Contract Termination

This SOP has internal roles only.

Purpose

To partly or fully terminate a contract for convenience or default.

Procedure

Termination of a contract for convenience does not hold a contractor at fault. The government might terminate for convenience if in its best interest, e.g., due to requirement changes or insufficient funds. This decision should be taken only after serious consideration because it is potentially costly.

Termination of a contract for default holds a contractor at fault due to an actual or anticipated failure to perform obligations, breach of contract conditions, or breaking federal law.

Non-profit and educational organizations can be terminated for convenience but not default.

Procedures differ for terminating a contract for convenience or default. When considering a termination, the government bases its decision on a review by contracting and technical personnel and counsel. For details on conditions and procedures, see FAR Part 49.

Termination for Convenience

Project Officers

• Promptly notify contracting officer when contemplating a termination for convenience.
• Prepare memo to contracting officer requesting termination and stating the reasons. Get program division director approval of the request. See FAR Part 49 for details.
• After contracting officer sends contractor a notice of termination, end contact with contractor unless directed otherwise by contracting officer. Any action that might encourage a contractor to continue performance may waive the government's rights.

Contracting Officers

• Inform Office of Acquisitions (OA) and Division of Extramural Activities (DEA) directors of the impending action before issuing a termination notice.
• Terminate a contract by sending contractor a written termination notice. See FAR Part 49 for requirements.
• Evaluate contractor settlement claims, perform cost or price analyses, negotiate termination settlements, and execute settlement agreements on SF 30, Amendment of Solicitation/Modification of Contract. Place memorandum documenting negotiations in the contract file.

Termination for Default

Project Officers

• After identifying unsatisfactory performance, failure to perform obligations, breach of contract conditions, or federal law violations, promptly notify contracting officer in writing. Contractor could interpret silence by the government as changed expectations of performance.
• To begin termination, prepare a memo to contracting officer requesting termination and defining the reasons. See FAR Part 49. Get program division director approval.
• After contracting officer sends contractor notice of termination, end contact with contractor unless directed otherwise by contracting officer. Any action that might encourage a contractor to continue performance may waive the government's rights.

Contracting Officers

• After project officer identifies unsatisfactory performance, failure to perform obligations, breach of contract conditions, or federal law violations, issue a written "cure notice" stating that the government will withhold payments if a default is not "cured" or determined to be excusable. Cure notices formally point out a deficiency in performance and give the contractor a specified time, usually 10 days, to correct it.
• If a default is not excusable or a contractor does not send a response in time, initiate withholding of payments and determine whether termination for default or other action is in the government's best interest.
• If termination for default is appropriate, notify contractor with a written "show cause notice." This notice states the contractual liabilities of termination for default and asks contractor to "show cause" why the contract should not be terminated.
• Before formally issuing a termination notice, inform the OA chief, the DEA director, and the program division director of the impending action.
• Terminate a contract by sending contractor a written termination notice.
• Evaluate contractor settlement claims, perform cost or price analyses, negotiate termination settlements, and execute settlement agreements on SF 30, Amendment of Solicitation/Modification of Contract. Place memorandum documenting negotiations in the contract file.

Contacts

See the Office of Acquisitions staff listing for the appropriate contract specialist.

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Links

Contract Modifications SOP

Contracting Officer SOP

Project Officer SOP