Changes & Termination (Parts 43 / 49)

FAR 52.249-2

Termination for Convenience of the Government (Fixed-Price)

Gives the Government the unilateral right to terminate the contract, in whole or in part, for the Government's convenience. Contractor must stop work upon notice and is entitled to a settlement covering: (1) work performed before termination, (2) work in progress, (3) settlement expenses, and (4) profit on work performed (but no anticipatory profit on the terminated portion).

FAR / DFARS Part
FAR Part 49 — Termination of Contracts
Prescribed By
FAR 49.502(b)(1)(i) — Required in fixed-price non-commercial contracts > simplified acquisition threshold (with some exceptions).
Flow-down to Subcontracts

Not flowed down (governs Government-prime relationship).

What this clause requires

  • 1Upon receiving notice of termination for convenience, the contractor must stop work to the extent specified.
  • 2Terminate sub orders to the extent specified and settle with subs.
  • 3Submit termination settlement proposal within 1 year (inventory basis or total-cost basis).
  • 4Maintain accurate records of incurred costs to support the settlement.
  • 5Profit allowed on work performed; no anticipatory profit on the terminated portion.

When this clause applies

Fixed-price non-commercial contracts > simplified acquisition threshold. Commercial-item terminations use the streamlined 52.212-4(l).

Common pitfalls

!Failing to stop work promptly — costs incurred after the termination effective date are generally not recoverable.
!Inadequate cost records — settlement is based on documented incurred cost; poor records mean poor settlement.
!Sub settlement complexity — primes must settle with subs, which can take months and adds settlement-expense.
!Missing the 1-year settlement proposal deadline — extensions are possible but require CO approval.

Proposal-team checklist

  • ☐Build a termination-readiness runbook — who triggers stop-work, who notifies subs, who preserves records.
  • ☐Maintain job-cost accounting at the WBS level that maps clearly to deliverables — supports termination settlement.
  • ☐Pre-identify which subs would settle and which would litigate — prepare standard termination-letter templates.
  • ☐Train PMs on inventory-basis vs. total-cost basis of settlement and which to choose.

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FAQ

Why can the Government terminate for convenience?

The Government's procurement needs change. T4C is a baked-in remedy that prevents Government from being locked into contracts that no longer fit its mission. The settlement framework attempts to make the contractor whole for performed work and reasonable settlement expenses.

Can I refuse to stop work?

No. The clause makes T4C unilateral. Continued performance after T4C notice is at contractor's own expense.

Do I get anticipatory profit?

No. Profit is allowed only on work performed before termination. Anticipatory profit on the terminated portion is excluded.

Related clauses

FAR 52.249-8
Default (Fixed-Price Supply/Service)
FAR 52.212-4
Contract Terms — Commercial
FAR 52.243-1
Changes — Fixed-Price

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Reference content based on the Federal Acquisition Regulation and DFARS as of June 2026. Always verify the current clause text at acquisition.gov before relying on it for an actual submission. Educational reference; not legal advice.