[Code of Federal Regulations]
[Title 48, Volume 1]
[Revised as of October 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 48CFR49]

[Page 912]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 49_TERMINATION OF CONTRACTS--Table of Contents
 
                     Subpart 49.1_General Principles
 
Sec.  49.108-3  Settlement procedure.

    (a) Contractors shall settle with subcontractors in general 
conformity with the policies and principles relating to settlement of 
prime contracts in this subpart and subparts 49.2 or 49.3. However, the 
basis and form of the subcontractor's settlement proposal must be 
acceptable to the prime contractor or the next higher tier 
subcontractor. Each settlement must be supported by accounting data and 
other information sufficient for adequate review by the Government. In 
no event will the Government pay the prime contractor any amount for 
loss of anticipatory profits or consequential damages resulting from the 
termination of any subcontract (but see 49.108-5).
    (b) Except as provided in 49.108-4, the TCO shall require that--
    (1) All subcontractor termination inventory be disposed of and 
accounted for in accordance with part 45; and
    (2) The prime contractor submit, for approval or ratification, all 
termination settlements with subcontractors.
    (c) The TCO shall promptly examine each subcontract settlement 
received to determine that the subcontract termination was made 
necessary by the termination of the prime contract (or by issuance of a 
change order--see 49.002(b)). The TCO will also determine if the 
settlement was arrived at in good faith, is reasonable in amount, and is 
allocable to the terminated portion of the contract (or, if allocable 
only in part, that the proposed allocation is reasonable). In 
considering the reasonableness of any subcontract settlement, the TCO 
shall generally be guided by the provisions of this part relating to the 
settlement of prime contracts, and shall comply with any applicable 
requirements of 49.107 and 49.111 relating to accounting and other 
reviews. After the examination, the TCO shall notify the contractor in 
writing of (1) approval or ratification, or (2) the reasons for 
disapproval.

[48 FR 42424, Sept. 19, 1983, as amended at 62 FR 237, Jan. 2, 1997