[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR49]



[Page 927]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

                CHAPTER 1--FEDERAL ACQUISITION REGULATION

 

PART 49_TERMINATION OF CONTRACTS--Table of Contents

 

                     Subpart 49.1_General Principles

 

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 the procedures contained in paragraphs 

(i) and (j) of the clause at 52.245-2, Government Property (Fixed-Price 

Contracts), and paragraphs (i) and (j) of the clause at 52.245-5, 

Government Property (Cost-Reimbursement, Time-and-Material, or Labor-

Hour Contracts); 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; 69 

FR 17748, Apr. 5, 2004]