (e.g., construction) and the type of entity involved (e.g., government agencies).
Key Rules
- Cost-Reimbursement Standard: The clause at FAR 52.249-6 is the default for most cost-reimbursement contracts, excluding no-fee R&D contracts with educational or nonprofit institutions.
- Alternate Usage for Cost-Reimbursement:
- Alternate I: Required for construction contracts.
- Alternates II & III: Used when contracting with U.S., State, local, or foreign government agencies if interest on excess partial payments is deemed inappropriate (III is specifically for construction).
- Alternates IV & V: Required for Time-and-Material (T&M) and Labor-Hour (LH) contracts (V is for government-to-government entities).
- Architect-Engineer (A&E) Services: FAR 52.249-7 must be used for fixed-price architect-engineer contracts.
- Subcontractor Flow-down: Prime contractors may use FAR 52.249-6 for cost-reimbursement subcontracts, but they must modify it to reflect the contractor-subcontractor relationship (e.g., deleting government-only rights and shortening the settlement proposal period to approximately six months).
Practical Implications
- Precision in Clause Selection: Contracting Officers must carefully select the correct Alternate (I through V) to ensure the termination procedures align with the specific contract type and the legal status of the performing entity.
- Subcontract Management: Prime contractors are responsible for tailoring termination clauses for their subcontractors; simply "copy-pasting" the prime clause is insufficient and may lead to administrative conflicts regarding settlement timelines and reporting requirements.