FAR 49.105-3—Termination case file.
Plain-English Summary
FAR 49.105-3 addresses the termination case file that the Termination Contracting Officer (TCO) must create and maintain when negotiating a final settlement after a contract termination. The section is narrowly focused on two core subjects: the requirement to establish a separate case file for each termination, and the contents of that file, which must include memoranda and records of all actions related to the settlement. It also cross-references FAR 4.801, which governs general contract file organization and recordkeeping, signaling that termination files must fit within the broader federal contract file system and documentation standards. In practice, this requirement exists to ensure there is a complete, traceable administrative record of how the settlement was handled, what decisions were made, and what support exists for the final settlement amount. For contracting officers, auditors, reviewers, and later dispute or litigation teams, the file is the primary evidence of the government’s actions and rationale. For contractors, it means the settlement process should be documented carefully and consistently, because the file may later be used to verify claims, support negotiations, or defend the government’s position.
Key Rules
Separate file for each termination
The TCO must create an individual case file for every termination settlement. This means each terminated contract or termination action is documented separately rather than being combined into a general file.
TCO owns the file
The responsibility to establish the case file rests with the TCO who is handling the final settlement negotiations. The file is part of the TCO’s official settlement record and should be maintained as the settlement progresses.
Include all settlement actions
The file must contain memoranda and records of all actions taken in connection with the settlement. This includes the documentation of negotiations, decisions, correspondence, analyses, approvals, and other actions that affect the final settlement.
Follow FAR 4.801
The case file must be maintained consistently with the contract file requirements in FAR 4.801. That cross-reference means the termination file should be organized and retained in a manner that supports complete, orderly, and accessible official records.
Responsibilities
Termination Contracting Officer (TCO)
Establish a separate case file for each termination and ensure it contains memoranda and records of all actions related to negotiating and completing the final settlement.
Contracting Officer / Acquisition Office
Support proper file creation, organization, and retention practices consistent with FAR 4.801 and ensure the termination file is available as part of the official contract record.
Contractor
Provide information, submissions, and supporting documentation needed for settlement negotiations, knowing that the government will document the actions and basis for the final settlement in the case file.
Auditors / Review Officials
Use the case file to review the completeness, reasonableness, and supportability of the settlement and to verify that the government’s actions were properly documented.
Practical Implications
A termination settlement should never be handled informally or only through email threads; the TCO needs a dedicated file that captures the full history of the action.
Incomplete documentation is a common problem. If negotiations, approvals, or key assumptions are not recorded, the government may have trouble defending the settlement later.
The cross-reference to FAR 4.801 means file organization matters, not just content. A complete file that is poorly arranged can still create audit and litigation risk.
Contractors should assume that settlement positions, supporting data, and negotiation outcomes may become part of the official record and should submit clear, well-supported documentation.
A well-maintained case file helps speed internal review, supports final payment decisions, and reduces the risk of disputes over what was agreed to and why.
Official Regulatory Text
The TCO responsible for negotiating the final settlement shall establish a separate case file for each termination. This file will include memoranda and records of all actions relative to the settlement (see 4.801 ).