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Special Termination Liability - Solicitation Provision


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I am working a proposal response to a solicitation and there is a requirement for Special Termination Liability - U) The Offeror shall provide all details related to their Special Termination Liability (STL). The details must include monthly projected termination liability, independently for each Minimum Capability and Package, proposed over the PoP and based on their unique technical approach.

This is a first for me, has anyone else run across this requirement and if so how did you reply?

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Here is the prescription for that clause (emphasis added):

DFARS 249.501-70, Special Termination Costs

(a) The clause at  252.249-7000 , Special Termination Costs, may be used in an incrementally funded contract when its use is approved by the agency head.

(b) The clause is authorized when

(1) The contract term is two years or more;

(2) The contract is estimated to require—

(i) Total RDT&E financing in excess of $25 million; or

(ii) Total production investment in excess of $100 million; and

(3) Adequate funds are available to cover the contingent reserve liability for special termination costs.

(c) The contractor and the contracting officer must agree upon an amount that represents their best estimate of the total special termination costs to which the contractor would be entitled in the event of termination of the contract. Insert this amount in paragraph (c) of the clause.

(d)(1) Consider substituting an alternate paragraph (c) for paragraph (c) of the basic clause when—

(i) The contract covers an unusually long performance period; or

(ii) The contractor's cost risk associated with contingent special termination costs is expected to fluctuate extensively over the period of the contract.

(2) The alternate paragraph (c) should provide for periodic negotiation and adjustment of the amount reserved for special termination costs. Occasions for periodic adjustment may include—

(i) The Government's incremental assignment of funds to the contract; 

(ii) The time when certain performance milestones are accomplished by the contractor; or

(iii) Other specific time periods agreed upon by the contracting officer and the contractor.”

See this for the clause: https://www.acquisition.gov/dfars/252.249-7000-special-termination-costs.#DFARS-252.249-7000

 

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9 hours ago, T Smith said:

I am working a proposal response to a solicitation and there is a requirement for Special Termination Liability - U) The Offeror shall provide all details related to their Special Termination Liability (STL). The details must include monthly projected termination liability, independently for each Minimum Capability and Package, proposed over the PoP and based on their unique technical approach.

This is a first for me, has anyone else run across this requirement and if so how did you reply?

I know what termination liability is, but I have never heard of "special termination liability."

For what it's worth, I could not find the phrase "special termination liability" anywhere in the FAR system, which includes the DFARS, in the DOD Financial Management Regulation, in any other policy document, in any board of contract appeals decision, or in any scholarly work pertaining to government contracts. However, I did find mention of it in a 1990 GAO (non-protest) decision, B-238581, Oct. 31, 1990, which referred to "special termination liability" in connect with a "special termination" clause in a contract for the B-1B Bomber program. You can find it online at the GAO website.

If the solicitation includes the clause at 252.249-7000, then it may be that the solicitation should have said "special termination cost liability," which would make sense. It might be a typo or a careless word omission. That's what I would suspect.

You'll have to ask the contracting officer who issued the solicitation for an explanation.

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Vern

 

Here is the provision out of the model contract contained within the solicitation:

N52.249-001  Special Termination Costs (JAN 2006)

(a) Special termination costs, as used in this clause, means only costs in the following categories as defined in FAR Part 31:

 

(1) Severance pay, as provided in FAR 31.205-6(g);

 

(2) Reasonable costs continuing after termination, as provided in FAR 31.205-42(b);

 

(3) Settlement of expenses, as provided in FAR 31.205-42(g);

 

(4) Costs of return of field service personnel from sites, as provided in FAR 31.205-35 and FAR 31.205-46(c);

 

(5) Loss of useful value of special tooling, and special equipment and machinery, as provided in FAR 31.205-42 (d).

 

(6) Costs incurred for rental under unexpired leases as provided in FAR 31.205-42(e); and

 

(7) Costs in paragraphs (a)(1), (2), (3), (4), (5), and (6) of this clause to which subcontractors may be entitled in the event of termination.

 

(b) Notwithstanding the Limitation of Cost, Limitation of Funds, or Limitation of Government Obligation clause of this contract, the contractor shall not include in its estimate of costs incurred or to be incurred, any amount for special termination costs to which the contractor may be entitled in the event this contract is terminated for the convenience of the Government.

 

(c) The contractor agrees to perform this contract in such a manner that the contractor's claim for special termination costs will not exceed the value of the contract. this will be updated upon award. or the amount reported on the most recent Contract Funds Status Report, whichever is lower. The Government shall have no obligation to pay the contractor any amount for the special termination costs in excess of this amount. This amount is subject to re-negotiation and adjustment at the discretion of the Contracting Officer.

 

(d) In the event of termination for the convenience of the Government, this clause shall not be construed as affecting the allowability of special termination costs in any manner other than limiting the maximum amount of the costs payable by the Government.

 

(e) This clause shall remain in full force and effect until this contract is fully funded.

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T Smith,

Have you ever dealt with a termination for convenience? Have you ever submitted a T4C settlement proposal? 

If not, you may want to consult with somebody who has.

Basically--and simplistically--the clause requires the contractor to be able to calculate its termination settlement costs each month, so that the government can make sure funds are available to pay such costs if necessary to do so. This requires the contractor, for example, to understand what its subcontractor and other supplier settlement costs might be, should the suppliers be terminated.

It's not particularly easy, but it can be done, especially if the contractor has a robust accounting system that tracks open supplier commitments and a robust EV system to which suppliers input accurate data timely.

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@T SmithLooking back at your opening post:

On 11/13/2021 at 11:34 AM, T Smith said:

Special Termination Liability - U) The Offeror shall provide all details related to their Special Termination Liability (STL). The details must include monthly projected termination liability, independently for each Minimum Capability and Package, proposed over the PoP and based on their unique technical approach.

They want you to present a projected monthly schedule over the life of the contract of what the special termination costs identified in the clause would be ("termination liability") if the contract were terminated at each point in time. Termination liability is a very old concept and technique.

Are you familiar with the concept of termination liability? If not, I'll try to provide you with references.

See this: https://www.lawinsider.com/dictionary/termination-liability

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On 11/13/2021 at 2:34 PM, T Smith said:

Special Termination Liability - U) The Offeror shall provide all details related to their Special Termination Liability (STL). The details must include monthly projected termination liability, independently for each Minimum Capability and Package, proposed over the PoP and based on their unique technical approach.

Is this the complete language for this requirement or only an extract?  If an extract, can you provide the full text?

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here is the full text, as well as the text from the model contract as included in the solicitation:

(U) The Offeror shall provide all details related to their Special Termination Liability (STL). The details
must include monthly projected termination liability, independently for each Minimum Capability and
Package, proposed over the PoP and based on their unique technical approach. This information shall
match the STL variable in the model contract, NAM 52.249-001.

 

N52.249-001  Special Termination Costs (JAN 2006)

(a) Special termination costs, as used in this clause, means only costs in the following categories as defined in FAR Part 31:

 

(1) Severance pay, as provided in FAR 31.205-6(g);

 

(2) Reasonable costs continuing after termination, as provided in FAR 31.205-42(b);

 

(3) Settlement of expenses, as provided in FAR 31.205-42(g);

 

(4) Costs of return of field service personnel from sites, as provided in FAR 31.205-35 and FAR 31.205-46(c);

 

(5) Loss of useful value of special tooling, and special equipment and machinery, as provided in FAR 31.205-42 (d).

 

(6) Costs incurred for rental under unexpired leases as provided in FAR 31.205-42(e); and

 

(7) Costs in paragraphs (a)(1), (2), (3), (4), (5), and (6) of this clause to which subcontractors may be entitled in the event of termination.

 

(b) Notwithstanding the Limitation of Cost, Limitation of Funds, or Limitation of Government Obligation clause of this contract, the contractor shall not include in its estimate of costs incurred or to be incurred, any amount for special termination costs to which the contractor may be entitled in the event this contract is terminated for the convenience of the Government.

 

(c) The contractor agrees to perform this contract in such a manner that the contractor's claim for special termination costs will not exceed the value of the contract. this will be updated upon award. or the amount reported on the most recent Contract Funds Status Report, whichever is lower. The Government shall have no obligation to pay the contractor any amount for the special termination costs in excess of this amount. This amount is subject to re-negotiation and adjustment at the discretion of the Contracting Officer.

 

(d) In the event of termination for the convenience of the Government, this clause shall not be construed as affecting the allowability of special termination costs in any manner other than limiting the maximum amount of the costs payable by the Government.

 

(e) This clause shall remain in full force and effect until this contract is fully funded.

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1 hour ago, T Smith said:

(U) The Offeror shall provide all details related to their Special Termination Liability (STL). The details
must include monthly projected termination liability, independently for each Minimum Capability and
Package, proposed over the PoP and based on their unique technical approach. This information shall
match the STL variable in the model contract, NAM 52.249-001.

I should have also asked, is this a solicitation provision, or is it a proposed contract clause?

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