FAR 52.249-2: Termination for Convenience of the Government (Fixed-Price)
Official federal procurement regulation analysis, contractor performance obligations, and risk mitigation strategies for small businesses.
What It Means in Plain English
Authorizes the federal government to terminate all or part of a contract whenever the Contracting Officer determines it is in the best interest of the government, even if the contractor has performed flawlessly.
Mandatory in all fixed-price solicitations and contracts exceeding the Simplified Acquisition Threshold ($250,000).
Mandatory Statutory Requirements
- Unilateral Government Authority: The government can cancel without proving breach of contract or default.
- Allowable Contractor Recovery: Entitled to payment for completed work at contract prices, actual allowable costs incurred for uncompleted work, reasonable settlement expenses, and a fair profit on completed work.
- No Anticipatory Profits: Contractors CANNOT recover lost future profits on unperformed work.
- 1-Year Settlement Window: The contractor must submit its formal termination settlement proposal within 1 year from the effective termination date.
Contractor Compliance Obligations
- Immediately cease all work, stop placing new subcontracts, and terminate existing subcontracts related to the terminated portion.
- Segregate and protect all government-furnished property and project inventory.
Failing to immediately issue stop-work orders to subcontractors results in unallowable subcontractor costs that the federal government will refuse to reimburse.
Frequently Asked Questions About FAR 52.249-2
Can I sue the government for terminating for convenience?
You cannot sue simply because the government terminated the contract, as FAR 52.249-2 gives them this contractual right. However, you can file a claim under the Contract Disputes Act if the agency disputes your audited settlement costs or terminated in bad faith.