The Government's right to terminate a contract is provided for in a standard contract clause that allows it to terminate work in whole or in part. When a contract is terminated for convenience, a contractor is entitled to the following:
- Reasonable costs for the terminated work
- Termination costs
- Settlement expenses
- Reasonable profit
Cost type contracts, on the other hand, are not subject to settlement limits or loss ratios. However the potential recovery under cost type contracts is constrained by the limitation of funds clause that exists in all cost-type contracts.
In future posts, we will discuss specific allowablility criters for termination costs, steps that a contractor must immediately take upon receipt of a termination notice, and some advice on how to "settle".