FAR Council squeezes termination settlements to 90 days
The proposal buys faster closeout by making contractors choose between thin support, late filings and False Claims Act exposure.
TL;DR
The FAR Council proposed cutting the deadline for termination settlement proposals from one year to 90 days while leaving the underlying support burden intact. Primes, subcontractors and counsel would have to collect cost data, address inventory, develop profit positions and resolve subcontractor claims on a compressed clock. The efficiency case is obvious. So is the litigation risk if contractors pad estimates or file before the record is ready.
The FAR Council’s proposed FAR Part 49 rewrite would move termination settlement proposals from the current one-year deadline to 90 days after termination, with comments due July 23, 2026. That is not a formatting change. Under current FAR 49.206-1, a final settlement proposal must cover all cost elements, including subcontractor settlements and proposed profit, and be supported by adequate accounting data. See https://www.acquisition.gov/far/49.206-1. Covington’s point is the practical one: the proposed rule shortens the clock without shrinking the file contractors have to build.
For prime contractors, that means the termination response becomes a supply-chain and accounting drill almost immediately. Cost data has to be collected and validated. Inventory has to be identified and disposed of. Subcontractor termination claims have to be pushed up through however many tiers the program actually uses. Counsel then has to decide whether the settlement proposal is supported well enough to certify or submit without creating a different problem.
That is where the False Claims Act risk enters. The proposed deadline gives the government a plausible efficiency gain: fewer lingering closeouts and less tolerance for proposals that arrive a year after termination. But contractors do not create accurate subcontractor settlement numbers by wanting them faster. If the 90-day rule forces protective amounts, rough estimates or premature subcontractor deals into the proposal, the government may trade delay for disputes, audit friction and FCA allegations.
The final rule question is whether the FAR Council pairs speed with a real safety valve. Current FAR 49.109-7 already allows a termination contracting officer to issue a determination if the contractor misses the required period, after notice and an opportunity to submit evidence. See https://www.acquisition.gov/far/49.109-7. A 90-day deadline may still work for simple terminations. For large primes and multi-tier subcontract chains, it turns termination settlement from a closeout process into a race to preserve rights without overclaiming. Monday morning, contractors should be revising termination playbooks, subcontract notice provisions and data-call procedures before the final rule makes the calendar the problem.
Published ·Deep Fathom