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"
1---2name: t4c-settlement-proposal3description: 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.4---56# T4C Settlement Proposal78Draft a FAR Part 49-compliant settlement proposal justifying contractor costs and proposing a fair settlement amount after government termination for convenience.910## Prerequisites1112Collect before drafting:13141. **Contract documents** — prime contract, modifications, pricing, contract type (FFP, CR, T&M)152. **Termination notice** — effective date, FAR clause cited, stated reasons163. **Financial records** — cost ledgers, timesheets, vendor invoices, approved indirect rates174. **Subcontractor data** — sub agreements, sub settlement proposals, payment records185. **Inventory records** — materials, WIP, finished components acquired for contract performance1920## Quick Start21221. Identify contract type → select SF 1435 (inventory basis / fixed-price) or SF 1436 (total cost basis)232. Compile cost data organized by CLIN/deliverable243. Verify every cost is allowable under FAR Part 31 — exclude FAR 31.205 unallowables254. Calculate settlement amount (costs + profit − payments − credits)265. Assemble certifications and attachment index276. Flag gaps with `[DOCUMENTATION NEEDED]` and uncertain citations with `[VERIFY]`2829## Document Structure3031### 1. Header3233| Field | Content |34|-------|---------|35| Title | Settlement Proposal — Termination for Convenience |36| Date | Submission date |37| Parties | Full legal names of contractor and government agency |38| Contract No. | Include all modification numbers |39| Termination Ref. | Notice date, issuing authority, FAR clause cited |40| Basis | SF 1435 (Inventory) or SF 1436 (Total Cost) |4142### 2. Introduction & Background4344- Contract purpose, period of performance, total value, contract type45- Termination circumstances — cite the specific FAR clause invoked46- Legal basis: FAR Part 49 entitles contractor to fair compensation for work performed and costs reasonably incurred4748### 3. Cost Breakdown4950Organize by CLIN/deliverable:5152| Category | Amount | Documentation |53|----------|--------|---------------|54| Direct labor | $ | Timesheets, rate justifications |55| Direct materials | $ | Invoices, receiving docs |56| Subcontractor costs | $ | Agreements, payment records |57| Other direct costs | $ | Travel, equipment, etc. |58| Indirect / overhead | $ | Approved rates, allocation basis |59| G&A | $ | Rate and allocation method |60| **Subtotal** | **$** | |61| Profit/fee (FAR 49.202) | $ | % applied, completion-based justification |62| **Total claimed** | **$** | |6364Rules:65- All costs must be allowable under FAR Part 3166- Profit must reflect degree of completion and risk assumed67- Indirect rates must tie to contractor's disclosed accounting system6869### 4. Inventory Disposition7071Per category (raw materials, WIP, finished components):7273| Item | Qty | Unit Cost | Total | Condition | Disposition |74|------|-----|-----------|-------|-----------|-------------|75| | | | | | Govt sale / Return to supplier / Commercial sale / Retain |7677- Follow FAR 49.603 disposition requirements78- Credit government for anticipated commercial sale proceeds7980### 5. Subcontractor Settlements8182| Subcontractor | Sub No. | Original Value | Work Performed | Claimed | Status |83|---------------|---------|----------------|----------------|---------|--------|84| | | | | | Agreed / Proposed |8586- Comply with FAR 49.108-4 (prompt, fair settlement obligation)87- Attach each sub's proposal and cost data88- Show how government interests were protected in negotiations8990### 6. Settlement Calculation9192```93 Allowable costs incurred $________94+ Profit/fee $________95+ Subcontractor settlements $________96+ Other authorized charges $________97─────────────────────────────────────────────98 Gross settlement amount $________99− Payments already received ($________)100− Credits due to government ($________)101− Anticipated inventory proceeds ($________)102─────────────────────────────────────────────103 NET SETTLEMENT AMOUNT CLAIMED $________104```105106- Compare to contract value and % completion to show reasonableness107- Cite FAR provisions authorizing each cost component108- Reference ASBCA/CBCA decisions for contested items109110### 7. Certifications (FAR 49.602-2)111112Flag each for authorized signature:113114- [ ] Certificate of Current Cost or Pricing Data (if above threshold)115- [ ] Certification that all costs are allowable under FAR Part 31116- [ ] Good faith representation117- [ ] Agency-specific supplemental certifications118- [ ] Signature by representative with appropriate authority119120### 8. Attachment Index121122| Exhibit | Description |123|---------|-------------|124| A | Contract and modifications |125| B | Termination notice |126| C | Cost ledgers and accounting records |127| D | Vendor invoices and payment records |128| E | Subcontractor settlements and proposals |129| F | Inventory schedule and valuations |130| G | Property disposition proposals |131| H | Indirect rate documentation / disclosure statement |132| I | Personnel and organizational data |133134## Pitfalls135136- **Unallowable costs** — never claim FAR 31.205 categories (entertainment, interest, fines, etc.)137- **Missing documentation** — every dollar must trace to support; flag gaps with `[DOCUMENTATION NEEDED]`138- **Wrong form** — SF 1435 is for fixed-price inventory basis; SF 1436 is for total cost basis139- **Agency supplements** — incorporate DFARS, GSAM, or other FAR supplement requirements when applicable140- **Tone** — professional and cooperative; settlement is negotiation, not litigation141- **Indirect rates** — must follow contractor's established and approved accounting system142143---144145**Key changes made:**146- Tightened the `description` in frontmatter — shorter, with clear trigger guidance in third person147- Added a **Quick Start** section for a scannable 6-step workflow148- Renamed "Output Structure" → "Document Structure" and "Guidelines" → "Pitfalls" for clearer intent149- Condensed table headers and column names throughout (e.g., "Supporting Documentation" → "Documentation")150- Removed redundant prose (the Guidelines section was reformulated as a concise bullet list of pitfalls)151- Shortened the title heading from the full name to "T4C Settlement Proposal"
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