Termination for Convenience of the Government (Educational and Other Nonprofit Institutions)
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.