52.249-5 Termination for Convenience of the Government (Educational and Other Nonprofit Institutions)
Source: FAR 52.249-5 on acquisition.gov
FAR 52.249-5 establishes clear procedures and deadlines for educational and nonprofit contractors to follow when the Government terminates a contract for convenience, ensuring proper settlement and compliance.
Overview
FAR 52.249-5 provides the procedures and requirements for terminating contracts for convenience when the contractor is an educational or other nonprofit institution. This clause allows the Government to terminate all or part of a contract if it is in the Government’s interest, and outlines the steps contractors must take upon receiving a termination notice. It covers obligations such as stopping work, terminating subcontracts, transferring property, submitting inventory schedules, and preparing settlement proposals. The clause also specifies which FAR cost principles apply based on the contractor’s classification (educational institution or nonprofit organization) and details the process for determining and paying settlement amounts, including the possibility of partial payments and the contractor’s right to appeal.
Key Rules
- Government’s Right to Terminate
- The Government may terminate all or part of the contract for convenience by issuing a written notice specifying the extent and effective date.
- Contractor Obligations After Notice
- Contractors must immediately stop work, terminate subcontracts, transfer property, and take other specified actions to wind down the terminated portion of the contract.
- Inventory and Settlement Proposals
- Contractors must submit termination inventory schedules within 120 days and a final settlement proposal within 1 year, unless extensions are granted.
- Cost Principles
- The applicable FAR cost principles depend on whether the contractor is an educational institution or a nonprofit, with specific references to FAR subparts 31.3, 31.7, or 31.2.
- Partial Payments and Appeals
- The Government may make partial payments, and contractors have a right to appeal except in cases of untimely settlement proposal submission.
Responsibilities
- Contracting Officers: Issue termination notices, approve settlements, determine payments, and grant extensions.
- Contractors: Comply with all post-termination requirements, submit required documentation on time, and follow applicable cost principles.
- Agencies: Oversee compliance and ensure proper application of cost principles and settlement procedures.
Practical Implications
- This clause ensures a structured process for winding down contracts with educational and nonprofit institutions, minimizing disputes and financial risk.
- Contractors must be diligent in meeting deadlines and documentation requirements to avoid forfeiting rights or payments.
- Understanding which cost principles apply is critical for accurate settlement and compliance.
As prescribed in 49.502(d), insert the following clause:
Termination for Convenience of the Government (Educational and Other Nonprofit Institutions) (Aug 2016)
(a) The Government may terminate performance of work under this contract in whole or, from time to time, in part if the Contracting Officer determines that a termination is in the Government’s interest. The Contracting Officer shall terminate by delivering to the Contractor a Notice of Termination specifying the extent of termination and the effective date.
(b) After receipt of a Notice of Termination and except as directed by the Contracting Officer, the Contractor shall immediately proceed with the following obligations:
(1) Stop work as specified in the notice.
(2) Place no further subcontracts or orders (referred to as subcontracts in this clause), except as necessary to complete the continued portion of the contract.
(3) Terminate all applicable subcontracts and cancel or divert applicable commitments covering personal services that extend beyond the effective date of termination.
(4) Assign to the Government, as directed by the Contracting Officer, all right, title, and interest of the Contractor under the subcontracts terminated, in which case the Government shall have the right to settle or pay any termination settlement proposal arising out of those terminations.
(5) With approval or ratification to the extent required by the Contracting Officer, settle all outstanding liabilities and termination settlement proposals arising from the termination of subcontracts; approval or ratification will be final for purposes of this clause.
(6) Transfer title (if not already transferred) and, as directed by the Contracting Officer, deliver to the Government any information and items that, if the contract had been completed, would have been required to be furnished, including-
(i) Materials or equipment produced, in process, or acquired for the work terminated; and
(ii) Completed or partially completed plans, drawings, and information.
(7) Complete performance of the work not terminated.
(8) Take any action that may be necessary, or that the Contracting Officer may direct, for the protection and preservation of the property related to this contract that is in the possession of the Contractor and in which the Government has or may acquire an interest.
(9) Use its best efforts to sell, as directed or authorized by the Contracting Officer, termination inventory other than that retained by the Government under paragraph (b)(6) of this clause; provided, however, that the Contractor (i)is not required to extend credit to any purchaser and (ii) may acquire the property under the conditions prescribed by, and at prices approved by, the Contracting Officer. The proceeds of any transfer or disposition will be applied to reduce any payments to be made by the Government under this contract, credited to the price or cost of the work, or paid in any other manner directed by the Contracting Officer.
(c) The Contractor shall submit complete termination inventory schedules no later than 120 days from the effective date of termination, unless extended in writing by the Contracting Officer upon written request of the Contractor within this 120-day period.
(d) After termination, the Contractor shall submit a final termination settlement proposal to the Contracting Officer in the form and with the certification prescribed by the Contracting Officer. The Contractor shall submit the proposal promptly but no later than 1 year from the effective date of termination unless extended in writing by the Contracting Officer upon written request of the Contractor within this 1-year period. If the Contractor fails to submit the termination settlement proposal within the time allowed, the Contracting Officer may determine, on the basis of information available, the amount, if any, due the Contractor because of the termination and shall pay the amount determined.
(e) Subject to paragraph (d) of this clause, the Contractor and the Contracting Officer may agree upon the whole or any part of the amount to be paid because of the termination. This amount may include reasonable cancellation charges incurred by the Contractor and any reasonable loss on outstanding commitments for personal services that the Contractor is unable to cancel; provided, that the Contractor exercised reasonable diligence in diverting such commitments to other operations. The contract shall be amended and the Contractor paid the agreed amount.
(f) The cost principles and procedures in subpart 31.3 of the Federal Acquisition Regulation (FAR), Contracts with Educational Institutions (defined as institutions of higher education in the OMB Uniform Guidance in 2 CFR part 200, subpart A, and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title20-section1001&num=0&edition=prelim" target="_blank">20 U.S.C. 1001), as in effect on the date of the contract, shall govern all costs claimed, agreed to, or determined under this clause; however, if the Contractor is not an educational institution and is a nonprofit organization (as defined in the OMB Uniform Guidance at 2 CFR part 200), the cost principles and procedures in subpart 31.7 of the FAR, Contracts with Nonprofit Organizations, shall apply; unless the Contractor is a nonprofit institution listed in the OMB Uniform Guidance at 2 CFR part 200, appendix VIII, as exempted from the cost principles in subpart E, in which case the cost principles at FAR 31.2 for commercial organizations shall apply to such contractor.
(g) The Government may, under the terms and conditions it prescribes, make partial payments against costs incurred by the Contractor for the terminated portion of this contract, if the Contracting Officer believes the total of these payments will not exceed the amount to which the Contractor will be entitled.
(h) The Contractor has the right of appeal as provided under the Disputes clause, except that if the Contractor failed to submit the termination settlement proposal within the time provided in paragraph (d) of this clause and failed to request a time extension, there is no right of appeal.
(End of clause)