Terminating for convenience doesn’t mean the government will not have to pay any costs. Image: DCStockPhotography/Shutterstock.com
By: FEDweek StaffThe GAO has cautioned that the widespread termination of contracts by federal agencies that has been underway—touted by the Trump administration as one of its signature initiatives in government management—could result in appeals and related costs.
In a blog post, GAO noted that federal contracts “typically include terms that give agencies the right to terminate contracts (partially or fully) for convenience ‘when it is in the government’s interest.’ For example, spending priorities and needs can change before a contract ends. This can be due to shifts in policy or even unforeseen event.”
Contractors don’t have that same flexibility in, it added, “but terminating for convenience doesn’t mean the government will not have to pay any costs. A contractor may be entitled to: costs already incurred and reasonable profits on those costs; costs associated with termination like disposing of inventories, and settling subcontracts; and settlement expenses including certain legal and accounting costs.”
Contractors can have up to a year to submit a settlement proposal, which the government might accept or negotiate over.
If the two do not reach an agreement, a government contracting officer can unilaterally determine a settlement amount but the contractor may then be able to appeal the government’s decision to the Board of Contract Appeals with jurisdiction or to the United States Court of Federal Claims, it said.
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