FAR 49.112-2—Final payment.
Plain-English Summary
FAR 49.112-2 explains how final payment is handled after a termination settlement has been reached or determined, and it covers the paperwork and payment steps that follow. It addresses negotiated settlements, settlements by determination, the effect of appeals, special handling for construction contracts with possible labor violations, and whether interest is payable on settlement amounts. In practice, this section tells the contractor how to submit the final voucher or invoice, tells the termination contracting officer (TCO) how to process and forward the payment package, and tells the contracting officer when to withhold funds in construction cases. It also clarifies that the Government generally does not pay interest on settlement amounts, except that interest may be payable on a successful appeal under the Disputes clause. The section exists to make final closeout of termination claims orderly, to protect the Government from improper payment, and to ensure contractors are paid the correct amount once the settlement process is complete.
Key Rules
Negotiated settlement payment
After the parties execute a settlement agreement, the contractor must submit a voucher or invoice for the agreed amount minus any amount already paid. The TCO must attach the settlement agreement to the payment document and send the package to the disbursing officer for payment.
Determination without appeal
If the settlement is made by determination and no appeal is filed within the allowed time, the contractor submits a voucher or invoice for the amount determined due, less any prior payments. This is the final payment basis once the determination becomes final.
Determination with appeal
If the contractor appeals a determination, the contractor submits a voucher or invoice for the amount finally determined on appeal, less any prior payments. While the appeal is pending, the contractor may still bill for charges not directly involved in the appealed portion, and doing so does not affect either party’s rights on the appeal.
Construction labor violations review
For construction contracts, the contracting officer must check for outstanding labor violations before forwarding the final payment voucher. If violations exist, the contracting officer must determine the amount to withhold from final payment under the labor standards rules in subpart 22.4.
No interest on settlements
The Government does not pay interest on amounts due under a settlement agreement or a settlement by determination. Interest may be payable only in the separate situation where the contractor successfully appeals a contracting officer’s determination under the Disputes clause at 52.233-1.
Responsibilities
Contractor
Submit the final voucher or invoice after a negotiated settlement or final determination, showing the correct amount due minus any amounts already paid. If there is an appeal, submit the invoice for the amount finally determined on appeal, and during the appeal may bill only for charges not directly involved in the disputed portion.
Termination Contracting Officer (TCO)
After a negotiated settlement is executed, attach the settlement agreement to the contractor’s voucher or invoice and forward the package to the disbursing officer for payment.
Contracting Officer
In construction contracts, check for outstanding labor violations before forwarding the final payment voucher and determine any amount that must be withheld. Also ensure the final payment action follows the correct settlement or appeal outcome.
Disbursing Officer
Process payment once the TCO forwards the settlement agreement and voucher or invoice package for a negotiated settlement.
Government/Agency
Pay only the amount properly due under the settlement or final determination, withhold amounts required for construction labor violations, and generally do not pay interest on settlement amounts except where interest is authorized after a successful appeal under the Disputes clause.
Practical Implications
Final payment depends on the settlement path, so contractors must use the right amount and subtract any prior payments to avoid delays or rejected invoices.
In appealed cases, contractors can sometimes keep billing uncontested charges, but they should clearly separate those charges from the disputed items to avoid waiver or accounting problems.
Construction terminations require an extra labor-standards check before final payment, so unresolved wage or labor issues can reduce or delay the final amount paid.
The Government’s no-interest rule means contractors should not expect interest on ordinary settlement amounts, even if payment is delayed after agreement or determination.
Careful documentation matters: missing the settlement agreement attachment, miscalculating prior payments, or failing to account for withheld amounts are common causes of payment errors and closeout delays.
Official Regulatory Text
(a) Negotiated settlement. After execution of a settlement agreement, the contractor shall submit a voucher or invoice showing the amount agreed upon, less any portion previously paid. The TCO shall attach a copy of the settlement agreement to the voucher or invoice and forward the documents to the disbursing officer for payment. (b) Settlement by determination. If the settlement is by determination and- (1) There is no appeal within the allowed time, the contractor shall submit a voucher or invoice showing the amount determined due, less any portion previously paid; or (2) There is an appeal, the contractor shall submit a voucher or invoice showing the amount finally determined due on the appeal, less any portion previously paid. Pending determination of any appeal, the contractor may submit vouchers or invoices for charges that are not directly involved with the portion being appealed, without prejudice to the rights of either party on the appeal. (c) Construction contracts. In the case of construction contracts, before forwarding the final payment voucher, the contracting officer shall ascertain whether there are any outstanding labor violations. If so, the contracting officer shall determine the amount to be withheld from the final payment (see subpart 22.4 ). (d) Interest. The Government shall not pay interest on the amount due under a settlement agreement or a settlement by determination. The Government may, however, pay interest on a successful contractor appeal from a contracting officer’s determination under the Disputes clause at 52.233-1 .