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Sec. 1-8.603-5 Procedure in leu of termination

for default. 1-8.603-6 Documentation in contract file. 1-8.603–7 Liquidation of liability. 1-8.604 Default termination of costo

reimbursement type contracts. 1-8.605 Default termination of certain

fixed-price research and devel.

opment contracts.

Subpart 1-8.7-Clauses 1-8.700 Scope and applicability of sub

part. 1-8.700–1 Scope. 1-8.700-2 Applicability. 1-8.701 Termination clause for fixed-price

contracts. 1-8.702 Termination clause for cost

reimbursement type contracts. 1-8.703 Termination clause for fixed-price

construction contracts. 1-8.704 Research and development con

tracts with educational and

other nonprofit institutions. 1-8.704-1 Termination clause. 1-8.704–2 Suggested clause for subcontracts. 1-8.705 Short-form termination for con

venience clauses for fixed-price

type contracts. 1-8.705-1 Contracts for supplies or services. 1-8.705-2 Construction contracts. 1-8.706 Subcontract termination clause. 1-8.707 Default clause for fixed-price

supply contracts. 1-8.708 Excusable delays clause for cost

reimbursement type contracts. 1-8.709 Default clause for fixed-price con

struction contracts. 1--8.709–1 Long-form clause. 1-8.709-2 Short-form clause. 1-8.710 Default clause for fixed-price re

search and development con

Subpart 1-8.8-Formats of Notices, Forms,

Warranties, and Agreements 1-8.800 Scope of subpart. 1-8.801 Notice of termination for conven.

ience of the Government. 1-8.801-1 Telegraphic notice. 1-8.801-2 Letter notice. 1-8.802 Formats of settlement proposal

forms. 1-8.802–1 Format 802–1, Settlement Pro

posal (Inventory Basis)-fixed

price type contracts. 1-8.802–2 Format 802–2, Settlement Pro

posal (Total Cost Basis)

fixed-price type contracts. 1-8.802–3 Format 802–3, Settlement Pro

posal (Short Form)-fixed.

price type contracts. 1-8.802-4 Format 802-4, Settlement Pro

posal for Cost-Reimbursement

Type Contracts. 1-8.803 Formats of inventory schedules.

Sec. 1-8.803–1 Format 803–1, Inventory Schedule

A (Metals in Mili Product

Form). 1-8.808-3 Format 803-2, Inventory Sched

ule A-Continuation Sheet

(Metals in Mill Product Form). 1-8.808-8 Format 803–3, Inventory Schedule

B. 1-8.803-4 Format 803-4, Inventory Sched

ule B-Continuation Sheet. 1-8.803–5 Format 803-5, Inventory Sched

ule C (Work in Process). 1-8.803–6 Format 803-6, Inventory Schedule

C—Continuation Sheet (Work

in Process). 1-8.803-7 Format 803-7, Inventory Sched

ule D (Dies, Jigs, Fixtures, etc.,

and Special Tools). 1-8.803-8 Format 803-8, Inventory Schedule

D-Continuation Sheet (Dies,
Jigs, Fixtures, etc., and Special

Tools). 1-8.803-9 Format 803-9, Termination In

ventory Schedule E (Short Form for Use with Format

802–3 Only). 1-8.804 Formats of miscellaneous forms. 1-8.804–1 Format 804–1, Schedule of AC

counting Information. 1-8.804–2 Format 804-2, Application for

Partial Payment. 1-8.805 Scrap warranty. 1-8.806 Formats of settlement agreement. 1-8.806–1 Settlement agreement for use in

settling fixed-price prime contracts after complete termi

nation. 1-8.806–2 Settlement agreement for use in

settling fixed-price prime con

tracts after partial termination. 1-8.806–3 Partial settlement agreement, for

use in settling fixed-price prime contracts after complete or partial termination where settlement pertains only to settle

ments with subcontractors. 1-8.806-4 Settlement agreement for use

in settling cost-reimbursement type prime contracts after complete termination where settle

ment includes costs. 1-8.806-5 Settlement agreement for use

in settling cost-reimbursement type prime contracts after complete termination where settle

ment is limited to fee. 1-8.806–6 No-cost settlement agreement

partial termination. 1-8.806–7 No-cost settlement agreement

complete termination. • AUTHORITY: The provisions of this Part 1-8 issued under sec. 205(c), 63 Stat. 390; 40 U.S.C. 486(c).

SOURCE: The provisions of this Part 1-8 appear at 29 F.R. 10196, July 24, 1964, unless Otherwise noted.

§ 1-8.000 Scope and applicability of gross claim or settlement (i) credits for part.

retention or other disposal of termina(a) This part sets forth policies and

tion inventory allocated to the claim, (ii)

credits for advance payments, and (iii) procedures relating to the complete or

credits for partial payments (see $ 1partial termination of contracts for the

8.212-1); but (2) does have deducted convenience of the Government or for default, and sets forth policies and pro

from the gross claim or settlement (i)

the amount payable for completed articedures relating to the settlement of

cles or work at the contract price, and claims arising therefrom. It includes

(ii) amounts payable for the settlement contract clauses, with respect to termination and excusable delay, and sug

or discharge of termination claims of

subcontractors. (This definition applies gested formats of notices, forms, war

only when the taking of an action deranties, and agreements related to the

pends upon the amount of a termination termination and settlement of contracts. (b) This part applies to contracts

claim or settlement; e.g., the amount which initially or by amendment pro

which determines whether audit of a vide for termination for the convenience

prime contract claim is required, or the of the Government or for the default of

amount which determines whether a

settlement must be reviewed by a settlethe contractor, whether or not the clauses in the contract with respect to

ment review board.) termination are those set forth in Sub

(b) “Common items” means materials part 1-8.7. However, to the extent that

which are common in nature to both the

terminated contract and the contractor's clauses actually used in contracts are

other work. inconsistent with the provisions of this

(c) “Continued portion of the conpart, the provisions of the clauses actually used shall control. Where a ter

tract” means that portion of a partially mination for convenience clause has not

terminated contract which relates to

work or end items not already completed been included in a contract, this part may also be used for guidance in negotiating

and accepted prior to the effective date a settlement agreement, or in making an

of termination and which the contractor equitable adjustment (see § 1-8.601

must continue to perform. (c)).

(d) “Contractor-acquired property" (c) This part also applies to the dis

means property procured or otherwise posal of contractor inventory arising out

provided by the contractor for the perof any modification of a cost-reimburse

formance of a contract, whether or not ment type contract pursuant to the

the Government has title by the terms

of the contract or exercises its conChanges clause. (d) When the head of a procuring ac

tractual right to take title. tivity so authorizes, the provisions of

(e) “Contractor inventory" means (1) this part may be utilized:

any property acquired by and in the pos(1) In determining any equitable ad

session of a contractor or subcontractor justment as a result of modification of

(including Government-furnished propany contract, other than a cost-reim

erty) under a contract pursuant to the bursement type contract, pursuant to the

terms of which title is vested in the GovChanges clause;

ernment, and in excess of the amounts (2) In the disposal of any property

needed to complete full performance unwhich has become obsolete or excess for

der the entire contract; and (2) any any reason under a contract whenever

property which the Government is obthe cost of such property is made the

ligated to or has an option to take over basis of a claim by the contractor against

under any type of contract as a result the Government; or

either of any changes in the specifica(3) In the disposal of contractor in

tions or plans thereunder or of the ter

mination of such contract (or subconventory generally.

tract thereunder), prior to completion of Subpart 1-8.1-Definition of Terms the work, for the convenience or at the

option of the Government. § 1-8.101 Definitions.

(f) “Effective date of termination” As used in this part, the following means the date upon which the notice of terms have the meanings stated:

termination first requires the contractor (a) "Amount of claim" or "amount of to stop performance, in whole or in part. settlement” means that amount which under the contract. If, however, the 01) does not have deducted from the termination notice is received subsequent to the date fixed for termination, then ture, vehicles, machine tools, and accesthe effective date of termination means sory and auxiliary items, but excluding the date on which the notice is received. special tooling) used or capable of use

(g) “Government-furnished proper- in the manufacture of supplies or in the ty" means property in the possession performance of services or for adminisof or acquired directly by the Govern trative or general plant purposes. ment, and subsequently delivered or (m) "Prime contract” means any conotherwise made available to the con tract as defined in § 1-1.208 entered into tractor.

by any executive agency. (h) “Government property” means all (n) "Production equipment” means property owned by or leased to the Gov those items of plant equipment which are ernment or acquired by the Government located within a manufacturing, processunder the terms of a contract; except ing, assembly, or service establishment. that property to which the Government and which are used for cutting, abrading. has acquired a lien or title solely as a re grinding, shaping, forming, joining, sult of partial, advance, or progress measuring, testing, heating, or treating payments shall not be classified as Gov- production materials or work in process. ernment property. With this exception, (0) "Salvage” means property which, Government property includes (1) Gov because of its worn, damaged, deterioernment-furnished property, and (2) rated, or incomplete condition, or bethat part of contractor-acquired prop cause of its specialized nature, has no erty title to which is vested in the reasonable prospect of sale or use as Government.

serviceable property without major re(i) “Material” means property which pairs or alterations but which has some may be incorporated into or attached to value in excess of its scrap value. an end item to be delivered under a con (p) "Scrap” means property which tract or which may be consumed or ex has no reasonable prospect of being sold pended in the performance of a contract. except for the recovery value of its basic It includes, but is not limited to, raw and material content. processed material, parts, components, (q) “Serviceable or usable property" assemblies, and small tools and supplies means property which has reasonable which may be consumed in normal use prospect of further use or sale either in in the performance of the contract. its existing form or with minor repairs

(j) “Other work” means any current or alterations. or scheduled work of the contractor, (r) "Settlement agreement” means a whether Government or commercial,

written agreement, in the form of an other than work related to the ter amendment to the contract, between the minated contract.

contractor and the Government settling (k) “Plant clearance period” means, all or a severable portion of a settlement for each particular property classifica proposal. tion (such as raw materials, purchased (s) "Settlement proposal” means a parts, and work in process) at any one

termination claim submitted by a conplant or location, a period beginning tractor or subcontractor in the form, and with the effective date of the termination supported by the data, required by this for convenience and ending 90 days after Part 1-8. receipt by the contracting officer of ac

(t) "Special machinery and equipceptable inventory schedules covering

ment” means that part of plant equipall items of that particular property ment which was acquired or constructed classification in the termination inven solely for the performance of the tertory at that plant or location, or ending minated contract or the terminated conon such later date as may be agreed to

tract and other Government contracts, by the contracting officer and the con

and as to which the contractor claims tractor. Final phase of a plant clearance loss of useful value. period means that part of a plant clear

(u) “Special tooling" means all jigs, ance period which occurs after the re

dies, fixtures, molds, patterns, special ceipt of acceptable inventory schedules taps, special gauges, special test equipcovering all items of the particular prop ment, other special equipment and manerty classification at the plant or loca ufacturing aids, and replacements theretion.

of, acquired or manufactured by the (1) “Plant equipment” means per- contractor for use in the performance of sonal property of a capital nature (con- a contract, which are of such a spesisting of machinery, equipment, furni cialized nature that, without substantial modification or alteration, their use is and to the settlement of both fixed-price limited to the production of such sup type and cost-reimbursement type conplies or parts thereof, or the perform tracts terminated for the convenience of ance of such services, as are peculiar to the Government. Additional principles the needs of the Government. The term applicable to the settlement of fixeddoes not include(1) items of tooling price and cost-reimbursement types of or equipment acquired by the contractor contracts, terminated for convenience, prior to the contract, or replacements are set forth in Subparts 1–8.3 and 1-8.4, thereof, whether or not altered or respectively. adapted for use in the performance of the contract, (2) consumable small tools,

§ 1-8.201 General. or (3) general or special machine tools,

(a) Contracts shall be terminated for or similar capital items.

the convenience of the Government (v) “Subcontract” means any con when it is determined that such action is tract, as defined in § 1-1.208, other than in the best interest of the Government, a prime contract, entered into by a prime or under the circumstances provided in contractor or a subcontractor, calling for § 1-8.601(b). supplies or services required for the (b) A well-drafted termination for performance of any one or more prime convenience clause defines the rights of contracts.

the Government and of the contractor (w) “Termination claim" means any in a termination of the contract for the claim by a contractor or subcontractor, convenience of the Government and propermitted by the terms of a prime con vides for the settlement of claims theretract, for compensation for the termina under. Thus, the contractual right to tion, in whole or in part, of the prime terminate a contract for the convenience contract or a subcontract thereunder, of the Government and to make a settleand any other claim which this Part 1-8 ment agreement (as defined in § 1-8.101 authorizes to be asserted and settled in (r)) is based on such a clause. However, connection with a termination settle the power of a contracting activity to ment.

issue a termination notice does not de(x) “Termination inventory" means pend on the existence of a termination any items of physical property pur- for convenience clause in the contract. chased, supplied, manufactured, fur- In the absence of a termination for connished, or otherwise acquired for per venience clause, however, such action formance of the terminated contract and normally constitutes a breach of conproperly allocable to the terminated por tract. Such a breach of contract may tion of the contract. The term does not subject the Government to liability for include any facilities, material, produc common-law damages, including anticition or other equipment, or special tool patory profits, unless the Government ing, which are subject to a separate arrives at a voluntary settlement with contract or a special contract provision governing the use or disposition thereof. (c) A contract which initially does Termination inventory may include not provide for termination for the concontractor-acquired property and Gov venience of the Government may, with ernment-furnished property.

the consent of the contractor, be (y) “Terminated portion of the con

amended either prior to or after termitract” means that portion of a termi

nation to incorporate such a clause. nated contract which relates to work

Even though a contract is not so or end items not already completed and

amended, a settlement agreement may accepted prior to the effective date of termination and which the contractor

be entered into after termination of the is not to continue to perform.

contract. Subpart 1-8.2—General Principles

§ 1-8.202 Notice of termination. Applicable to the Termination for (a) Contracts shall be terminated for Convenience and Settlement of

convenience only by a written notice to Fixed-Price Type and Cost-Reim

the contractor (see § 1-8.801 for sugbursement Type Contracts

gested formats of notices of termination

for convenience), stating: § 1-8.200 Scope of subpart.

(1) That the contract is being terThis Subpart 1-8.2 deals with general minated for the convenience of the Govprinciples applicable to the termination ernment (citing the appropriate contract

clause, if any, authorizing such termina- in the possession of the contractor in tion);

which the Government has or may ac(2) The effective date of termination; quire an interest; and, to the extent di

(3) The extent of termination and, rected by the contracting officer, deliver if a partial termination, the portion of such property to the Government; the contract to be continued; and

(f) Promptly notify the contracting (4) Any special instructions.

officer in writing of any legal proceed(b) A copy of the notice of termina ings against the contractor growing out tion shall be sent to each known assignee, of any subcontract or other commitguarantor, or surety of the contractor. ment related to the terminated portion $ 1-8.203 Methods of settlement.

of the contract;

(g) Settle all outstanding liabilities Settlement of cost-reimbursement type and all claims arising out of termination contracts and of fixed-price type con of subcontracts, obtaining any approvals tracts terminated for convenience may

or ratifications required by the contractbe effected by (a) negotiated agreement,

ing officer; (b) determination by the contracting (h) Promptly submit his own settleofficer, (c) costing out under proper in

ment proposal, supported by appropriate voices or vouchers (in the case of costs schedules; and under cost-reimbursement type con

(i) Disposed of any termination intracts), or (d) a combination of these

ventory, as directed or authorized by the methods. Every effort shall be made to

contracting officer. reach a fair and prompt settlement with the contractor. The negotiated agree

§ 1-8.205 Duties of contracting officer ment is the most expeditious and most

after issuance of notice of termina. satisfactory method of settling termina

tion. tion claims and shall be used whenever (a) In accordance with the terminafeasible. Settlement by determination tion clause in the contract and with the shall be used only when a termination notice of termination, the contracting claim cannot be settled by agreement. officer shall, among other things: § 1-8.204 Duties of prime contractor

(1) Direct the action required of the

prime contractor;
after receipt of notice of termina.

(2) Examine the settlement proposal

of the prime contractor and, when apAfter receipt of the notice of termi

propriate, the settlement proposals of nation, the contractor must comply with

subcontractors; the termination clause of the contract

(3) Promptly negotiate settlement and the notice of termination, except as

with the contractor and enter into & otherwise directed by the contracting

settlement agreement; and officer under the authority of the clause.

(4) To the extent that he is unable to The clause and the notice generally

negotiate settlement after due and dilishould require, among other things,

gent effort, promptly settle the contracthat the contractor:

tor's claim by determination. (a) Stop work on the terminated por

(b) To expedite settlement, the contion of the contract and discontinue

tracting officer shall seek assistance from placing subcontracts thereunder;

specially qualified personnel (such as (b) Terminate all subcontracts re

legal, accounting, inspecting, engineerlated to the terminated portion of

ing, and property disposal personnel) so the prime contract;

that such personnel may: (c) Immediately advise the contract

(1) Assist in dealing with the coning officer of any special circumstances

tractor; precluding the stoppage of work;

(2) Render advice on legal and con(d) If the termination is partial, per

tractual matters; form the continued portion of the con

(3) Conduct accounting reviews and tract and submit promptly any request

render advice and assistance on accountfor an equitable adjustment of price

ing matters; and with respect to the continued portion of

(4) Perform the following functions the contract, supported by evidence of with respect to the termination inyenany increase in the cost thereof;

tory(e) Take such action as may be neces- (i) Verify its existence; sary, or as the contracting officer may (ii) Determine qualitative and quantidirect, to protect and preserve property tative allocability;

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