FAR 49.208—Equitable adjustment after partial termination.
Plain-English Summary
FAR 49.208 addresses equitable adjustments after a partial termination of a fixed-price contract. It explains when a contractor may seek a price adjustment for the continued portion of the contract, who receives and forwards the contractor’s proposal, what format the proposal must use, and how the government must avoid duplicating costs between the termination settlement and the equitable adjustment. The section also distinguishes responsibilities when the Termination Contracting Officer (TCO) handles the matter versus when the contracting officer retains negotiation authority and executes the supplemental agreement. In practice, this rule is meant to ensure the contractor is fairly compensated for the changed scope of the remaining work without being paid twice for the same costs. It is especially important in partial terminations because the terminated and continued portions of the contract can overlap in cost accounting, pricing, and settlement discussions. The section therefore serves both as a procedural guide and as a safeguard against double recovery.
Key Rules
Partial termination may justify adjustment
After a partial termination under the termination clause, the contractor may request an equitable adjustment in the price or prices of the continued portion of a fixed-price contract. The adjustment applies only to the work that remains after the termination, not to the terminated portion.
Use the required proposal format
The contractor must submit the equitable adjustment proposal in the format of Table 15-2 of FAR 15.408. This ensures the proposal contains the pricing and supporting information needed for review and negotiation.
TCO forwards proposal unless delegated
The TCO must forward the contractor’s proposal to the contracting officer unless negotiation authority has been delegated to the TCO. This preserves the proper chain of responsibility for negotiation and settlement actions.
No double counting in settlements
When the contracting officer negotiates the equitable adjustment and executes the supplemental agreement, the contracting officer must ensure that no portion of any price increase is included in a termination settlement that has been made or is in process. The government may not pay the same cost element twice.
TCO must protect against overlap
If the TCO is handling the matter, the TCO must also ensure that no portion of the costs included in the equitable adjustment are included in the termination settlement. This requires coordination between the adjustment and settlement files and careful cost segregation.
Responsibilities
Contractor
May request an equitable adjustment for the continued portion of a fixed-price contract after a partial termination. Must submit the proposal in the format required by Table 15-2 of FAR 15.408 and support the claimed price change with appropriate cost or pricing information.
Termination Contracting Officer (TCO)
Must forward the contractor’s proposal to the contracting officer unless negotiation authority has been delegated to the TCO. Must ensure that costs included in the equitable adjustment are not also included in the termination settlement.
Contracting Officer
When retaining negotiation authority, must negotiate the equitable adjustment and execute the supplemental agreement. Must ensure that no portion of any increase in price is included in a termination settlement that has been made or is in process.
Agency/Contracting Activity
Must maintain coordination between termination settlement actions and equitable adjustment actions so the same costs are not recovered twice and the contract file clearly reflects the basis for the final pricing actions.
Practical Implications
Contractors should separate costs tied to the continued work from costs tied to the terminated work; otherwise, the proposal may be rejected, reduced, or delayed.
Contracting personnel must coordinate closely between settlement and pricing teams because the same labor, overhead, or material costs can easily be claimed in both places if the files are not reconciled.
The required Table 15-2 format matters in practice because it standardizes the submission and helps the government evaluate the request efficiently.
A common pitfall is treating the equitable adjustment as part of the termination settlement; FAR 49.208 requires these to be kept distinct even though they arise from the same partial termination.
If negotiation authority is delegated to the TCO, responsibilities shift, but the anti-duplication requirement remains the same: no double recovery of costs or price increases.
Official Regulatory Text
Under the termination clause, after partial termination, a contractor may request an equitable adjustment in the price or prices of the continued portion of a fixed-price contract. The TCO shall forward the proposal to the contracting officer except when negotiation authority is delegated to the TCO. The contractor shall submit the proposal in the format of Table 15-2 of 15.408 . (a) When the contracting officer retains responsibility for negotiating the equitable adjustment and executing a supplemental agreement, the contracting officer shall ensure that no portion of an increase in price is included in a termination settlement made or in process. (b) The TCO shall also ensure that no portion of the costs included in the equitable adjustment are included in the termination settlement.