FAR 49.602-5—Settlement agreement.
Plain-English Summary
FAR 49.602-5 is a very short but important procedural rule in the termination-for-convenience settlement process. It addresses one specific topic: the required form for executing a settlement agreement after the parties have negotiated the amount and terms of settlement under the termination rules, with a cross-reference to FAR 49.109-1. In practice, this means the settlement is not just an informal understanding; it must be documented on Standard Form 30, Amendment of Solicitation/Modification of Contract, which is the government’s standard contract modification instrument. The rule exists to ensure the settlement is formally incorporated into the contract file, properly authorized, and clearly memorialized as a binding modification. For contracting officers and contractors, the practical significance is that even when the dollar amount and terms are agreed, the settlement is not fully executed until the SF 30 is used and signed by the authorized parties. This section therefore supports administrative consistency, auditability, and enforceability in termination settlements.
Key Rules
Use SF 30
A settlement agreement must be executed on Standard Form 30, Amendment of Solicitation/Modification of Contract. No other form is prescribed by this section for formal execution of the settlement agreement.
Follow 49.109-1
This section works together with FAR 49.109-1, which addresses settlement agreements in more detail. The SF 30 requirement applies in that settlement-agreement framework and should be read together with the related procedures.
Formalize the agreement
The negotiated settlement must be reduced to a formal contract modification. This ensures the agreement is part of the official contract record and has the legal effect of a binding modification rather than a mere negotiation summary.
Responsibilities
Contracting Officer
Prepare and execute the settlement agreement using SF 30, ensure the document accurately reflects the negotiated terms, and obtain the necessary signatures and approvals consistent with the contract file and applicable termination procedures.
Contractor
Review the settlement terms on SF 30, confirm the agreement reflects the negotiated settlement, and sign the form when the contractor is accepting the settlement terms.
Agency
Maintain the settlement agreement in the official contract file and ensure internal procedures support use of the prescribed form for termination settlement actions.
Practical Implications
A negotiated termination settlement is not complete until it is documented on SF 30, so parties should not treat a verbal or email agreement as final.
Using the wrong form or failing to execute the settlement as a formal modification can create file deficiencies, delay payment, and complicate later audits or disputes.
Contracting officers should verify that the SF 30 matches the negotiated settlement exactly, including any release language, payment terms, and effective date.
Contractors should carefully review the modification before signing because the SF 30 becomes the controlling written record of the settlement.
Because this rule is procedural and narrow, the main risk is administrative error: missing signatures, incorrect modification data, or failure to align the SF 30 with the underlying settlement authority.
Official Regulatory Text
Standard Form30 ( SF 30 ), Amendment of Solicitation/Modification of Contract, shall be used to execute a settlement agreement (see 49.109-1 ).