[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 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

 

49.108-5  Recognition of judgments and arbitration awards.



    (a) When a subcontractor obtains a final judgment against a prime 

contractor, the TCO shall, for the purposes of settling the prime 

contract, treat the amount of the judgment as a cost of settling with 

the contractor, to the extent the judgment is properly allocable to the 

terminated portion of the prime contract, if--

    (1) The prime contractor has made reasonable efforts to include in 

the subcontract a termination clause described in 49.502(e), 49.503(c), 

or a similar clause excluding payment of anticipatory profits or 

consequential damages;

    (2) The provisions of the subcontract relating to the rights of the 

parties upon its termination are fair and reasonable and do not 

unreasonably increase the common law rights of the subcontractor;

    (3) The contractor made reasonable efforts to settle the settlement 

proposal of the subcontractor;

    (4) The contractor gave prompt notice to the contracting officer of 

the initiation of the proceedings in which the judgment was rendered and 

did not refuse to give the Government control of the defense of the 

proceedings; and

    (5) The contractor diligently defended the suit or, if the 

Government assumed control of the defense of the proceedings, rendered 

reasonable assistance requested by the Government.

    (b) If the conditions in subparagraphs (a)(1) through (5) above are 

not all met, the TCO may allow the contractor the part of the judgment 

considered fair for settling the subcontract settlement proposal, giving 

due regard to the policies in this part for settlement of proposals.

    (c) When a contractor and a subcontractor submit the subcontractor's 

settlement proposal to arbitration under any applicable law or contract 

provision, the TCO shall recognize the arbitration award as the cost of 

settling the proposal of the contractor to the same extent and under the 

same conditions as in paragraphs (a) and (b) above.