[Code of Federal Regulations]
[Title 23, Volume 1]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 23CFR635.125]

[Page 172-173]
 
                           TITLE 23--HIGHWAYS
 
 CHAPTER I--FEDERAL HIGHWAY ADMINISTRATION, DEPARTMENT OF TRANSPORTATION
 
PART 635_CONSTRUCTION AND MAINTENANCE--Table of Contents
 
                      Subpart A_Contract Procedures
 
Sec. 635.125  Termination of contract.

    (a) All contracts exceeding $10,000 shall contain suitable 
provisions for termination by the State, including the manner by which 
the termination will be effected and the basis for settlement. In 
addition, such contracts shall describe conditions under which the 
contract may be terminated for default as well as conditions where the 
contract may be terminated because of circumstances beyond the control 
of the contractor.
    (b) The STD prior to termination of a Federal-aid contract shall 
consult with and receive the concurrence of the Division Administrator. 
The extent of Federal-aid participation in contract termination costs, 
including final settlement, will depend upon the merits of the 
individual case. However, under no circumstances shall Federal funds 
participate in anticipated profit on work not performed.
    (c) Except as provided for in paragraph (e) of this section, normal 
Federal-aid plans, specifications, and estimates, advertising, and award 
procedures are to be followed when a STD awards the contract for 
completion of a terminated Federal-aid contract.
    (d) When a STD awards the contract for completion of a Federal-aid 
contract previously terminated for default, the construction amount 
eligible for Federal participation on the project should not exceed 
whichever amount is the lesser, either:
    (1) The amount representing the payments made under the original 
contract plus payments made under the new contract; or
    (2) The amount representing what the cost would have been if the 
construction had been completed as contemplated by the plans and 
specifications under the original contract.
    (e) If the surety awards a contract for completion of a defaulted 
Federal-aid contract or completes it by some other acceptable means, the 
FHWA will consider the terms of the original contract to be in effect 
and that the work will

[[Page 173]]

be completed in accordance with the approved plans and specifications 
included therein. No further FHWA approval or concurrence action will 
therefore be needed in connection with any defaulted Federal-aid 
contract awarded by a surety. Under this procedure, the construction 
amount eligible for Federal participation on the project should not 
exceed the amount representing what the cost would have been if the 
construction had been completed as contemplated by the plans and 
specifications under the original contract.