52.249-2
Termination for Convenience of the Government (Fixed-Price)
FAR 52.249-2 ensures contractors are fairly compensated when the government terminates a fixed-price contract for convenience, but requires strict adherence to procedures, deadlines, and documentation.
Overview
FAR 52.249-2, "Termination for Convenience of the Government (Fixed-Price)," provides the standard contract clause that allows the government to terminate all or part of a fixed-price contract when it is in the government's interest. The clause outlines the procedures, contractor obligations, timelines, and settlement processes following a termination for convenience. It also includes alternate versions for construction contracts and contracts with government agencies where interest on excess payments may be inappropriate.
Key Rules
- Government's Right to Terminate
- The government may terminate the contract, in whole or in part, at any time for its convenience by issuing a Notice of Termination.
- Contractor Obligations Upon Termination
- Contractors must immediately stop work, terminate subcontracts, protect government property, and follow all directions from the Contracting Officer.
- Inventory and Settlement Proposals
- Contractors must submit termination inventory schedules within 120 days and a final settlement proposal within 1 year, unless extended.
- Settlement and Payment
- The Contracting Officer and contractor may agree on the settlement amount, or the Contracting Officer will determine the amount based on allowable costs, profit, and settlement expenses.
- Recordkeeping and Appeals
- Contractors must retain records for 3 years after final settlement and may appeal certain determinations under the Disputes clause.
- Alternates for Construction and Government Agency Contracts
- Alternate versions modify settlement calculations and interest payment requirements for construction or intergovernmental contracts.
Responsibilities
- Contracting Officers: Issue termination notices, direct post-termination actions, review and approve settlements, and ensure compliance with FAR cost principles.
- Contractors: Cease work as directed, manage and dispose of inventory, submit required schedules and proposals on time, maintain records, and comply with all settlement and property protection requirements.
- Agencies: Oversee the termination process, ensure proper settlement, and enforce recordkeeping and reporting obligations.
Practical Implications
- This clause protects the government's flexibility to end contracts when necessary, while providing a fair process for contractors to recover allowable costs and profit on completed work. Contractors must be prepared to act quickly upon receiving a termination notice, maintain thorough documentation, and adhere to strict deadlines to ensure full and timely compensation. Common pitfalls include missing submission deadlines, inadequate recordkeeping, and misunderstanding allowable costs or settlement procedures.