Joseph Feibel – January 6, 2018
Question:
What is the Government’s preferred method of contract termination?
Answer:
The Government’s preferred method of contract termination is to issue a no-cost settlement without using formal termination procedures.
A contract can be terminated through a no-cost settlement only if:
- The contractor hasn’t incurred cost for the terminated portion of the contract or
- The contractor is willing to waive the cost incurred and
- No amounts are due to the government under the contract
As with with any type of termination, the no-cost settlement may be complete (i.e, the contract is terminated in entirety) or partial (i.e.only a portion of the contract is terminated. FAR 49.603-6 prescribes a no-cost settlement agreement to be used for a complete termination.
49.603-6 — No-Cost Settlement Agreement — Complete Termination.
[Insert the following in Block 14 of SF 30 if a no-cost settlement agreement, under a complete termination, is to be executed.]
(a) This supplemental agreement [insert “modifies the contract to reflect a no-cost settlement agreement with respect to the Notice of Termination dated ____” or, if not previously terminated, “terminates the contract in its entirety”].
(b) The parties agree as follows:
The Contractor unconditionally waives any charges against the Government because of the termination of the contract and, except as set forth below, releases it from all obligations under the contract or due to its termination. The Government agrees that all obligations under the contract are concluded, except as follows:
[List reserved or excepted rights and liabilities. See 49.109-2 and 49.603-1(b)(7).]
(End of agreement)