[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 921]
 
            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.  49.203  Adjustment for loss.

    (a) In the negotiation or determination of any settlement, the TCO 
shall not allow profit if it appears that the contractor would have 
incurred a loss had the entire contract been completed. The TCO shall 
negotiate or determine the amount of loss and make an adjustment in the 
amount of settlement as specified in paragraph (b) or (c) below. In 
estimating the cost to complete, the TCO shall consider expected 
production efficiencies and other factors affecting the cost to 
complete.
    (b) If the settlement is on an inventory basis (see 49.206-2(a)), 
the contractor shall not be paid more than the total of the amounts in 
subparagraphs (1), (2), and (3) below, less all disposal credits and all 
unliquidated advance and progress payments previously made under the 
contract:
    (1) The amount negotiated or determined for settlement expenses.
    (2) The contract price, as adjusted, for acceptable completed end 
items (see 49.205).
    (3) The remainder of the settlement amount otherwise agreed upon or 
determined (including the allocable portion of initial costs (see 
31.205-42(c)), reduced by multiplying the remainder by the ratio of (i) 
the total contract price to (ii) the total cost incurred before 
termination plus the estimated cost to complete the entire contract.
    (c) If the settlement is on a total cost basis (see 49.206-2(b)), 
the contractor shall not be paid more than the total of the amounts in 
subparagraphs (1) and (2) below, less all disposal and other credits, 
all advance and progress payments, and all other amounts previously paid 
under the contract:
    (1) The amount negotiated or determined for settlement expenses.
    (2) The remainder of the total settlement amount otherwise agreed 
upon or determined (lines 7 and 14 of SF 1436, Settlement Proposal 
(Total Cost Basis)) reduced by multiplying the remainder by the ratio of 
(i) the total contract price to (ii) the remainder plus the estimated 
cost to complete the entire contract.