The government may unilaterally terminate all or part of a contract for its convenience. This type of termination does not arise from any fault on the part of the contractor. Termination for convenience protects the government's interests by allowing it to cancel contracts for products that become obsolete or unnecessary.
As with terminations for default, the government must give you written notice of termination for convenience, but is not required to give advance notice. The notice of termination will usually direct you to:
stop work,
terminate subcontracts,
place no further orders,
communicate similar instructions to subcontractors and suppliers, and
prepare a termination settlement claim.
If you fail to follow these directions, you do so at your own risk and expense. You should also receive detailed instructions as to the protection and preservation of all property that is or may become government-owned.
After termination for convenience, the government will make a settlement with you to compensate you fully and fairly for the work you have done and any preparation made for the terminated portion of the contract. A reasonable allowance for profit is also included.
Information courtesy of the Small Business Administration.
