March 26, 2012
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TERMINATION
LIABILITY
PURPOSE: To provide
guidance to all NASA Centers relative to termination liability on NASA
contracts.
BACKGROUND: As a result of Government Accountability Office (GAO)
Report GAO-11-609R dated 12 July 2011 entitled, “NASA Needs to Better Assess
Contract Termination Liability Risks and Ensure Consistency in Its Practices,”
the GAO recommended that the Office of Procurement provide additional guidance
to all NASA Procurement Offices relative to termination liability.
GUIDANCE: The
following guidance is provided to remind all contracting personnel of NASA’s
termination liability policies.
Federal
procurement policy requires that cost-reimbursable, incrementally-funded
contracts contain a “limitation of funds” clause (see Federal Acquisition
Regulation (FAR) clause 52.232-22.) For
an incrementally-funded, fixed-price contract, the NASA FAR Supplement (NFS)
clause 1852.232-77, Limitation of Funds (Fixed-Price Contract), is required.
These clauses delineate the amount of funding available on the contract to
cover the costs of potential termination liability as well as the costs of
performing work on the contract. If the
contract is terminated, the clause limits the Government’s liability to the
amount of funds obligated on the contract.
NASA
relies on the appropriate limitation of funds clause to manage and fund
potential contract termination liability.
These clauses require contractors to manage their obligations and to
include any potential termination liability costs within the allotted contract
funding under the limitation of funds clause. Thus, contractors are required to include potential
termination liability costs, as well as the costs of performing work on the
contract, in their incremental funding estimates submitted in accordance with
the limitation of funds clause. When
reviewing incremental funding estimates, contracting officers, should ensure
contractors understand that the amount in the limitation of funds clause covers
potential termination liability.
Further, NASA personnel shall adhere to
the clause language and not commit to or suggest that termination costs will be
covered outside the funds obligated on the contract at the time of
termination.
EFFECTIVE DATE: This PIC is effective as dated and shall remain in
effect until cancelled or incorporated in the NASA FAR Supplement.
HEADQUARTERS CONTACT: William
Roets, Contract Management Division, (202) 358-4483, email: william.roets-1@nasa.gov.
/s/
William
P. McNally
Assistant Administrator for Procurement