CFCM Terminations 3 — Questions and Answers
Question 1: After a termination for convenience, allowable settlement costs under FAR 49.201 generally exclude:
- Costs of settlement negotiations
- Subcontractor termination costs
- Unearned anticipated profits on the terminated portion (Correct answer)
- Storage costs for terminated inventory
Correct answer: Unearned anticipated profits on the terminated portion
FAR 49.201 explicitly excludes unearned anticipated profits and unrealized income from allowable termination settlement costs.
Question 2: A 'no-cost settlement' in a termination for convenience is appropriate when:
- The contractor has incurred no costs and waives all claims (Correct answer)
- The contract value exceeds $1 million
- The contractor disputes the termination
- The government retains all delivered items
Correct answer: The contractor has incurred no costs and waives all claims
A no-cost settlement is used when the contractor has incurred no costs, or the costs are offset by the value of items retained, and the contractor agrees.
Question 3: Under FAR 49.402-6, a termination for default may be converted to a termination for convenience if:
- The contractor requests it within 30 days
- It is determined the default was excusable (Correct answer)
- The CO decides within 60 days
- The contractor provides a performance bond
Correct answer: It is determined the default was excusable
FAR 49.402-6 allows conversion to convenience termination when it is found that the contractor's failure was excusable.
Question 4: Which of the following is NOT considered an excusable delay under FAR 52.249-8?
- Acts of God
- Acts of the government in its sovereign capacity
- Subcontractor insolvency caused by the subcontractor's own mismanagement (Correct answer)
- Unusually severe weather
Correct answer: Subcontractor insolvency caused by the subcontractor's own mismanagement
Subcontractor financial difficulties caused by the subcontractor's own actions are not excusable delays; the prime contractor remains liable.
Question 5: The FAR 49.108 requirement that the prime contractor flow down termination clauses to subcontractors is intended to:
- Protect the government's right to audit subcontractor records
- Enable the prime to settle with subcontractors upon government termination (Correct answer)
- Limit subcontractor profits
- Transfer default risk to subcontractors
Correct answer: Enable the prime to settle with subcontractors upon government termination
Flowing down termination clauses ensures the prime can settle subcontract claims using the same framework if the prime contract is terminated.
Question 6: Under FAR 49.607, a contracting officer issues a 'demand for payment' after a default termination primarily to recover:
- Anticipated profits on remaining work
- Excess reprocurement costs and unliquidated progress payments (Correct answer)
- The full contract value
- Administrative termination costs
Correct answer: Excess reprocurement costs and unliquidated progress payments
After a default, the government may demand reprocurement excess costs and recovery of any unliquidated progress payments or advance payments.
Question 7: A contractor's termination settlement proposal must be submitted to the contracting officer within how many days after the effective date of termination, per FAR 49.206-1?
- 30 days
- 60 days
- 90 days (Correct answer)
- 1 year
Correct answer: 90 days
FAR 49.206-1 requires the contractor to submit a settlement proposal within 1 year of the effective date of termination, though the CO may extend this period.
CFCM Terminations 3
After a termination for convenience, allowable settlement costs under FAR 49.201 generally exclude: