FAR 49.402-6—Repurchase against contractor’s account.
Plain-English Summary
FAR 49.402-6 explains how the Government may repurchase supplies or services after a default termination and charge the extra cost back to the defaulting contractor. It covers when repurchase is required, the timing of the repurchase decision, how to set the repurchase quantity, the need to buy the same or similar items at a reasonable price, and the requirement to obtain competition to the maximum extent practicable. It also distinguishes between repurchases that stay within the undelivered terminated quantity and those that exceed it, because the latter must be treated as a new acquisition. Finally, it addresses how to recover excess repurchase costs from the contractor, including written demand and debt collection procedures under FAR subpart 32.6. In practice, this section protects the Government’s mission by allowing prompt replacement of needed items while preserving the ability to recover avoidable extra costs caused by the contractor’s default.
Key Rules
Repurchase when still needed
If the supplies or services are still required after termination, the contracting officer must repurchase the same or similar items against the contractor’s account as soon as practicable. The purpose is to minimize mission disruption and replace the defaulted performance without unnecessary delay.
Reasonable price and quantity
The repurchase must be made at as reasonable a price as practicable, taking into account quality and delivery requirements. The contracting officer may buy more than the terminated undelivered quantity if needed, but the defaulting contractor can only be charged excess costs up to the amount tied to the terminated quantity, including any contractually permitted quantity variations.
Repurchase decision timing
As a general rule, the contracting officer should decide whether to repurchase before issuing the termination notice. This helps ensure the Government can move quickly if replacement performance is needed and supports a coordinated termination-and-reprocurement strategy.
Use Default clause authority
For repurchases not exceeding the undelivered terminated quantity, the Default clause authorizes the contracting officer to use any terms and acquisition method deemed appropriate. Even so, the contracting officer must obtain competition to the maximum extent practicable and cite the Default clause as the authority for the repurchase.
Treat excess quantity as new acquisition
If the repurchase quantity exceeds the undelivered quantity terminated for default, the contracting officer must treat the entire quantity as a new acquisition. That means the repurchase is no longer limited to default-clause repurchase authority for the whole buy.
Recover excess repurchase cost
If the repurchase price is higher than the terminated contract price, the contracting officer must, after completion and final payment of the repurchase contract, make written demand for the total excess amount. The calculation must consider offsets such as transportation changes, discounts, and similar cost differences.
Collect as a contract debt
If the contractor does not pay the demanded amount, the contracting officer must follow FAR subpart 32.6 procedures for collecting contract debts owed to the Government. This turns the excess repurchase cost into a formal debt collection matter.
Responsibilities
Contracting Officer
Determine whether the supplies or services are still required after default termination and decide whether to repurchase. Make the repurchase as soon as practicable, at a reasonable price, and with competition to the maximum extent practicable. Decide the repurchase quantity, cite the Default clause when appropriate, treat over-quantity buys as new acquisitions, and issue written demand for any excess cost after repurchase completion and final payment.
Contractor
Remain financially responsible for excess repurchase costs attributable to the defaulted quantity, including permitted quantity variations, if the Government repurchases at a higher price. If billed by written demand, the contractor must pay the excess amount or face debt collection action under FAR subpart 32.6.
Agency/Government
Ensure replacement needs are addressed promptly after termination and support the contracting officer in obtaining competition and documenting the repurchase decision. If the contractor does not pay the demanded excess cost, the agency must pursue collection under the contract debt procedures.
Practical Implications
This section is the Government’s main tool for replacing defaulted performance without waiting for a separate, lengthy procurement process, but it still requires reasonable pricing and competition where possible.
Contracting officers should document why the repurchase was needed, how the quantity was determined, what market research or competition was obtained, and why the price was reasonable; weak documentation can undermine a later excess-cost claim.
A common pitfall is repurchasing more than the terminated quantity without recognizing that the entire buy must be treated as a new acquisition, which can affect authority, competition requirements, and file structure.
Another frequent issue is failing to account for offsets such as freight, discounts, or other cost changes when calculating excess costs; the demand letter should reflect the net difference, not just the headline contract prices.
Because excess cost recovery becomes a debt collection matter if unpaid, contracting officers should coordinate early with legal, finance, and debt collection personnel to preserve the Government’s claim and follow the required procedures.
Official Regulatory Text
(a) When the supplies or services are still required after termination, the contracting officer shall repurchase the same or similar supplies or services against the contractor’s account as soon as practicable. The contracting officer shall repurchase at as reasonable a price as practicable, considering the quality and delivery requirements. The contracting officer may repurchase a quantity in excess of the undelivered quantity terminated for default when the excess quantity is needed, but excess cost may not be charged against the defaulting contractor for more than the undelivered quantity terminated for default (including variations in quantity permitted by the terminated contract). Generally, the contracting officer will make a decision whether or not to repurchase before issuing the termination notice. (b) If the repurchase is for a quantity not over the undelivered quantity terminated for default, the Default clause authorizes the contracting officer to use any terms and acquisition method deemed appropriate for the repurchase. However, the contracting officer shall obtain competition to the maximum extent practicable for the repurchase. The contracting officer shall cite the Default clause as the authority. If the repurchase is for a quantity over the undelivered quantity terminated for default, the contracting officer shall treat the entire quantity as a new acquisition. (c) If repurchase is made at a price over the price of the supplies or services terminated, the contracting officer shall, after completion and final payment of the repurchase contract, make written demand on the contractor for the total amount of the excess, giving consideration to any increases or decreases in other costs such as transportation, discounts, etc. If the contractor fails to make payment, the contracting officer shall follow the procedures in subpart 32.6 for collecting contract debts due the Government.