Government contracts provide that the government may cancel (terminate) your contract if:
you fail to make delivery within the time specified in the contract,
you fail to make progress so as to endanger performance of the contract, and/or
you fail to perform any provisions of the contract.
Before terminating a contract for default, the contracting officer must, however, give you an opportunity to remedy defects in your performance or show why your contract should not be terminated.
If your contract is terminated for default, you are entitled only to payment at the contract's price for items accepted by the government. If the government still needs the items that you failed to deliver, it has the right to procure the same items elsewhere and, if they cost more, charge the excess costs to you. This can be a very serious and costly matter.
If you can show that your failure to deliver or to make progress is excusable, your contract will not be terminated for default. To be excusable, a delay must be beyond your control and not caused by your fault or negligence. If your contract is terminated for default and you can prove that the government's action was improper, the termination will be treated as one for the "convenience of the government."
Information courtesy of the Small Business Administration.
