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FAR and DFARS › FAR Part 49: Termination of Contracts › Subpart 49.2

FAR 49.204 Deductions.

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 requires the Termination Contracting Officer (TCO) to deduct certain amounts from any settlement payment owed to a contractor after a termination. The deductions cover items like the agreed price for retained termination inventory, proceeds from sold materials not yet credited to the Government, and the fair value of lost or damaged inventory. It matters because it reduces the final settlement amount a contractor receives.

Applies to: Contractors receiving a termination settlement under a Government contract

Key terms: TCO · termination inventory · fair value · normal spoilage · settlement

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

The text

From the amount payable to the contractor under a settlement, the TCO shall deduct—

(a) The agreed price for any part of the termination inventory purchased or retained by the contractor, and the proceeds from any materials sold that have not been paid or credited to the Government;

(b) The fair value, as determined by the TCO, of any part of the termination inventory that, before transfer of title to the Government or to a buyer under part 45, is lost or so damaged as to become undeliverable (normal spoilage is excepted, as is inventory for which the Government has expressly assumed the risk of loss); and

(c) Any other amounts as appropriate in the particular case.

← 49.203 Adjustment for loss. · 49.205 Completed end items. →

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 49.204 Deductions · SpendQuery