FAR 49.304—Procedure for partial termination.

General.

FAR 49.304-1 explains how the Termination Contracting Officer (TCO) handles a partial termination under a cost-reimbursement contract when only part of the work is ended. It covers the default rule that the settlement is limited to adjusting the fee, if any, and, with contracting office concurrence, reducing the estimated cost; it also points to the specific fee-adjustment procedures in FAR 49.304-2 and 49.305. The section then identifies two exceptions: when the terminated portion is clearly severable from the rest of the contract, or when performance is virtually complete, only subsidiary items or spare parts remain, or the remaining performance is otherwise not substantial. In those exception cases, the more general partial-termination procedures in FAR 49.302 and 49.303 apply instead. Practically, this section matters because it determines whether the government treats the partial termination as a limited accounting adjustment or as a broader partial-termination settlement, which affects how costs, fee, and settlement procedures are handled.

Submission of settlement proposal (fee only).

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.

Submission of vouchers.

FAR 49.304-3 addresses how a contractor submits payment vouchers after a partial termination settlement when the settlement is limited to an adjustment of fee only. It explains that, in that situation, the contractor must keep submitting the SF 1034, Public Voucher for Purchases and Services Other Than Personal, for all costs that remain reimbursable under the contract. The section also limits reimbursement for amounts the contractor pays to settle with subcontractors: those settlement costs are not reimbursable unless the required approvals or ratifications have been obtained under FAR 49.108. In practice, this provision keeps the normal billing process moving for allowable contract costs while preventing unauthorized subcontractor settlement payments from being shifted to the Government. It is a narrow but important rule for contractors and contracting officers working through partial terminations, especially where only the fee is being adjusted and the underlying cost-reimbursement billing structure continues.