Subpart 49.6 - Contract Termination Forms and Formats

Subpart 49.6 - Contract Termination Forms

and Formats

Parent topic: Part 49 - Termination of Contracts

49.601 Notice of termination for convenience.

(See 49.402-3(g) for notice of termination for default.)

49.601-1 Electronic notice.

The contracting officer may provide expedited notice of termination by electronic means that

includes a requirement for the contractor to confirm receipt. If the contractor does not confirm

receipt promptly, the contracting officer shall resend the notice electronically, and expedite the

letter notice described in 49.601-2. If confirmation of the electronic notice is received, and the

electronic notice includes all content in 49.601-2, the contracting officer need not send the letter

notice described in 49.601-2.

(a) Complete termination: The following electronic notice is suggested for use if a supply contract is

being completely terminated for convenience. If appropriately modified, the notice may be used for

other than supply contracts.

Date ____________

XYZ Corporation New York, NY 12345

Contract No. ___________________ is completely terminated under clause ___________, effective

__________________ [insert "immediately, (today’s date)" or "on ______________, 20_____," or "as soon as

you have delivered, including prior deliveries, the following items:" (list)]. Immediately stop all work,

terminate subcontracts, and place no further orders except to the extent [insert if applicable

"necessary to complete items not terminated or"] that you or a subcontractor wish to retain and

continue for your own account any work-in-process or other materials. Provide by electronic means

similar instructions to all subcontractors and suppliers. Detailed instructions follow.

_______________________________________________________________________________

(Contracting Officer)

(b) Partial termination:The following electronic notice is suggested for use if a supply contract is

being partially terminated for convenience. If appropriately modified, the notice may be used for

other than supply contracts.

Date ____________

XYZ Corporation New York, NY 12345

Contract No.______________ is partially terminated under clause ___________, effective ____________

[insert "immediately, (today’s date)" or "on ________, 20____"]. Reduce items to be delivered as

follows: [insert instructions]. Immediately stop all work, terminate subcontracts, and place no

further orders except as necessary to perform the portion not terminated or that you or a

subcontractor wish to retain and continue for your account any work-in-process or other materials.

Provide by electronic means similar instructions to all subcontractors and suppliers. Detailed

instructions follow.

_____________________________________________________________________________

(Contracting Officer)

49.601-2 Letter notice.

The following letter notice of termination is suggested for use if a contract for supplies is being

terminated for convenience. With appropriate modifications, it may be used in terminating contracts

for other than supplies and in terminating subcontracts. This notice shall be sent by certified mail,

return receipt requested, or electronically, provided evidence of receipt is received by the

contracting officer. If no prior electronic notice was issued, or if no confirmation of an electronic

notice was received, use the alternate notice that follows this notice.

Notice of Termination to Prime Contractors

[At the top of the notice, set out all special details relating to the particular termination; e.g.,name

and address of company, contract number of terminated contract, line items, etc.]

(a) Effective date of termination. This confirms the Government’s electronic notice to you dated

_____________, 20_____, terminating _____________ [insert "completely" or "in part"] Contract

No._________ (referred to as "the contract") for the Government’s convenience under the clause

entitled ___________ [insert title of appropriate termination clause]. The termination is effective on

the date and in the manner stated in the electronic notice.

(b) Cessation of work and notification to immediate subcontractors. You shall take the following

steps:

(1) Stop all work, make no further shipments, and place no further orders relating to the contract,

except for-

(i) The continued portion of the contract, if any;

(ii) Work-in-process or other materials that you may wish to retain for your own account; or

(iii) Work-in-process that the Contracting Officer authorizes you to continue (A) for safety

precautions, (B)to clear or avoid damage to equipment, (C)to avoid immediate complete spoilage of

work-in-process having a definite commercial value, or (D)to prevent any other undue loss to the

Government. (If you believe this authorization is necessary or advisable, immediately notify the

Contracting Officer by telephone or personal conference and obtain instructions.)

(2) Keep adequate records of your compliance with paragraph (b)(1) of this section showing the-

(i) Date you received the Notice of Termination;

(ii) Effective date of the termination; and

(iii) Extent of completion of performance on the effective date.

(3) Furnish notice of termination to each immediate subcontractor and supplier that will be affected

by this termination. In the notice-

(i) Specify your Government contract number;

(ii) State whether the contract has been terminated completely or partially;

(iii) Provide instructions to stop all work, make no further shipments, place no further orders, and

terminate all subcontracts under the contract, subject to the exceptions in paragraph (b)(1) of this

section;

(iv) Provide instructions to submit any settlement proposal promptly; and

(v) Request that similar notices and instructions be given to its immediate subcontractors.

(4) Notify the Contracting Officer of all pending legal proceedings that are based on subcontracts or

purchase orders under the contract, or in which a lien has been or may be placed against

termination inventory to be reported to the Government. Also, promptly notify the Contracting

Officer of any such proceedings that are filed after receipt of this Notice.

(5) Take any other action required by the Contracting Officer or under the Termination clause in the

contract.

Government all termination inventory of the following types or classes, including subcontractor

termination inventory that you have the right to take: [Contracting Officer insert proper

identification or "None"].

(2) To settle your proposal, it will be necessary to establish that all prime and subcontractor

termination inventory has been properly accounted for. For detailed information, see part 45.

(d) Settlements with subcontractors. You remain liable to your subcontractors and suppliers for

proposals arising because of the termination of their subcontracts or orders. You are requested to

settle these settlement proposals as promptly as possible. For purposes of reimbursement by the

Government, settlements will be governed by the provisions of part 49.

(e) Completed end items.(1) Notify the Contracting Officer of the number of items completed under

the contract and still on hand and arrange for their delivery or other disposal (see 49.205).

(2) Invoice acceptable completed end items under the contract in the usual way and do not include

them in the settlement proposal.

(f) Patents. If required by the contract, promptly forward the following to the Contracting Officer:

(1) Disclosure of all inventions, discoveries, and patent applications made in the performance of the

contract.

(2) Instruments of license or assignment on all inventions, discoveries, and patent applications made

in the performance of the contract.

(g) Employees affected.(1)If this termination, together with other outstanding terminations, will

necessitate a significant reduction in your work force, you are urged to-

(i) Promptly inform the local State Employment Service of your reduction-in-force schedule in

numbers and occupations, so that the Service can take timely action in assisting displaced workers;

(ii) Give affected employees maximum practical advance notice of the employment reduction and

inform them of the facilities and services available to them through the local State Employment

Service offices;

(iii) Advise affected employees to file applications with the State Employment Service to qualify for

unemployment insurance, if necessary;

(iv) Inform officials of local unions having agreements with you of the impending reduction-in-force;

and

(v) Inform the local Chamber of Commerce and other appropriate organizations which are prepared

to offer practical assistance in finding employment for displaced workers of the impending

reduction-in-force.

(2) If practicable, urge subcontractors to take similar actions to those described in paragraph (1) of

this section.

(h) Administrative. The contract administration office named in the contract will identify the

Contracting Officer who will be in charge of the settlement of this termination and who will, upon

request, provide the necessary settlement forms. Matters not covered by this notice should be

brought to the attention of the undersigned.

(i) Please acknowledge receipt of this notice as provided below.

__________________________________________________ (Contracting Officer)

__________________________________________________ __________________________________________________

(Name of Office)

__________________________________________________ (Address)

Acknowledgment of Notice

The undersigned acknowledges receipt of a signed copy of this notice on ____________, 20____. Two

signed copies of this notice are returned.

__________________________________________________ (Name of Contractor)

By _______________________________________________ (Name)

__________________________________________________ (Title)

(End of notice)

Alternate notice. Substitute the following paragraph (a) for paragraph (a) of 49.601-2, Notice of

Termination to Prime Contractors, if no prior electronic notice was issued, or if no confirmation of an

electronic notice was received:

(a) Effective date of termination. You are notified that Contract No. ______________ (referred to as

"the contract") is terminated __________ [insert "completely" or "in part"] for the Government’s

convenience under the clause entitled _____________[insert title of appropriate termination clause].

The termination is effective __________________ [insert either "immediately upon receipt of this

Notice" or "on ____________, 20____," or "as soon as you have delivered, including prior deliveries, the

following items:" (list)]. Reduce items to be delivered as follows: [insert instructions].

49.602 Forms for settlement of terminated contracts.

The standard forms listed below shall be used for settling terminated prime contracts. The forms at

49.602-1 and 49.601-2 may also be used for settling terminated subcontracts. A listing of the

Standard forms is located in subpart 53.3.

49.602-1 Termination settlement proposal forms.

(a) Standard Form 1435, Settlement Proposal (Inventory Basis), shall be used to submit settlement

proposals resulting from the termination of fixed-price contracts if the proposals are computed on an

inventory basis (see 49.206-2(a)).

(b) Standard Form 1436, Settlement Proposal (Total Cost Basis), shall be used to submit settlement

proposals resulting from the termination of fixed-price contracts if the proposals are computed on a

total cost basis (see 49.206-2(b)).

used to submit settlement proposals resulting from the termination of cost-reimbursement contracts

(see 49.302).

(d) Standard Form 1438, Settlement Proposal (Short Form), shall be used to submit settlement

proposals resulting from the termination of fixed-price contracts if the total proposal is less than

$10,000 (see 49.206-1(d)).

49.602-2 Inventory forms.

Standard Form (SF) 1428, Inventory Disposal Schedule, and SF 1429, Inventory Disposal Schedule-

Continuation Sheet, shall be used to support settlement proposals submitted on the forms specified

in 49.602-1(b) and (d).

49.602-3 Schedule of accounting information.

Standard Form 1439, Schedule of Accounting Information, shall be filed in support of a settlement

proposal unless the proposal is filed on Standard Form 1438, Settlement Proposal (Short Form) (see

49.206-1(e)).

49.602-4 Partial payments.

Standard Form 1440, Application for Partial Payment, shall be used to apply for partial payments

(see 49.112-1).

49.602-5 Settlement agreement.

Standard Form30 (SF 30), Amendment of Solicitation/Modification of Contract, shall be used to

execute a settlement agreement (see 49.109-1).

49.603 Formats for termination for convenience settlement

agreements.

The formats to be used for termination for convenience settlement agreements should be

substantially as shown in this section (see 49.109). Termination contracting officers (TCO’s) may,

however, modify the contents of these agreements to conform with special termination clauses

prescribed or authorized by their agencies (e.g., see 49.501 and 49.505(c)).

49.603-1 Fixed price contracts-complete termination.

[Insert the following in Block 14 of SF 30 for settlements of fixed-price contracts completely

terminated.]

(a) This supplemental agreement settles the settlement proposal resulting from the Notice of

Termination dated ___________.

(b) The parties agree to the following:

(1) The Contractor certifies that all contract termination inventory (including scrap) has been

retained or acquired by the contractor, sold to third parties, returned to suppliers, delivered to or

stored for the Government, or otherwise properly accounted for, and that all proceeds and retention

credits have been used in arriving at this agreement.

(2) The Contractor certifies that each immediate subcontractor, whose settlement proposal is

included in the proposal settled by this agreement, has furnished the contractor a certificate stating-

(i) That all subcontract termination inventory (including scrap) has been retained or acquired by the

subcontractor, sold to third parties, returned to suppliers, delivered to or stored for the government,

or otherwise properly accounted for, and that all proceeds and retention credits were used in

arriving at the settlement of the subcontract, and

(ii) That the subcontractor has received a similar certificate from each immediate subcontractor

whose proposal was included in its proposal.

(3) The contractor certifies that all items of termination inventory, the costs of which were used in

arriving at the amount of this settlement or the settlement of any subcontract settlement proposal

included in this settlement, (i) are properly allocable to the terminated portion of the contract, (ii)do

not exceed the reasonable quantitative requirements of the terminated portion of the contract, and

(iii)do not include any items reasonably usable without loss to the Contractor on its other work. The

Contractor further certifies that the Contracting Officer has been informed of any substantial change

in the status of the items between the dates of the termination inventory schedules and the date of

this agreement.

(4) The Contractor transfers, conveys, and assigns to the Government all the right, title, and

interest, if any, that the Contractor has received, or is entitled to receive, in and to subcontract

termination inventory not otherwise properly accounted for.

(5) The Contractor shall, within 10 days after receipt of the payment specified in this agreement, pay

to each of its immediate subcontractors (or their respective assignees) the amounts to which they

are entitled, after deducting any prior payments and, if the Contractor so elects, any amounts due

and payable to the Contractor by those subcontractors.

(6)(i) The Contractor has received $________ for work and services performed, or items delivered,

under the completed portion of the contract. The Government confirms the right of the Contractor,

subject to paragraph (7) of this section, to retain this sum and agrees that it constitutes a portion of

the total amount to which the Contractor is entitled in complete and final settlement of the contract.

(ii) Further, the Government agrees to pay to the Contractor or its assignee, upon presentation of a

proper invoice or voucher, the sum of $________ [insert net amount of settlement], arrived at by

deducting from the sum of $________ [for proposals on an inventory basis insert gross amount of

settlement; for proposals on a total cost basis, insert gross amount of settlement less amount shown

in subdivision(6)(i) of this sub-section]-

(A) The amount of $________ for all unliquidated partial or progress payments previously made to the

Contractor or its assignee and all unliquidated advance payments (with any interest),

(B) The amount of $_______ for all applicable property disposal credits [insert if appropriate, "and (C)

the amount of $____ for all other amounts due the Government under this contract, except as

provided in paragraph (7) of this section."]

(iii) The net settlement of $____ in subdivision(ii)of this section, together with sums previously paid,

constitutes payment in full and complete settlement of the amount due the Contractor for the

complete termination of the contract and all other demands and liabilities of the Contractor and the

Government under the contract, except as provided in paragraph (b)(7) of this section.

(7) Regardless of any other provision of this agreement, the following rights and liabilities of the

parties under the contract are reserved: [The following list of reserved or excepted rights and

liabilities is intended to cover those that should most frequently be reserved and that should be

scrutinized at the time a settlement agreement is negotiated (see 49.109-2). The suggested language

of the excepted items on the list may be varied at the discretion of the contracting officer. If

accuracy or completeness can be achieved by referencing the number of a contract clause or

provision covering the matter in question, then follow that method of enumerating reserved rights

and liabilities. Omit any of the following that are not applicable and add any additional exceptions or

reservations required.]

(i) All rights and liabilities, if any, of the parties, as to matters covered by any renegotiation

authority.

(ii) All rights of the Government to take the benefit of agreements or judgments affecting royalties

paid or payable in connection with the performance of the contract.

(iii) All rights and liabilities, if any, of the parties under those clauses inserted in the contract

because of the requirements of Acts of Congress and Executive orders, including, without limitation,

any applicable clauses relating to: labor law, contingent fees, domestic articles, and employment of

aliens. [If the contract contains clauses of this character inserted for reasons other than

requirements of Acts of Congress or Executive orders, the suggested language should be

appropriately modified.]

(iv) All rights and liabilities of the parties arising under the contract and relating to reproduction

rights, patent infringements, inventions, or applications for patents, including rights to assignments,

invention reports, licenses, covenants of indemnity against patent risks, and bonds for patent

indemnity obligations, together with all rights and liabilities under the bonds.

(v) All rights and liabilities of the parties, arising under the contract or otherwise, and concerning

defects, guarantees, or warranties relating to any articles or component parts furnished to the

Government by the Contractor under the contract or this agreement.

(vi) All rights and liabilities of the parties under the contract relating to any contract termination

inventory stored for the Government.

(vii) All rights and liabilities of the parties under agreements relating to the future care and

disposition by the Contractor of Government-owned property remaining in the Contractor’s custody.

(viii) All rights and liabilities of the parties relating to Government property furnished to the

Contractor for the performance of this contract.

(ix) All rights and liabilities of the parties under the contract relating to options (except options to

continue or increase the work under the contract), covenants not to compete, and covenants of

indemnity.

(x) All rights and liabilities, if any, of the parties under those clauses of the contract relating to price

reductions for defective certified cost or pricing data.

(End of agreement)

49.603-2 Fixed-price contracts-partial termination.

[Insert the following in Block14 of SF 30 for settlements of fixed-price contracts partially

terminated.]

(a) This supplemental agreement settles the settlement proposal resulting from the Notice of

Termination dated _________________.

(b) The parties agree to the following:

(1) The terminated portion of the contract is as follows: [specify the terminated portion clearly as to-

(i) Line item numbers,

(ii) Descriptions,

(iii) Quantity terminated,

(iv) Unit price of items,

(v) Total price of terminated items, and

(vi) Any other explanation necessary to avoid uncertainty or misunderstanding].

(2) The Contractor certifies that all contract termination inventory (including scrap) has been

retained or acquired by the Contractor, sold to third parties, returned to suppliers, delivered to or

stored for the Government, or otherwise properly accounted for, and that all proceeds and retention

credits have been used in arriving at this agreement.

(3) The Contractor certifies that each immediate subcontractor, whose settlement proposal is

included in the proposal settled by this agreement, has furnished the Contractor a certificate stating-

(i) That all subcontract termination inventory (including scrap) has been retained or acquired by the

subcontractor, sold to third parties, returned to suppliers, delivered to or stored for the Government,

or otherwise properly accounted for, and that all proceeds and retention credits were used in

arriving at the settlement of the subcontract, and

(ii) That the subcontractor has received a similar certificate from each immediate subcontractor

whose proposal was included in its proposal.

(4) The Contractor certifies that all items of termination inventory, the costs of which were used in

arriving at the amount of this settlement or the settlement of any subcontract settlement proposal

included in this settlement, (i) are properly allocable to the terminated portion of the contract, (ii)do

not exceed the reasonable quantitative requirements of the terminated portion of the contract, and

(iii)do not include any items reasonably usable without loss to the Contractor on its other work. The

Contractor further certifies that the Contracting Officer has been informed of any substantial change

in the status of the items between the dates of the termination inventory schedules and the date of

this agreement.

(5) The Contractor transfers, conveys, and assigns to the Government all the right, title, and

interest, if any, that the Contractor has received, or is entitled to receive, in and to subcontract

termination inventory not otherwise properly accounted for.

(6) The Contractor shall, within 10 days after receipt of the payment specified in this agreement, pay

to each of its immediate subcontractors (or their respective assignees) the amounts to which they

are entitled, after deducting any prior payments and, if the Contractor so elects, any amounts due

and payable to the Contractor by those subcontractors.

(7)(i) The Government agrees to pay to the Contractor or its assignee, upon presentation of a proper

invoice or voucher, the sum of $______ [insert net amount of settlement], arrived at by deducting

from $________ [insert gross amount of settlement],

(A) the amount of $____ for all unliquidated partial or progress payments previously made to the

Contractor or its assignee and all unliquidated advance payments (with any interest) applicable to

the terminated portion of the contract and

(B) the amount of $_______ for all applicable property disposal credits.

(ii) The net settlement of $______ in subdivision (b)(7)(i) of this section, together with sums

previously paid, constitutes payment in full and complete settlement of the amount due the

Contractor for the terminated portion of the contract, except as provided in paragraph (b)(8) of this

section.

(iii) Upon payment of the net settlement of $______, all obligations of the Contractor to perform

further work or services or to make further deliveries under the terminated portion of the contract

and all obligations of the Government to take further payments or carry out other undertakings

concerning the terminated portion of the contract shall cease; provided, that nothing in this

agreement shall impair or affect any covenants, terms, or conditions of the contract relating to the

completed or continued portion of this contract.

(8) Regardless of any other provision of this agreement, the following rights and liabilities of the

parties under the contract are reserved: [The following list of reserved or excepted rights and

liabilities is intended to cover those that should most frequently be reserved and that should be

scrutinized at the time a settlement agreement is negotiated (see 49.109-2). The suggested language

of the excepted items in the list may be varied at the discretion of the contracting officer. If accuracy

or completeness can be achieved by referencing the number of a contract clause or provision

covering the matter in question, then follow that method of enumerating reserved rights and

liabilities. Omit any of the following that are not applicable and add any additional exceptions or

reservations required.]

(i) All rights and liabilities, if any, of the parties, as to matters covered by any renegotiation

authority.

(ii) All rights of the Government to take the benefit of agreements or judgments affecting royalties

paid or payable in connection with the performance of the contract.

(iii) All rights and liabilities, if any, of the parties under those clauses inserted in the contract

because of the requirements of Acts of Congress and Executive orders, including, without limitation,

any applicable clauses relating to: labor law, contingent fees, domestic articles, and employment of

aliens. [If the contract contains clauses of this character inserted for reasons other than

requirements of Acts of Congress or Executive orders, the suggested language should be

appropriately modified.]

(iv) All rights and liabilities of the parties arising under the contract and relating to reproduction

rights, patent infringements, inventions, or applications for patents, including rights to assignments,

invention reports, licenses, covenants of indemnity against patent risks, and bonds for patent

indemnity obligations, together with all rights and liabilities under the bonds.

(v) All rights and liabilities of the parties, arising under the contract or otherwise, and concerning

defects, guarantees, or warranties relating to any articles or component parts furnished to the

government by the Contractor under the contract or this agreement.

(vi) All rights and liabilities of the parties under the contract relating to any contract termination

inventory stored for the Government.

(vii) All rights and liabilities, if any, of the parties under those clauses of the contract relating to

price reductions for defective certified cost or pricing data.

(End of agreement)

49.603-3 Cost reimbursement contracts-complete termination, if settlement

includes cost.

[Insert the following in Block 14 of SF 30 for settlement of cost-reimbursement contracts that are

completely terminated, if settlement includes costs.]

(a) This supplemental agreement settles the settlement proposal resulting from the Notice of

Termination dated ________.

(b) The parties agree to the following:

(1) The Contractor certifies that all contract termination inventory (including scrap) has been

retained or acquired by the Contractor, sold to third parties, returned to suppliers, delivered to or

stored for the Government, or otherwise properly accounted for, and that all proceeds and retention

credits have been used in arriving at this agreement.

(2) The Contractor certifies that each immediate subcontractor, whose settlement proposal is

included in the proposal settled by this agreement, has furnished the Contractor a certificate stating-

(i) That all subcontract termination inventory (including scrap) has been retained or acquired by the

subcontractor, sold to third parties, returned to suppliers, delivered to or stored for the Government,

or otherwise properly accounted for, and that all proceeds and retention credits were used in

arriving at the settlement of the subcontract; and

(ii) That the subcontractor has received a similar certificate from each immediate subcontractor

whose proposal was included in its proposal.

(3) The Contractor certifies that all items of termination inventory, the costs of which were used in

arriving at the amount of this settlement or he settlement of any subcontract settlement proposal

included in this settlement, (i) are properly allocable to the terminated portion of the contract, (ii) do

not exceed the reasonable quantitative requirements of the terminated portion of the contract, and

(iii) do not include any items reasonably usable without loss to the Contractor on its other work. The

Contractor further certifies that the Contracting Officer has been informed of any substantial change

in the status of the items between the dates of the termination inventory schedules and the date of

this agreement.

(4) The Contractor transfers, conveys, and assigns to the Government all the right, title and interest,

if any, that the Contractor has received, or is entitled to receive, in and to subcontract termination

inventory not otherwise properly accounted for.

(5) The Contractor shall, within 10 days after receipt of the payment specified in this agreement, pay

to each of its immediate subcontractors (or their respective assignees) the amounts to which they

are entitled, after deducting any prior payments and, if the Contractor so elects, any amounts due

and payable to the Contractor by those subcontractors.

(6)(i) The Contractor has received $______ for work and services performed, or articles delivered,

under the contract before the effective date of termination. The Government confirms the right of

the Contractor, subject to paragraph (b)(7) of this section, to retain this sum and agrees that it

constitutes a portion of the total amount to which the Contractor is entitled in complete and final

settlement of the contract.

(ii) Further, the Government agrees to pay to the Contractor or its assignee, upon presentation of a

proper invoice or voucher, the sum of $_____ [insert net amount of settlement], arrived at by

deducting from the sum of $___ [insert gross amount of settlement less amount shown in

subdivision(6)(i) a of this section]-

(A) The amount of $___ for all unliquidated partial or progress payments previously made to the

Contractor or its assignee and all unliquidated advance payments (with any interest),

(B) The amount of $___ for all applicable property disposal credits [insert if appropriate, "and (C) the

amount of $___ for all other amounts due the Government under this contract, except as provided in

paragraph (b)(7) of this section."]

(iii) The net settlement of $_______ in subdivision (b)(6)(ii) of this section, together with sums

previously paid, constitutes payment in full and complete settlement of the amount due the

Contractor for the complete termination of the contract and of all other demands and liabilities of

the Contractor and the Government under the contract, except as provided in paragraph (b)(7) in