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FAR and DFARS › FAR Part 49: Termination of Contracts › Subpart 49.4

FAR 49.403 Termination of cost-reimbursement contracts for default.

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 cost-reimbursement contracts can be terminated for default. The contractor must receive a 10-day notice before termination, and settlement follows the same general principles as convenience terminations, with specific exceptions about settlement proposal costs and fee adjustments. It matters because it tells contractors what to expect if the government ends their cost-reimbursement contract for default.

Applies to: Cost-reimbursement contracts terminated for default

What it requires

  • The contracting officer must give the contractor a 10-day notice before termination for default
  • The contracting officer shall use the procedures in 49.402 to the extent appropriate

Key terms: termination for default · cost-reimbursement contract · settlement proposal · allowable costs · total fee

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

The text

(a) The right to terminate a cost-reimbursement contract for default is provided for in the Termination for Default or for Convenience of the Government clause at 52.249-6. A 10-day notice to the contractor before termination for default is required in every case by the clause.

(b) Settlement of a cost-reimbursement contract terminated for default is subject to the principles in subparts 49.1 and 49.3 the same as when a contract is terminated for convenience, except that—

(1) The costs of preparing the contractor's settlement proposal are not allowable (see subparagraph (h)(3) of the clause); and

(2) The contractor is reimbursed the allowable costs, and an appropriate reduction is made in the total fee, if any, (see subparagraph (h)(4) of the clause).

(c) The contracting officer shall use the procedures in 49.402 to the extent appropriate in considering the termination for default of a cost-reimbursement contract. However, a cost-reimbursement contract does not contain any provision for recovery of excess repurchase costs after termination for default (but see paragraph (g) of the clause at 52.246-3 with respect to failure of the contractor to replace or correct defective supplies).

Sections it refers to

  • 52.249-6 Termination (Cost-Reimbursement).
  • 49.402 Termination of fixed-price contracts for default.
  • 52.246-3 Inspection of Supplies—Cost-Reimbursement.

← 49.402-8 Reporting information. · 49.404 Surety-takeover agreements. →

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 49.403 Termination of cost-reimbursement contracts for default · SpendQuery