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Termination and the COR's and Contractor's Duties

What is the COR's role in a contract termination action?

The COR has a key role in any potential or actual termination action. The COR is the individual responsible for documenting circumstances that may lead to the need to terminate the contract.

If a situation arises that could lead to a termination action, it is the responsibility of the COR to notify the CO in a timely manner. This duty is completed successfully when the COR identifies termination situations and procedures and can recommend a termination for convenience or a termination for default (or cause) when necessary. In the event of a possible termination, the COR should:

1. Identify the event(s) that have led to consideration of termination of the contract

2. Notify the CO of the possible need to terminate

3. Assist the CO with termination proceedings.

What are the contractor's duties upon receiving a termination notice?

Upon receipt of a termination notice, whether for convenience or for default, the contractor must comply with the following requirements:

Stop work immediately on the terminated portion of the contract and stop placing subcontracts.

Terminate all subcontract work related to the terminated portion of the prime contract.

Immediately advise the government of any special circumstances preventing work stoppage.

Perform the portion of the contract that is to be continued and promptly submit any request for an equitable adjustment (a price adjustment "marked by due consideration for what is fair and impartial, unhampered by technical rules the law may have devised that limit recovery or defense"[1]) for this continuing portion.

Take action to protect and preserve property in the contractor's possession that the government has or may acquire an interest in, and deliver the property to the government.

Promptly notify the government in writing of any legal proceedings arising from any subcontract or other commitment related to the terminated portion of the contract.

Settle outstanding liabilities and proposals from terminated subcontracts and obtain approvals required by the government.

Submit a settlement proposal within one year of termination. (If the termination is partial, the contractor may submit a request for equitable adjustment to the government for reprising the unchanged portion of the contract to reflect, for example, new quantities or delivery schedules.)

Dispose of termination inventory as directed or authorized by the CO.

The COR can assist in making sure the contractor fulfills these responsibilities by communicating the status of these activities to the CO.

Notification of Contract Termination

What should be included in the COR's notification to the CO of possible contract termination?

The COR should notify the CO when conditions indicate a contract may need to be terminated. The notification should document:

Clause(s) of the contract affected by the possible termination

The specific failure of the contractor and reasons provided by the contractor for such failure

The availability of supplies or services from other sources

The urgency of the government's need and the period of time that would be required for work by other sources, as compared with the time in which completion could be obtained from the delinquent contractor

The degree of indispensability of the contractor (i.e., consideration of the contractor's unique capabilities)

The impact the termination would have on the availability of funds

Any other pertinent facts and circumstances.

  • [1] Steven H. Gifis, Barron's Dictionary of Legal Terms, 3rd ed. (Hauppauge, NY: Barron's Educational Services, Inc., 1998), p. 159.
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