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name: t4c-settlement-proposal language: en 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

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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:

1. Contract documents — prime contract, modifications, pricing, contract type (FFP, CR, T&M)
2. Termination notice — effective date, FAR clause cited, stated reasons
3. Financial records — cost ledgers, timesheets, vendor invoices, approved indirect rates
4. Subcontractor data — sub agreements, sub settlement proposals, payment records
5. Inventory records — materials, WIP, finished components acquired for contract performance

Quick Start

1. Identify contract type → select SF 1435 (inventory basis / fixed-price) or SF 1436 (total cost basis)
2. Compile cost data organized by CLIN/deliverable
3. Verify every cost is allowable under FAR Part 31 — exclude FAR 31.205 unallowables
4. Calculate settlement amount (costs + profit − payments − credits)
5. Assemble certifications and attachment index
6. 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:

• Certificate of Current Cost or Pricing Data (if above threshold)
• Certification that all costs are allowable under FAR Part 31
• Good faith representation
• Agency-specific supplemental certifications
• Signature by representative with appropriate authority

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

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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"