[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 912-913]
 
            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.  49.108-4  Authorization for subcontract settlements without approval 
or ratification.

    (a)(1) The TCO may, upon written request, give written authorization 
to the prime contractor to conclude settlements of subcontracts 
terminated in whole or in part without approval or ratification when the 
amount of settlement (see 49.002(d)) is $100,000 or less, if--
    (i) The TCO is satisfied with the adequacy of the procedures used by 
the contractor in settling settlement proposals, including proposals for 
retention, sale, or other disposal of termination inventory of the 
immediate and lower tier subcontractors (the TCO shall obtain the advice 
and recommendations of (A) the appropriate audit agency relating to the 
adequacy of the contractor's audit administration, including personnel, 
and (B) the cognizant plant clearance officer relating to the adequacy 
of the contractor's procedures and personnel for the administration of 
property disposal matters);
    (ii) Any termination inventory included in determining the amount of 
the settlement will be disposed of as directed by the prime contractor, 
generally using the requirements of 45.614, except that the disposition 
of the inventory shall not (A) be subject to review by the TCO under 
49.108-3(c) or 45.607, or (B) be subject to the screening requirements 
in 45.608; and
    (iii) A certificate similar to the certificate in the settlement 
proposal form in 49.602-1(a) will accompany the settlement.

[[Page 913]]

    (2) Except as provided in subparagraph (4) below, authority granted 
to a prime contractor under subparagraph (1) above by any TCO shall 
apply to all Executive agencies' prime contracts that are terminated, or 
modified by change orders.
    (3) Except as provided in subparagraph (4) below, the TCO shall 
accept, as part of the prime contractor's settlement proposal, 
settlements of terminated lower tier subcontracts concluded by any of 
the prime contractor's immediate or lower tier subcontractors who have 
been granted authority as prime contractors to settle subcontracts; 
provided, that the settlement is within the limit of the authority. 
Authorization to settle proposals of lower tier subcontractors shall not 
be granted directly to subcontractors. However, a prime contractor 
authorized to approve subcontractor settlements may also exercise this 
authority in its capacity as a subcontractor, with respect to its 
terminated subcontracts and orders. When exercising this authority as a 
subcontractor, the contractor shall notify the purchaser.
    (4) The provisions of subparagraphs (1), (2), and (3) above shall 
not apply to contracts under the administration of any contracting 
officer if the contracting officer so notifies the prime contractor 
concerned. This notice shall (i) be in writing, and (ii) if subparagraph 
(3) above is involved, specify any subcontractor affected.
    (b) Section 45.614 shall apply to disposal of completed end items 
allocable to the terminated subcontract. However, these items may be 
disposed of without review by the TCO under 49.108-3 or 45.607, and 
without screening under 45.608, if the total amount (at the subcontract 
price) when added to the amount of the settlement does not exceed the 
amount authorized under this subsection.
    (c) A TCO granting the authorization in subparagraph (a)(1) above 
shall periodically (at least annually) make a selective review of 
settlements and settlement procedures to determine if the contractor is 
making adequate reviews and fair settlements, and whether the 
authorization should remain in effect. The TCO shall obtain the advice 
and recommendations of the appropriate audit agency and the cognizant 
plant clearance officer. When it is determined that the contractor's 
procedures are not adequate, or that improper settlements are being 
made, or when the authority has not been used in the preceding 2 years, 
the TCO shall revoke the authorization by written notice to the 
contractor, effective on the date of receipt.
    (d) The contractor may make any number of separate settlements with 
a single subcontractor but shall not divide settlement proposals solely 
to bring them under an authorization limit. Separate settlement 
proposals that would normally be included in a single proposal, such as 
those based on a series of separate orders for the same item under one 
contract, shall be consolidated whenever possible.
    (e) Upon written request of the contractor, the TCO may increase an 
authorization granted under subparagraph (a)(1) of this subsection to 
authorize the contractor to conclude settlements under a particular 
prime contract. The TCO may limit the increased authorization to 
specific subcontracts or classes of subcontracts.
    (f) Authorizations granted under this 49.108-4 shall not authorize 
the settlement of requisitions or orders placed with any unit within the 
contractor's corporate entity.
    (g) Recommended formats for a request to settle subcontractor 
settlement proposals and the TCO's letter of authorization to the 
contractor are in 49.605 and 49.606, respectively.

[48 FR 42447, Sept. 19, 1983, as amended at 55 FR 52797, Dec. 21, 1990]