A termination does not end your obligations; it starts a new set, with deadlines. The two kinds, convenience and default, work very differently.
Termination for convenience
Under the fixed-price clause, the government may terminate performance of work in whole or, from time to time, in part if the contracting officer determines that a termination is in the government's interest 1. The commercial terms clause at 52.212-4 has its own version: the government reserves the right to terminate the contract, or any part of it, for its sole convenience 2.
After the notice arrives, the fixed-price clause lists what the contractor must do. Among the items: stop work as specified in the notice 3; place no further subcontracts or orders, except as necessary to complete the continued portion of the contract 4; and terminate all subcontracts to the extent they relate to the work terminated 5.
Settling a convenience termination
Submit the final termination settlement proposal promptly, but no later than 1 year from the effective date of termination, unless the contracting officer extends that in writing on a written request made within the year 6. If you miss the deadline, the contracting officer may determine, on the basis of information available, the amount, if any, due because of the termination 7.
A settlement should compensate the contractor fairly for the work done and the preparations made for the terminated portions of the contract, including a reasonable allowance for profit 8. The use of business judgment, as distinguished from strict accounting principles, is the heart of a settlement 9. Under the clause, the agreed amount may include a reasonable allowance for profit on work done 10.
Bids2Bank's Deadlines page has a type for anything else with a date 11; put the settlement proposal deadline there the day the notice arrives.
Termination for default
Under the fixed-price supply and service clause, the government may, by written notice of default to the contractor, terminate the contract in whole or in part if the contractor fails to 12 deliver the supplies or perform the services within the time specified in the contract or any extension 13, make progress so as to endanger performance 14, or perform any of the other provisions of the contract 15.
A cure notice matters. The clause lets the government exercise that right if the contractor does not cure such failure within 10 days (or more if authorized in writing by the contracting officer) after receipt of the notice specifying the failure 16. Read your clause to see which grounds the cure period covers.
The consequences are heavy. The government may acquire similar supplies or services elsewhere, and the contractor will be liable for any excess costs 17; the contractor shall still continue the work not terminated 18.
Excusable failures and subcontractors
Except for defaults of subcontractors at any tier, the contractor is not liable for excess costs if the failure to perform arises from causes beyond its control and without its fault or negligence 19.
Subcontractor failures have their own test. If a subcontractor's default is caused by something beyond the control of both the contractor and the subcontractor, and without fault or negligence of either, the contractor is not liable for excess costs unless the subcontracted supplies or services were obtainable from other sources in sufficient time to meet the required delivery schedule 20.
A wrong default termination converts. If it is later determined that the contractor was not in default, or that the default was excusable, the rights and obligations of the parties are the same as if the termination had been issued for the convenience of the government 21.
Worked example. Contractor W's only supplier of a machined housing closes, and deliveries slip. Within the week W searches for other sources, finds none that could meet the delivery schedule, and sends the contracting officer that record with its response to the cure notice.
Record the settlement deadline in Deadlines →
Indented paragraphs are invented worked examples. Tool links open Bids2Bank and need a free account.