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I can't really go into a lot of detail here, but I have a question regarding the various types of terminations. Don't assume that the question relates to a contract that has not already been terminated.

The FAR appears to be silent on this matter, but why is there no guidance regarding a "contract termination by the mutual consent of the parties"?

It seems that this would be a useful tool, and is recognized by DoE's Bonneville Power Administration (BPA) within their instructions (BPA does not follow the FAR).

I seem to recall such a concept buried deeply in statute, but I cannot seem to locate it now. Is anyone familiar with such a mechanism?

From BPA's instructions:

20.2 TERMINATION BY MUTUAL CONSENT.

(a) INFORMATION: A termination by mutual consent is an agreement between BPA and the

contractor to cease work under the contract. Such a termination would be used in a situation

where mutual problems make it undesirable to continue the work, but in which assessing

responsibility to either party would not be fair or reasonable under the circumstances. There

usually will not be a clear indication of failure on the part of either party, and thus a payment by

one party to the other to cover the costs of termination is generally not appropriate. The CO

should consider using such a termination in lieu of issuing a convenience or default termination

when the contractor has not incurred costs for the terminated portion of the contract or the

contractor is willing to waive the costs incurred. Since this type of termination is not a unilateral

right of BPA under the contract, it must be negotiated between the parties, and no contract

clause is used.

(B) PROCEDURE: Termination by mutual consent may be initiated by either party, by oral or

written means. However it is initiated, the CO shall ensure that there is a mutual agreement to

terminate before proceeding with the action. The CO shall document the contract file with the

reasons for the termination and the basis for the settlement. The settlement shall be documented

as a contract modification, and shall include the following information modified as appropriate to

reflect partial or complete terminations:

(1) This supplemental agreement modifies the contract to reflect a partial termination by

mutual consent.

(2) The terminated portion of the contract is as follows: (Specify item numbers, descriptions,

quantity terminated, unit and total price of terminated items, and any other explanation

necessary to avoid uncertainty or misunderstanding.)

(3) The Contractor unconditionally waives any claim against BPA arising under the

terminated portion of the contract or by reason of its termination, including, without limitation,

all obligations of BPA to make further payments or to carry out any further undertakings

under the terminated portion of the contract.

(4) BPA acknowledges that the Contractor has no obligation to perform further work or

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

(5) Under the terminated portion of the contract, the following rights and liabilities of the

parties are reserved:

(List reserved or excepted rights and liabilities)

(End of agreement)

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Sixth,

How is what you described different than a no-cost settlement?

FAR 49.109-4 No-cost settlement.

The TCO shall execute a no-cost settlement agreement (see 49.603-6 or 49.603-7, as applicable) if?

(a) The contractor has not incurred costs for the terminated portion of the contract or

(B) The contractor is willing to waive the costs incurred and

( c ) No amounts are due the Government under the contract.

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To me, it sounds like a termination for the Government's convenience where both parties have already negotiated the settlement at the time of termination.

That's actually a very good way to look at it, but I just don't understand why there wouldn't be some other way to get to that settlement without making it appear that something is only for the Government's convenience if ending a contract is a decision by both parties. In the manner that you have suggested, some prophylactic contractor's release language would be necessary to specifically protect the Government from some subsequent settlement request or resulting claim; that could be tough. It just seems that it would be better from the outset to make it clear that the termination is not just for the convenience of the Government to prevent receiving a subsequent settlement proposal and to remove claim and litigation risk.

In my opinion, it's not enough to just state that a contract is terminated by mutual agreement of the parties, even though many types of contract modifications can be made by the mutual agreement of the parties (i.e. it's not required to cite a contractual authority for the modification).

This would become especially important for large magnitude firm-fixed-price contracts.

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Sixth,

How is what you described different than a no-cost settlement?

FAR 49.109-4 No-cost settlement.

The TCO shall execute a no-cost settlement agreement (see 49.603-6 or 49.603-7, as applicable) if?

(a) The contractor has not incurred costs for the terminated portion of the contract or

(B) The contractor is willing to waive the costs incurred and

© No amounts are due the Government under the contract.

Don,

Yes, true...I've built a hybrid of that and some other settlement language...for the instant situation.

But yes, for the general situation that I've described this should appear to resolve my earlier concern.

Thanks all,

-Will

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Don,

Yes, true...I've built a hybrid of that and some other settlement language...for the instant situation.

But yes, for the general situation that I've described this should appear to resolve my earlier concern.

Thanks all,

-Will

My former office used the no cost settlement with a TFC several times. It was no big deal.

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