The FAR Council has proposed rule changes seeking to clarify certain terms related to claims and terminations.  The definitions of “claim”, “continued portion of the contract”, “partial termination”, “terminated portion of the contract” and “termination for convenience” will be moved from their various locations in the FAR to section FAR 2.101 (Definitions).  The definitions will adopt a “plain English” version so now, for example, “terminated portion of the contract” will mean “the portion of a contract that the contractor is not to perform following a partial termination” rather than the current confusing definition “the portion of a terminated contract that relates to work or end items not completed or accepted before the effective date of termination that the contractor is not to continue to perform.”  In addition a definition of “termination for default” will also be moved to the same FAR definition site and be defined as “the exercise of the Government’s right to completely or partially terminate a contract because of the contractor’s actual or anticipated failure to perform its contractual obligations.”  Also, a new paragraph will be added to explain the distinction between termination for convenience and cancellation - termination can be for total or partial quantity and occur any time during the life of the contract while cancellation can occur only between fiscal years and be for all subsequent fiscal years’ quantities.

The change also revises the definition of a “claim” which will make sure the definition in the Disputes clause at FAR 52.233-1 is consistent with the definition.  The revised definition of claim means “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms or other relief arising under or related to the contract.”  The definition goes on to state a written demand exceeding $100,000 is not a claim under the Disputes act until it is certified.  Also, a voucher, invoice or other routine request for payment not in dispute is not a claim.  The submission may be converted to a claim when it complies with the submission and certification requirements of the clause and it is either disputed as to a liability or amount or it is not acted upon in a reasonable period of time.

In addition, FAR 33.213 (Obligation to Continue Performance) is revised to establish it is the contractor’s obligation to continue performance pending resolution of a claim.  The change also clarifies the distinction between claims “arising under a contract” – which can be resolved under a clause other than the Disputes clause at FAR 52.233-1 - and claims “related to a contract” which can be resolved only under the Disputes clause.

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