FAR 42.9—Subpart 42.9

Scope of subpart.

FAR 42.900 is the scope statement for the bankruptcy subpart, and it tells readers what the subpart is designed to do: set policies and procedures for actions to take when a contractor enters bankruptcy-related proceedings. It specifically covers the contractor’s duty to notify the contracting officer when it files a bankruptcy petition, and it establishes minimum requirements that agencies must follow once a contractor bankruptcy occurs. In practice, this section matters because bankruptcy can affect contract performance, payment, rights in property, and the government’s ability to protect its interests, so the subpart provides an orderly framework for response. Although this section does not itself spell out every procedural step, it signals that both contractors and agencies have defined responsibilities once bankruptcy is in play. It is the gateway provision for the rest of the bankruptcy rules in FAR Subpart 42.9.

General.

FAR 42.901 is a short but important risk-management provision focused on contractor bankruptcy. It assigns the contract administration office the duty to act quickly when a contractor appears to be insolvent, has filed for bankruptcy, or otherwise may be heading into bankruptcy, so the Government can assess the effect on ongoing contracts and protect its interests. In practice, this means identifying whether performance, delivery schedules, payments, property, records, or other contract rights may be disrupted, and then taking timely steps to preserve the Government’s position. The section is about early detection and prompt response, not about resolving bankruptcy law issues in detail; it serves as the trigger for closer review, coordination, and protective action. For contracting personnel, it underscores that bankruptcy is not just a legal event for the contractor—it is an immediate contract administration concern that can affect performance continuity, recovery of Government property, and the Government’s financial exposure.

Procedures.

FAR 42.902 sets out the basic agency procedures to follow when a contractor enters bankruptcy proceedings. It covers immediate notice handling, coordination with legal counsel and other agency offices, identification and review of open, completed, or terminated contracts to estimate the Government’s potential claim, protection of the Government’s financial interests, safeguarding of Government property, and sharing pertinent contract information with Government counsel. It also requires the contracting officer to consult legal counsel whenever possible before taking any action related to the bankruptcy. In practice, this section is about rapid internal coordination and preservation of rights: agencies must move quickly to understand exposure, protect assets, and avoid actions that could weaken the Government’s position in the bankruptcy case. For contractors, the practical significance is that bankruptcy triggers heightened government scrutiny of contract status, unpaid amounts, property issues, and legal strategy.

Solicitation provision and contract clause.

FAR 42.903 is a very short but mandatory prescription that tells contracting officers when to include the Bankruptcy clause at FAR 52.242-13. It covers one topic only: the required use of the clause in solicitations and contracts that exceed the simplified acquisition threshold. In practice, this means the clause is not optional or left to discretion when the threshold is crossed; it must be inserted in both the solicitation and the resulting contract. The purpose is to protect the Government’s interests if a contractor becomes involved in bankruptcy proceedings, by ensuring the contract contains the standard rights and notice framework established in the clause. For contractors, this section signals that bankruptcy-related obligations and Government protections will apply on larger procurements. For contracting officers, it is a straightforward compliance requirement that should be checked as part of solicitation and award preparation.