[Code of Federal Regulations]

[Title 48, Volume 1]

[Revised as of October 1, 2005]

From the U.S. Government Printing Office via GPO Access

[CITE: 48CFR12.403]



[Page 201-202]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

                CHAPTER 1--FEDERAL ACQUISITION REGULATION

 

PART 12_ACQUISITION OF COMMERCIAL ITEMS--Table of Contents

 

  Subpart 12.4_Unique Requirements Regarding Terms and Conditions for 

                            Commercial Items

 

Sec. 12.403  Termination.



    (a) General. The clause at 52.212-4 permits the Government to 

terminate a contract for commercial items either for the convenience of 

the Government or for cause. However, the paragraphs in 52.212-4 

entitled ``Termination for the Government's Convenience'' and 

``Termination for Cause'' contain concepts which differ from those 

contained in the termination clauses prescribed in part 49. 

Consequently, the requirements of part 49 do not apply when terminating 

contracts for commercial items and contracting officers shall follow the 

procedures in this section. Contracting officers may continue to use 

part 49 as guidance to the extent that part 49 does not conflict with 

this section and the language of the termination paragraphs in 52.212-4.

    (b) Policy. The contracting officer should exercise the Government's 

right to terminate a contract for commercial items either for 

convenience or for cause only when such a termination would be in the 

best interests of the Government. The contracting officer should consult 

with counsel prior to terminating for cause.

    (c) Termination for cause. (1) The paragraph in 52.2124 entitled 

``Excusable Delay'' requires contractors notify the contracting officer 

as soon as possible after commencement of any excusable delay. In most 

situations, this requirement should eliminate the need for a show cause 

notice prior to terminating a contract. The contracting officer shall 

send a cure notice prior to terminating a contract for a reason other 

than late delivery.

    (2) The Government's rights after a termination for cause shall 

include all the remedies available to any buyer in the marketplace. The 

Government's preferred remedy will be to acquire similar items from 

another contractor and to charge the defaulted contractor with any 

excess reprocurement costs together with any incidental or consequential 

damages incurred because of the termination.

    (3) When a termination for cause is appropriate, the contracting 

officer shall send the contractor a written notification regarding the 

termination. At a minimum, this notification shall--

    (i) Indicate the contract is terminated for cause;

    (ii) Specify the reasons for the termination;

    (iii) Indicate which remedies the Government intends to seek or 

provide a date by which the Government will inform the contractor of the 

remedy; and

    (iv) State that the notice constitutes a final decision of the 

contracting officer and that the contractor has the right to appeal 

under the Disputes clause (see 33.211).

    (d) Termination for the Government's convenience. (1) When the 

contracting officer terminates a contract for commercial items for the 

Government's convenience, the contractor shall be paid--

    (i) The percentage of the contract price reflecting the percentage 

of the work performed prior to the notice of the termination, and



[[Page 202]]



    (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.

    (2) Generally, the parties should mutually agree upon the 

requirements of the termination proposal. The parties must balance the 

Government's need to obtain sufficient documentation to support payment 

to the contractor against the goal of having a simple and expeditious 

settlement.