Upon receipt of a request for a cutback in contract quantities from the cognizant commodity manager, the following information will be utilized in selecting the contract for termination:
(a) Ascertain all current contracts for items involved.
(i) Determine the undelivered portion of each contract.
(ii) Consider supplies in transit (f.o.b. destination contract) as deliveries, unless the contract is delinquent and a notice to terminate for default has been sent to the contractor.
(iii) Determine what deliveries, if any, are delinquent.
(iv) Determine whether the delinquency is excusable or inexcusable.
(v) Contract quantities scheduled for direct delivery to users are not subject to termination action unless specifically so designated.
(b) If delinquency is considered inexcusable, terminate for default where appropriate.
(c) Where termination for default is not appropriate or where additional quantities remain to be cut back after termination for default, proceed in the selection of contracts to be terminated for convenience.
(1) First choice should be where contractors are agreeable to total or partial termination (voluntary or no cost settlement).
(2) Consider the following factors.
(i) Contracts involving contractors' commercial item.
(ii) Contracts awarded as rated orders.
(iii) Contracts for mandatory acquisition.
(iv) Contracts most recently awarded and those providing for longest production lead time where production has not progressed to an appreciable degree.
(v) Contracts awarded at the highest price and work down pricewise.
(vi) Partial termination of all contracts where two or more contractors are involved in lieu of total termination of a few.
(d) The dollar amount of potential settlement claims should be estimated with the assistance of DCMA. Consider:
(1) Unit price of undelivered items.
(2) Raw material on hand and/or on order.
(3) Components on hand or on order.
(4) Work in process.
(5) Unamortized start up costs.
(6) Percentage of completion.
(7) Current commercial value and saleability of the item involved.
(8) Disposal actions required, taking into consideration recoupment through sales of items to be disposed.
