FAR 49.504—Termination of fixed-price contracts for default.
Plain-English Summary
FAR 49.504 tells contracting officers which default clauses must be included in fixed-price solicitations and contracts, and which alternate versions apply in special situations. It covers three major subject areas: fixed-price supplies and services, fixed-price research and development, and fixed-price construction, including dismantling, demolition, and removal of improvements. It also addresses when these clauses are mandatory versus discretionary based on the estimated contract amount relative to the simplified acquisition threshold, and it identifies special cases such as transportation or transportation-related services, awards to educational or nonprofit institutions on a no-profit basis, and contracts awarded during a national emergency. In practice, this section matters because the default clause is the government’s primary contractual remedy when a contractor fails to perform, so the clause selection affects risk allocation, termination rights, and contractor exposure. Contracting officers must choose the correct clause and alternate at solicitation and award, while contractors need to understand that the default remedy may differ depending on the type of work and the contract’s circumstances.
Key Rules
Use default clause for supplies/services
For fixed-price supply and service contracts expected to exceed the simplified acquisition threshold, the contracting officer must insert FAR 52.249-8, Default (Fixed-Price Supply and Service). For contracts at or below the threshold, the clause is optional but may be used when appropriate, such as when the acquisition involves items with a history of unsatisfactory quality.
Transportation needs Alternate I
If the contract is for transportation or transportation-related services, the contracting officer must use FAR 52.249-8 with Alternate I. This alternate tailors the default clause to the transportation context.
Use R&D default clause
For fixed-price research and development contracts expected to exceed the simplified acquisition threshold, the contracting officer must insert FAR 52.249-9, Default (Fixed-Price Research and Development), except for contracts with educational or nonprofit institutions on a no-profit basis. At or below the threshold, the clause may be used when appropriate, such as when key personnel may be diverted to other programs.
Use construction default clause
For fixed-price construction contracts expected to exceed the simplified acquisition threshold, the contracting officer must insert FAR 52.249-10, Default (Fixed-Price Construction). For smaller construction contracts, the clause is optional but may be used when appropriate, such as when completion dates are essential.
Dismantling and demolition alternate
If the contract is for dismantling, demolition, or removal of improvements, the contracting officer must use FAR 52.249-10 with Alternate I. This alternate is required because these activities present different performance and default considerations than ordinary construction.
National emergency alternates
During a period of national emergency, the contracting officer may use special alternates for construction-related work: Alternate II for fixed-price construction contracts and Alternate III for dismantling, demolition, or removal of improvements. The rule is permissive, not mandatory, but it gives the government a tailored default remedy in emergency conditions.
Responsibilities
Contracting Officer
Determine whether the contemplated contract is for supplies and services, research and development, construction, or dismantling/demolition/removal work; identify whether the contract is fixed-price; compare the estimated contract amount to the simplified acquisition threshold; and insert the correct default clause and required alternate, or decide whether use is appropriate below the threshold.
Contracting Officer
Apply the special exceptions and conditions in the rule, including the transportation alternate, the exclusion for educational or nonprofit institutions on a no-profit basis in R&D, and the national emergency alternates for construction-related contracts.
Contractor
Understand that the contract may include a default clause that allows the government to terminate for failure to perform, and recognize that the specific clause or alternate depends on the type of work and contract circumstances. Contractors should review the clause carefully because it affects performance obligations, schedule risk, and potential liability after default.
Agency
Support acquisition planning and clause selection by identifying the nature of the requirement, the expected contract type and value, and any special circumstances such as transportation, demolition, or national emergency conditions that affect which default clause applies.
Practical Implications
Clause selection is not optional when the rule says the contracting officer "shall" insert a clause; using the wrong default clause can create a solicitation or contract defect and complicate any later termination action.
The simplified acquisition threshold is a key trigger, so contracting officers must estimate the contract amount correctly before award and not assume the clause is unnecessary just because the acquisition is relatively small.
Special alternates matter: transportation, dismantling/demolition, and national emergency situations each require or permit different versions of the default clause, so a one-size-fits-all approach is risky.
For R&D, the nonprofit/educational no-profit exception is important; if that exception applies, the standard fixed-price R&D default clause is not inserted under this section.
Even when the clause is optional below the threshold, contracting officers should think about performance risk, quality history, and schedule sensitivity before deciding whether to include it, because the default clause can be a useful protection in higher-risk acquisitions.
Official Regulatory Text
(a) (1) Supplies and services. The contracting officer shall insert the clause at 52.249-8 , Default (Fixed-Price Supply and Service), in solicitations and contracts when a fixed-price contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold. The contracting officer may use the clause when the contract amount is at or below the simplified acquisition threshold, if appropriate ( e.g., if the acquisition involves items with a history of unsatisfactory quality). (2) Transportation. If the contract is for transportation or transportation-related services, the contracting officer shall use the clause with its AlternateI. (b) Research and development. The contracting officer shall insert the clause at 52.249-9 , Default (Fixed-Price Research and Development), in solicitations and contracts for research and development when a fixed-price contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold, except those with educational or nonprofit institutions on a no-profit basis. The contracting officer may use the clause when the contract amount is at or below the simplified acquisition threshold;, if appropriate ( e.g., if the contracting officer believes that key personnel essential to the work may be devoted to other programs). (c) (1) Construction. The contracting officer shall insert the clause at 52.249-10 , Default (Fixed-Price Construction), in solicitations and contracts for construction, when a fixed-price contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold. The contracting officer may use the clause when the contract amount is at or below the simplified acquisition threshold, if appropriate ( e.g., if completion dates are essential). (2) Dismantling and demolition. If the contract is for dismantling, demolition, or removal of improvements, the contracting officer shall use the clause with its AlternateI. (3) National emergencies. If the contract is to be awarded during a period of national emergency, the contracting officer may use the clause- (i) With its AlternateII when a fixed-price contract for construction is contemplated, or (ii) With its AlternateIII when a contract for dismantling, demolition, or removal of improvements is contemplated.