Reprocurement Under FAR 49.402-6: Mistakes That Escalate Default Costs

By QuickBidSetup Editorial Team · Published November 9, 2026 · Sources linked below

When a federal contract faces termination for default, prime contractors and specialty trade subcontractors often assume the financial impact is finalized once work stops. In reality, the financial fallout frequently expands during reprocurement. Under FAR 49.402-6, the government possesses specific authority to repurchase supplies or services against the defaulting contractor's account. Understanding the boundaries of this authority is critical for evaluating whether the government’s demand for excess costs is legitimate or improperly calculated.

Mistake 1: Assuming the Contracting Officer Cannot Buy Larger Quantities

Contractors often assume that a repurchase action is strictly restricted to the exact count of items remaining on the jobsite. Under FAR 49.402-6, when supplies or services are still required after termination, the contracting officer shall repurchase the same or similar supplies or services against the contractor’s account as soon as practicable. However, the contracting officer may also repurchase a quantity in excess of the undelivered quantity terminated for default when that excess quantity is needed.

The crucial limit that contractors misunderstand concerns the billing: excess cost may not be charged against the defaulting contractor for more than the undelivered quantity terminated for default, including variations in quantity permitted by the terminated contract. If the contracting officer repurchases an increased quantity beyond the undelivered balance, the regulation dictates that the contracting officer shall treat the entire quantity as a new acquisition. Contractors must verify that additional agency requirements are not improper additions charged back to their account.

Mistake 2: Believing Repurchase Can Proceed Without Competition

Another frequent mistake is believing the contracting officer has complete freedom to award a sole-source replacement contract at any price. If the repurchase is for a quantity not over the undelivered quantity terminated for default, the Default clause does authorize the contracting officer to use any terms and acquisition method deemed appropriate for the repurchase, citing the Default clause as authority. However, the contracting officer shall obtain competition to the maximum extent practicable.

Furthermore, the contracting officer is required to repurchase at as reasonable a price as practicable, considering the quality and delivery requirements. If an agency fails to seek competitive pricing or ignores reasonable commercial terms, the defaulting contractor can challenge whether the repurchase price was established properly. Familiarity with procedures in Terminating for Default Under FAR 49.402-3: A Scenario Walk-Through helps teams track the procedural baseline before reprocurement begins.

Mistake 3: Anticipating Immediate Written Demands Prior to Final Payment

Contractors often worry that excess cost assessments will hit their cash flow immediately upon termination. In federal procurement, the sequence of demand is strictly conditioned on completion. If a repurchase is made at a price over the price of the supplies or services terminated, the contracting officer shall make written demand on the contractor for the total amount of the excess only after completion and final payment of the repurchase contract.

An agency cannot legally demand payment for projected or speculative cost overruns while the replacement contractor is still performing. The final calculation cannot occur until the replacement contract is fully completed and final payment has actually cleared. Any premature demand ignores the regulatory sequence established by the Federal Acquisition Regulation.

Mistake 4: Overlooking Offsets for Transportation and Discounts

When the government calculates the excess reprocurement bill, contractors often make the mistake of accepting the raw difference in contract award prices without auditing adjustments. Under the regulation, the contracting officer shall make written demand for the total amount of the excess while giving consideration to any increases or decreases in other costs such as transportation, discounts, and related factors.

If the replacement contract featured prompt payment discounts, reduced shipping rates, or differing freight terms, those cost reductions must offset the gross excess reprocurement figure. Conversely, if delivery changes caused cost variances, those must be examined to ensure they align directly with the original contract terms rather than upgraded project requirements. Managing these cost impacts is just as vital as reviewing bonded exposures covered in our guide on Bid Bonds, Performance Bonds and Payment Bonds: A Contractor's Guide.

Mistake 5: Failing to Track Contract Debt Collection Procedures Under Subpart 32.6

A final common error is ignoring the formal collection process once a demand letter is issued. Generally, the contracting officer will make a decision whether or not to repurchase before issuing the termination notice. When repurchase occurs at a higher price and the contractor fails to make payment following the post-completion written demand, the contracting officer shall follow the procedures in subpart 32.6 for collecting contract debts due the Government.

Subpart 32.6 establishes specific federal debt collection procedures. Defaulting contractors who fail to engage with the initial demand letter or ignore the formal debt determination risk administrative offsets, interest assessments, and aggressive collection mechanisms across their other federal accounts.

Key FAR 49.402-6 Repurchase Requirements

To audit an excess reprocurement assessment accurately, contractors and estimators should evaluate the replacement procurement against these explicit regulatory standards:

The repurchase must cover the same or similar supplies or services.
The reprocurement must be executed as soon as practicable.
The price must be as reasonable as practicable under prevailing quality and delivery needs.
Competition must be obtained to the maximum extent practicable.
Excess charges cannot exceed the undelivered quantity terminated for default, including permitted contract quantity variations.
When repurchase quantities exceed the undelivered balance, the contracting officer shall treat the entire quantity as a new acquisition.
Written demand for excess costs must occur after completion and final payment of the repurchase contract.
The demand must reflect adjustments for cost increases or decreases, including transportation and discounts.
Unpaid demands must proceed through the debt collection procedures set forth in subpart 32.6.

Editor's follow-up — QuickBidSetup Estimating Desk (staff)

A crucial detail often missed after a default notice involves jobsite materials. Under FAR 49.402-2, the contracting officer may acquire manufacturing materials to furnish to the replacement contractor, but only after considering the difficulties that the other contractor may have in using those materials. When acquiring completed supplies or manufacturing materials under the Default clause, the government must also guard against overpayment from outstanding lien rights. The contracting officer is required to take specific measures before releasing payment, such as verifying whether payment bonds are adequate to satisfy lien claims, requiring statements from laborers and suppliers disclaiming lien rights, or withholding amounts to protect the government.

Sources

Acquisition.GOV: FAR 49.402-6 Repurchase against contractor’s account

Published November 9, 2026. No affiliate links on this page. Facts come from the sources linked above; check them for updates.