CONTRACT ADMIN & INVOICINGFAR Part 49 (Termination of Contracts)

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.

REGULATORY CONTEXT

What It Means in Plain English

Official Acquisition.gov Text ↗

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.

Where This Clause Appears in Federal RFPs:

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.
⚠️ Audit Trap & High-Risk Pitfall

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.

Related Procurement Clauses

FAR 52.219-14

Limitations on Subcontracting (The 50% Rule)

When a small business wins a set-aside contract, it cannot simply broker the deal to a large business or non-qualified subcontractor. The prime contractor (and its similarly situated small business teammates) must perform at least a specified minimum percentage of the contract value or labor cost.

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DFARS 252.204-7012

Safeguarding Covered Defense Information & Cyber Incident Reporting (CMMC / NIST 800-171)

Requires all Department of Defense contractors and subcontractors handling Covered Defense Information (CDI) or Controlled Unclassified Information (CUI) to provide 'adequate security' by implementing the 110 security controls of NIST SP 800-171, record a score in SPRS, and report cyber incidents within 72 hours.

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FAR 52.204-27

Prohibition on a ByteDance Covered Application (TikTok Federal Ban)

Strictly bans the presence or use of TikTok or any application developed or provided by ByteDance Limited on any information technology used by contractors in the performance of federal contracts, including personal devices used under BYOD policies.

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