FAR 49.304-2—Submission of settlement proposal (fee only).
Plain-English Summary
FAR 49.304-2 addresses how a contractor submits a settlement proposal when the only issue after termination is fee, not other costs. It tells the contractor to limit the proposal to a proposed reduction in the amount of fee, to submit the final proposal to the Termination Contracting Officer (TCO) within one year from the effective date of termination unless the TCO extends that period, and to use either the form prescribed in FAR 49.602-1 or an appropriately certified letter. It also requires the contractor to substantiate the amount of fee claimed, with the supporting standards found in FAR 49.305. In practice, this section is meant to streamline closeout of fee-only terminations by narrowing the submission to the fee issue, while still ensuring the government has enough documentation to evaluate the claim. For contractors, the key significance is timing and proof: missing the deadline or failing to support the fee amount can reduce or defeat recovery. For contracting officials, the section provides a clear framework for receiving and reviewing a limited settlement proposal without reopening unrelated termination issues.
Key Rules
Fee-only proposal scope
The settlement proposal must be limited to a proposed reduction in the amount of fee. This means the contractor should not include broader cost claims or unrelated termination settlement items in this submission.
One-year submission deadline
The final settlement proposal must be submitted to the TCO within one year from the effective date of termination, unless the TCO extends the period. Timely submission is a core requirement, so contractors should track the termination date carefully.
TCO may extend time
The one-year period is not absolute if the TCO grants an extension. Any extension should be requested and documented before the deadline expires whenever possible.
Permitted submission formats
The proposal may be submitted using the form prescribed in FAR 49.602-1 or by an appropriately certified letter. The contractor has flexibility in format, but the submission still must be complete and properly certified if submitted by letter.
Fee must be substantiated
The contractor must substantiate the amount of fee claimed in accordance with FAR 49.305. Supporting documentation should show why the claimed fee reduction is appropriate and how the amount was calculated.
Responsibilities
Contractor
Prepare a settlement proposal limited to the fee issue, submit the final proposal to the TCO within one year of the termination effective date unless extended, use the prescribed form or a properly certified letter, and provide documentation substantiating the fee claimed.
Termination Contracting Officer (TCO)
Receive the settlement proposal, consider requests for extension of the submission period, and review the contractor’s substantiation of the fee claimed in accordance with the termination settlement rules.
Practical Implications
This section is narrower than a full termination settlement rule: it applies only when the remaining issue is fee, so contractors should avoid mixing in other termination costs or claims that belong elsewhere.
The one-year deadline is a common pitfall. Contractors should calendar the effective date of termination immediately and request an extension early if more time is needed.
A properly certified letter can be used instead of the standard form, but certification and supporting detail still matter; an unsupported letter is unlikely to be sufficient.
The contractor must be ready to prove the fee amount under FAR 49.305, so internal records, contract terms, and any fee calculation basis should be assembled before submission.
For TCOs, the main practical issue is ensuring the submission is timely and limited to fee, so the review stays focused and the termination file can be closed efficiently.
Official Regulatory Text
The contractor shall limit the settlement proposal to a proposed reduction in the amount of fee. The final settlement proposal shall be submitted to the TCO within oneyear from the effective date of termination, unless the period is extended by the TCO. The proposal may be submitted in the form prescribed in 49.602-1 or by letter appropriately certified. The contractor shall substantiate the amount of fee claimed (see 49.305 ).