48 C.F.R. § 49.502

49.502 Termination for convenience of the Government.

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(a) Fixed-price contracts that do not exceed the simplified acquisition threshold (short form)—(1) General use. The contracting officer shall insert the clause at 52.249-1, Termination for Convenience of the Government (Fixed-Price) (Short Form), in solicitations and contracts when a fixed-price contract is contemplated and the contract amount is not expected to exceed the simplified acquisition threshold, except (i) if use of the clause at 52.249-4, Termination for Convenience of the Government (Services) (Short Form) is appropriate, (ii) in contracts for research and development work with an educational or nonprofit institution on a no-profit basis, (iii) in contracts for architect-engineer services, or (iv) if one of the clauses prescribed or cited at 49.505(a) or (c), is appropriate.

(2) Dismantling and demolition. If the contract is for dismantling, demolition, or removal of improvements, the contracting officer shall use the clause with its Alternate I.

(b) Fixed-price contracts that exceed the simplified acquisition threshold—(1)(i) General use. The contracting officer shall insert the clause at 52.249-2, Termination for Convenience of the Government (Fixed-Price), in solicitations and contracts when a fixed-price contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold, except in contracts for (i) dismantling and demolition, (ii) research and development work with an educational or nonprofit institution on a no-profit basis, or (iii) architect-engineer services; it shall not be used if the clause at 52.249-4, Termination for Convenience of the Government (Services) (Short Form), is appropriate (see 49.502(c)), or one of the clauses prescribed or cited at 49.505(a), (b), or (e), is appropriate.

(ii) Construction. If the contract is for construction, the contracting officer shall use the clause with its Alternate I.

(iii) Partial payments. If the contract is with an agency of the U.S. Government or with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess partial payments is inappropriate, the contracting officer shall use the clause with its Alternate II. In such contracts for construction, the contracting officer shall use the clause with its Alternate III.

(2) Dismantling and demolition. The contracting officer shall insert the clause at 52.249-3, Termination for Convenience of the Government (Dismantling, Demolition, or Removal of Improvements) in solicitations and contracts for dismantling, demolition, or removal of improvements, when a fixed-price contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold,. If the contract is with an agency of the U.S. Government or with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess partial payments is inappropriate, the contracting officer shall use the clause with its Alternate I.

(c) Service contracts (short form). The contracting officer shall insert the clause at 52.249-4, Termination for Convenience of the Government (Services) (Short Form), in solicitations and contracts for services, regardless of value, when a fixed-price contract is contemplated and the contracting officer determines that because of the kind of services required, the successful offeror will not incur substantial charges in preparation for and in carrying out the contract, and would, if terminated for the convenience of the Government, limit termination settlement charges to services rendered before the date of termination. Examples of services where this clause may be appropriate are contracts for rental of unreserved parking space, laundry and drycleaning, etc.

(d) Research and development contracts. The contracting officer shall insert the clause at 52.249-5, Termination for the Convenience of the Government (Educational and Other Nonprofit Institutions), in solicitations and contracts when either a fixed-price or cost-reimbursement contract is contemplated for research and development work with an educational or nonprofit institution on a no-profit or no-fee basis.

(e) Subcontracts—(1) General use. The prime contractor may find the clause at 52.249-1, Termination for Convenience of the Government (Fixed-Price) (Short Form), or at 52.249-2, Termination for Convenience of the Government (Fixed-Price), as appropriate, suitable for use in fixed-price subcontracts, except as noted in subparagraph (2) below; provided, that the relationship between the contractor and subcontractor is clearly indicated. Inapplicable conditions (e.g., paragraph (d)) in 52.249-2 should be deleted and the periods reduced for submitting the subcontractor's termination settlement proposal (e.g., 6 months), and for requesting an equitable price adjustment (e.g., 45 days).

(2) Research and development. The prime contractor may find the clause at 52.249-5, Termination for the Convenience of the Government (Educational and Other Nonprofit Institutions), suitable for use in subcontracts placed with educational or nonprofit institutions on a no-profit or no-fee basis; provided, that the relationship between the contractor and subcontractor is clearly indicated. Inapplicable conditions (e.g., paragraph (h)) should be deleted, the period for submitting the subcontractor's termination settlement proposal should be reduced (e.g., 6 months), the subcontract should be placed on a no-profit or no-fee basis, and the subcontract should incorporate or be negotiated on the basis of the cost principles in part 31 of the Federal Acquisition Regulation.

[48 FR 42447, Sept. 19, 1983, as amended at 61 FR 39222, July 26, 1996; 71 FR 57368, Sept. 28, 2006; 72 FR 27389, May 15, 2007]

Notes of Decisions

Cited in 13 cases (1 in the last 5 years), 1991–2025 · leading case: A.L. Prime Energy Consultant, Inc. v. Mass. Bay Transp. Auth., 95 N.E.3d 547 (Mass. 2018).

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A.L. Prime Energy Consultant, Inc. v. Mass. Bay Transp. Auth., 95 N.E.3d 547 (Mass. 2018). · cites it 2× “; 48 C.F.R. § 49.502 . Indeed, Federal regulations now provide uniform language for termination provisions that must be included in certain Federal procurement contracts, permitting termination when it is "in the Government's interest.”

RAM Eng'g & Constr., Inc. v. Univ. of Louisville, 127 S.W.3d 579 (Ky. 2003). · cites it 2× “2d 819 (1997); see also 48 C.F.R. § 49.502 (1995). As explained by the 11th Circuit Court of Appeals, termination for convenience "permits the Government to terminate a contract, even in the absence of fault or breach by the other party, without incurring the usual financial…”

Morrison Knudsen Corp. v. Fireman's Fund Ins., 175 F.3d 1221 (10th Cir. 1999). “See also 48 C.F.R. § 49.502 (e)(1) (recommending that prime include standard termination-for-convenience clause in its subcontracts, with “the period[] reduced for submitting the subcontractor's termination settlement proposal (e.”

Krygoski Constr. Co., Inc. v. United States, 94 F.3d 1537 (Fed. Cir. 1996). “See 48 C.F.R. § 49.502 (1995). The exigencies of war no longer limited the Government’s ability to terminate a contract for convenience.”

Questar Builders, Inc. v. CB Flooring, LLC, 978 A.2d 651 (Md. 2009). “See 48 C.F.R. § 49.502 (2009). In its modern form, the clause ordinarily provides that the government may terminate “if the Contracting Officer determines that a termination is in the Government’s interest.”

Gulf Grp. Gen. Enter. Co. W.l.l., Plaintiff, v. United States, Defendant, 114 Fed. Cl. 258 (Fed. Cl. 2013). “See 48 C.F.R. § 49.502 (b) (2005) (directing that “the clause at 52.”

4N Int'l, Inc. v. Metro. Transit Auth., 56 S.W.3d 860 (Tex. App. 2001). “See 48 C.F.R. §§ 49.502 , 49.503, 52.249-1, 52.”

Handi-Van, Inc. v. Broward Cnty., 116 So. 3d 530 (Fla. 4th DCA 2013). “See 48 C.F.R. § 49.502 (2012). Limitations on the Government’s Authority to Terminate for Convenience In its earliest “war-time” contemplation, “the consensus remained that the government’s right to terminate a contract was justified by the exigencies and uncertainties of armed…”

Red River Holdings, LLC v. United States, 802 F. Supp. 2d 648 (D. Maryland 2011). “” See 48 C.F.R. § 49.502 (b)(1)(i). . Generally speaking, a "commercial item” is "[a]ny item, other than real property, that is of a type customarily used by the general public or by non-governmental entities for purposes other than governmental purposes .”

Linan-Faye Constr. Co. v. Hous. Auth., 847 F. Supp. 1191 (D.N.J. 1994). “502, 48 C.F.R. § 49.502 (setting forth requirements for inclusion); FAR 52.”

Mark Dunning Indus., Inc. v. Cheney, 934 F.2d 266 (11th Cir. 1991). “" See 48 C.F.R. §§ 49.502 (b)(l)(i), 52.-249-2 (1990).”

MB Oil Ltd., Co. v. City of Albuquerque, 2016 NMCA 090 (N.M. Ct. App. 2016). “1996); see also 48 C.F.R. § 49.502 (2007) (noting the types of contracts that utilize a termination for convenience by the government clause).”

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