FAR and DFARS › FAR Part 49: Termination of Contracts › Subpart 49.1
FAR 49.115 Settlement of terminated incentive contracts.
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 how the termination contracting officer (TCO) settles terminated incentive contracts. For fixed-price incentive contracts, the TCO follows specific termination and incentive price revision clauses, and for cost-plus-incentive-fee contracts, the TCO follows the cost-reimbursement termination clause. It matters because it tells contractors which rules apply when an incentive contract is partially or completely terminated.
Applies to: Terminated incentive contracts (fixed-price incentive and cost-plus-incentive-fee)
What it requires
- For partially terminated fixed-price incentive contracts, the TCO must negotiate a settlement as provided in the termination clause and the applicable incentive price revision clause.
- For partially terminated fixed-price incentive contracts, the TCO must reimburse the contractor at target price for completed articles in the settlement proposal for which a final price has not been established.
- For partially terminated fixed-price incentive contracts, the TCO must include an appropriate reservation as to final price for those completed articles in the settlement agreement.
- For completely terminated fixed-price incentive contracts, the TCO must ensure that no portion of the costs considered in the incentive negotiations is included in the termination settlement.
Key terms: TCO · fixed-price incentive contracts · cost-plus-incentive-fee contracts · partial termination · complete termination
Written by AI from this section's text. A guide, not legal advice: the text below rules.
The text
(a) Fixed-price incentive contracts. The TCO shall settle terminated fixed-price incentive (FPI) contracts under the provisions of paragraph (j) of the clause at 52.216-16, Incentive Price Revision—Firm Target, and 52.249-2, Termination for Convenience of the Government (Fixed-Price).
(1) Partial termination. Under a partially terminated contract, the TCO shall negotiate a settlement as provided in the termination clause of the contract, and paragraph (j) of the clause at 52.216-16, Incentive Price Revision—Firm Target, or paragraph (1) of the clause at 52.216-17, Incentive Price Revision—Successive Targets. The contracting officer shall apply the incentive price revision provisions to completed items accepted by the Government, including any for which the contractor may request reimbursement in the settlement proposal. The TCO shall reimburse the contractor at target price for completed articles included in the settlement proposal for which a final price has not been established. The TCO shall incorporate in the settlement agreement an appropriate reservation as to final price for these completed articles.
(2) Complete termination. If any items were delivered and accepted by the Government, the contracting officer shall establish prices under the incentive provisions of the contract. On the terminated portion of the contract, the provisions of the termination clause (see 52.249-2, Termination for Convenience of the Government (Fixed-Price)) shall govern and the provisions of the incentive clause shall not apply. The TCO responsible for the termination settlement will ensure, on the basis of evidence considered proper (including coordination with the contracting officer), that no portion of the costs considered in the negotiations under the incentive provisions are included in the termination settlement.
(b) Cost-plus-incentive-fee contracts. The TCO shall settle terminated cost-plus-incentive-fee contracts under the clause at 52.249-6, Termination (Cost-Reimbursement).
(1) Partial termination. Under a partial termination, the TCO shall limit the settlement to an adjustment of target fee as provided in paragraph (e) of the clause at 52.216-10, Incentive Fee. The settlement agreement shall include a reservation regarding any adjustment of target cost resulting from the partial termination. The contracting officer shall adjust the target cost, if required.
(2) Complete termination. The parties shall negotiate the settlement under the provisions of subpart 49.3 and the clause at 52.249-6, Termination (Cost-Reimbursement). The fee shall be adjusted on the basis of the target fee, and the incentive provisions shall not be applied or considered.
← 49.114 Unsettled contract changes. · 49.201 General. →
Rule changes for FAR Part 49
- Federal Acquisition Regulation: Revolutionary Federal Acquisition Regulation Overhaul Parts 3 and 49 ↗ · proposed 2026-06-23 · comments due 2026-07-23
- Federal Acquisition Regulation; Technical Amendments ↗ · final rule 2024-12-16 · effective 2025-01-03
Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.