Dealing with government contracts

For those businesses in Cincinnati that work contractually, landing a government contract is often considered to be a boon. Government partners offer security and stability that few private companies can match. Yet one risk that does come from working with them is the freedoms that they are automatically afforded due to their government backing.

One of these advantages is the ability to terminate contracts for convenience. Most assume that a contractual partner has to have cause in order to terminate a contract before its terms have been fulfilled. Yet according to the Federal Acquisition Institute, Section 52.249-1 of the Code of Federal Regulations states that any government entity can terminate a contract whenever it is believed to be in its best interest (private organizations are only allowed this benefit if it stipulated in a particular contract).

Essentially, this empowers a government agency to end a contractual agreement at any time. Per the Congressional Research Service, some of the common reasons that have been cited in the past when invoking this benefit include:

  • The agency gaining the capacity to provide the products or services covered in the contract in-house
  • The agency no longer needing the products or services
  • A breakdown in the business relationship between the agency and its contracted partner
  • The contracted partner refusing to the renegotiate the terms of the contract
  • The contracted partner ceasing to be eligible to qualify for the contract
  • Questions arising as to the performance of the contract

If and when a government agency does choose to end a contract for its convenience, the contracted partner can typically only collect those funds that it has not already received along with any compensation to cover the costs of ending its services.

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