48 C.F.R. § 49.202

49.202 Profit.

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(a) The TCO shall allow profit on preparations made and work done by the contractor for the terminated portion of the contract but not on the settlement expenses. Anticipatory profits and consequential damages shall not be allowed (but see 49.108-5). Profit for the contractor's efforts in settling subcontractor proposals shall not be based on the dollar amount of the subcontract settlement agreements but the contractor's efforts will be considered in determining the overall rate of profit allowed the contractor. Profit shall not be allowed the contractor for material or services that, as of the effective date of termination, have not been delivered by a subcontractor, regardless of the percentage of completion. The TCO may use any reasonable method to arrive at a fair profit.

(b) In negotiating or determining profit, factors to be considered include—

(1) Extent and difficulty of the work done by the contractor as compared with the total work required by the contract (engineering estimates of the percentage of completion ordinarily should not be required, but if available should be considered);

(2) Engineering work, production scheduling, planning, technical study and supervision, and other necessary services;

(3) Efficiency of the contractor, with particular regard to—

(i) Attainment of quantity and quality production;

(ii) Reduction of costs;

(iii) Economic use of materials, facilities, and manpower; and

(iv) Disposition of termination inventory;

(4) Amount and source of capital and extent of risk assumed;

(5) Inventive and developmental contributions, and cooperation with the Government and other contractors in supplying technical assistance;

(6) Character of the business, including the source and nature of materials and the complexity of manufacturing techniques;

(7) The rate of profit that the contractor would have earned had the contract been completed;

(8) The rate of profit both parties contemplated at the time the contract was negotiated; and

(9) Character and difficulty of subcontracting, including selection, placement, and management of subcontracts, and effort in negotiating settlements of terminated subcontracts.

(1) Comply with paragraphs (a) and (b) above;

(2) Allow profit on the prime contractor's settlements with construction subcontractors for actual work in place at the job site; and

(3) Exclude profit on the prime contractor's settlements with construction subcontractors for materials on hand and for preparations made to complete the work.

Notes of Decisions

Cited in 9 cases, 1996–2018 · leading case: White Buffalo Constr., Inc. v. United States, 52 Fed. Cl. 1 (Fed. Cl. 2002).

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White Buffalo Constr., Inc. v. United States, 52 Fed. Cl. 1 (Fed. Cl. 2002). “” 48 C.F.R. § 49.202 (2001) (emphasis added).”

Best Foam Fabricators, Inc. v. United States, 38 Fed. Cl. 627 (Fed. Cl. 1997). “48 C.F.R. § 49.202 (a) (1993). Obviously, in this case, the contracting officer did not actually invoke the termination for convenience clause to end the contractual relationship between the parties.”

White Buffalo Constr., Inc. v. United States, 101 Fed. Cl. 1 (Fed. Cl. 2011). “See 48 C.F.R. § 49.202 (b). Here, White Buffalo stated that it performed contract work in the amount of $626,185, and that, in doing so, it incurred $680,980 in costs.”

Lockheed Martin Corp. v. Gordon R. England, Sec'y of the Navy, 424 F.3d 1199 (Fed. Cir. 2005). “” 48 C.F.R. § 49.202 (a). In response, Lockheed’s final termination settlement proposal sought fee or profit (as appropriate to the contract type) for all costs incurred by the subcontractors.”

United States ex rel. Ragghianti Foundations III, LLC v. Peter R. Brown Constr., Inc., 49 F. Supp. 3d 1031 (M.D. Fla. 2014). “” See 48 C.F.R. § 49.202 (a) (emphasis added). Thus, according to PRBC, it is clear that a terminated Contractor is only allowed reasonable profit on the work already performed under the Prime Contract and the referenced FAR provisions.”

Contel of California, Inc. v. United States, 37 Fed. Cl. 68 (Fed. Cl. 1996). “DISCUSSION In its initial motion plaintiff argued that the governing agreement mandated the relief it seeks: Articles B5(a) and B5(d) obligated reimbursement for Contel’s “nonreeoverable costs;” Article B5(d)(4) compelled reimbursement for its shutdown costs; 48 C.F.R. § 49.202…”

Raytheon Co. v. BAE Sys. Tech. Solutions & Servs., Inc. (Del. Super. Ct. 2017). “98 Raytheon’s cited cases, American List and Tractebel Energy, in which plaintiffs recovered the entire balance due of multi-year contracts that had been prematurely cancelled, don’t help here.”

Btr Enter. of Sc, LLC v. United States (Fed. Cl. 2018). “; 48 C.F.R. §§ 49.202 (a), 52.249-1 through -5.”

Lockheed Martin Corp. v. England (Fed. Cir. 2005). “” 48 C.F.R. § 49.202 (a). In response, Lockheed’s final termination settlement proposal sought fee or profit (as appropriate to the contract type) for all costs incurred by the subcontractors.”

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