FAR 49.109-5—Partial settlements.
Plain-English Summary
FAR 49.109-5 addresses partial settlements in termination for convenience negotiations. It explains the general rule that the Termination Contracting Officer (TCO) should try to resolve all rights and liabilities under the terminated contract in one final agreement, except for matters tied to any continued portion of the contract. It also states that the TCO generally should not break the settlement proposal into piecemeal agreements on individual items. A partial settlement is allowed only when the TCO cannot promptly complete the full settlement and the agreed issues are clearly severable from the unresolved issues. Even then, the partial settlement must not prejudice either the Government’s or the contractor’s interests in resolving the remaining proposal. In practice, this section is about efficiency and fairness: it permits interim resolution when needed, but only if doing so will not complicate or distort the final settlement.
Key Rules
One settlement preferred
The TCO should try to settle all rights and liabilities under the terminated contract in a single agreement. The only matters excluded are those arising from any continued portion of the contract.
No piecemeal item-by-item deals
As a general rule, the TCO should not make partial settlements that cover only selected items of the contractor’s settlement proposal. The regulation favors a comprehensive resolution rather than fragmented agreements.
Partial settlement only if delay exists
A partial settlement may be used when the TCO cannot promptly complete the full settlement under the terminated contract. This is an exception for situations where waiting for a complete agreement is not practical.
Issues must be severable
The matters already agreed to must be clearly separable from the unresolved issues. If the settled and unsettled issues are intertwined, a partial settlement is not appropriate.
No prejudice to either side
The partial settlement must not harm the Government’s or the contractor’s interests in resolving the remaining issues. The TCO must ensure the interim agreement does not limit, distort, or disadvantage later negotiations.
Responsibilities
Termination Contracting Officer (TCO)
Attempt to resolve the entire settlement in one agreement, avoid piecemeal settlements, and use a partial settlement only when full settlement cannot be completed promptly and the settled issues are clearly severable without prejudicing either party.
Contractor
Present settlement proposals in a way that supports comprehensive resolution and be prepared to separate clearly resolved issues from unresolved ones if a partial settlement is considered.
Government
Protect its interests in the unresolved portion of the settlement and ensure any partial agreement does not waive, impair, or complicate later resolution of remaining claims or liabilities.
Practical Implications
This rule pushes both sides toward a complete termination settlement instead of negotiating one cost element or claim at a time.
Partial settlements can be useful when some issues are ready to close but others need more time, such as when documentation is incomplete or technical questions remain.
The biggest risk is agreeing to a partial settlement that is not truly severable, which can create disputes over whether later issues were implicitly resolved.
Another common pitfall is failing to reserve unresolved matters clearly, leading to confusion about what the partial settlement covers.
TCOs should document why a partial settlement is necessary, what issues are included, and why the remaining issues are unaffected.
Official Regulatory Text
The TCO should attempt to settle in one agreement all rights and liabilities of the parties under the contract except those arising from any continued portion of the contract. Generally, the TCO shall not attempt to make partial settlements covering particular items of the prime contractor’s settlement proposal. However, when a TCO cannot promptly complete settlement under the terminated contract, a partial settlement may be entered into if- (a) The issues on which agreement has been reached are clearly severable from other issues and (b) The partial settlement will not prejudice the Government’s or contractor’s interests in disposing of the unsettled part of the settlement proposal.