[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 927-929]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

                CHAPTER 1--FEDERAL ACQUISITION REGULATION

 

PART 49_TERMINATION OF CONTRACTS--Table of Contents

 

                     Subpart 49.1_General Principles

 

49.108-4  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



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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, 

except that the disposition of the inventory shall not be subject to--

    (A) Review by the TCO under 49.108-3(c); or

    (B) The screening requirements in 45.602-3; and

    (iii) A certificate similar to the certificate in the settlement 

proposal form in 49.602-1(a) will accompany the settlement.

    (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 45.602 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 and without 

screening under 45.602-3, if the items do not require demilitarization 

and 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



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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; 

69 FR 17748, Apr. 5, 2004]