CFCM Terminations 5 — Questions and Answers
Question 1: Under FAR 49.402-8, if a court or board finds that a termination for default was improper, the default is typically converted to:
- A mutual rescission of the contract
- A termination for convenience (Correct answer)
- A constructive change order
- A no-cost termination
Correct answer: A termination for convenience
An improper or wrongful default termination is converted to a termination for convenience, entitling the contractor to convenience settlement recovery.
Question 2: Under FAR 49.603, 'settlement by determination' occurs when:
- Both parties reach a negotiated agreement on termination costs
- The contracting officer unilaterally determines the settlement amount after negotiations fail (Correct answer)
- An independent panel determines the settlement
- The GAO renders a decision on the termination
Correct answer: The contracting officer unilaterally determines the settlement amount after negotiations fail
FAR 49.603 provides that when negotiated settlement fails, the CO makes a unilateral determination of the amount owed.
Question 3: Which of the following costs is specifically ALLOWABLE in a termination for convenience settlement under FAR 49.201?
- Costs of preparing a settlement proposal (Correct answer)
- Rental costs for space no longer needed after termination
- Costs of advertising for new government contracts
- Bonuses paid to executives for securing the terminated contract
Correct answer: Costs of preparing a settlement proposal
Reasonable costs of preparing the settlement proposal are allowable under FAR 49.201 as a direct cost of the termination.
Question 4: FAR 49.101 states that when a contract is terminated for convenience, the contractor is protected from:
- Future contract debarment based on the termination
- Loss of profits on the entire contract
- Loss due to the termination itself, to the extent practicable (Correct answer)
- Recoupment of any payments already made
Correct answer: Loss due to the termination itself, to the extent practicable
FAR 49.101 establishes that the government's policy is to protect the contractor from loss resulting from a convenience termination, to the extent practicable.
Question 5: In a termination for default, which party bears the initial burden of proving that a default notice was properly issued?
- The contractor
- The government (Correct answer)
- Neither—it is presumed proper
- The cognizant audit agency
Correct answer: The government
The government bears the initial burden of proving that the contractor was in default and the termination notice was proper.
Question 6: Under FAR 49.305, which type of costs are specifically addressed for construction contract terminations?
- Costs of retaining a replacement contractor
- Costs to dismantle and remove completed construction
- Costs for mobilization, preparatory work, and partially completed work in place (Correct answer)
- Only material costs, not labor
Correct answer: Costs for mobilization, preparatory work, and partially completed work in place
FAR 49.305 provides that construction termination settlements include mobilization costs, preparatory work, and the value of partially completed work in place.
Question 7: A 'show cause' notice under FAR 49.402-3 is used instead of a cure notice when:
- The contractor has already received a cure notice and failed to respond
- There is no time remaining in the contract schedule to cure the deficiency (Correct answer)
- The contract value exceeds the TINA threshold
- The contractor is a small business
Correct answer: There is no time remaining in the contract schedule to cure the deficiency
A show cause notice is issued when the delivery date has passed and there is no time left to cure, requiring the contractor to justify why default action should not be taken.
CFCM Terminations 5
Under FAR 49.402-8, if a court or board finds that a termination for default was improper, the default is typically converted to: