How do I pass through subcontractor costs in a T4C claim?

When your prime contract is terminated for convenience, you are responsible for terminating your subcontractors and resolving their claims before or alongside your own settlement. FAR 49.108 governs this process.

Your obligations: Promptly after receiving your T4C notice, issue written termination notices to all affected subcontractors. Delay can expose you to sub costs you cannot recover — costs they incur after you were required to terminate them are generally your liability, not the government's. Your subcontract should include a termination for convenience clause mirroring your prime contract.

Obtain their proposals: Each subcontractor must submit a settlement proposal to you for their allowable costs and profit. They have the same one-year deadline from their subcontract termination date. You need their proposals before you can include their amounts in your prime settlement.

Negotiate or approve: You must negotiate or approve each subcontractor's settlement before including it in your prime proposal. You cannot simply pass through whatever they claim without review. The government will scrutinize subcontractor costs closely and may ask for your review documentation.

Including in your proposal: Subcontractor settlements appear as a separate line item in your settlement proposal (typically under direct costs). Attach each subcontractor's approved settlement proposal as a supporting exhibit.

Documentation required: For each subcontractor: their termination notice, their settlement proposal, your written approval or negotiated agreement, and evidence of payment or a documented obligation to pay once your prime settlement funds.

RELATED GUIDES

• → Recoverable costs in a T4C settlement
• → T4C settlement supporting documents
• → T4C filing deadline