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Countersign termination

hello and welcome to the wonderful world of federal contracting made easy where it's our goal to take the complex world of government contracting and break it down into simple steps that anyone can master this is episode number 96 today we're going to discuss termination for convenience but before we get started let's roll that intro termination for convenience those three words are something that no contractor wants to hear after all who wants the government to seek termination actions on their contract but let's be honest it does happen contract terminations can happen at any time sometimes the contractor is at fault and sometimes the contractor is not at fault our goal for today's episode is to educate you on the procedures that transpire when the government terminates a contract in addition we will go over the resources available to both parties government and contractor remember the better educated you are the better business decisions you can make AB next we'll go over contract termination options used by the government types of contract terminations there are basically three types of contract terminations the first one is the termination for convenience otherwise known as a t4c the second one is called a termination for default that one is a t4d and the third is a no-cost cancellation generally contracts value greater than 25,000 will contain a contract cause allowing the government to terminate the contract if the contractor defaults on the contract the reason is obvious the government needs to protect itself the government will use a termination convenience clause when it's in the government's best interest to do so if you have been following along with their episodes you will notice that this is a common theme with the government in essence this allows the government in strategy the gum recan now-discontinued a contract due to technical article developments that make the contract obsolete or perhaps there is a lack of funding due to budgetary restrictions it allows them an out there also finally the government can terminate the contract because the work is no longer needed thus allowing the government to reallocate taxpayer money for something that is needed by the government essentially this Clause avoids liability for the government for a breach of contract action by a contractor next we'll look at the Federal Acquisition regulation references termination for convenience 52.2 49 1 through 7 contains the sections depending on if it's a fixed price contract if it's a services contract if it's a cost reimbursement contract those will each have its own section but they're covered between 52 to 49 1 through 7 it is important that you review the clauses contained in your contract generally these clauses are the only ones the contracting officer can use make sure to go to the far and read about each clause make sure that you not only read but you comprehend what the clause is containing and what it actually means sometimes the wrong clauses are added to contracts if you suspect that a clause is not relevant contact your contracting officer immediately do this prior to performing any work on the contract as we discussed earlier a termination for convenience allows the government to terminate all or part of a contract for its convenience when the government terminates a contract for convenience they have to notify you in writing the notice of termination must contain an effective date that the termination is effective as of the extent of the termination and any special instructions what do I mean when I say the extent of the termination well the government may not elect to terminate the entire contract but only a portion of the contract if the government leaves part of the contract intact then you the contractor will need to perform the parts of the contract that the government did not remove next we're going to discuss the termination notice the termination notice will instruct the contractor to stop work immediately only on the termination portion of the contract this includes any subcontractors that are performing work on a portion of the contract that the government is eliminating however the contractor and the subcontractor still must perform the portions of the contract that are not terminated in addition the government will settle termination claims from both the contractor and its subcontractors good to know right you must follow the instructions in the termination notice if you fail to do so you are opening yourself up for risk and expense the government will include detail instructions on the protection and preservation of all property that is or may be become government-owned do not under any circumstances continuing to perform work on any portion of a contract that the government is terminating the chances of you being reimbursed for your expenses is low next let's talk about the settlement process because the government is eliminating part or all of your contract they still have to compensate you for the work that you've performed and any preparations that were taken before the termination in addition the government is reached acquired to make a fair and prompt settlement with you generally this will result in a negotiated agreement between both parties the objective here is to compensate you fairly in philly for the work that you have done and any preparation that you made for the termination terminated portion of the contract also a reasonable allowance for profit is included this settlement is much easier in costs reimburse contracts since you were reimbursed on a cost basis since the beginning of the contract furthermore you are entitled to recover all allowable costs incurred in settling a termination for convenience what allowable costs are you talking about well let's go through them costs incurred for work completed and accepted at the time of the termination in addition cost considered allowable allocable and reasonable don't forget your profit on the above costs incurred and final closeout demobilization and settlement proposal costs associated with preparing a final cost proposal for submission to the government our allowable less profit as soon as you receive the notice of the government is going to terminate a portion or the whole contract start gathering the above information it's in your best interest to be as detailed as possible besides you don't want to leave any money on the table more importantly the government will retain their rights who approve or ratify any settlements made with your subcontractors once the government and the contractor agree to all or part of a compensation claim as a result of a termination a written amendment is made to the contract this is known as an ax settlement agreement your contracting officer will mend the contract accordingly under normal circumstances a search emanation will stop regular payments to you under contract however since you may have money tied up and finished and unfinished products materials and labor most terminated clauses provide you with interim financing through partial payment in fact discuss this with your Contracting Officer as soon as possible in future articles we'll discuss the rights for terminations for convenient and will provide with updated information as always until next time be safe