You did not see it coming, or you did. If you have a termination for convenience clause in your contract, the Government may notify you that they no longer want you to continue with your contract. It may be sudden, or you could have guessed it. Whenever it happens, it is important to understand that you have a right and an obligation to prepare a termination for convenience proposal. The Government does not need to provide a specific reason for the termination for convenience, and it is not due to a breach of contract. Do NOT just walk away from the contract without preparing or getting some assistance with preparing a settlement proposal.
Termination Contractual Authority
The contractual authority used to terminate a contract for convenience resides in the Federal Acquisition Regulations (FAR) clauses 52.249-1 through 52.249-6 and 52.212-4. Once a Government contractor receives notice of such a termination, aside from stopping work, they need to immediately notify their subcontractors, dispose of termination inventory, protect property, and prepare their settlement proposal plus a myriad of other actions. The termination proposal must be submitted within one year of the termination notice.
Settlement Proposal Highlights
The settlement or termination proposal requires appropriate schedules, documentation, and accounting for costs differently than they typically do. It is important to note that in a termination for convenience situation, a firm fixed price contract is converted into a cost reimbursement contract. This allows you to recover the costs of work performed up to the date of termination, PLUS certain costs that continue after termination, AND reasonable settlement expenses.
Estimate vs. Real Costs
It is not all easy. It is a detailed cost proposal. You must prove the termination costs with sufficient certainty, so the amounts and documentation are more than just theory or guesswork. While estimates may be used, they must be documented for reasonableness. We prefer to obtain documentation for the noted data that you will claim. Call us if you want or need assistance to prepare your settlement proposal.
