CFCM Terminations 4 — Questions and Answers
Question 1: The 'loss ratio' adjustment in termination settlements under FAR 49.203 is applied when:
- The contractor would have incurred a loss on the contract if fully performed (Correct answer)
- The government terminates more than 50% of the work
- The contractor has multiple subcontracts
- Progress payments exceed 80% of costs
Correct answer: The contractor would have incurred a loss on the contract if fully performed
FAR 49.203 requires a loss adjustment to prevent a contractor from recovering more under a termination than it would have earned completing a loss contract.
Question 2: Under FAR 49.501, termination for convenience clauses in service contracts allow settlement for:
- Only direct labor costs
- Costs incurred, profit on work done, and reasonable settlement costs (Correct answer)
- The full contract ceiling price
- Only fixed costs
Correct answer: Costs incurred, profit on work done, and reasonable settlement costs
FAR 49.501 settlement principles for service contracts allow recovery of incurred costs, profit on completed work, and reasonable costs of the settlement itself.
Question 3: When the government terminates a contract for default and the reprocurement price is LOWER than the defaulted contract price, the contractor:
- Must pay the difference to the government
- Is entitled to the savings
- Owes nothing and the government keeps the savings (Correct answer)
- Must return all progress payments
Correct answer: Owes nothing and the government keeps the savings
When reprocurement costs are lower, the government retains the savings; the defaulted contractor has no claim to them.
Question 4: FAR 49.402-1 states that a termination for default is appropriate when the contractor fails to:
- Submit a cost proposal on time
- Make progress endangering performance, or fails to perform any contract provision (Correct answer)
- Maintain required insurance
- Pass a contractor responsibility review
Correct answer: Make progress endangering performance, or fails to perform any contract provision
FAR 49.402-1 identifies failure to deliver, failure to make progress, or failure to perform any contract provision as grounds for default.
Question 5: A 'partial termination' under FAR 49.208 refers to termination of:
- A portion of the contract work or deliverables, with the remainder continuing (Correct answer)
- The first phase of a multiphase contract
- Termination of one contractor in a joint venture
- Cancellation of option periods only
Correct answer: A portion of the contract work or deliverables, with the remainder continuing
A partial termination cancels only a portion of the contract scope while the unterminated portion continues performance.
Question 6: Under FAR 52.249-2, the contractor must stop work upon receiving a termination notice and must also:
- Immediately return all government-furnished property
- Terminate subcontracts and settle subcontractor claims (Correct answer)
- Submit a final invoice within 10 days
- Surrender all contract files to the CO
Correct answer: Terminate subcontracts and settle subcontractor claims
Upon termination, the contractor must stop work and take required termination actions including settling subcontract terminations.
Question 7: The statute of limitations for filing a contractor claim related to a termination settlement is generally:
- 1 year from the termination date
- 3 years from the accrual of the claim
- 6 years from the accrual of the claim (Correct answer)
- 5 years from contract award
Correct answer: 6 years from the accrual of the claim
The Contract Disputes Act establishes a 6-year statute of limitations for contractor claims, including those arising from termination settlements.
CFCM Terminations 4
The 'loss ratio' adjustment in termination settlements under FAR 49.203 is applied when: