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TERMINATED FIXED-PRICE TYPE CONTRACTS

8.306 Completed End Items. Promptly after the effective date of termination, the TCO shall have all undelivered completed end items inspected and accepted if they comply with the prime contract requirements, and shall determine which accepted end items shall be delivered under the contract. The contractor shall be paid for completed end items so accepted and delivered by invoicing them at the contract price in the usual manner and shall not include such end items in his termination claim. Where completed end items, though accepted, are not to be delivered under the contract, the contractor shall include such end items in his settlement proposal at the contract price, appropriately adjusted for any saving of freight or other charges, together with any credits for their purchase, retention, or sale.

8.307 Settlement Proposals.

8.307-1 Submission of Settlement Proposals.

(a) Subject to the provisions of the Termination clause in the contract, the contractor should promptly submit to the TCO a settlement proposal setting forth the amount claimed to be due by reason of the termination. The proposal must be submitted within one year from the effective date of the termination, unless the period has been extended in accordance with the terms of the contract. Termination charges under a single prime contract involving two or more divisions or units of the prime contractor must be consolidated and included in a single termination claim.

(b) The settlement proposal must cover all elements of the contractor's claim, including settlements with subcontractors. With the consent of the TCO, proposals may be filed in successive steps covering separate portions of a claim. Such interim proposals shall include all costs of a particular type, except as the TCO may authorize otherwise.

(c) Settlement proposals must be in the form prescribed in 8.802. When none of those forms is adequate for a particular contract, the Assistant Administrator for Procurement may authorize appropriate modifications. Settlement proposals must be in reasonable detail supported by adequate accounting data. Actual, standard (appropriately adjusted), or average costs, may be used in preparing settlement proposals; provided, that such costs are determined in accordance with generally recognized accounting principles consistently followed by the contractor. When actual, standard, or average costs are not reasonably available, estimated costs may be used if the method of arriving at the estimates is approved by the TCO. A contractor shall not be required to maintain unduly elaborate cost accounting systems merely because his contracts may subsequently be terminated.

(d) DD Form 831 (see 8.802-3) may be used when the total claim is less than $10,000, unless otherwise instructed by the TCO. Claims which would normally be included in a single settlement proposal, such as those based on a series of separate orders for the same item under one contract, must be consolidated wherever possible and must not be divided in such a way as to bring them below $10,000.

(e) The Schedule of Accounting Information, DD Form 546, must be submitted for each termination under a contract on which a claim for reimbursement of costs is made, except that the Schedule is not required when the Short Form Settlement Proposal, DD Form 831, is used. Although several interim proposals may be submitted, DD Form 546 need be submitted only once unless, subsequent to filing of the original form, major changes occur in the information contained therein.

NASA PROCUREMENT REGULATION

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8.307-2 Bases for Settlement Proposals.

(a) Inventory Basis. Use of the inventory basis for settlement proposals is preferred. Under this basis the contractor may claim only costs chargeable or allocable to the terminated portion of the contract, and the settlement proposal must itemize separately:

(i) at purchase or manufacturing cost, each of the following metals, raw materials, purchased parts, work in process, finished parts, components, dies, jigs, fixtures, and tooling;

(ii) charges such as engineering costs, initial costs, and general administrative costs;

(iii) costs of settlements with subcontractors;

(iv) settlement expenses; and

(v) other proper charges.

An allowance for profit (see 8.303) or adjustment for loss (see 8.304(b)) must be made to complete the gross termination claim. All unliquidated advance and progress payments, and all disposal and other credits known when the proposal is submitted, must then be deducted.

(b) Total Cost Basis.

(1) When use of the inventory basis is not practicable or will unduly delay settlement, the total cost basis may be used if approved in advance by the TCO. The following are examples of situations where use of the total cost basis may be permitted by the TCO:

(i) if production has not commenced and the accumulated costs represent planning and preproduction or "get ready" expenses;

(ii) if the contractor's accounting system will not readily lend itself to the establishment of unit costs for work in process and finished products; (iii) if the contract does not specify unit prices; or

(iv) if the termination is complete and involves a letter contract.

(2) When the total cost basis is used under a complete termination, all costs incurred under the contract up to the effective date of termination must be itemized and the costs of settlements with subcontractors and applicable settlement expenses must be added. An allowance for profit (see 8.303) or adjustment for loss (see 8.304(c)) must be made. The contract price for all end items which have been or are to be delivered and accepted must be deducted. All unliquidated advance and progress payments, disposal and other credits known when the proposal is submitted, must also be deducted.

(3) When the total cost basis is used under a partial termination, the settlement proposal must not be submitted until completion of the continued portion of the contract. The settlement proposal must be prepared in accordance with (2) above except that all costs incurred to the date of completion of the continued portion of the contract must be included.

(c) Other Basis. Termination claims may not be submitted on any basis other than (a) or (b) above without the prior approval of the Assistant Administrator for Procurement.

8.308 Limitation on Settlements. The total amount payable to the contractor on account of a settlement, whether through negotiation or by determination, before deducting disposal or other credits and exclusive of settlement costs, must not exceed the contract price less payments otherwise made or to be made under the contract.

8.309 Equitable Adjustment in Unit Prices Under Fixed-Price contracts in Cases of Partial Termination.

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(a) If, as a result of a partial termination, the contractor submits in writing a request according to the termination clause for an equitable adjustment of the price or prices specified in the contract which are related to the continued portion, the request must be sent to the purchasing office.

(b) The contracting officer shall have final responsibility for negotiating an equitable adjustment in the price relating to the continued portion of the contract and will effect a supplemental agreement covering any changes in price. The contracting officer shall assure himself, on the basis of evidence he deems proper (including coordination with the TCO), that no portion of any increase in price has been included in any termination settlement previously made or currently in process.

(c) The TCO shall assure himself, on the basis of evidence he deems proper (including coordination with the contracting officer), that no portion of the costs included in the equitable adjustment for the continued portion of the contract are included in the termination settlement.

NASA PROCUREMENT REGULATION

8.309

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

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(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

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