FAR 49.205—Completed end items.
Plain-English Summary
FAR 49.205 explains how to handle completed end items when a contract is terminated for convenience or another termination action that triggers settlement procedures. It covers the termination contracting officer’s duty to promptly inspect and accept undelivered completed end items that meet contract requirements, decide which accepted items will still be delivered under the contract, and distinguish those items from accepted items that will not be delivered and therefore must be included in the termination settlement proposal. It also explains how the contractor must invoice accepted and delivered end items at the contract price in the normal billing process, while excluding them from the settlement proposal, and how to price accepted but undelivered items in the settlement proposal by using the contract price adjusted for freight or other savings and any credits for purchase, retention, or sale. Finally, it clarifies that in construction contracts, work in place accepted by the Government is not treated as a completed end item even if the contract paid for that work at unit prices. In practice, this section prevents double recovery, separates normal contract performance from termination settlement costs, and ensures the Government pays only once for accepted deliverables while properly settling items that were accepted but not ultimately delivered.
Key Rules
Inspect accepted end items promptly
After the effective termination date, the TCO must promptly inspect all undelivered completed end items and accept those that comply with contract requirements. This ensures the Government identifies which finished items are usable and eligible for normal contract payment or settlement treatment.
Decide delivery status for accepted items
The TCO must determine which accepted end items will still be delivered under the contract. That decision controls whether the contractor invoices the items normally or includes them in the termination settlement proposal.
Invoice delivered items normally
Accepted end items that are delivered under the contract are billed at the contract price in the usual manner. They are not included in the settlement proposal, which avoids duplicate payment for the same items.
Settle accepted but undelivered items
If completed end items are accepted but will not be delivered under the contract, the contractor must include them in the settlement proposal at the contract price, adjusted for any freight or other savings, plus any credits for purchase, retention, or sale. This establishes the amount recoverable in termination settlement for items the Government accepted but did not take delivery of.
Exclude completed items from settlement when invoiced
Once accepted and delivered end items are billed normally, they are excluded from the termination settlement proposal. The settlement process is reserved for items and costs not already compensated through standard contract invoicing.
Construction work in place is not a completed item
Under construction contracts, work in place that has been accepted by the Government is not treated as a completed end item, even if paid for at unit prices. This prevents contractors from treating partially completed construction work as if it were a finished deliverable for termination settlement purposes.
Responsibilities
Termination Contracting Officer (TCO)
Promptly inspect all undelivered completed end items after the effective termination date, accept those that meet contract requirements, and decide which accepted items will still be delivered under the contract. The TCO must also apply the rule that accepted construction work in place is not a completed end item.
Contractor
Invoice accepted and delivered end items at the contract price in the normal billing process and exclude them from the settlement proposal. For accepted but undelivered completed end items, the contractor must include them in the settlement proposal at the contract price, adjusted for freight or other savings and reduced by any applicable credits for purchase, retention, or sale.
Government/Agency
Ensure the termination settlement process distinguishes between items already accepted and delivered, items accepted but not delivered, and construction work in place. The agency must avoid paying twice for the same item and must apply the correct settlement treatment based on the item’s status.
Practical Implications
Contractors should separate finished inventory into three buckets immediately after termination: accepted and delivered, accepted but undelivered, and not yet accepted. Mixing these categories is a common source of billing errors and settlement disputes.
The TCO’s acceptance and delivery decision drives payment treatment, so contractors should confirm in writing which items the Government will take delivery of and which belong in the settlement proposal.
Freight, handling, and other avoided charges matter. Contractors should adjust settlement amounts for savings and document any credits from resale, retention, or prior purchase to support the proposal.
Construction contractors should not assume that accepted work in place can be treated like a completed end item. Even if paid by unit price, it remains construction work and follows different termination accounting treatment.
A frequent pitfall is double counting: billing delivered accepted items normally and also including them in the settlement proposal. FAR 49.205 is designed to prevent that, so careful reconciliation of invoices and settlement schedules is essential.
Official Regulatory Text
(a) Promptly after the effective date of termination, the TCO shall (1) have all undelivered completed end items inspected and accepted if they comply with the contract requirements, and (2) determine which accepted end items are to be delivered under the contract. The contractor shall invoice accepted and delivered end items at the contract price in the usual manner and shall not include them in the settlement proposal. When completed end items, though accepted, are not to be delivered under the contract, the contractor shall include them in the settlement proposal at the contract price, adjusted for any saving of freight or other charges, together with any credits for their purchase, retention, or sale. (b) Work in place accepted by the Government under a construction contract is not considered a completed item even though that work may have been paid for at unit prices specified in the contract.