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FAR and DFARS › FAR Part 49: Termination of Contracts › Subpart 49.3

FAR 49.303-5 Final settlement.

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 tells the Termination Contracting Officer (TCO) how to handle the final settlement of a terminated contract. It says the TCO proceeds once the audit report and closing statement are received, adjusts the fee, and may settle all government demands and contractor proposals together. It matters because it sets the ground rules for what can and cannot be included in a final settlement agreement.

Applies to: Termination Contracting Officers handling final settlement of terminated contracts

What it requires

  • Proceed with settlement and execute a settlement agreement upon receipt of the audit report, if applicable, and the contract audit closing statement covering vouchered costs
  • Adjust the fee as provided in 49.305

Key terms: TCO · final settlement agreement · contract audit closing statement · vouchered costs · overall settlement

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

The text

(a) The TCO shall proceed with the settlement and execution of a settlement agreement upon receipt of the audit report, if applicable, and the contract audit closing statement covering vouchered costs.

(b) The TCO shall adjust the fee as provided in 49.305.

(c) The final settlement agreement may include all demands of the Government and proposals of the contractor under the terminated contract. However, no amount shall be allowed for any item of cost disallowed by the Government, nor for any other item of cost of the same nature.

(d) If an overall settlement of costs is agreed upon, agreement on each element of cost is not necessary. If appropriate, differences may be compromised and doubtful questions settled by agreement. An overall settlement shall not include costs that are clearly not allowable under the terms of the contract.

Sections it refers to

← 49.303-4 Adjustment of indirect costs. · 49.304 Procedure for partial 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 49.303-5 Final settlement · SpendQuery