New Product Development (Us & Global) (Mrkt 450)

Assignment 5

Carla E. Henderson

Dr. James Moses

Contract Modification and Options (MGMT-450)

March 24, 2012

What are the ways to protect contractor's interests after it lost the contract award? Can a losing company benefit from this situation?

Almost every government contract will contain some type of "Termination for Convenience" clause. This clause permits the Government to terminate the contract, at any time, without cause, when in "the Government's best interest". The right to terminate without cause arose from the Government's need to adapt acquisition needs and hence, the taxpayer's dollars to changes in situations and technologies. For example, a contract for continued production of a certain military weapon may be rendered unnecessary by the abrupt conclusion of a war. Or, Congress may refuse to fund an expensive new fighter aircraft because of the end of the Cold War. The standard FAR clause inserted in fixed-price supply contracts is the clause found in FAR 52.249-2. It provides, inter alia, that "the Government may terminate performance of work under this contract in whole or, from time to time, in part if the Contracting Officer determines that a termination is in the Government's interest." Although this right is quite broad, the Government may not terminate a contract in bad faith or otherwise abuse its discretion.

A contract is terminated for convenience by Government issuance of a written notice of termination. FAR 52.249-2 (a). This notice must contain: (1) a statement that the contract is being terminated for the convenience of the Government; (2) the effective date of termination; (3) the extent of termination; (4) any special instructions; and (5) the steps the contractor is to take to minimize the impact on personnel. FAR 49.102 (a). Thereafter, as set forth in the standard "Termination for Convenience" clause the contractor is to: (1) stop work immediately on the terminated portion of the contract; (2) terminate all subcontracts...