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FAR and DFARS › FAR Part 49: Termination of Contracts › Subpart 49.1

FAR 49.101 Authorities and responsibilities.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section explains who may terminate a contract and when. Contracting officers can terminate for convenience or default, but only when it serves the Government's interest, and they must use a no-cost settlement in certain situations. It also sets rules for small business concerns and for handling settlements after termination.

Applies to: Contracting officers, termination contracting officers, auditors, and contractors whose contracts may be terminated

What it requires

  • Terminate contracts only when it is in the Government's interest
  • Effect a no-cost settlement instead of issuing a termination notice when the stated conditions are met
  • Normally let a contract run to completion when the undelivered balance price is less than $5,000
  • Give preference to continuing performance of small business contracts over large business contracts when terminating part of undelivered units, unless the chief of the contracting office determines otherwise

Key terms: termination for convenience · termination for default · no-cost settlement · termination contracting officer (TCO) · small business concerns

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) The termination clauses or other contract clauses authorize contracting officers to terminate contracts for convenience, or for default, and to enter into settlement agreements under this regulation.

(b) The contracting officer shall terminate contracts, whether for default or convenience, only when it is in the Government's interest. The contracting officer shall effect a no-cost settlement instead of issuing a termination notice when (1) it is known that the contractor will accept one, (2) Government property was not furnished, and (3) there are no outstanding payments, debts due the Government, or other contractor obligations.

(c) When the price of the undelivered balance of the contract is less than $5,000, the contract should not normally be terminated for convenience but should be permitted to run to completion.

(d) After the contracting officer issues a notice of termination, the termination contracting officer (TCO) is responsible for negotiating any settlement with the contractor, including a no-cost settlement if appropriate. Auditors and TCO's shall promptly schedule and complete audit reviews and negotiations, giving particular attention to the need for timely action on all settlements involving small business concerns.

(e) If the same item is under contract with both large and small business concerns and it is necessary to terminate for convenience part of the units still to be delivered, preference shall be given to the continuing performance of small business contracts over large business contracts unless the chief of the contracting office determines that this is not in the Government's interest.

(f) The contracting officer is responsible for the release of excess funds resulting from the termination unless this responsibility is specifically delegated to the TCO.

← 49.100 Scope of subpart. · 49.102 Notice of termination. →

Rule changes for FAR Part 49

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 49.101 Authorities and responsibilities · SpendQuery