[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 935-936]

 

            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

 

49.202  Profit.



    (a) The TCO shall allow profit on preparations made and work done by 

the contractor for the terminated portion of the contract but not on the 

settlement expenses. Anticipatory profits and consequential damages 

shall not be allowed (but see 49.108-5). Profit for the contractor's 

efforts in settling subcontractor proposals shall not be based on the 

dollar amount of the subcontract settlement agreements but the 

contractor's efforts will be considered in determining the overall rate 

of profit allowed the contractor. Profit shall not be allowed the 

contractor for material or services that, as of the effective date of 

termination, have not been delivered by a subcontractor, regardless of 

the percentage of completion. The TCO may use any reasonable method to 

arrive at a fair profit.

    (b) In negotiating or determining profit, factors to be considered 

include--

    (1) Extent and difficulty of the work done by the contractor as 

compared with the total work required by the contract (engineering 

estimates of the percentage of completion ordinarily should not be 

required, but if available should be considered);

    (2) Engineering work, production scheduling, planning, technical 

study and supervision, and other necessary services;

    (3) Efficiency of the contractor, with particular regard to--

    (i) Attainment of quantity and quality production;

    (ii) Reduction of costs;

    (iii) Economic use of materials, facilities, and manpower; and

    (iv) Disposition of termination inventory;

    (4) Amount and source of capital and extent of risk assumed;

    (5) Inventive and developmental contributions, and cooperation with 

the Government and other contractors in supplying technical assistance;

    (6) Character of the business, including the source and nature of 

materials and the complexity of manufacturing techniques;

    (7) The rate of profit that the contractor would have earned had the 

contract been completed;



[[Page 936]]



    (8) The rate of profit both parties contemplated at the time the 

contract was negotiated; and

    (9) Character and difficulty of subcontracting, including selection, 

placement, and management of subcontracts, and effort in negotiating 

settlements of terminated subcontracts.

    (c) When computing profit on the terminated portion of a 

construction contract, the contracting officer shall--

    (1) Comply with paragraphs (a) and (b) above;

    (2) Allow profit on the prime contractor's settlements with 

construction subcontractors for actual work in place at the job site; 

and

    (3) Exclude profit on the prime contractor's settlements with 

construction subcontractors for materials on hand and for preparations 

made to complete the work.