TAKING ACTION

FEDERAL CONTRACT TERMINATION OR MODIFICATION
by Jonathan J. Straw

The White House has directed Agency heads to “terminate or modify . . . covered contracts.” With some exceptions, there are numerous potential contracts on the chopping block. What should contractors do?

Upon receipt of a unilateral modification, assess whether the cost or time will increase in unchanged areas. For example, deductive changes for certain work could increase costs for other work that must still be performed. If costs were increased because of deductive changes, then carefully consider submitting a request for equitable adjustment.
Upon receipt of a notice of complete termination for convenience, promptly stop incurring further costs and, within one year of the termination, present a reasonable and well-supported termination settlement proposal to the Government under FAR 52.249-2(e). Recoverable costs include:

1. Costs actually incurred;
2. Profit on the work actually done; and
3. Costs of preparing a termination settlement proposal.

Upon receipt of a notice of partial termination for convenience, promptly stop incurring costs related to the terminated portion of the work and present a request for equitable adjustment within 90 days of the notice under FAR 52.249-2(l).