Take the sting out of terminations. Learn the do's and dont's of the termination process and how to maintain client relationships.

1. NCMA NOVA NEWS – DECEMBER 2017 4
So, it’s come to this? Termination is never easy, but
it does happen and when it does you need to be
prepared. Here’s what you need to know.
The Government does not enter into terminations
lightly, as a matter of fact the Federal Acquisition
Regulation (FAR) instructs that “the contracting
officer shall terminate contracts, whether for default
or convenience, only when it is in the Government’s
interest” and if the remaining contract performance
or delivery is over $5,000 in value. If the remaining
value is below $5,000, the Government will allow the
contract to run its course.1
What You Can’t Be Terminated For
As a contractor, once you accept an award, there is a
long list of responsibilities and expectations that
focus on a failure to deliver or to perform. Almost as
important is knowing what you are not responsible
for. When it comes to terminations for default, a
contract cannot be terminated for:
 Acts of God or of the public enemy,
 Acts of the Government in either its sovereign
or contractual capacity,
 Acts of another contractor in the performance
of a contract with the Government,
1
FAR 49.101 (b), (c) Authorities and Responsibilities
 Fires,
 Floods,
 Epidemics,
 Quarantine restrictions,
 Strikes,
 Freight embargoes,
 Unusually severe weather, or
 Delays of subcontractors or suppliers at any tier
arising from unforeseeable causes beyond the
control and without the fault or negligence of
both the contractor and the subcontractors or
suppliers. 2
Pay special attention to the last one. As contractors,
subcontractors are vital to our supply chain and many
2
FAR 52.249.8 (c)- Default (Fixed-Supply and Service)

2. NCMA NOVA NEWS – DECEMBER 2017 5
contract difficulties occur when there is a breakdown
in our supply chain.
Additionally the Government will try to pursue no
settlement terminations as they are the most
advantageous to the Government. No settlement
terminations will occur when these conditions exist:
3
FAR 49.101 (b) Authorities and Responsibilities
 The contractor has made it known that they will
accept a no settlement termination.
 The Government has not been provided
property (or service).
 There are no outstanding payments, debts to the
Government or other contractor obligations.3
Settlements are the responsibility of the Terminating
Contracting Officer. This could be your current
Contracting Officer or it may be assigned to a
completely new one to maintain an environment of
neutrality. Whoever it is, you will be notified in
writing of who will be handling your termination.
How do you know you’ve been terminated?
Much like getting fired from a job, a termination of
contract is most likely an event you know is coming.
When the gauntlet falls, the FAR lays out a strict
notification procedure. Embracing the technological
aspects of contracting, your official Notice of
THE WHITEFISH ENERGY TERMINATION
The Whitefish Energy contract indicates how quickly an
award can become a cancellation. Awarded as a no-bid
contract in September 2017 to rebuild Puerto Rico’s
electric grid, by October 29th
the Puerto Rico Electric
Power Authority (PREPA) announced cancellation of
the $300 Million contract.
This cancellation occurred when the award was no
longer in the best interest of the government. The
contract contained a termination clause that stated:
“PREPA may, at any moment, terminate, cancel or
accelerate its expiration, after giving the Contractor
not less than thirty (30) days prior notice, for any or
no reason, when in PREPA’s judgment such action
responds to its best interest.”
- PREPA Contract 2018-P00029A, Article 14, p. 11

3. NCMA NOVA NEWS – DECEMBER 2017 6
Termination could come as an email. Electronic
communication is deemed an acceptable form of
official communication in the FAR.4
If the
termination is sent via the U.S. Postal Service, it must
be mailed with a return receipt. If it is hand-delivered
it must contain a statement that the contract is being
terminated for convenience or default, the
corresponding contract clause, the effective date of
the termination, the extent of the termination and any
special instructions.
What now?
It seems bleak, but there is light at the end of the
tunnel. A termination can be called off. It’s not
typical but it is a glimmer of hope; the relationship
can be salvaged, costs to replace the contractor can be
avoided and reinstalling you as the contractor can be
in the best interest of the Government.5
There is a seven part framework to consider when
creating an appeal to have a termination rescinded.
Your attempt to have a termination rescinded should
provide a realistic rebuttal for as many of these areas
as possible.6
(1) The terms of the contract and applicable
laws and regulations.
Know what the contract required and find a way to
show that your performance satisfies the contract.
4
FAR Part 49.102 (a)-Notice of Termination
5
FAR Part 49.102 (d)-Notice of Termination
(2) The specific failure of the contractor and
the excuses for the failure.
Have reasonable and justifiable excuses for anything
required by the contract that you could not do. Be
sure to show how procuring these items from other
vendors would cost the Government more in terms of
money, time and effort.
(3) The availability of the supplies or services
from other sources.
Highlight why you are still the best option. You will
need to walk a fine line here, because you have
previously had a misstep.
(4) The urgency of the need for the supplies or
services and the period of time required to
obtain them from other sources, as compared
with the time delivery could be obtained from
the delinquent contractor.
In your response, point out how much of a burden it
will be to the Government to resolicit the work and
how much a delay will cost the Government in terms
of time and resources.
(5) The degree of essentiality of the
contractor in the Government acquisition
program and the effect of a termination for
6
FAR Part 49.402-3 (f) 1-7-Procedure for Default

4. NCMA NOVA NEWS – DECEMBER 2017 7
default upon the contractor’s capability as a
supplier under other contracts.
This is where your relationships and business
development efforts will show full value. You need
to maintain a good relationship with the client in
order for them to concede that there is some essential
element of the contract that you have to perform.
They need to be able to visualize that they still need
you. At no time should you utter, either verbally or
in writing, the words “you still need me,” but there
should be some tactful alluding to that point.
(6) The effect of a termination for default on
the ability of the contractor to liquidate
guaranteed loans, progress payments, or
advance payments.
Your ability to repay Government loans, or otherwise
provide performance or delivery commensurate with
the progress/advance payments you have received is
a factor the Contracting Officer must consider. It
may prompt the Contracting Officer to seek remedies
other than termination. Also bear in mind that there
are viable termination defenses when a default is
clearly linked to the Government’s failure to make a
timely progress or advance payment. The late
payment must have left you financially incapable of
performance or delivery.7
(7) Any other pertinent facts and
circumstances.
Anything else you can think of that may help your
case, including any clause that will help bolster your
point of view of why you were unintentionally unable
to perform, is the way to go. If you intentionally
failed to perform, you are just going to have to throw
yourself on the mercy of your Contracting Officer.
Provide the customer with an airtight plan on how
you will mediate the deficiencies. Termination
comes after a cure notice, so it stands to reason that
7
U.S. Army, 2014 Contract Attorney’s Deskbook, Chapter 20,
Contract Payment, (accessed November 27, 2017), p. 20-4.
https://www.loc.gov/rr/frd/Military_Law/pdf/CAD_2014_Ch20
.pdf
BEFORE YOU
THROW IN
THE TOWEL
Before you give in to a termination, be
sure that every single rule and timeline
has been followed. In particular, when
the Government fails to timely exercise
its right to terminate for default it may
waive that right.
Tangible evidence of that waiver occurs
when the Contracting Officer has made
revisions to delivery schedules and
encouraged the contractor to perform
after the delivery date.
- Robert Douglas Parsons, “Armed Services
Board of Contract Appeals: analysis of
sustained decisions on DOD supply contract
disputes,” 1886-12, Calhoun, Institutional
Archive of the Naval Postgraduate School,
(accessed November 27, 2017), p. 34
https://calhoun.nps.edu/bitstream/handle/10
945/18617/armedservicesboa00pars.pdf?seq
uence=1

5. NCMA NOVA NEWS – DECEMBER 2017 8
you’ve not satisfied previous attempts to solve the
problem. Acknowledge previous shortcomings and
provide the steps you will take to ensure that they will
not occur again. Provide a quick timeline, I’m talking
within seven days, for the mitigation and correction
to begin.
Provide the customer with a way to monitor and
verify checks. Help them help you. Whether it is a
daily status call or a weekly monitoring report, be
accessible and amendable to questions and requests
for information.
Knowing why you can be terminated and what can
cause that termination is crucial in your success as a
contractor; knowing how to navigate a termination
may well be the defining factor in the success of your
organization. While not the outcome you strive for
as a contractor, how you handle the termination can
sometimes be much more important than the fact that
you received a termination. Terminations will follow
you for every future proposal declaration and every
future award. You will need the Terminating
Contracting Officer to speak favorably of you in an
unfavorable circumstance.
Ms. Leona Charles is a
seasoned professional
with over 15 years of
experience in project
management, acquisition
and Federal procurement
reporting. She has
proven experience in
developing diversity
goals in contracting and
commercial departments,
managing and
developing diversity
program reviews, policy
implementation,
advocacy, and strategic
research. Key skills include: training, organizing,
conducting analysis of organizational and projects,
public speaking and staff development. She supports
a broad spectrum of clients including the
manufacturing industry in the United Kingdom, the
U.S. Department of Defense and U.S. nonprofit
organizations. Ms. Charles is the President and
Chief Executive Officer of SPC Business Consulting,
and is the current President of NCMA’s Chesapeake
Bay Chapter, in Saint Mary’s County, Maryland.
Upcoming events, news, and resources for the
Chesapeake Bay Chapter are located:
http://ncmachesa.org/.
NCMA CHESAPEAKE BAY CHAPTER
http://ncmachesa.org/