FAR 49.602—Forms for settlement of terminated contracts.
Plain-English Summary
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.
Key Rules
Use standard forms
The standard forms listed in this section must be used to settle terminated prime contracts. This makes the prescribed forms mandatory rather than optional for prime contract termination settlements.
Subcontract use allowed
The forms identified at FAR 49.602-1 and 49.602-2 may also be used for settling terminated subcontracts. This gives contracting personnel a recognized format for subcontract termination settlements when appropriate.
Refer to FAR 53.3
The official listing of Standard Forms is found in FAR subpart 53.3. Users must consult that subpart to identify the correct form numbers and titles.
Responsibilities
Contracting Officer
Ensure the proper standard form is used to document settlement of a terminated prime contract, and use the referenced forms when appropriate for subcontract settlements.
Contractor
Prepare, support, and submit termination settlement documentation on the required standard form when settling a terminated prime contract, and use the approved forms if involved in a subcontract settlement process.
Subcontract Administrator / Prime Contractor
When a subcontract is terminated, use the forms identified in this section if they are being used for the settlement, and ensure the documentation is complete and consistent with the termination action.
Agency / Contracting Activity
Maintain awareness of the required standard forms and ensure personnel have access to the current form listings in FAR subpart 53.3.
Practical Implications
This section is mainly a paperwork-control rule, but it is critical because using the wrong form can delay settlement processing or require resubmission.
Contracting officers should verify they are using the current standard form listed in FAR subpart 53.3, not an outdated internal template or locally created document.
Contractors should expect termination settlement packages to follow a prescribed format, so they should organize cost, inventory, and claim support to match the form requirements.
For subcontract terminations, the rule is permissive rather than mandatory in the same way as prime contracts, but using the referenced forms can help standardize negotiations and approvals.
A common pitfall is confusing the form requirement with the settlement entitlement rules; this section only governs the forms used, not whether a particular cost or amount is allowable or payable.
Official Regulatory Text
The standard forms listed below shall be used for settling terminated prime contracts. The forms at 49.602-1 and 49.601-2 may also be used for settling terminated subcontracts. A listing of the Standard forms is located in subpart 53.3 .