Termination of Government Contracts for Convenience (T4C)

Imagine you’re a Government Contractor under a firm, fixed-price contract and you’ve done nothing wrong.  Nevertheless, the Government has decided to unilaterally end its contract with you.  Yes, the Government can do this (for almost any reason).  No, you cannot get your anticipated profit for unperformed work.  You can only recover:

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

Costs actually incurred include preparing to perform (e.g., costs incurred after award and before notice-to-proceed) because “a settlement should compensate the contractor fairly for the work done and preparations made for the terminated portions of the contract…”). FAR 49.201(a); Appeal of Pro-Built Construction Firm, ASBCA No. 59278 (June 1, 2017).

“Cost and accounting data may provide guides, but are not rigid measures, for ascertaining fair compensation.” FAR 49.201(c).  But, contract line items (CLINs) regarding price have no meaning in a T4C settlement focused on costs.  Appeal of Atlas Sahil Construction Co., ASBCA No. 58951 (November 9, 2017).

If you get a T4C notice, promptly stop incurring further costs and present a reasonable and well-supported termination settlement proposal to the Government.

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