How Does DOGE Cancelled Contracts for Convenience Impact You?
According to the Federal News Network “Nearly 40% of the federal cancelled contracts that President Donald Trump’s administration claims to have canceled as part of its signature cost-cutting program aren’t expected to save the government any money, the administration’s own data shows.”
The Department of Government Efficiency, run by Trump adviser Elon Musk, published an updated list Monday of nearly 2,300 contracts that agencies terminated in recent weeks across the federal government. Data published on DOGE’s “Wall of Receipts” shows that more than one-third of the contract cancellations, 794 in all, are expected to yield no savings. “The General Services Administration is making a second, more direct push to strongly encourage agencies to cut “nonessential” consulting contracts by March 7. And this time, it’s telling agencies to target contractors they believe agencies are spending the most with.”
On February 26, 2025, President Donald J. Trump issued an executive order that furthers the mission of the Department of Government Efficiency (DOGE) Cost Efficiency Initiative (Order). The Executive Order‘s goal is to transform federal spending on government contracts, federal grants, and other loans.
Parts of the order state that:
Sec. 3. Cutting Costs to Save Taxpayers Money. (a) Contract and Grant Justification. Each Agency Head shall, with assistance as requested from the agency’s DOGE Team Lead, build a centralized technological system within the agency to seamlessly record every payment issued by the agency pursuant to each of the agency’s covered contracts and grants, along with a brief, written justification for each payment submitted by the agency employee who approved the payment. This system shall include a mechanism for the Agency Head to pause and rapidly review any payment for which the approving employee has not submitted a brief, written justification within the technological system.
(b) Review of Covered Contracts and Grants. Each Agency Head, in consultation with the agency’s DOGE Team Lead, shall review all existing covered contracts and grants and, where appropriate and consistent with applicable law, terminate or modify (including through renegotiation) such covered contracts and grants to reduce overall Federal spending or reallocate spending to promote efficiency and advance the policies of my Administration. This process shall commence immediately and shall prioritize the review of funds disbursed under covered contracts and grants to educational institutions and foreign entities for waste, fraud, and abuse. Each Agency Head shall complete this review within 30 days of the date of this order.
The main focus here is on your canceled contracts and your rights under government contract termination clauses.
The executive order requires agencies to implement new mechanisms to record, justify, and approve agency payments; perform comprehensive reviews of contracts, grants, contracting policies, procedures, and personnel; and issue new guidance on signing or modifying new and existing contracts.
What this means in that your planned revenues for a contract with one base year and three option could be very terminated for convenience under the Federal Acquisition Regulations (FAR), VA contract termination regulations, GSA and other termination clauses.
Can You Challenge DOGE’s Goal to Cancel Government Contracts?
As FAR termination for convenience lawyers, we believe it would be an uphill battle. Courts are not usually in the business of dealing with contract administration problems. The question would more than likely be whether the President, through DOGE, can constitutionally require that money, already appropriated by Congress for these canceled contracts, support an order to terminate federal contracts.
What Are My Rights When the Government Cancels My Contracts for Convenience?
The “Termination for Convenience of the Government” clause in a Government contract gives specific rights to the Agency, through the contracting officer, to terminate the contract when termination is in the Government’s interest.
Under FAR 52.249-2 Termination for Convenience of the Government (Fixed-Price), small businesses and large government contractors “shall have the right of appeal, under the Disputes clause, from any determination made by the Contracting Officer under paragraph (e), (g), or (l) of this clause, except that if the Contractor failed to submit the termination settlement proposal or request for equitable adjustment within the time provided in paragraph (e) or (l), respectively, and failed to request a time extension, there is no right of appeal.”
After the contracting officer issues you a FAR termination for convenience notice, and except as directed by the Contracting Officer, you, among other things ” shall immediately proceed with the following obligations, regardless of any delay in determining or adjusting any amounts due under this clause:
(1) Stop work as specified in the notice.
(2) Place no further subcontracts or orders (referred to as subcontracts in this clause) for materials, services, or facilities, except as necessary to complete the continued portion of the contract.
(3) Terminate all subcontracts to the extent they relate to the work terminated.
(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 to 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; the approval or ratification will be final for purposes of this clause.”
What Types of Contract Do You Have? This Makes a Difference
If your canceled or terminated contract was awarded under FAR Part 12 for the acquisition of commercial items, you are entitled to recover (1) the percentage of the contract price reflecting the percentage of completion, plus (2) reasonable charges resulting from the termination.
FAR 12.403 Terminations.
(d). termination for the Government’s convenience.
(1) When the contracting officer terminates a contract for commercial products or commercial services for the Government’s convenience, the contractor shall be paid-
(i) (A) The percentage of the contract price reflecting the percentage of the work performed prior to the notice of the termination for fixed-price or fixed-price with economic price adjustment contracts; or
(B) An amount for direct labor hours (as defined in the Schedule of the contract) determined by multiplying the number of direct labor hours expended before the effective date of termination by the hourly rate(s) in the Schedule; and
(ii) Any charges the contractor can demonstrate directly resulted from the termination. The contractor may demonstrate such charges using its standard record keeping system and is not required to comply with the cost accounting standards or the contract cost principles in part 31. The Government does not have any right to audit the contractor’s records solely because of the termination for convenience.
FAR Part 15 Terminations
In the Federal Acquisition Regulation (FAR), “termination for convenience” under Part 15 refers to the government’s ability to end a contract, either partially or completely, at its discretion when it deems it in the government’s best interest, without needing to prove any fault or breach by the contractor; this is typically outlined in FAR clause 52.249-1, “Termination for Convenience of the Government (Fixed-Price).
Timelines
You have to 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.
What Damages Can You Get Under the FAR Termination for Convenience Clause?
If DOGE’s efforts causes your contract to be terminated for convenience under FAR 15, you may be able to recover (among other things):
The reasonable costs of settlement of the work terminated, including-
(i) Accounting, legal, clerical, and other expenses reasonably necessary for the preparation of termination settlement proposals and supporting data;
(ii) The termination and settlement of subcontracts (excluding the amounts of such settlements); and
(iii) Storage, transportation, and other costs incurred, reasonably necessary for the preservation, protection, or disposition of the termination inventory.
Contact us for help preparing your termination for convenience settlement proposal. Please call our government contract termination attorneys toll-free at 1.866.601.5518. Or Contact Us Online.