Termination for Convenience
- FAR Subpart 8.406-5
- The ordering activity has the right to terminate all or part of an order when it is in
the government’s best interest (e.g., when an item is no longer needed)
- If the Schedule Contracting Officer terminates any services or supplies covered
by the contract:
- The contractor must complete any orders for those services or supplies
- The ordering activity Contracting Officer may terminate the order for convenience
The ordering activity Contracting Officer may unilaterally terminate all or part of a
Schedule order at any time, with or without giving any reason, for the convenience of
the government when it is in the government’s best interest (e.g., when an item is no
longer needed). Terminating an order has no effect on the Schedule contract.
Before terminating an order for convenience, the ordering activity Contracting Officer
must try to enter into a no-cost settlement agreement with the Schedule contractor.
The Contracting Officer should be able to negotiate a no-cost cancellation in situations
where it is in the interest of both parties to the Schedule order, such as in the following
- An off-the-shelf supply has not been shipped
- No significant work has been expended by the contractor in providing a service
or special-order supply, or no work hours have been expended
If a no-cost settlement cannot be reached, the Contracting Officer sends a Notice of
Termination for Convenience to the contractor.
Once the contractor receives the Notice of Termination for Convenience, he/she must
immediately stop work and ensure all suppliers and subcontractors cease work.
The parties to the Schedule order should mutually agree upon the requirements of
the termination settlement quote. The parties must balance the government’s need to
obtain sufficient documentation to support payment to the contractor against the goals
of having a simple and expeditious settlement.
Termination for Convenience: Liabilities and Rights
When an ordering activity Contracting Officer terminates a GSA Schedule fixed-price
order for the government’s convenience, the contractor must be paid:
- The percentage of the contract price reflecting the percentage of the work
performed prior to the notice of the termination
- Reasonable charges the contractor can demonstrate, to the satisfaction of the
ordering activity using a standard record keeping system, resulting from the
The contractor must not be required to comply with the Cost Accounting Standards
Board, Cost Accounting Standards (CAS), or the contract cost principles in FAR
Part 31, Contract Cost Principles and Procedures. The government does not have any right
to audit the contractor’s records solely because of the termination for convenience.
The contractor must not be paid for any work performed or costs incurred that could
have been avoided.
When an ordering activity Contracting Officer terminates a GSA Schedule LH or T&M
task order for the government’s convenience, the contractor must be paid an amount
for direct labor hours (as defined in the GSA Schedule contract and order) determined
by multiplying the number of direct labor hours expended before the effective date of
termination by the hourly rate(s) in the order, less any hourly rate payments already
made to the contractor, plus reasonable charges the contractor can demonstrate to the
satisfaction of the ordering activity, using its standard recordkeeping system, that have
resulted from the termination.