Subpart 4-Terminated Cost-Type Contracts 8.401 General Considerations. The termination clauses for cost-reimbursement type contracts (see 8.702 and 8.704) provide for the settlement of costs and of fee, if any. The provisions of the particular contract governing costs shall determine what costs are allowable. 8.402 Discontinuance of Vouchers. (a) When the contract has been completely terminated, the contractor shall not use Standard Form 1034 (Public Voucher) after the last day of the sixth month following the month in which the termination notice is effective; however, he may elect to discontinue the use of such vouchers at any time prior thereto. When the contractor has vouchered out all costs within the six-month period, his claim for fee, if any, may be submitted on DD Form 547 (see 8.803) or by letter appropriately certified. The contractor must substantiate the amount of the fee he claims. The claim for fee must be submitted to the contracting officer within one year from the effective date of termination, unless the period has been extended in accordance with the terms of the contract. When the use of vouchers has been discontinued, all unvouchered costs and claim for fee, if any, shall thereafter be submitted in accordance with 8.404. (b) When the contract has been partially terminated, the provisions of 8.405 shall be applied. 8.403 [Reserved] 8.404 Procedure After Vouchers Are Discontinued 1050 8.404-1 Submission of Settlement Proposal. The contractor shall submit a settlement proposal covering unvouchered costs and his claim for a fee, if any. Such proposal shall be submitted to the TCO within one year from the effective date of termination, unless the period has been extended in accordance with the terms of the contract and in the form prescribed in 8.803 unless the Assistant Administrator for Procurement authorizes modification thereof. The proposal shall contain only unvouchered costs and the contractor may not include in such proposal costs which: (i) have been finally disallowed by the contracting officer; or (ii) are the subject of a reclaim voucher or any costs of a similar nature. 8.404-2 Audit of Settlement Proposal. The TCO shall submit the settlement proposal to the cognizant audit office for appropriate examination and recommendation in accordance with 8.208. However, if the settlement proposal is limited to an adjustment of fee, no referral to the audit office is required. 8.404-3 Partial Payments. Requests for partial payments shall be made and processed in accordance with 8.213-1. 8.404-4 Adjustment of Overhead Costs. (a) If the contract contains a negotiated overhead rate clause (see 3.704) and it appears that adjustment of overhead costs applicable to vouchered costs under the procedure established for determining such negotiated overhead rates will unduly delay final settlement, the TCO after obtaining appropriate information from the cognizant auditor may agree with the contractor: (i) to negotiate the amount of overhead for the contract for the period for which fixed overhead rates have not previously been negotiated, based upon audit recommendations requested by the TCO for such purpose or utilize billing rates for this period to expeditiously effect final settlement if the billing rate appears reasonable (see 3.706(d)); or NASA PROCUREMENT REGULATION 8.404-4 TERMINATION OF CONTRACTS (ii) that any overhead adjustment shall be reserved in the final settlement agreement, pending establishment of negotiated rates in accordance with Part 3, Subpart 7. (b) When an amount of overhead is negotiated pursuant to (a) (i), above, the contractor will eliminate such overhead and the related direct costs on which it was based from the total pool and base used to compute overhead for other contracts performed during the applicable accounting period. 8.404-5 Final Settlement. (a) The TCO shall proceed with the settlement and execution of an appropriate settlement agreement upon receipt of the audit report, if applicable, and the contract audit closing statement covering vouchered costs (see 51.309). (b) The fee shall be adjusted as provided in 8.406. (c) The final settlement agreement may include all claims of the Government and of the contractor under the terminated contract, except that no amount may be allowed for any item of cost disallowed by the contracting officer, or for any other item of cost of the same nature. (d) The provisions of the contract governing the types of reimbursable costs shall constitute the basis of negotiations; however, if an overall settlement of costs is agreed upon, agreement on each separate element of cost is not necessary. In appropriate cases, differences may be compromised and doubtful questions settled by agreement. An overall settlement shall not, under any circumstances, be made the means of reimbursing contractors for costs which under the provisions of the contract are clearly not allowable. 8.405 Procedure for Partial Termination. 8.405-1 General. (a) In the event of a partial termination, the settlement shall be limited to an adjustment of the fee, if any, and, subject to the concurrence of the contracting officer a reduction in estimated cost. The fee shall be adjusted in accordance with 8.405-2 and 8.406 unless the termination contracting officer determines that: (i) the terminated portion is clearly severable from the balance of the contract; or (ii) performance of the contract is virtually complete, or that performance of any continued portion is only on subsidiary items or spare parts, or is otherwise not substantial. (b) In the case of the foregoing exceptions, the procedures in 8.402, and 8.404 are applicable. 8.405-2 Submission of Settlement Proposal (Fee Only). The contractor shall submit a settlement proposal which shall be limited to a proposed reduction in the amount of fee, if any. Such proposal shall be submitted to the TCO within one year from the effective date of termination, unless the period has been extended in accordance with terms of the contract. The proposal may be submitted in the form prescribed in 8.803 or by letter appropriately certified. The contractor shall substantiate the amount of the fee he claims in accordance with 8.406. 8.405-3 Submission of Vouchers. In the event of a partial termination when settlement is limited to adjustment of fee, if any, the contractor shall continue to submit on Standard Form 1034 all costs reimbursable under the contract, including (i) his own costs allocable to the terminated 8.404-5 CFR TITLE 41 CHAPTER 18 TERMINATED COST-TYPE CONTRACTS portion of the contract, (ii) cost of settlements with subcontractors properly identified as such, and (iii) applicable settlement expenses. The contractor shall not be reimbursed for costs of settlements with subcontractors unless the approval or ratifications required pursuant to the contract have been obtained (see 8.209). 8.406 Adjustment of Fee. The adjusted fee to be paid, if any, shall be determined in the manner provided by the contract, generally based on percentage of completion of the contract or of the terminated portion thereof. Where this basis is used, factors such as the extent and difficulty of the work performed by the contractor (including but not limited to planning, scheduling technical study, engineering work production and supervision, placing and supervising subcontracts to the extent reasonably required, and work performed by the contractor in (i) stopping performance, (ii) settling claims of subcontractors, and (iii) disposing of termination inventory) shall be compared with the total work required by the contract or by the terminated portion thereof. The prime contractor's adjusted fee shall not include an allowance for fee for subcontract effort included in subcontractors' termination claims. The ratio of costs incurred to the total estimated cost of performing the contract or the terminated portion thereof is only one factor in computing the percentage of completion. This percentage may be either greater or less than that indicated by the ratio of costs incurred, depending upon the evaluation by the TCO of the above factors and other relevant considerations. 8.407 Termination of Default. The right to terminate a cost-reimbursement type contract for default is provided for in the Termination clause set forth in 8.702(a). In the event of termination, the contractor shall be reimbursed his allowable costs in accordance with the clause, and an appropriate reduction shall be made in the total fee, if any, computed in accordance with the default provisions of the contract (see para. (e)(i)(D)(II) of the clause in 8.702(a)). The costs of preparing the contractor's settlement proposal are not allowable. A cost-reimbursement type contract does not contain any provision for recovery of excess costs of reprocurement after termination for default, but see paragraph (b) of the clause set forth in 7.203-5 with respect to failure of the contractor to replace or correct defective supplies. The procedures set forth in 8.602 shall be used to the extent appropriate in considering the termination for default of a cost-reimbursement type contract. A ten-day notice to the contractor prior to termination for default is required in every case by the Termination clause in 8.702(a). NASA PROCUREMENT REGULATION 8.407 Subpart 6-Termination for Default 8.600 Scope of Subpart. This Subpart sets forth policies and procedures for the utilization and application of the Default clause set forth in 8.707 for fixed-price supply contracts, and the "Termination for Default-Damages for Delay-Time Extensions" clause set forth in 8.709 for fixed-price construction contracts. (For cost-reimbursement type contracts, see 8.407.) 8.601 General. (a) Termination for default is generally the exercise of a contractual right of the Government to terminate the contract in whole or in part by reason of the contractor's failure, actual or anticipatory, to perform his obligations under the contract. (b) If the contractor can establish that his failure to perform arose out of causes beyond his control and without his fault or negligence, the contract clauses in 8.707 and 8.709 provide that a termination for default shall be deemed to have been a termination for the convenience of the Government, and the rights and obligations of the parties shall be governed accordingly. (c) The Government may also in appropriate cases exercise termination or cancellation rights in addition to those set forth in the contract clauses (see for example, paragraph (f) of the Default clause in 8.707). (d) When a fixed-price type contract is to be terminated for default, the contracting officer of the NASA installation responsible for issuing the contract normally shall accomplish the termination for default. However, another NASA installation or the Department of Defense may be requested to assist in the termination for default when it is considered to be economical and practicable. (e) When it is proposed to utilize the services of another NASA installation, the contracting officer shall arrange with the contracting officer of that installation to perform those duties that are appropriate. (f) When it is proposed to utilize the services of the Department of Defense, a request for such services shall be made by letter prepared in accordance with the agreement with the Department of Defense. (See Part 51, Subpart 3.) 8.602 Termination of Fixed-Price Supply Contracts for Default. 8.602-1 The Government's Right to Terminate for Default. Under contracts containing the Default clause in 8.707 the Government has the right, subject to the notice requirements of the clause, to terminate the whole or any part of the contract for default if the contractor (i) fails to make delivery of the supplies or to perform the services within the time specified in the contract (ii) fails to perform any other provision of the contract, or (iii) fails to make progress so as to endanger performance of the contract. 8.602-2 Effect of Termination for Default. (a) Under a termination for default the Government is not liable for the contractor's costs on undelivered work, and is entitled to the repayment of advance payments and progress payments, if any, applicable to such work. The Government may elect, pursuant to paragraph (d) of the Default clause (see 8.707), to require the contractor to transfer title and deliver to the Government completed supplies and manufacturing materials, in the manner and to the extent directed by the contracting officer. The contracting officer shall not use the Default clause as authority to acquire any completed supplies or manufacturing materials unless he has NASA PROCUREMENT REGULATION 8.602-2 |