Government Termination of Contract Notice – CEO’s Biggest Fear

As CEO of the company, receiving the government’s contract termination letter is one of the sudden blows that you do not usually dream of seeing. Your anticipated profits and the future of your business are at risk. Whether the agency terminates for cause or convenience, developing an immediate response is critical.

Knowing how to take the next steps is essential because you can inadvertently reduce whatever statutory damages you are entitled to.

For a termination for default, the next step is obviously to find legal counsel to appeal the decision. There is little wiggle room if the contracting officer has made a final decision. You must act. There are several approaches to appealing a default termination of a federal contract. 

When the government issues a termination of contract for convenience, a CEO must first decide whether the termination was lawful. Sometimes, the government contracting agency does make mistakes. The first line of thinking is what damages can you get when there is a convenience termination.  

• The ultimate impact to your company is that planned- for revenues are essentially gone.
• The next question should be what damages can you get by statute?

What to Do When You Receive the Government’s Notice of Termination of Contract Letter

 The FAR requires the contracting officer (CO) to perform specific contract termination notification requirements to the contractor. After having received the federal government ‘s termination of contract letter for convenience from the contracting officer, you may want to see whether there is a recent solicitation for the EXACT services to another contractor.  Procurement law suggests that the government should not issue a termination for convenience notice simply to get a better deal. Your best course of action before contract negotiation is to find out about the termination process and your entitlements under government contracting law.

When you receive the contract termination notice, you also want to notify your subcontractors immediately. This reduces any damages. You may want to revisit your subcontracts to make sure that there is a termination clause included.

Government’s Regulatory Termination of Contract Requirements

The Federal Acquisition Regulation requires that the Contracting Officer provides a written contract termination notice.

The termination of contract letter should include:

• A statement that the contract is terminated for the convenience of the government;
• The effective date of the termination;
• The extent of the termination – partial or entire agreement; any special instructions about work in progress or other matters; and
• Steps the contractor should take to decrease the impact of the termination on personnel.

During contract negotiation, CEOs should always tell the government any reasons why immediate cessation of work is not possible. You can reduce the impact by communicating with the agency after the notification of termination of contract. 

As a CEO, you don’t want to let anger and frustration cause you to decrease what statutory damages you may have coming to you.

Notice of Contract Termination – Can You Refuse if the Termination of Contract Notice as Being Defective?

Courts tend not to buy this argument. The reason is that you as a contractor, are presumed to understand the particular contract termination clause within your contract.

• A  termination of contract notice that may not meet the specific requirements would not be thrown out because it may be deemed an administrative error and not a reversible one.

When you receive a notice of contract termination, the best approach is to communicate with the government. You must also want to seek the assistance of a reputable government contracts termination attorney who understands the process.

• While you are complying with a government contract termination notice requirements, your lawyer can also perform a legal analysis to see if there was a breach of contract on the government’s part. 

For Immediate Help with a Contract Termination for Convenience or Default, Call 1-866-601-5518. Contact a government contracts attorney for a FREE INITIAL CONSULTATION.