[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 920]
 
            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM
 
                CHAPTER 1--FEDERAL ACQUISITION REGULATION
 
PART 49_TERMINATION OF CONTRACTS--Table of Contents
 
Subpart 49.2_Additional Principles for Fixed-Price Contracts Terminated 
                             for Convenience
 
Sec.  49.202  Profit.

    (a) The TCO shall allow profit on preparations made and work done by 
the contractor for the terminated portion of the contract but not on the 
settlement expenses. Anticipatory profits and consequential damages 
shall not be allowed (but see 49.108-5). Profit for the contractor's 
efforts in settling subcontractor proposals shall not be based on the 
dollar amount of the subcontract settlement agreements but the 
contractor's efforts will be considered in determining the overall rate 
of profit allowed the contractor. Profit shall not be allowed the 
contractor for material or services that, as of the effective date of 
termination, have not been delivered by a subcontractor, regardless of 
the percentage of completion. The TCO may use any reasonable method to 
arrive at a fair profit.
    (b) In negotiating or determining profit, factors to be considered 
include--
    (1) Extent and difficulty of the work done by the contractor as 
compared with the total work required by the contract (engineering 
estimates of the percentage of completion ordinarily should not be 
required, but if available should be considered);
    (2) Engineering work, production scheduling, planning, technical 
study and supervision, and other necessary services;
    (3) Efficiency of the contractor, with particular regard to--
    (i) Attainment of quantity and quality production;
    (ii) Reduction of costs;
    (iii) Economic use of materials, facilities, and manpower; and
    (iv) Disposition of termination inventory;
    (4) Amount and source of capital and extent of risk assumed;
    (5) Inventive and developmental contributions, and cooperation with 
the Government and other contractors in supplying technical assistance;
    (6) Character of the business, including the source and nature of 
materials and the complexity of manufacturing techniques;
    (7) The rate of profit that the contractor would have earned had the 
contract been completed;
    (8) The rate of profit both parties contemplated at the time the 
contract was negotiated; and
    (9) Character and difficulty of subcontracting, including selection, 
placement, and management of subcontracts, and effort in negotiating 
settlements of terminated subcontracts.
    (c) When computing profit on the terminated portion of a 
construction contract, the contracting officer shall--
    (1) Comply with paragraphs (a) and (b) above;
    (2) Allow profit on the prime contractor's settlements with 
construction subcontractors for actual work in place at the job site; 
and
    (3) Exclude profit on the prime contractor's settlements with 
construction subcontractors for materials on hand and for preparations 
made to complete the work.

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