Termination for Convenience Cost Reimbursement Contracts FAR 52.249-6

[Tzarina of Compliance]

FAR 52.249-6 states at (c) After receipt of a Notice of Termination, and except as directed by the Contracting Officer, the Contractor shall immediately proceed with the following obligations, regardless of any delay in determining or adjusting any amounts due under this clause:

(1) Stop work as specified in the notice.

(2) Place no further subcontracts or orders (referred to as subcontracts in this clause), except as necessary to complete the continued portion of the contract.

(3) Terminate all subcontracts to the extent they relate to the work terminated.

(4) Assign to the Government, as directed by the Contracting Officer, all rights, title, and interest of the Contractor under the subcontracts terminated, in which case the Government shall have the right to settle or to pay any termination settlement proposal arising out of those terminations.

Does anyone know when this is ever used and for what reason?  Does this only relate to like subcontractor IP rights or patent situations?  Appreciate any thoughts.  Or any link to where I can read about this. 

[Neil Roberts]

1 hour ago, Tzarina of Compliance said:

Does this only relate to like subcontractor IP rights or patent situations?

I think the language is clear enough for me to say my answer is  "no."

[Neil Roberts]

1 hour ago, Tzarina of Compliance said:

Does anyone know when this is ever used and for what reason?

I don't know. But, if I was the government I would consider the assignment if the subcontract work was on a critical path and the government would award the work directly to another contractor.

[Retreadfed]

15 hours ago, Tzarina of Compliance said:

Does anyone know when this is ever used and for what reason?

I don't know what the current practice is, but this was not an uncommon practice in the 1980s and 90s particularly in DoD.  The reason was that it was believed that contractors cut sweetheart deals with subcontractors that complicated the settlement process.  So it was easier for the government to deal directly with the subs.

[Tzarina of Compliance]

13 minutes ago, Retreadfed said:

I don't know what the current practice is, but this was not an uncommon practice in the 1980s and 90s particularly in DoD.  The reason was that it was believed that contractors cut sweetheart deals with subcontractors that complicated the settlement process.  So it was easier for the government to deal directly with the subs.

This makes sense.    I think it would make sense to do this in the current environment, except the agencies may not have enough staff to do primes and subs....   Thank you!!!

[Retreadfed]

2 hours ago, Tzarina of Compliance said:

the agencies may not have enough staff to do primes and subs

A lot of the work was done by DCAA.  The sub's settlement proposal would be sent to the TCO who would hand it off to DCAA for audit.  

[C Culham]

20 hours ago, Tzarina of Compliance said:

 Appreciate any thoughts.

I think it takes more research than the responses here might imply.   I have never had the experience but it seems, while it might make sense, it is more than a simple assignment if the CO directs assignment.   We already know the basic rule of privity of contract but what quickly comes to my mind is what the subcontract states about settlement of termination or even disputes.   Is a state's law stated, no law, Federal procurement law?  I do not want to overcomplicate it but it almost sounds like in some cases a subcontract might have to be reformed with the Government as opposed to assignment.

So my thought repeated in another way.   I would be burying my head in case law to see what I could find because as it goes it will depend.   Heck I could see 10 subcontracts under one prime with all 10 offering challenges based on the subcontract language of each if all 10 were to be assigned.

 

[formerfed]

FAR 49.108-8, Assignment of rights under subcontracts, provides more information.  One interesting aspect is “The TCO shall not require the assignment unless it is in the Government’s interest.”  So this only comes into play when the governments need that to occur.  

i did hear this happening twice from a discussion at a conference.  DoD terminated contracts for IT development when it appeared the solutions weren’t going to achieve the intended objectives and decided to start over.  But they wanted to continue with software packages that the primes subcontractor for.  I believe all it took was assigning licenses from the prime to the government directly.  The prime just wrote the appropriate language.  

[Tzarina of Compliance]

18 hours ago, formerfed said:

FAR 49.108-8, Assignment of rights under subcontracts, provides more information.  One interesting aspect is “The TCO shall not require the assignment unless it is in the Government’s interest.”  So this only comes into play when the governments need that to occur.  

i did hear this happening twice from a discussion at a conference.  DoD terminated contracts for IT development when it appeared the solutions weren’t going to achieve the intended objectives and decided to start over.  But they wanted to continue with software packages that the primes subcontractor for.  I believe all it took was assigning licenses from the prime to the government directly.  The prime just wrote the appropriate language.  

Thats good info.  Thank you

[Retreadfed]

21 hours ago, C Culham said:

it almost sounds like in some cases a subcontract might have to be reformed with the Government as opposed to assignment.

Why?  What ever the subcontract says, if an assignment of rights is made to the government, the government merely steps into the shoes of the prime and will settle the subcontract in accordance with its terms.

[C Culham]

1 hour ago, Retreadfed said:

Why?

So you are saying that if the subcontract says something like the laws of the state of XXXXX shall be the jurisdication to resolve all disputes under the subcontract the Federal government would accept this language as is under assignment?

[Retreadfed]

23 hours ago, C Culham said:

So you are saying that if the subcontract says something like the laws of the state of XXXXX shall be the jurisdication to resolve all disputes under the subcontract the Federal government would accept this language as is under assignment?

Why not?  

[formerfed]

The language in FAR 49.108-8 makes it clearer that assignment of rights, title, and interests of the contractor and settlement of subcontracts are separate issues.  Here’s part of the language

Quote

As a general rule, the prime contractor is obligated to settle and pay these proposals. However, when the TCO determines that it is in the Government’s interest, the TCO shall, after notifying the contractor, settle the subcontractor’s proposal using the procedures for settlement of prime contracts. An example in which the Government’s interest would be served is when a subcontractor is a sole source and it appears that a delay by the prime contractor in settlement or payment of the subcontractor’s proposal will jeopardize the financial position of the subcontractor. Direct settlements with subcontractors are not encouraged.

So the smart thing for the government to do is stay away unless there are extenuating circumstances.  You can assign rights but let the prime handle settlement. 
 

[C Culham]

20 hours ago, Retreadfed said:

Why not? 

To avoid the complications with regard to case law.   Case law on termination in say state XXXX could be very different than case law with regard to Federal procurement law.  Remember I said this (empahsis added) "So my thought repeated in another way.   I would be burying my head in case law to see what I could find because as it goes it will depend.   Heck I could see 10 subcontracts under one prime with all 10 offering challenges based on the subcontract language of each if all 10 were to be assigned."  I did not say in every matter of termination reformation was a must, just possibly a consideration,  just like the clause and the guidance that former fed has pointed out that assignment is not a must just when in the best interest.   To consider assignment as the best interest I would be burying my head in case law research. 

 Disagree as you may this is what I think.