8.406-4 Termination for cause
Source: FAR 8.406-4 on acquisition.gov
FAR 8.406-4 establishes strict procedures and documentation requirements for terminating Federal Supply Schedule orders for cause, including notification, repurchase, and reporting obligations.
Overview
FAR 8.406-4 outlines the procedures and requirements for terminating individual orders for cause under Federal Supply Schedule (FSS) contracts. It details the authority of ordering activity contracting officers to terminate orders, the need to comply with FAR 12.403, and the process for charging contractors with excess costs due to repurchase. The section also mandates notification to the schedule contracting office in cases of termination or suspected fraud, and provides specific steps for handling excusable failures, repurchase procedures, and reporting requirements. Only the schedule contracting officer can terminate supplies or services at the contract level, and all terminations and related actions must be properly documented and reported.
Key Rules
- Termination Authority and Process
- Ordering activity contracting officers may terminate individual orders for cause, following FAR 12.403, and may charge excess repurchase costs to the contractor.
- Notification Requirements
- The schedule contracting office must be notified of all terminations for cause and suspected fraud.
- Excusable Failure Procedures
- If the contractor claims excusable failure, procedures in FAR 8.406-6 must be followed.
- Repurchase and Excess Costs
- Repurchases must be at a reasonable price, and excess costs may be withheld or set off. Detailed documentation and notification are required if excess costs cannot be collected.
- Contract-Level Termination
- Only the schedule contracting officer can terminate supplies or services at the contract level, and no further orders may be placed for terminated items.
- Reporting
- All terminations for cause and subsequent amendments or conversions must be reported per agency procedures and FAR 42.1503(h).
Responsibilities
- Contracting Officers: Must follow proper procedures for termination, notification, repurchase, and reporting; ensure compliance with FAR 12.403 and 8.406-6; and coordinate with the schedule contracting office.
- Contractors: Must respond to terminations, may assert excusable failure, and are liable for excess costs if applicable.
- Agencies: Must ensure oversight, proper reporting, and adherence to documentation requirements.
Practical Implications
- This section ensures that terminations for cause are handled consistently, fairly, and with proper documentation, protecting government interests and providing due process for contractors. It impacts daily contracting by requiring strict adherence to notification, documentation, and reporting procedures, and by clarifying liability for excess costs. Common pitfalls include failure to notify the schedule contracting office, improper documentation, or not following required procedures for excusable failures or repurchases.
(a)
(1) An ordering activity contracting officer may terminate individual orders for cause. Termination for cause shall comply with FAR 12.403, and may include charging the contractor with excess costs resulting from repurchase.
(2) The schedule contracting office shall be notified of all instances where an ordering activity contracting officer has terminated for cause an individual order to a Federal Supply Schedule contractor, or if fraud is suspected.
(b) If the contractor asserts that the failure was excusable, the ordering activity contracting officer shall follow the procedures at 8.406-6, as appropriate.
(c) If the contractor is charged excess costs, the following apply:
(1) Any repurchase shall be made at as low a price as reasonable, considering the quality required by the Government, delivery requirement, and administrative expenses. Copies of all repurchase orders, except the copy furnished to the contractor or any other commercial concern, shall include the notation:
Repurchase against the account of __________ [insert contractor’s name] under Order __________ [insert number] under Contract __________ [insert number].
(2) When excess costs are anticipated, the ordering activity may withhold funds due the contractor as offset security. Ordering activities shall minimize excess costs to be charged against the contractor and collect or set-off any excess costs owed.
(3) If an ordering activity is unable to collect excess repurchase costs, it shall notify the schedule contracting office after final payment to the contractor.
(i) The notice shall include the following information about the terminated order:
(A) Name and address of the contractor.
(B) Schedule, contract, and order number.
(C) Line item number(s) and a brief description of the item(s).
(D) Cost of schedule items involved.
(E) Excess costs to be collected.
(F) Other pertinent data.
(ii) The notice shall also include the following information about the purchase contract:
(A) Name and address of the contractor.
(B) Item repurchase cost.
(C) Repurchase order number and date of payment.
(D) Contract number, if any.
(E) Other pertinent data.
(d) Only the schedule contracting officer may modify the contract to terminate for cause any, or all, supplies or services covered by the schedule contract. If the schedule contracting officer has terminated any supplies or services covered by the schedule contract, no further orders may be placed for those items. Orders placed prior to termination for cause shall be fulfilled by the contractor, unless terminated for the convenience of the Government by the ordering activity contracting officer.
(e) Reporting. An ordering activity contracting officer, in accordance with agency procedures, shall ensure that information related to termination for cause notices and any amendments are reported. In the event the termination for cause is subsequently converted to a termination for convenience, or is otherwise withdrawn, the contracting officer shall ensure that a notice of the conversion or withdrawal is reported. All reporting shall be in accordance with 42.1503(h).