Termination for Convenience (T4C) is a critical legal mechanism in government contracting. Unlike termination for default, where the contractor has failed to perform, T4C allows the government to unilaterally end a contract when it deems it in the government's best interest—regardless of contractor performance. This power is broad, but it does not leave contractors without recourse.
T4C is typically used when government funding is reduced, project needs change, or priorities shift. Understanding your rights and available remedies is crucial. While contractors cannot recover lost profits on unperformed work, they are entitled to reimbursement for costs incurred up to the termination date, including direct labor, materials, and applicable indirect costs. Additionally, settlement expenses, such as legal and accounting fees related to the termination, may also be recoverable.
Many contractors mistakenly believe the government can terminate a contract without financial obligation. However, the Federal Acquisition Regulation (FAR) establishes that contractors must be compensated for allowable costs, provided they are properly documented. This means maintaining organized financial records is essential for maximizing recovery. Contractors should also ensure they are in compliance with FAR-mandated procedures and timelines for submitting settlement proposals.
In the case of disputes, contractors have avenues to challenge the government’s calculations. This includes negotiating with the Termination Contracting Officer (TCO), appealing to the Boards of Contract Appeals (ASBCA/CBCA), or filing a claim in the U.S. Court of Federal Claims.
T4C is a powerful tool for the government, but contractors can still protect their financial interests by understanding the process, documenting costs, and being proactive in negotiations.
Martin & Jones’s professionals have experience assisting and advising clients who have had their federal contracts terminated. We can assist clients preparing and negotiating a termination settlement proposal. If your organization’s contract has been terminated, contact Martin & Jones immediately and one of our attorneys will discuss with you how we can be of assistance to your organization.
Have you had your government contract terminated for convenience? Our experienced legal team can help you recover what you’re owed. Contact us today for a consultation.