FAR 49—Termination of Contracts

Scope of part.

FAR 49.000 is the scope statement for FAR Part 49, and it tells readers what this part is about and why it exists. It covers policies and procedures for the complete or partial termination of contracts, whether the termination is for the convenience of the Government or for default. It also covers the contract clauses that address termination and excusable delay, and it includes instructions for using termination and settlement forms. In practice, this part is the roadmap for how the Government ends a contract before full performance, how the parties document the legal basis for that action, and how they process the resulting settlement or closeout issues. For contracting officers, it signals when to apply termination procedures and related clauses; for contractors, it identifies the rules that govern their rights, obligations, and potential recovery when performance stops early.

Definitions.

FAR 49.001 supplies the core definitions used throughout FAR Part 49, which governs termination of contracts. It defines key terms that control how termination settlements are handled, including "other work," "plant clearance period," "final phase of the plant clearance period," "settlement agreement," "settlement proposal," and "unsettled contract change." These definitions matter because they determine what costs and activities are included or excluded when a contract is terminated, how long property disposition and clearance actions may take, and what documents are required to close out a termination. In practice, these terms affect both the contractor’s ability to prepare a proper settlement package and the contracting officer’s ability to evaluate, negotiate, and finalize termination actions. The definition of settlement proposal is especially important because it ties termination submissions to the concept of a claim under the False Claims Acts, which raises the stakes for accuracy, completeness, and good faith. The definition of unsettled contract change also matters because it separates ordinary termination settlement issues from other contract adjustments that still require a definitive modification.

Subpart 49.1

Subpart 49.2

Applicability.

FAR 49.002 explains when the termination and settlement rules in FAR Part 49 apply and how they are used in related situations. It covers four main topics: applicability to contracts with termination for convenience or default clauses, the special treatment of commercial product and commercial service contracts awarded under FAR Part 12, use of Part 49 by contractors and contracting officers in settling terminated subcontracts, use of Part 49 as guidance for equitable adjustments under the Changes clause, and how to calculate the "amount" of a settlement proposal when a threshold or authority depends on that amount. In practice, this section tells users whether Part 49 is controlling, merely advisory, or inapplicable, and it helps ensure settlement and adjustment calculations are made on a consistent basis. It is especially important in termination scenarios because the wrong rule set can affect allowable costs, settlement strategy, and the Government’s reimbursement exposure. It also clarifies that subcontract settlements and change-order adjustments may be evaluated using Part 49 concepts even when the prime contract itself is not being terminated. Finally, it defines what counts toward the settlement proposal amount, which can affect approval levels, review requirements, and whether a proposal falls within a particular authority or procedure.

Subpart 49.3

Subpart 49.4

Subpart 49.5

Subpart 49.6