12.403
Termination
FAR 12.403 provides streamlined, distinct procedures for terminating commercial contracts, emphasizing simplified settlements and clear notification requirements for both convenience and cause.
Overview
FAR 12.403 outlines the procedures for terminating contracts for commercial products or commercial services, distinguishing these from the more complex requirements of FAR Part 49. It clarifies that the termination clauses in 52.212-4 apply, and that Part 49 is not mandatory for commercial contracts, though it may be used as guidance if not in conflict. The section details the policies and steps for both termination for cause and for the Government’s convenience, including notification, remedies, and payment procedures.
Key Rules
- Applicability of 52.212-4 Clauses
- Termination procedures for commercial contracts are governed by 52.212-4, not Part 49, though Part 49 may be used as guidance if not conflicting.
- Termination for Cause
- Contracting officers must send a cure notice (except for late delivery), notify the contractor in writing, specify reasons, remedies, and appeal rights, and report all terminations and amendments per 42.1503(h).
- Termination for Convenience
- Contractors are paid for work performed and direct charges resulting from termination, using standard record-keeping without requiring compliance with cost accounting standards or Part 31. The Government cannot audit solely due to termination for convenience.
Responsibilities
- Contracting Officers: Must follow 12.403 procedures, consult counsel before terminating for cause, issue required notices, and report terminations as required.
- Contractors: Must notify of excusable delays, respond to cure and termination notices, and provide documentation for termination settlements.
- Agencies: Ensure proper reporting of terminations and conversions/withdrawals per 42.1503(h).
Practical Implications
- This section streamlines termination procedures for commercial contracts, reducing administrative burden compared to non-commercial contracts. Contractors benefit from simplified settlement and limited audit rights, but must be diligent in documentation and communication. Contracting officers must ensure proper notification and reporting to avoid disputes or compliance issues.