Section 27-3318. TERMINATION FOR CONVENIENCE COSTS

 

3318.1The costs of items reasonably usable on the contractor's other work shall not be allowable upon termination of a contract for the convenience of the District, unless the contractor submits evidence that the items could not be retained at cost without sustaining a loss.

 

3318.2Costs which cannot be discontinued immediately after the effective date of the termination may be allowed. However, any costs continuing after the effective date of the termination due to the negligent or willful failure of the contractor to discontinue the costs shall not be allowable.

 

3318.3Initial costs, such as starting load and preparatory costs, shall be allowable in the following circumstances:

 

(a)When starting load costs not fully absorbed because of termination are nonrecurring labor, material, and related overhead costs incurred in the early part of production and result from factors such as the following:

 

(1)Excessive spoilage due to inexperienced labor;

 

(2)Idle time and subnormal production due to testing and changing production methods;

 

(3)Training; and

 

(4)Lack of familiarity or experience with the product, materials, or manufacturing processes.

 

(b)When costs incurred in preparing to perform the terminated contract include costs such as those incurred for initial plant rearrangement and alterations, management and personnel organization, and production planning, but not special machinery and equipment and starting load costs.

 

3318.4When initial costs are included in the settlement proposal as direct costs, those costs also shall not be included in overhead. Initial costs attributable only to a single contract shall not be allocated to other contracts.

 

3318.5The loss of useful value of special tooling, or special machinery and equipment, shall be allowed if the following factors apply:

 

(a)The special tooling, or special machinery and equipment, is not reasonably capable of use in the other work of the contractor;

 

(b)The District's interest is protected by transfer of title to the District or by other means deemed appropriate by the contracting officer; and

 

(c)The loss of useful value for a single terminated contract is limited to that portion of the procurement cost which bears the same ratio to the total procurement cost as the terminated portion of the contract bears to the entire terminated contract and other District contracts for which the special tooling or special machinery and equipment was procured.

 

3318.6Rental costs under an unexpired lease, less the residual value of the lease, shall be allowable when the contracting officer determines that the lease was reasonably necessary for the performance of the terminated contract. The following limitations shall apply:

 

(a)The amount of rental claimed shall not exceed the reasonable use value of the property leased for the period of the contract and any further period that may be reasonable; and

 

(b)The contractor shall make all reasonable efforts to terminate, assign, settle, or otherwise reduce the cost of the lease.

 

3318.7The contract may provide that the costs of alterations and reasonable restorations required by a lease are allowable.

 

3318.8The costs of settlement of the termination (such as accounting, legal, clerical, and similar costs reasonably necessary for the preparation and presentation of settlement claims to the contracting officer) shall be allowable. Indirect costs related to salary and wages incurred as a result of the preparation and presentation of settlement claims shall be allowable.

 

3318.9Costs of termination and settlement of subcontracts, as well as subcontractor claims as a result of a termination, shall be allowable except as provided in §3707.

 

source

Final Rulemaking published at 35 DCR 1657 (February 26, 1988).