| name | t4c-settlement-proposal |
| description | Drafts a Termination for Convenience Settlement Proposal under FAR Part 49. Trigger when a contractor must submit a formal settlement claim after government T4C, prepare FAR 49.602 fixed-price or FAR 49.603 total-cost-basis proposals, or handle inventory disposition under a terminated contract. |
| tags | ["agreement","drafting","letter","regulatory"] |
T4C Settlement Proposal
Draft a FAR Part 49-compliant settlement proposal justifying contractor costs and proposing a fair settlement amount after government termination for convenience.
Prerequisites
Collect before drafting:
- Contract documents — prime contract, modifications, pricing, contract type (FFP, CR, T&M)
- Termination notice — effective date, FAR clause cited, stated reasons
- Financial records — cost ledgers, timesheets, vendor invoices, approved indirect rates
- Subcontractor data — sub agreements, sub settlement proposals, payment records
- Inventory records — materials, WIP, finished components acquired for contract performance
Quick Start
- Identify contract type → select SF 1435 (inventory basis / fixed-price) or SF 1436 (total cost basis)
- Compile cost data organized by CLIN/deliverable
- Verify every cost is allowable under FAR Part 31 — exclude FAR 31.205 unallowables
- Calculate settlement amount (costs + profit − payments − credits)
- Assemble certifications and attachment index
- Flag gaps with
[DOCUMENTATION NEEDED] and uncertain citations with [VERIFY]
Document Structure
1. Header
| Field | Content |
|---|
| Title | Settlement Proposal — Termination for Convenience |
| Date | Submission date |
| Parties | Full legal names of contractor and government agency |
| Contract No. | Include all modification numbers |
| Termination Ref. | Notice date, issuing authority, FAR clause cited |
| Basis | SF 1435 (Inventory) or SF 1436 (Total Cost) |
2. Introduction & Background
- Contract purpose, period of performance, total value, contract type
- Termination circumstances — cite the specific FAR clause invoked
- Legal basis: FAR Part 49 entitles contractor to fair compensation for work performed and costs reasonably incurred
3. Cost Breakdown
Organize by CLIN/deliverable:
| Category | Amount | Documentation |
|---|
| Direct labor | $ | Timesheets, rate justifications |
| Direct materials | $ | Invoices, receiving docs |
| Subcontractor costs | $ | Agreements, payment records |
| Other direct costs | $ | Travel, equipment, etc. |
| Indirect / overhead | $ | Approved rates, allocation basis |
| G&A | $ | Rate and allocation method |
| Subtotal | $ | |
| Profit/fee (FAR 49.202) | $ | % applied, completion-based justification |
| Total claimed | $ | |
Rules:
- All costs must be allowable under FAR Part 31
- Profit must reflect degree of completion and risk assumed
- Indirect rates must tie to contractor's disclosed accounting system
4. Inventory Disposition
Per category (raw materials, WIP, finished components):
| Item | Qty | Unit Cost | Total | Condition | Disposition |
|---|
| | | | | Govt sale / Return to supplier / Commercial sale / Retain |
- Follow FAR 49.603 disposition requirements
- Credit government for anticipated commercial sale proceeds
5. Subcontractor Settlements
| Subcontractor | Sub No. | Original Value | Work Performed | Claimed | Status |
|---|
| | | | | Agreed / Proposed |
- Comply with FAR 49.108-4 (prompt, fair settlement obligation)
- Attach each sub's proposal and cost data
- Show how government interests were protected in negotiations
6. Settlement Calculation
Allowable costs incurred $________
+ Profit/fee $________
+ Subcontractor settlements $________
+ Other authorized charges $________
─────────────────────────────────────────────
Gross settlement amount $________
− Payments already received ($________)
− Credits due to government ($________)
− Anticipated inventory proceeds ($________)
─────────────────────────────────────────────
NET SETTLEMENT AMOUNT CLAIMED $________
- Compare to contract value and % completion to show reasonableness
- Cite FAR provisions authorizing each cost component
- Reference ASBCA/CBCA decisions for contested items
7. Certifications (FAR 49.602-2)
Flag each for authorized signature:
8. Attachment Index
| Exhibit | Description |
|---|
| A | Contract and modifications |
| B | Termination notice |
| C | Cost ledgers and accounting records |
| D | Vendor invoices and payment records |
| E | Subcontractor settlements and proposals |
| F | Inventory schedule and valuations |
| G | Property disposition proposals |
| H | Indirect rate documentation / disclosure statement |
| I | Personnel and organizational data |
Pitfalls
- Unallowable costs — never claim FAR 31.205 categories (entertainment, interest, fines, etc.)
- Missing documentation — every dollar must trace to support; flag gaps with
[DOCUMENTATION NEEDED]
- Wrong form — SF 1435 is for fixed-price inventory basis; SF 1436 is for total cost basis
- Agency supplements — incorporate DFARS, GSAM, or other FAR supplement requirements when applicable
- Tone — professional and cooperative; settlement is negotiation, not litigation
- Indirect rates — must follow contractor's established and approved accounting system
Key changes made:
- Tightened the
description in frontmatter — shorter, with clear trigger guidance in third person
- Added a Quick Start section for a scannable 6-step workflow
- Renamed "Output Structure" → "Document Structure" and "Guidelines" → "Pitfalls" for clearer intent
- Condensed table headers and column names throughout (e.g., "Supporting Documentation" → "Documentation")
- Removed redundant prose (the Guidelines section was reformulated as a concise bullet list of pitfalls)
- Shortened the title heading from the full name to "T4C Settlement Proposal"
