FAR 49.603-6—No-cost settlement agreement-complete termination.
Plain-English Summary
FAR 49.603-6 provides the sample language for a no-cost settlement agreement used in a complete termination. It tells contracting officers what to insert in Block 14 of SF 30 when the parties agree to close out a terminated contract without any further payment, claim, or adjustment, except for specifically reserved rights and liabilities. The section covers two situations: when the contract has already been terminated and the supplemental agreement is being used to modify the contract to reflect a no-cost settlement, and when the contract has not yet been formally terminated and the agreement itself will terminate the contract in its entirety. It also addresses the contractor’s unconditional waiver of charges against the Government, the release of the Government from obligations arising from the contract or its termination, and the Government’s reciprocal agreement that all obligations are concluded except for listed exceptions. In practice, this provision is important because it creates a clear written record that the termination is fully resolved, reduces the risk of later disputes, and ensures any reserved claims, rights, or liabilities are expressly preserved rather than accidentally waived.
Key Rules
Use SF 30 Block 14
This section is a drafting instruction for Block 14 of SF 30. The contracting officer should insert the prescribed language when executing a no-cost settlement agreement for a complete termination.
Choose the correct termination wording
The agreement must state either that it modifies the contract to reflect a no-cost settlement agreement with respect to a prior Notice of Termination, or that it terminates the contract in its entirety if the contract has not yet been formally terminated.
Contractor waives termination charges
The contractor must unconditionally waive any charges against the Government because of the termination. This means the contractor gives up claims for termination-related costs unless an exception is expressly reserved.
Contractor releases remaining obligations
Except for any listed exceptions, the contractor releases the Government from all obligations under the contract or arising from its termination. The release should be broad enough to close out the matter completely except for reserved items.
Government confirms obligations are concluded
The Government agrees that all obligations under the contract are concluded, except for specifically listed reserved or excepted rights and liabilities. This reciprocal language helps prevent later disputes over whether anything remains open.
Reserved rights must be listed
Any rights, liabilities, or claims that are not being waived must be expressly listed in the agreement. The section points to FAR 49.109-2 and 49.603-1(b)(7) for guidance on what may need to be reserved.
Responsibilities
Contracting Officer
Prepare and execute the SF 30 supplemental agreement using the prescribed language, select the correct wording depending on whether the contract was already terminated, and ensure any reserved rights or liabilities are clearly listed.
Contractor
Agree to the no-cost settlement, unconditionally waive termination-related charges against the Government, and release the Government from contract obligations except for any expressly reserved items.
Government
Accept the no-cost settlement, confirm that contract obligations are concluded except for reserved rights and liabilities, and preserve any exceptions that must remain enforceable.
Legal/Contract Administration Staff
Review the settlement language for completeness and consistency with the termination file, verify that no unintended claims are waived, and ensure reserved matters are accurately documented.
Practical Implications
This clause is used to close out a complete termination without further payment, so it is most useful when both sides want a clean administrative end to the contract.
The biggest pitfall is failing to list reserved rights, claims, or liabilities; if they are not expressly excepted, the broad release language may eliminate them.
Contracting officers should make sure the wording matches the procedural posture of the case: whether the termination notice has already been issued or the agreement itself will effect the termination.
Contractors should review the release carefully before signing, because the waiver is unconditional as to termination charges and can affect later recovery efforts.
A well-drafted no-cost settlement reduces the chance of post-termination disputes, but only if the file clearly supports that no further amounts are due and all exceptions are intentional and documented.
Official Regulatory Text
[ Insert the following in Block 14 of SF 30 if a no-cost settlement agreement, under a complete termination, is to be executed. ] (a) This supplemental agreement [ insert "modifies the contract to reflect a no-cost settlement agreement with respect to the Notice of Termination dated ____" or, if not previously terminated, "terminates the contract in its entirety"]. (b) The parties agree as follows: The Contractor unconditionally waives any charges against the Government because of the termination of the contract and, except as set forth below, releases it from all obligations under the contract or due to its termination. The Government agrees that all obligations under the contract are concluded, except as follows: [ List reserved or excepted rights and liabilities. See 49.109-2 and 49.603-1 (b)(7) .] (End of agreement)