FAR 49.114—Unsettled contract changes.
Plain-English Summary
FAR 49.114 addresses how the government must handle unsettled contract changes when a contract is being terminated, either completely or partially. It covers two related situations: first, the termination settlement officer (TCO) must identify and resolve all related but still-open contract changes before final settlement of a completely terminated contract; and second, when only part of a contract is terminated, the contracting officer normally keeps responsibility for any unresolved changes, although that responsibility may be delegated to the TCO. The section exists to make sure termination settlements are complete, accurate, and coordinated with any pending contract modifications, equitable adjustments, or other change actions that could affect the final amount owed. In practice, this prevents the government and contractor from settling a termination claim without accounting for unresolved changes that may increase, decrease, or otherwise affect the final settlement amount. It also clarifies who has authority to resolve those changes, reducing the risk of inconsistent decisions between the termination settlement process and the underlying contract administration process.
Key Rules
Identify all unsettled changes
Before settling a completely terminated contract, the TCO must obtain from the contracting office a list of all related unsettled contract changes. This ensures the termination settlement is based on a complete picture of open change actions that may affect the final amount.
Resolve changes in final settlement
For a complete termination, the TCO must settle all unsettled contract changes as part of the final settlement. The TCO cannot finalize the termination without addressing those open changes.
Use contracting office recommendations
The TCO must obtain the contracting office’s recommendations concerning the unsettled changes before settling them. This keeps the termination settlement aligned with the contract administration office’s knowledge of the underlying change issues.
Partial terminations usually stay with CO
When a contract is only partially terminated, outstanding unsettled contract changes are usually handled by the contracting officer rather than the TCO. The default rule keeps change administration with the contracting officer in partial termination situations.
Delegation is permitted
The contracting officer may delegate handling of unsettled contract changes to the TCO in a partial termination. This allows flexibility when it is more efficient for the TCO to resolve the changes during settlement.
Responsibilities
Termination Contracting Officer (TCO)
For a complete termination, obtain the list of all related unsettled contract changes from the contracting office, secure the contracting office’s recommendations, and settle those changes as part of the final settlement. If delegated in a partial termination, the TCO may also handle the unsettled contract changes.
Contracting Officer
Provide the TCO with the list of related unsettled contract changes for a complete termination and furnish recommendations on those changes. For a partial termination, normally handle outstanding unsettled contract changes unless the function is delegated to the TCO.
Contracting Office
Identify and communicate all related unsettled contract changes to the TCO and provide recommendations concerning those changes so they can be incorporated into the final settlement.
Agency/Contract Administration Function
Ensure coordination between termination settlement and contract change administration so that open changes are not overlooked and the correct official resolves them.
Practical Implications
Termination settlements should not be finalized until all related open change actions are identified and addressed; otherwise the settlement may be incomplete or inaccurate.
A common pitfall is treating the termination claim as separate from pending modifications, equitable adjustments, or other change actions that still affect contract price, schedule, or scope.
For complete terminations, the TCO needs active coordination with the contracting office; missing recommendations or an incomplete list of changes can delay settlement or create disputes.
For partial terminations, parties should confirm who has authority over unsettled changes early, because the default is the contracting officer but delegation to the TCO is allowed.
Good file discipline matters: unresolved changes should be tracked alongside the termination case so the final settlement reflects the full contract history and avoids later rework or claims.
Official Regulatory Text
(a) Before settlement of a completely terminated contract, the TCO shall obtain from the contracting office a list of all related unsettled contract changes. The TCO shall settle, as part of final settlement, all unsettled contract changes after obtaining the recommendations of the contracting office concerning the changes. (b) When the contract has been partially terminated, any outstanding unsettled contract changes will usually be handled by the contracting officer. However, the contracting officer may delegate this function to the TCO.