Your Federal Government Contracting Past Performance Record

FAR 42.1501

“Relevant information for future source selection purposes, regarding a contractor’s actions under previously awarded contracts. It includes, for example, the contractor’s record of conforming to contract requirements and to standards of good workmanship; the contractor’s record of forecasting and controlling costs; the contractor’s adherence to contract schedules, including the administrative aspects of performance; the contractor’s history of reasonable and cooperative behavior and commitment to customer satisfaction; and generally, the contractor’s business-like concern for the interest of the customer.” 

As a small enterprise enters the government contracting venue, the phrase “Past Performance” almost immediately comes to the fore. When examining government Requests for Proposal (RFP’s) a section of the award criteria is almost always specified for past performance ratings on previous similar government work.

We have discussed meeting the initial past performance challenge for companies new to government contracting in the following discussion:

The Small Business Government Contracting Past Performance Challenge

The primary purpose of past performance evaluations is to ensure that accurate data on contractor performance is current and available for use in source selections. A past performance evaluation report provides a record of a contractor’s performance, both positive and negative, on a given contract during a specified period of time.
This article will focus on accessing your past performance record, and explain how the government rates a contractor’s past performance:

ACCESS

The following is an extract from the Contractor Past Performance Information Retrieval Web Site on obtaining information on your company information there:  Contractor Past Performance Assessment Reporting System

CLICK IMAGE TO ENLARGE 

PAST PERFORMANCE REVIEW CONTENTS BY KEY ASSESSMENT ELEMENT

Below are the key assessment elements required for contractor reviews of major procurement sectors in federal government contracting. 

Assessment Elements for the Systems Sector

Technical (Quality of Product) —This element is comprised of an overall rating and six sub elements.

Activity critical to successfully complying with contract requirements must be assessed within one or more of these sub-elements. The overall rating at the element level is the Program Manager's integrated assessment as to what most accurately depicts the contractor's technical performance or progress toward meeting requirements. It is not a predetermined roll-up of the sub-element assessments.

Product Performance—Assess the achieved product performance relative to performance
parameters required by the contract.

Systems Engineering—Assess the contractor's effort to transform operational needs and
requirements into an integrated system design solution.

Software Engineering—Assess the contractor's success in meeting contract requirements for software development, modification, or maintenance. Results from Software Capability Evaluations (SCEs) (using the Software Engineering Institute {SEI's} Capability Maturity Model {CMM} as a means of measurement), Software Development Capability Evaluations (SDCEs), or similar software assessments may be used as a source of information to support this evaluation.

Logistic Support/Sustainment—Assess the success of the contractor's performance in accomplishing logistics planning.

Product Assurance—Assess how successfully the contractor meets program quality objectives (e.g., producibility, reliability, maintainability, inspectability, testability, system safety) and controls the overall manufacturing process.

Other Technical Performance—Assess all the other technical activity critical to successful contract performance. Identify any additional assessment aspects that are unique to the contract or that cannot be captured in another sub-element
.
SCHEDULE—Assess the timeliness of the contractor against the completion of the contract, task orders, milestones, delivery schedules, administrative requirements, etc.

COST CONTROL—(Not required for firm-fixed-price or firm-fixed-price with economic price adjustment contracts.) Assess the contractor's effectiveness in forecasting, managing, and controlling contract cost, including reporting and analyzing variances.

 Management—This element is comprised of an overall rating and three sub-elements. Activity critical to successfully executing the contract must be assessed within one or more of these sub-elements. This overall rating at the element level is the Program Manager's integrated assessment as to what most accurately depicts the contractor's performance in managing the contracted effort. It is not a predetermined roll-up of the sub-element assessments.

 Management Responsiveness—Assess the timeliness, completeness, and quality of problem identification, corrective action plans, proposal submittals (especially responses to change orders, engineering change proposals, or other undefinitized contract actions), the contractor's history of reasonable and cooperative behavior, effective business relations, and customer satisfaction.

Subcontract Management—Assess the contractor's success with timely award and management of subcontracts, including whether the contractor met or exceeded small business, small disadvantaged business, small business HUBZone, veteran-owned small business, service disabled veteran-owned small business, and women-owned small business participation and subcontracting goals.

Program Management and Other Management—Assess the extent to which the contractor discharges its responsibility for integration and coordination of all activity needed to execute the contract, identifies and applies resources required to meet schedule requirements, assigns responsibility for tasks/actions required by contract, and communicates appropriate information to affected program elements in a timely manner. Assess the contractor's risk management practices, especially the ability to identify risks and formulate and implement risk mitigation plans. If applicable, identify and assess any other areas that are unique to the contract or that cannot be captured elsewhere under the Management element.
Assessment Elements for the Services, Information Technology, and Operations Support Sectors

QUALITY OF PRODUCT OR SERVICE—Assess the contractor's conformance to contract requirements, specifications, quality of software product and development, and standards of good workmanship (e.g., commonly accepted technical, professional, environmental, or safety and health standards).

SCHEDULE—Assess the contractor’s timeliness against the completion of the contract, task orders, milestones, delivery schedules, and administrative requirements (e.g., efforts that contribute to or effect the schedule variance).

COST CONTROL—(Not required for firm-fixed-price or firm-fixed-price with economic price adjustment contracts.) Assess the contractor's effectiveness in forecasting, managing, and controlling contract cost, including reporting and analyzing variances.

 BUSINESS RELATIONS—Assess the integration and coordination of all activity needed to execute the contract, specifically the timeliness, completeness, and quality of problem identification, corrective action plans, proposal submittals, the contractor's history of reasonable and cooperative behavior, customer satisfaction, timely award and management of subcontracts, and whether the contractor met small business, small disadvantaged business, small business HUBZone, veteran-owned small business, service disabled veteran-owned small business, and women-owned small business participation and subcontracting goals.

MANAGEMENT OF KEY PERSONNEL (for Services and Information Technology business sectors only)—Assess the contractor's performance in selecting, retaining, supporting, and replacing—when necessary—key personnel.

SUMMARY

Regular review of your past performance information system data is vital to your future marketing efforts. Please feel free to download the Guide to the Past Performance Retrieval System in the second, vertical Box Net "References" cube in the right margin of this site.

Meeting The Small Business Federal Government Contracting "Past Performance" Challenge

As a small business begins the proposal submission process to federal government agencies or to prime contractors the past performance requirement is a major challenge. By definition a start-up company in government contracting has no direct government agency past performance projects to site in meeting the requirement in requests for proposals (RFP’s) for historical references to similar projects in terms of size, duration and complexity.

Past performance data must be specific to the enterprise bidding a contract. It cannot site historical references to performance of individuals now in the company when they were with other firms, achievements by predecessor companies or successful projects that the current company did not perform as its current entity. The purpose for this rigid perspective by the government is to avoid "Fronting" a new enterprise with misleading information to obtain a high past performance rating.

So how can a startup or a small business new to government contracting meet the past performance challenge?

The answer lies in historical projects that may be similar in the commercial arena and a high quality proposal that clearly demonstrates an understanding of the requirement at hand, a unique and cost effective project plan and high performing personnel and/or products tailored to the statement of work to offset an interim, light past performance record.

A past performance reference sheet usually accompanies an agency RFP. It normally requires the bidder to fill it out with references to historical projects the company has performed and the contact points for confirmation. The government may request these forms in advance of the main body of the proposal to allow enough time to send them to the references. The past performance form is sent by the government to the references and you never see the result. The input goes directly from your past performance references back to the government.

For details on past performance formats and records processes please see Your Past Performance Record 

Many small businesses work through prime contractors to "Grow" past performance history (subcontracts count). By teaming with a sizable firm a small entity can relate its participation to larger projects and ultimately graduate to a good library of references, carefully maintained and kept as a living, growing data base of good customer service records that can be sited again and again in proposals.

It is wise to keep customer perceptions of your professionalism and products or services alive by constant vigilance, visits, surveys and other feedback mechanisms so that you are not surprised at a proposal debriefing when you find that a client you thought rated you highly did not.

The major services maintain past performance records by contract that you can access. Inquire with them as to a membership at the appropriate web site and review them regularly. The GSA utilizes service companies to rate contractors. You can get your rating by inquiring with them, much like a credit rating, except pertinent to cost, schedule and technical performance. Monitor your D&B report. It is always out there for prime contractor and government assessment of your financial health, your vendor payment history, your organization profile and your rating.

The U.S. Federal Contractor Registration System for Award Management  has a narrative to profile your company. Check your registration and insure you have a current and complete description of your supplies and services available to all who use the Dynamic Search Mechanism Dynamic Small Business Search (DSBS)

Insure your web site, your capability statement and your marketing plans are maintained current alive and dynamically reflective of your successes as you pursue new business and carefully develop your library of past performance records by project with accessible profiles to use in your government proposals.

Are Startups Missing Out By Not Bidding On Federal Contracts?

By Kayleigh Alexandra

It isn’t easy to acquire a government contract, especially if your business is just getting started, but it isn’t impossible, and the benefits can be substantial.

If it’s an option you’d like to pursue in the future, make an effort to begin preparing your organizational structure to meet federal requirements, and seek out subcontracting work to help you establish the connections that could help you in the right direction.”

If you run a startup, the thought might never have crossed your mind to seek out contract work with the government. After all, it isn’t the conventional way forward, and you might well figure that federal contracts will invariably go to companies with well-established government links.

But are you missing out by not making an effort to seek out federal contract work? Let’s go through some reasons why you might want to give it more consideration.

You can’t get what you don’t apply for

The notion that government contracts will always go to giant corporations is something of a self-fulfilling prophecy, as it spurs small enterprises to hold back from applying for them. Despite this impression, it’s generally quite viable, especially since the Federal Government sets a goal every fiscal year for contracting a percentage of its work to small businesses.

In 2020, the Federal Government awarded 26.01 percent or  $145.7 billion in contract work to small businesses, exceeding the yearly goal of 23%  and at a $13 billion increase from the previous fiscal year.

Given this ongoing commitment to diversifying the awarding of government work, now is as good a time as any to pitch for available contracts. If you succeed in getting one, you may be able to parlay it into an ongoing working relationship.

The field is becoming more open

The main difficulties with landing federal contracts are not technical but procedural and organizational, and the problem with high-level bureaucracy is that it’s incredibly difficult to dislodge. The flexibility in approach, then, must stem from the applicants.

While this is undoubtedly a frustrating notion to small businesses everywhere, consider that it also wards off a lot of possible competition, and that the benefits of securing federal work are extensive.

Another thing worth noting for programs set aside for small business is that medium and large businesses are both precluded from assuming prime roles and limited in their participation as subcontractors. The government’s mandate for a small business set-aside contract caps participation by firms other than the small business prime awardee at 49% of the project effort (factoring in work scope, cost, and time). While this does mean that a small business must demonstrate (during the proposal and site survey phases) the ability to carry out 51% of the work internally to win a contract, it does ensure that a majority of the work genuinely goes to small business workers.

The advantages of government work

Even disregarding the intimidating process involved in securing government work, a lot of startups may well think that it isn’t the right fit for them, particularly given the common perception that federal contracts are dull, expensive, or overly complicated. Brand image is very important in the social media age and pitching to popular brands might feel like a better option.

The big advantage to working on government contracts is that it lends your company a great deal of credibility and cache. People understand that it’s a difficult marketplace to operate in, and will view your ability to do so as an indication of your professionalism.

Here are some more advantages:

●     Scheduling Consistency

○     A lot of contract work extends to substantial periods of time, meaning you plan your financial year around it and allocate your resources efficiently.

●     Industry Networking

○     You’ll have the chance to meet people in very important positions in your industry, providing you with the opportunity to network and establish useful contacts.

●     Financial Certainty

○     Government payments will always be issued on time and in accordance with the agreed terms. You will never face the prospect of chasing them for payment.

Meeting the requirements for contractors

There are specific requirements that prospective contract work suppliers must meet in order to be granted consideration, and meeting those requirements is the most challenging part of the process (with the possible exception of formulating the pitch).

Typically, you’ll need to ensure that your business system meets government standards for job cost accounting (each job is unique and must be costed accurately), be fully prepared to deal with thorough audit requests, and have the capacity to produce project proposals of a sufficiently-high quality and that your business system meets government standards

You’ll also want to make sure your company has adequate insurance. Basic likely won’t cut it— you should pursue a suitable custom policy that covers everything needed, such as Defense Base Act insurance if you use overseas employees. The government is very risk-averse in awarding contracts and you won’t stand a chance if your proposition seems a little rocky.

To navigate those murky waters, it’s generally best to consult a specialist. This website offers a great deal of information for free, but there are also paid consultants you can hire to help get your business ready to be viable for contract bidding. Here are a couple you may wish to consider:

●     Judy Bradt: https://www.linkedin.com/in/judybradt/

●     Mark Amtower: https://www.linkedin.com/in/markamtower/

Working with a prime contractor

Given the complexity and expense involved in becoming a government contractor, it’s often worth considering the option of working as a subcontractor for a prime contractor, which is a business that has been granted full control of a government contract, allowing it to delegate parts of the work should it wish to.

If your startup isn’t ready to battle with much larger companies for huge contracts, subcontracting work could be a great first step to take. Most of the advantages we covered earlier still apply, as well, so it gives you the chance to make some influential contacts.

In summary

It isn’t easy to acquire a government contract, especially if your business is just getting started, but it isn’t impossible, and the benefits can be substantial.

If it’s an option you’d like to pursue in the future, make an effort to begin preparing your organizational structure to meet federal requirements, and seek out subcontracting work to help you establish the connections that could help you in the right direction.”

ABOUT THE AUTHOR:

Kayleigh Alexandra is a content writer for Micro Startups — a site dedicated to giving through growth hacking. Visit the blog for your latest dose of startup, entrepreneur, and charity insights from top experts around the globe. Follow us on Twitter @getmicrostarted.

Consider The Women Owned Small Business (WOSB) Federal Contracting Program Certification Process

Small Business Administration 

Becoming certified for the WOSB Federal Contracting Program means your business is eligible to compete for contracts that are set aside for WOSBs and economically disadvantaged WOSBs and sole-source federal contracts within eligible industries. 

New WOSB Federal Contracting Program regulations were published in the Federal Register on May 11, 2020, detailing changes to the certification process. DON’T MISS OUT! 

Visit the The Women-Owned Small Business Federal Contract Program (WOSB Program) web site to submit your initial application. The site makes it easy for you to understand the the certification process to ensure you remain eligible. 

On the homepage, you can: 

• Access checklists that provide guidance prior to applying

• Explore your company’s eligibility 

• Find answers to questions regarding your firm’s eligibility in the program

 

• Request information from SBA program experts 

• Create an account and proceed with your application 

SBA WOSB Certification

Registering Your Business For Federal Government Contracting

You have worked hard establishing your small business in the commercial market; or you have succeeded in your profession working for large enterprises. You have established yourself and you are recognized as a success by your superiors, your peers and your subordinates. Someone or something one day attracts your attention with the suggestion that the federal government may be in the market for your skills, products or services. This article will address the path to expanding your existing business or initially undertaking a business involving federal government contracts.

GETTING STARTED

The best way to explore federal government contracting possibilities is to expand your business plan to include a sector for that type of business or develop your start up plan including a federal government business sector. Doing business with the Federal Government is not "Rocket Science" but it is different. It embodies a set of regulations entitled, "The Federal Acquisition Regulation" or FAR, which contain the rules by which the government and industry abide in contracting for supplies and services. The FAR had its genesis during World War II and has evolved since that time to control and regulate the ever-expanding amounts of goods and services which the federal government buys.

The following are the most important "Mechanical Steps" necessary in positioning your business to begin selling to the federal government. They are listed in the necessary sequence for becoming a supplier entity in the government system. A link to appropriate web sites is provided at each step.

A. Register Your Company With Your State And with the IRS:

Incorporation is fairly inexpensive and can be done yourself via the WEB for either a non-profit or a for-profit business. 
You may download free instructions to register a Limited Liability Company (LLC) in your state from the BOX in the right margin of this site.  

B. Register at the System For Award Management Web Site:

System for Award Management (SAM)

C. For application in the SBA Small, Disadvantaged Business (SDB) Program:

SBA 8(a) Program

If you qualify as a minority, follow the directions closely. Note there is a preview section which will acquaint you with the application and the types of information that will be necessary when you start the process.

D. For Historically Under-Utilized Business (HUB) Zone Information:


SBA Hub Zone Program

Note that Hub Zone qualification is based on where the business is located and where the personnel in the business reside as well.

For information on additional set aside designations such as those for women-owned business, veterans and disabled veterans please see:

Federal Government Contracting Set Aside Designations

E. For Searches on Federal Buys:

Contract Opportunities  is the gateway for all federal business. The search tool there is a very powerful engine with many filters that are useful. It is well worth the time to learn the filters. Every federal agency is required by regulation to advertise there and you will be amazed at the products and services the federal government buys.

F. For an example of a small business capability statement check the following web site:

Your Capability Statement

A capability statement is always a good idea for marketing. The link above as an example. It was found on the web in the public domain Note that the site is a SDB. Later you will get into proposal preparation and the regulations governing the types of grants and contracts, as well as billing the government for your work and other factors.

G. Questions for you:

Are you planning to produce a deliverable, distinct, end product such as software, hardware, a commodity, a report, a conference, a survey or a study, sell it to meet the government's statement of work and bill for the end product when delivered?

OR

Are you planning to price your services at an hourly rate, sell them by labor categories with professional job descriptions to perform the government's statement of work and bill by the hour for labor and at cost for material and travel?

Answers to the above questions are key factors in how you set up your business and price your work in proposals to federal agencies. The answer to the above questions is "Yes" in both cases for some businesses. Some small businesses sell their product commercially, but contract for product implementation and support on a service contract basis.

Understanding The Federal Government Contract Format

The Federal Acquisition Regulation (FAR) 15-204-1 specifies a uniform contract format for federal government contracts. You have encountered this format during the RFP stage of your procurement since the government is required to utilize it in structuring the request for proposal (RFP), leaving blank those items, which are subject to negotiation such as final contract pricing. Your contract is divided into four parts, with various sections within each part. Prime contractors issue subcontracts flowing down terms and conditions, pricing and other topics in an identical format.

Like any other contractual document in the business world, the quality and content of this format may vary by agency and with the experience and knowledge of the contracting officer and the government administrative and technical support personnel preparing it or the prime contractor. It behooves your small business to examine the contents, research the appropriate sections of the FAR that may govern them and review them as commitments to which your organization can conform and perform before you sign your contract.

The following is a listing of the topics making up this format with a brief description of the contract parts and sections and some tips regarding each from a project management perspective.

PART I - THE SCHEDULE

SECTION A - SOLICITATION/CONTRACT FORM

Standard Form 33 or Optional Form 308 are the most common formats utilized by government agencies.  (click below image to enlarge)

These forms contain the following:

Name, Address, and Location of Issuing Activity, Including Room and Building.

Contract Number/Modification or Revision Number

Date

Request for Proposal (RFP) Number

Number of pages

Requisition or Other Purchase Author

Brief Description of Item or Service

Requirement for the offeror to provide its name and complete address, including street, city, county, state, and zip code, and electronic address (including facsimile address), if appropriate

Other Agency-unique data such as priority ratings, security classification and similar data

Signature blocks for the government and the contractor at contract

Section B - SUPPLIES OR SERVICES AND PRICES/COSTS

This is a listing by contract line item of the negotiated products or services and the prices for them in your contract. This section is very critical for billing purposes in your accounting system. Invoices to the government for supplies or services delivered must reference the items and all detail for the items contained in this section. Government requisition and appropriation data are contained in the contract line item detail and are carried throughout the government finance and accounting systems, to include the operations that make payment on your invoices.

SECTION C - DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORK

Perhaps the most critical section of the contract in terms of technical performance, this section describes the work to be performed and references requirements for the end product, including product performance. A tight, thorough statement of work (SOW) is the key to a well-understood relationship with your COTR, who will approve your performance against the SOW and sign off on your billings and invoices based on said approval. The SOW contains the benchmarks for defining the baseline effort required for the current contract price. One of the highest risks in government contacting is performance outside the statement of work, either due to a very general and loose SOW or by taking direction for added scope from government representatives without getting a contact change order modifying the SOW and increasing the price of the contract.

SECTION D - PACKAGING AND MARKING

With the vast amount of procurement the U.S. Government performs and the many locals to which the government directs shipments, it is necessary to specifically establish specifications for packaging and identification of products. The government considers this information important enough to establish a separate contract section for it. Your company should closely examine and comply with the instructions therein.

SECTION E - INSPECTION AND ACCEPTANCE

This section identifies the government criteria for an acceptable product under your contract and the methodology that will be utilized by the government to perform inspection to insure the product quality. In many cases a specification will be called out. The place of delivery will also be specified.


SECTION F - DELIVERIES OR PERFORMANCE
A discrete schedule by contract line item will be contained in this section. Requirements for time, place and method of delivery or performance will be specified.

SECTION G - CONTRACT ADMINISTRATION DATA

This section will contain required accounting and appropriation data and any contract administration information or instructions other than those on the contract form. It will specify your payment address if it is different than your company street address.

SECTION H - SPECIAL CONTRACT REQUIREMENTS

Special contract requirements that are not included in Section I, Contract Clauses, or in other sections of the uniform contract format will be specified in this section.

PART II - CONTRACT CLAUSES

SECTION I - CONTRACT CLAUSES

This section includes the clauses required by law or by this part and any additional clauses if these clauses are not required in any other section of the uniform contract format. An index may be inserted if this section’s format is particularly complex. The index normally makes reference to FAR clauses, or FAR Agency Supplements. They may index  the FAR and FAR Agency Supplement web sites to which you should direct your attention, depending on the agency with whom you are doing business. The FAR Agency Supplements are intended to support the FAR by applying overall FAR guidance with specific agency details regarding implementation:

PART III - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS

SECTION J - LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTS

This section lists the title, date, and number of pages for each attached document, exhibit, and other attachment. The government may include documents that clarify or further define the contract. A commonly attached item is the DD Form 1423, "Contract Data Requirements List", that specifies for all data deliverables the Data Item Descriptions (DID's) and their delivery schedules. Lists of government furnished property in support of contractor performance on the contract are contained in this section if such equipment is provided.

PART IV - REPRESENTATIONS AND INSTRUCTIONS

SECTION K - REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS

The federal government requires the contractor to certify to certain statements in bidding and performing government contracts. These signed documents become a part of your government contract when it is executed. Many of these "Certs and Reps", as they are commonly called, establish compliance with conflict of interest laws and establish the identity of the contractor by specifying information unique to the company such as NAICS Codes, CCR registration numbers, D&B Numbers, CAGE Codes and similar data. Minority-Owned Business and HUB Zone Business certification numbers are specified in this section, together with other small business self-certifications, such as Woman-owned, Veteran-Owned or Disabled-Veteran-Owned designations. Certain representations regarding sources for raw materials may also be required in Section K together with other agency-unique certifications such as facility and security officer information, security classification data and the like.

With the advent of internet use for record retention, the federal government now requires that contractors maintain certain standard certifications and representations at a government web site and update them annually for any changes:

System for Award Management

You should establish and maintain your registration,  certifications  and representations, update them whenever necessary and insure that signed, paper copies of them are included in all your proposals for new work and in your contracts to the government.

Managing Risk And Recovery In Federal Government Contract Terminations

On occasion the government finds it necessary to terminate contractual arrangements with contractors. FAR Sub-part 49.5 governs such actions. There are  two common forms of contract termination that you should know about and how to manage them.

GENERAL CONSIDERATIONS

Certain conditions are usually present when contact termination is on the horizon. These factors range from product and services obsolescence to developments that change the direction and amount of agency funding. They may also include customer relations difficulties or changes in the mission of an agency.

It is best to manage the risks associated with terminations by viewing them in the light of funding and performance liability. We have previously discussed limitation of funds and funding exposure in the following articles:

Limitation of Funds and Funding Exposure

Contract Baseline Management

If it is generally known, for instance, that if the government is having funding challenges in terms of justifying the next phase of a program, your company should carefully monitor incurred costs and commitments so they do not exceed the existing funding on the contract.

Moreover, if performance on a particular contract has been sub-par, deliveries have been late and corrective action has not remedied the situation, the reality of a termination for default should be assessed from a liability perspective; particularly concerning costs the government may bill the contractor for inconvenience. Receipt of "Show Cause" notices or "Cure Letters" are signs the government is positioning a justification for contract termination.

Terminations for default are particularly harmful to a contractor's past performance rating on federal government contracts:

Contract Past Performance Record

The remainder of this article will focus on each of the two major types of terminations and how to manage each.

TERMINATION FOR CONVENIENCE

This form of termination arises from standard clause(s) in your government contract that give the government the right to unilaterally terminate the contract at any time with or without giving any reason. The contractor is generally entitled to a negotiated settlement for an equitable recovery of costs and losses incurred. Please see the following link for applicable clauses:

Subpart 49.5 Termination Clauses

A termination for convenience is the least risky form of termination to the contractor. Although receiving a notice that your contract is being terminated for convenience is never good news, it does offer the opportunity to recover costs you have incurred and those you estimate will impact your business due to the termination.


Actions necessary:

1. First, insure your costs to date, plus commitments have not exceeded the funding level of the contract. If they have, consider asking for a funds amendment to your contact to cover the overrun. It may not be granted by the government. Next, immediately notify departments internal to the company with regard to the termination and inform them that their charge numbers for the program have been closed. Close all charge numbers. 

2. Notify all suppliers and subcontractors with respect to the contract termination, direct that they cease work, discontinue deliveries and submit to you a termination proposal containing itemization and costs associated with terminating their order or contract. You will negotiate with your supply chain and include their costs in your termination settlement proposal to the government.

3. Open a contract termination charge number for selected use by those who are associated with the termination to charge related time and expenses for ceasing work, inventorying material, supporting a termination proposal, dealing with suppliers, handling special requests or other direct efforts to cease work. It makes no difference whether the individuals are direct or indirect in their normal time keeping. This special accounting charge number will be utilized to record the cost to your firm for terminating the contract and proposing a settlement to the government. 

4. Complete your contract termination settlement proposal and submit it to the agency contracting officer to meet the date specified by the agency for same.

Termination Contract Settlement Proposal

5. When the contract termination settlement proposal has been negotiated and formalized with an amendment to closeout the contract in accordance with the following government approved practices:

Government Contract Closeout

TERMINATION FOR DEFAULT

A termination for default rises from standard clause(s) in your contract that give the government the right to unilaterally terminate the contractor if the contractor fails to perform according to the specified terms. The contractor is generally not entitled to any payment for the unfinished part of the contract and, instead, may be liable for (1) repayment of monies advanced, (2) liquidated and other damages and (3) excess cost incurred by the government in completing the contact under a new contractor. Please see the following link for applicable clauses:

Subpart 49.5 Termination Clauses

The Government contracting officer will terminate a contract for default when he or she determines that the contractor has failed to adequately perform in accordance with the contract. The Default clause applicable to fixed-price contracts limits the Government's liability for unaccepted work, subjects the contractor to actual (or liquidated) damages, and may subject the contractor for the excess cost of re-procurement. Moreover, the default becomes part of the contractor's past performance record which will harm the contractor's ability to compete on future contracts. Because the Government is not liable for work not accepted, the termination for default has a greater adverse consequence on supply contracts than service and construction contracts.

The government may terminate all or part of a contract for anything that was done that was not in the interest of the government, including:

• Attempted fraud

• Failure to meet quality requirements

• Failure to deliver the supplies or perform the services within the time specified in the contract

• Failure to make progress and that failure endangers performance of the contract

• Failure to perform any other provisions of the contract.

Cure Notice

Before terminating a contract for default because of your failure to make progress or to perform, the contracting officer will usually give you a written notice, called a "cure notice." That notice allows you at least 10 days to cure any defects. Unless the failure to perform is cured within the 10 days, the contracting officer may issue a notice of termination for default.

Show-Cause Notice 

If there is not sufficient time for a cure, the contracting officer will usually send a show-cause notice. That notice directs you to show why your contract should not be terminated for default. It ensures that you understand your predicament, and your answer can be used in evaluating whether circumstances justify default action.

If a contractor succeeds in appealing the termination for default, the default is usually converted into one for the convenience of the Government.

Actions Necessary:

1. When a termination for default is at hand, contact a law firm that specializes in government contract terminations and proceed within the guidance offered by them in pursuing any part of the termination that could be converted to a termination for convenience or other form of relief with respect to conditions over which you may not have had control or for which you may be entitled to a request for equitable adjustment or contact claim.

2.  You should also proceed in accordance with paragraphs 1 through 3 of the Terminations for Convenience section above to limit your internal and supplier liability as well as isolate costs associated with the termination for a potential settlement or claim.  

When the contract has been amended by termination for default, close out the contract in accordance with the following government approved practices:

Government Contract Closeout

SUMMARY

Contract terminations should be avoided if at all possible. They are expensive on the part of both the government and the contractor. The negative aspects of a termination for default, in particular, can last for years in government contractor past performance data bases.