TERMINATION OF CONTRACTS

(a) Prior NASA Headquarters clearance of the information release is required before any notice or any information concerning a proposed contract termination involving a reduction in employment of 100 or more contractor employees is released to a contractor. Coordination of the timing of the notice to the contractor and release of information to Congress or the public is the responsibility of NASA Headquarters through its liaison point designated in (b) below. In a labor surplus area a lesser number than 100 may be significant, and if so, should be similarly cleared. (b) The following information will be submitted to the Office of Legislative Affairs, NASA Headquarters (Code C) which, in coordination with the Office of Public Affairs (Code F), has been designated the NASA liaison point:

(i) contract number, date, type of contract;

(ii) name of company;

(iii) nature of contract or end item;

(iv) the reasons for the termination;

(v) contract price of items terminated;

(vi) total number of contractor employees involved including the Government's estimate of the number who may be discharged;

(vii) statement of anticipated impact on the company and the community (identify); identify area labor category, and whether contractor is large or small business, and include any known impact on hardcore disadvantaged employment programs;

(viii) total number of subcontractors involved as well as the impact in this area, if known; and

(ix) draft (unclassified) of suggested press release of information. Information copies of the above will be furnished the following NASA Headquarters offices: the Office of Public Affairs (Code F) the cognizant Program Office, and the Assistant Administrator for Procurement (Code HP).

(c) Clearance to release the information will be requested as soon as possible after the decision has been made to terminate a contract. Pending receipt of clearance to release, information pertinent to the termination will require "For Official Use Only" handling unless a security clearance is required.

(d) The liaison office will act promptly on the request for clearance to release information (not days after receipt) to avoid the accrual of termination costs.

8.203 Notice of Termination.

(a) General. Contracts shall be terminated for convenience, or for default in the case of cost-reimbursement type contracts, only by a written notice to the contractor (see 8.801), stating:

(i) that the contract is being terminated for the convenience of the the Government (or for default) pursuant to the contract provisions authorizing such termination;

(ii) the effective date of termination;

(iii) the extent of termination and, if a partial termination, the portion of the contract to be continued;

(iv) recommended actions to be taken by the contractor to minimize the impact on his personnel if the termination, together with all other outstanding terminations, will result in a significant reduction in the contractor's work force (see paragraph 7 of the letter notice in 8.801-2); and (v) any special instructions.

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(b) Distribution of Copies. Simultaneously with issuance of the termination notice to the contractor a copy shall be sent to the office administering the contract and to any known assignee, guarantor, or surety of the

contractor.

(c) Amendment of Termination Notice. A notice of termination may be amended to provide for:

(i) the correction of mistakes in the notice, of a nonsubstantive nature; (ii) addition of supplemental data or instructions; and

(iii) rescission of the notice when it has been determined that the items of work terminated had been completed or shipped prior to the contractor's receipt of the notice.

(d) Reinstatement of Terminated Contracts. The procurement office may authorize reinstatement of the terminated portion of a contract in whole or in part by an amendment to the notice of termination provided that it has been determined in writing that:

(i) circumstances clearly indicate a requirement for the terminated items; and

(ii) reinstatement is advantageous to the Government; provided that the written consent of the contractor is obtained to the reinstatement.

8.204 Methods of Settlement. Settlement of terminated cost-reimbursement type contracts and of fixed-price type contracts terminated for convenience may be effected by (i) negotiated agreement, (ii) determination by the TCO, (iii) in the case of cost-reimbursement type contracts, costing-out under vouchers using Standard Form 1034, or (iv) a combination of these methods. Every effort shall be made to reach a fair and prompt settlement with the contractor. The negotiated agreement is the most expeditious and most satistactory method of settling termination claims and shall be used whenever feasible. Settlement by determination shall be used only when a termination claim cannot be settled by agreement.

8.205 Duties of Prime Contractor After Receipt of Notice of Termination. The contractor, after receipt of the notice of termination and except as otherwise directed by the TCO, must comply with the termination clause of the contract and the notice of termination which generally require, among other things, that the contractor:

(i) stop work immediately on the terminated portion of the contract and discontinue placing subcontracts thereunder;

(ii) terminate all subcontracts related to the terminated portion of the prime contract;

(iii) immediately advise the TCO of any special circumstances precluding the stoppage of work;

(iv) if the termination is partial, perform the continued portion of the contract and submit promptly any request for an equitable adjustment of price with respect to the continued portion of the contract, supported by evidence of any increase in the cost thereof;

(v) take such action as may be necessary, or as the TCO may direct, to protect and preserve property in the possession of the contractor in which the Government has or may acquire an interest; and, to the extent directed by the TCO, deliver such property to the Government;

(vi) promptly notify the TCO in writing of any legal proceedings against the contractor growing out of any subcontract or other commitment related to the terminated portion of the contract;

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(vii) settle all outstanding liabilities and all claims arising out of termination of subcontracts, obtaining any approvals or ratifications required by the TCO;

(viii) promptly submit his own settlement proposal, supported by appropriate schedules; and

(ix) dispose of any termination inventory, as directed or authorized by the TCO.

8.206 Duties of Termination Contracting Officer After Issuance of Notice of Termination.

(a) In accordance with the termination clause in the contract and with the notice of termination, the TCO shall, among other things:

(i) direct the action required of the prime contractor including the execution of a no-cost settlement agreement (see 8.210-4) if appropriate;

(ii) examine the settlement proposal of the prime contractor and, when appropriate, the settlement proposals of subcontractors;

(iii) promptly negotiate settlement with the contractor and enter into a settlement agreement; and

(iv) to the extent that he is unable to negotiate settlement after due and diligent effort, promptly settle the contractor's claim by determination.

(b) To expedite settlement, the TCO shall seek assistance from specially qualified personel (such as negotiating, legal, accounting, inspecting, engineering, and property disposal personnel) to:

(i) assist the TCO in dealings with the contractor;

(ii) render advice on legal and contractual matters;

(iii) conduct accounting reviews and render advice and assistance on accounting matters; and

(iv) perform the following functions with respect to the termination inventory-.

(A) verify its existence;

(B) determine qualitative and quantitative allocability;

(C) make recommendations concerning serviceability and unserviceability;

(D) undertake necessary screening and redistribution; and (E) assist the contractor in accomplishing other disposition.

(c) An initial conference shall be held with the contractor as promptly as possible to develop a definite program for effecting the settlement. Where appropriate in the judgment of the TCO, principal subcontractors should be present. The TCO shall prepare and place in the termination case file, a memorandum on the results of the conference. Topics discussed at the conference should include:

(i) general principles relating to the settlement of any termination claim, including obligations of the contractor under the termination clause of the contract;

(ii) extent of the termination, point at which work is stopped, and status of any plans, drawings, and information which would have been delivered had the contract been completed;

(iii) status of any continuing work;

(iv) obligation of the contractor to terminate subcontractor and general principles to be followed in settlement of subcontractor claims;

(v) names of subcontractors involved and the respective dates termination notices were issued to them;

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(vi) contractor personnel handling, and methods for, review and settlement of subcontractor claims;

(vii) arrangements for transfer of title and delivery to the Government of any materials required by the Government;

(viii) general principles and procedures to be followed in the protection, preservation, and disposition of contractor's and subcontractor's termination inventory, including the preparation of termination inventory schedules;

(ix) contractor accounting practices and preparation of DD Form 546 (Schedule of Accounting Information)(8.802-9);

(x) form in which settlement proposals shall be submitted;

(xi) accounting review of settlement proposals;

(xii) any requirement for interim financing in the nature of partial payments;

(xiii) tentative time schedule for negotiation of the settlement including submission of settlement proposals, termination inventory schedules, and accounting information schedules by the contractor and subcontractors; and

(xiv) actions taken by the contractor to minimize impact upon employees affected adversely by the termination (see paragraph 7 of the letter notice in 8.801-2).

(xv) obligation of the contractor to furnish accurate, complete and current cost or pricing data and to certify to that effect in accordance with 3.807-3(j) prior to execution of the termination settlement agreement in excess of $100,000.

8.206-1 Release of Excess Funds. An estimate of funds required to settle the termination claim will be made by the TCO at the earliest practicable date. Except in cases where (i) the contract price of items terminated is $1,000 or less, or (ii) the estimated amount of excess funds available is $1,000 or less, funds obligated under the contract in excess of an estimated amount required for settlement will be released to the procurement office within 30 days after issuance of the termination notice by the TCO. Amounts of less than $1,000 shall be released upon request from the procurement office. Continuous surveillance of required funds will be maintained by the TCO to permit timely release of any additional excess funds. In all cases, funds will be released within 10 days after the amount required for settlement has been determined by the TCO. A recommended format for release of excess funds is in 8.807. If it appears that the previous releases of excess have resulted in a shortage of the amount which will be required for settlement, the TCO will inform the procurement office and request by letter the reinstatement of funds, which will be provided within 30 days thereafter.

8.206-2 Termination Case File. A separate termination case file shall be established and maintained for each individual termination by the TCO responsible for negotiating final settlement. Such file shall include records of all actions relative to the settlement. (See 1.308).

8.206-50 Negotiation and Settlement by the Department of Defense or Other Government Agency. Procurement offices shall utilize the services of the Department of Defense and other Government agencies whenever possible to administer and negotiate settlement of terminated contracts. Delegation of the termination function will be made in accordance with the provisions of Part 51, Subpart 3.

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8.207 Fraud or Other Criminal Conduct. Whenever the TCO has reason to suspect fraud or other criminal conduct in connection with the settlement of a terminated contract, he shall discontinue all negotiations with the contractor and shall report the facts in accordance with 1.111. 8.208 Audit of Prime Contract Settlement Proposals and of Subcontract Settlements.

(a) Each settlement proposal of $10,000 or over submitted by a prime contractor shall be referred by the TCO to the cognizant audit office for appropriate examination and recommendation. The TCO may when circumstances indicate the necessity therefor, refer settlement proposals of less than $10,000 to such office. The TCO's referral shall be in writing, indicate any specific information or data which the TCO desires to have developed, and include any facts or circumstances within the knowledge of the TCO which will assist the cognizant audit office in the accomplishment of its function. auditor shall develop such information and may make such further accounting review as he deems appropriate. The cognizant audit office shall submit written comments and recommendations to the TCO. In claims of less than $10,000 where a formal examination of the settlement proposal is not warranted, a desk review will be performed by the TCO or a qualified member of his staff. A written summary of the review will be incorporated in the termination case file.

(b) Subcontract settlements submitted by a contractor to the TCO for approval or ratification in accordance with 8.209 shall be referred to the cognizant audit office for review and recommendations if (i) the settlement involves $25,000 or more unless an accounting review of the settlement proposal has been performed by the cognizant audit office; or (ii) the TCO considers an accounting review in whole or in part, desirable. The requirement for review under (i) or (ii) does not relieve the prime contractor or higher tier subcontractor of the responsibility for performing an accounting review. The audit office shall submit written comments and recommendations to the TCO.

(c) The responsibility of the contractor set forth in 8.209-1 for settlement of immediate subcontractors' settlement proposals applies equally to prime contractors and subcontractors and includes responsibility for performing accounting reviews and any necessary field audits. However, in the situations outlined below, the audit office generally should be requested to perform the accounting review of a subcontractor's settlement proposal where:

(i) a subcontractor objects to an accounting review of his records by an upper-tier contractor for competitive reasons;

(ii) the cognizant audit office is currently performing audit work at the subcontractor's plant, or where it can be performed more economically or efficiently;

(iii) audit by the cognizant audit office is necessary for consistent audit treatment and orderly administration; or

(iv) the contractor has a substantial or controlling financial interest in the subcontractor.

Duplication by the audit office of accounting reviews performed by the upper-tier contractor on subcontractor settlement proposals will be avoided to the extent possible. However, when appropriate, the Government will make additional reviews. Where the contractor is performing accounting reviews in accordance with this paragraph, the TCO should

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