Guidelines and Considerations when Terminating Government ContractsResource Government
August 6, 2013 — 2,536 views
The Government officers have a free hand to exercise their will with the termination of convenience contract. Government contracting officers have the authority to terminate contracts in the interest of the state if they feel the need to do so. The process is complex and many contractors are not experienced in this process of contract termination.
Terminations for Convenience
The Government contract brings along with it a lot of complications in terms of the subcontracts which also get cancelled along with it. Cancellations of these subcontracts could result in loss of compensation for costs incurred to prepare for the work or from subcontractors.
Secondly, several federal agencies may see this as a political propaganda on part of the Congressmen. Thirdly, to carry out the termination of this contract finding the right set of manpower is also challenging. Most government contractors are ill experienced as these clauses have very rarely been used.
Introduced during the Civil war, the Government contract was given to the Government as a way to terminate supply of war goods once they were no longer needed. It was later extended to agencies in 1964 and revised several times over the years.
The clause now incorporates costs that if properly documented one could recover, these costs could be due to startup expenses, unexpired leases, equipment bought to complete the contract, and costs incurred to prepare the termination settlement proposal.
Terminations Due to Default
Termination due to default means that the Government may terminate all or part of a contract which could be due to several reasons, namely, attempted fraud, failure to meet quality requirements, time lapse, failure to fulfill any part of a contract, or inability to make progress in the project which may impact the entire project.
The contracting officer would provide a written notice called a cure notice giving the contractor 10 days after which the officer may issue a notice of termination by default. This notice allows one to cure any defects within this span of time. If there is insufficient time for a cure notice, the officer may send a show cause notice. This notice needs a contractor to explain why the Government contract must not be terminated. This gives the contractor a chance to be heard, and his answer to the show cause notice is considered before the breach of contract.
Other Rights to Termination
The Government also has the authority to terminate a contract when the contractor uses abuse of discretion standard to apply for termination of convenience provisions.
If the contractor seems to take advantage of the contract agreements and fails to fulfill any of the contract requirements, as agreed upon previously, it could lead to termination of the Government contract. Some parts of the agreement of the contract are, attempted fraud, failure to meet quality requirements, time lapse, failure to fulfill any part of a contract, or inability to make progress in the project which may impact the entire project.
Termination for convenience has been a very controversial clause, debated upon fiercely by people in the construction agency, though there have been no absolute conclusions to it. It is still being continually practiced.