FAR 49.6—Subpart 49.6

Notice of termination for convenience.

FAR 49.601 is the basic notice provision for a termination for convenience. It tells the contracting officer how to notify the contractor that the Government is ending all or part of the contract for convenience, and it points readers to FAR 49.402-3(g) for the separate notice requirements that apply when the termination is for default. In practice, this section matters because the notice is the formal trigger for the termination process: it starts the contractor’s obligation to stop work, protects the Government’s record of the action, and helps define the scope and effective date of the termination. Although the section is brief, it sits at the front end of the termination process and connects directly to later steps such as stop-work actions, settlement proposals, inventory disposition, and closeout. The practical significance is that a clear, timely, and properly addressed notice reduces disputes over whether the termination was effective, what work was covered, and when the contractor had to begin winding down performance.

Forms for settlement of terminated contracts.

FAR 49.602 addresses the forms used to settle terminated contracts, focusing on the standard forms that must be used when closing out terminated prime contracts and, in some cases, terminated subcontracts. In practice, this section points users to the specific settlement forms identified in FAR 49.602-1 and 49.602-2, and it also directs readers to FAR subpart 53.3 for the official listing of Standard Forms. The purpose of the rule is to promote consistency, completeness, and administrative efficiency in documenting termination settlements, so that contracting officers, contractors, and subcontract administrators use the same approved paperwork and process. For federal contracting, this matters because termination settlements often involve significant cost, time, and legal consequences, and using the prescribed forms helps reduce disputes, ensure required information is captured, and support proper approval and payment actions. The section is narrow in scope, but operationally important because it governs the form of the settlement documentation rather than the substantive settlement terms themselves.

Formats for termination for convenience settlement agreements.

FAR 49.603 addresses the standard formats for termination for convenience settlement agreements and tells contracting personnel how those agreements should generally be drafted. It points readers to FAR 49.109 for the actual settlement agreement forms and states that the formats in this section should be used substantially as written, which promotes consistency, completeness, and enforceability in termination settlements. The section also recognizes that agencies may have special termination clauses, and it gives termination contracting officers (TCOs) limited flexibility to modify the agreement contents to match those agency-specific clauses, including those authorized under provisions such as FAR 49.501 and 49.505(c). In practice, this section matters because settlement agreements are the formal documents that close out a convenience termination and memorialize the parties’ negotiated resolution of costs, payments, and related obligations. Using the proper format helps reduce disputes, ensures required terms are captured, and supports accurate administrative and financial closeout of the terminated contract.

Release of excess funds under terminated contracts.

FAR 49.604 prescribes the required format for recommending the release of excess funds after a contract has been terminated, and it applies when the contracting office does not retain responsibility for settlement of the termination. The section is essentially a standardized reporting template that the termination contracting officer (TCO) uses to tell the contracting office how much money should remain reserved for settlement and how much can be deobligated as excess. It covers the addressee and subject line, the required references to the termination notice and any prior excess-funds letters, the statement identifying whether the termination was complete or partial, the estimate of gross settlement cost, the calculation of the amount available for release, the treatment of any payments already made to the contractor for terminated items, the revision process when earlier estimates are updated, and the identification of the related appropriations and allocated amounts. In practice, this section helps ensure that funds are released only after a reasoned estimate of settlement exposure, that accounting records are supported by a clear written recommendation, and that all affected offices receive the information needed to adjust obligations and manage termination settlement actions. It is a control mechanism that reduces the risk of prematurely deobligating funds needed to pay termination claims or, conversely, leaving excess funds unnecessarily tied up.

Request to settle subcontractor settlement proposals.

FAR 49.605 tells contractors what they must submit when asking the contracting officer for authority to settle subcontractor settlement proposals in a termination situation. The section is essentially an application checklist: it requires identifying information about the contractor and the plant divisions involved, an explanation of why the authority is needed, a description of the contractor’s termination-handling organization, data on uncompleted prime contracts and subcontracts, the contractor’s experience with terminations and subcontractor proposals, information on terminations already in process, a disclosure about whether similar requests have been made for the same plant divisions, and the specific limit of authority requested. In practice, this helps the Government judge whether the contractor has the organization, experience, workload, and controls needed to responsibly settle subcontractor claims on behalf of the termination effort. It also gives the contracting officer enough information to decide whether to grant, limit, or deny the requested authority and to avoid duplicate or conflicting authorizations across plant divisions.

Granting subcontract settlement authorization.

FAR 49.606 provides the standard letter format a contracting officer must use when granting subcontract settlement authorization after a prime contract termination or termination-related modification. The section covers the scope of the delegation, including authority to settle terminated subcontracts and purchase orders without further Government approval, the limits tied to subsection 49.108-4, the treatment of Government-furnished material and completed but undelivered articles, the dollar ceiling on authorized settlements, how settlement amounts are computed, disposal of termination inventory, the contracting officer’s ability to issue specific disposal instructions, reimbursement treatment under Part 49 and the termination clause, rules for multiple settlements with the same subcontractor, the prohibition on use with affiliated subcontractors or suppliers, and the Government’s right to review and revoke the authorization. In practice, this section is about controlled delegation: it lets the prime contractor move termination settlements faster, but only within defined financial, inventory, and relationship-based limits. It protects the Government by preserving oversight over disposal of Government property, preventing artificial splitting of claims, and excluding non-arm’s-length relationships where the Government’s interests may be at greater risk. For contractors, it is a working authority document that must be followed exactly; for contracting officers, it is a risk-management tool that should be tailored with clear dollar limits and conditions.

Delinquency notices.

FAR 49.607 provides standard notice formats for dealing with contractor delinquency before a default termination, specifically the Cure Notice and the Show Cause Notice. It explains when each notice may be used, how they relate to the default-termination procedures in FAR 49.402-3, and the requirement that notices be sent with proof of delivery requested. The section also cross-references stop-work orders in subpart 42.13, signaling that delinquency issues may overlap with other contract administration remedies. In practice, this section helps contracting officers preserve the Government’s rights, create a clear written record, and give the contractor a fair opportunity to correct performance problems or explain excusable delay before termination for default is pursued. For contractors, it is an early warning that performance is in jeopardy and that silence or inadequate response can be used against them in a later default decision.