Terminating Contracts and CLINS SPS Spotlight Series June 2015

This information was originally created for The SPS Spotlight Series project, which ran from November 2013 through November 2015. Updates to the original content may be incorporated to ensure accuracy. If you have any questions about this information, please contact the SPS Help Desk at sps.helpdesk@caci.com.

Overview Explanation of Termination Authority to Terminate Who May Terminate Notice of Termination Types of Terminations

What is a Termination Action?

Termination Contract Termination occurs when one or both parties decide to end their contractual obligations.

Usually, the Government is the author of the Termination action.

Why Terminate a Contract? Termination Why Terminate a Contract?

Termination Non-Appropriation of Funds The Convenience of the Government The Default in action or form of a Contractor

Termination – Authority There will be Termination clauses or other contract clauses, authorizing Contracting Officers to Terminate contracts. The Contractor should be aware of these clauses by simply reading the contract. Ignorance of terms and conditions of the contract is not an excuse for failures on the contractor’s part.

Termination – Who may Terminate MSgt Julian M. Wilson Unlimited to all contracts and stuff Only a duly appointed Contracting Officer may be considered to Terminate contracts.

Termination – Who may Terminate TCO The Contracting Officer must then be appointed as a Terminating Contracting Officer (TCO) for the purpose of the Termination. This appointment may be removed once the termination action is completed.

Termination – Notice The Contracting Officer shall Terminate contracts only by a written notice to the contractor.

Termination – Notice When the notice is mailed, it shall be sent by certified mail, return receipt requested. Please see FAR 49.102 for more information on Notice of Termination.

Termination Types There are three types of Terminations. They are: Termination for Convenience (also known as T for C) Termination for Default (also known as T for D) Termination for Cause

Terminations Types – Termination for Convenience A Termination for Convenience allows the federal Government to Terminate all or part of a contract for its convenience. This type of termination protects the Government’s interest by allowing cancellation of contracts for products that become obsolete or unneeded. The Termination does not necessarily arise from any fault on the part of the contractor.

Termination Types – Termination for Convenience Reasons for Termination for Convenience include: Items, service, or construction no longer needed Contractor failure to meet requirements Mutual agreement of both parties Unable to fund portion of work

Terminations Types – Termination for Default A Termination for Default means that the Government may Terminate all or part of a contract, for anything that was done that was not in the interest of the Government.

Termination Types – Termination for Default Reasons for Termination for Default include: Attempted fraud Failure to meet quality requirements Failure to deliver the supplies or perform the services within the time specified Failure to make progress and that failure endangers the contract Failure to perform any other provision of the contract

Termination Types – Termination for Default Contract may not be terminated for Default however, if the contractor can show that the failure was excusable. Examples of excusable failure include: Acts of God Acts of a public enemy Acts of Government Strikes

Termination Types – Termination for Cause FAR PART 12 Only contracts written using Commercial Item Acquisition procedures may be Terminated for Cause. Other than the contract type, the procedures and reasons will be the same.

Termination The Contracting Officer shall Terminate contracts only when it is in the Government’s best interest to do so. The Contracting Officer shall affect a No-Cost settlement instead of issuing a Termination notice when: It is known that the Contractor will accept one Government property was not furnished There are no outstanding payments, debts due the Government, or other contractor obligations

Terminations Procedures in PD2 There are two termination types in PD2. They are: Complete Contract Termination Line item or Partial Termination

Terminations Procedures in PD2 - Complete To affect a “complete” contract Termination in PD2, begin by highlighting the contract to be terminated.

Terminations Procedures in PD2 - Complete Go to the menu Procurement→ Post-Award→ Termination→ Terminate

Terminations Procedures in PD2 - Complete The “Termination” window displays. Here, the choice for Convenience, Default, or Cause may be selected. Note: With the selection of “Cause”, a drop down appears for additional selection choices.

Terminations Procedures in PD2 - Complete Further, a “Description” area is provided for recording additional information about this termination. When all pertinent information has been entered, click the [OK] button.

Terminations Procedures in PD2 - Complete An informational message window will appear alerting the specialist that an SF30 Termination modification must be created. PD2 does not automatically create this modification. The specialist must initiate it. Now click the [OK] button.

Terminations Procedures in PD2 - Complete The “Release” stamp on the award will change to a “T4C” (“T4D” or “T4CA”) depending on which was chosen.

Terminations Procedures – Modification Information The Contracting Officer administering the contract makes and issues the modification on an SF 30. The modification should accomplish three actions:

Terminations Procedures – Modification Information The modification should state that it confirms the initial notification of Convenience (Default or Cause) Termination. The initial notification should be made an attachment to the modification. The modification should advise the contractor of the actions he should take under the Termination. The actions are set forth in FAR 49.601-2. The modification should move all unliquidated funds for the Terminated portion of the contract from their current funds cite to a new funds cite. This assures that the funds necessary for settling any contractor’s claim are retained on the contract.

Terminations Procedures in PD2 – Line Item or Partial To affect a “Line Item” or “Partial” contract Termination in PD2, begin by highlighting the contract to be terminated.

Terminations Procedures in PD2 – Line Item or Partial Go to the menu Procurement→ Post-Award→ Modification

Terminations Procedures in PD2 – Line Item or Partial The “Create New Contract Mod” window displays. Fill in the reason for Modification and then click the [OK] button.

Terminations Procedures in PD2 – Line Item or Partial Fill in the effective date in block 3 and then go to tab, SF30 13-16.

Terminations Procedures in PD2 – Line Item or Partial Select the appropriate check box. (usually C or D) Be sure to enter the authority for this Termination action. This entry is mandatory. Now click on the tab containing the line items.

Terminations Procedures in PD2 – Line Item or Partial Here the line items that are affected will be selected.

Terminations Procedures in PD2 – Line Item or Partial In our case, we will effect termination on two subCLINs of line item 0002.

Terminations Procedures in PD2 – Line Item or Partial We have decided to Terminate for Convenience line items 0002 AB, and 0002 AC. Begin by highlighting the first line item to be Terminated.

Terminations Procedures in PD2 – Line Item or Partial Go to the menu Line Items→ Termination → Terminate CLIN

Terminations Procedures in PD2 – Line Item or Partial The “Termination” window displays. Select the Termination Reason and CLIN Termination type. Enter a Description for this action. Note: If “Cause” is selected, use the additional drop-down for other selection choices.

Terminations Procedures in PD2 – Line Item or Partial A PD2 message window will appear. Click the [Yes] button to go to line item detail.

Terminations Procedures in PD2 – Line Item or Partial The “Line Item Detail Modifications” window will display.

Terminations Procedures in PD2 – Line Item or Partial Make the necessary change for the Quantity that is to be reduced. In our case it is all of the quantity. Once that is done, click the [OK] button.

Terminations Procedures in PD2 – Line Item or Partial The line item affected will now display a “T4C” banner on it. This procedure must be repeated individually, for each line item to be Terminated.

Terminations Procedures in PD2 – Line Item or Partial Generate, Approve, and Release the Modification as would normally be done. Keep in mind that the person releasing the Modification should be a TCO. PD2 does NOT check to see if anyone is a TCO. PD2 will allow the release of the Modification by a Contracting Officer with authority to do so.