Overview
This section prescribes standardized language and templates for supplemental agreements used to finalize settlement proposals following a termination for convenience. It provides specific formats tailored to fixed-price and cost-reimbursement contracts, as well as distinctions between complete and partial terminations.
Key Rules
- Mandatory Baseline: Termination Contracting Officers (TCOs) should use these formats substantially as written, though they may modify them to conform to specific agency-authorized clauses.
- Inventory Certification: The contractor must certify that all termination inventory (including scrap and subcontractor inventory) has been properly accounted for, allocated correctly, and used to calculate the settlement amount.
- Subcontractor Protections: Contractors are required to pay their subcontractors within 10 days of receiving the settlement payment and must obtain inventory certifications from those subcontractors.
- Reservation of Rights: Settlement agreements must explicitly list "reserved" rights and liabilities that are not waived by the agreement, such as patent infringements, warranties, government property, and defective pricing data.
- Specific Documentation: For partial terminations, the agreement must clearly identify the specific line items, quantities, and prices being removed to avoid ambiguity regarding the remaining work.
Practical Implications
- Standardization of Closeouts: These formats ensure consistency across federal agencies, providing a predictable legal framework for contractors and the Government to release claims and finalize payments.
- Liability Management: By identifying "Reserved Rights," the Government protects itself from waiving future claims related to audits, royalties, or defects that may not be apparent at the time of the settlement.
- Administrative Efficiency: The use of Block 14 on Standard Form 30 (SF 30) for these agreements streamlines the modification process, allowing for a "plug-and-play" approach to contract closeout.