TERMINATION FOR DEFAULT

(a) The contracting officer shall consider the following factors in determining whether to terminate a contract for default:

(i) the provisions of the contract and applicable laws and regulations;

(ii) the specific failure of the contractor and excuses, if any, made by the contractor for such failure;

(iii) the period of time which would be required for the Government or another contractor to complete the work as compared to the time required for completion by the delinquent contractor; (iv) the effect of a termination for default on the ability of the contractor to liquidate guaranteed loans, progress payments, or advance payments; and

(v) any other pertinent facts and circumstances.

(b) If the contracting officer determines that the contractor's failure to perform arises from causes which are excusable under the terms of the contract, the contracting officer shall not terminate the contractor's right to proceed, nor shall he charge the contractor with liquidated damages (or if no liquidated damages, then actual damages) because of any delays occasioned by such causes.

(c) If the contracting officer determines that termination for default is in the best interest of the Government, he shall promptly send a written notice to the contractor terminating his right to proceed. The notice shall:

(i) set forth the contract number and date;

(ii) describe the act or omissions, and the extent of the resultant delay, constituting the default; (iii) state that the contractor's right to proceed further with performance of the contract (or of a specified portion of the contract) is terminated;

(iv) state that the Government may cause the contract to be completed and that the contractor will be held liable for any increased costs;

(v) state that the Government reserves all rights and remedies provided by law or under the contract, in addition to charging increased costs;

(vi) state that the notice constitutes a decision (see 1.314), pursuant to the "Disputes" clause, that the contractor is in default as specified and that the contracting officer has determined that the delay is not excusable; and

(vii) state that the contractor has the right to appeal as specified in the "Disputes" clause. (d) The same distribution shall be made of the termination notice as was made of the contract. A copy thereof shall also be furnished to the contractor's surety at the same time that the notice is furnished to the contractor. The surety at the same time should be requested to advise if he desires to enter into any arrangement for completion of the work. In addition, the disbursing officer involved shall be notified to withhold further payments under the terminated contract pending further advice which should be furnished at the earliest practicable time.

(e) Promptly after issuance of the termination notice, the contracting officer shall determine the manner in which the work is to be completed and whether the materials, appliances, and plant which are on the site will be needed.

8.650-5 Dealings with Surety-Take Over Agreements.

(a) By reason of the surety's liability for damages resulting from the contractor's default, the surety has certain rights and interests in connection with the completion of the contract work and the application of the undisbursed funds available therefor. Because of such interests of the surety, proposals by the surety concerning the completion of the work should be given due consideration, and the decision as to the action to be taken shall be made on the basis of the best interest of the Government, including the possible effect of such action upon the Government's rights against the surety.

(b) Where the surety desires to complete the contract work, completion by the surety should normally be permitted unless the contracting officer has reason to believe that the persons, firms, or corporation by whom the surety proposes to have the work done are incompetent or unqualified so that the interests of the Government would be substantially prejudiced by their efforts.

(c) Because of the possibility of conflicting claims to unpaid prior earnings (retained percentages or amounts representing unpaid progress estimates) of the defaulting contractor, the surety may condition its offer of completion upon the execution by the Government of a "take over" agreement fixing the surety's rights to payment from such funds. In that event the contracting

NASA PROCUREMENT REGULATION

8.650-5

TERMINATION OF CONTRACTS

officer may in his discretion (but not before the effective date of termination) enter into a written agreement with the surety. Further, consideration should be given to having the agreement include both the surety and the defaulting contractor in order to eliminate any disagreement as to the contractor's residual rights, such as claims to unpaid prior earnings. The agreement shall provide that the surety will undertake to complete the work required by the contract in accordance with all the terms and conditions of the contract, and that the Government will pay the surety in the manner provided by the contract, but not in excess of the surety's costs and expenses, the balance of the contract price unpaid at the time of default; subject, however, to the following conditions:

(i) any unpaid earnings of the defaulting contractor, including retained percentages and progress estimates for work accomplished prior to termination, shall be subject to claims by the Government against the contractor, except to the extent that such unpaid earnings may be required to permit payment to the completing surety of its actual costs and expenses incurred in the completion of the work, exclusive of its payments and obligations under the payment bond given in connection with the contract.

(ii) Such agreement shall not waive or release the Government's right to liquidated damages for delays in completion of the work, except to the extent that such delays may be excused under the provisions of the contract.

(iii) If the proceeds of the contract have been assigned to a financing institution, the surety may not be paid from retained percentages or amounts representing unpaid progress estimates earned by or payable to the contractor unless the assignee shall consent in writing to such payment. (iv) In no event shall the surety be entitled to be paid any amount in excess of its total expenditures necessarily made in completing the work and discharging its liabilities under the payment bond of the defaulting contractor. Furthermore, payments to the surety to reimburse it for discharging its liabilities under the payment bond of the defaulting contractor shall be only on authority of (A) mutual agreement between the Government, the defaulting contractor, and the surety, or (B) determination of the Comptroller General as to payee and amount, or (C) order of a court of competent jurisdiction.

8.650-6 Completion by Another Contractor. Where the surety does not complete performance of the contract, the contracting officer normally will complete the performance of work by awarding a new contract based on the same plans and specifications. Such award may be the result of competitive bidding or negotiation, whichever procedure is most appropriate under the circumstances. The contracting officer must use reasonable diligence to obtain the lowest price available for completion.

8.650-7 Procedure in Lieu of Termination for Default. If after due consideration, the contracting officer determines that termination is not in the best interest of the Government although the contractor is in default, the contracting officer may permit the contractor to continue the work, and the contractor and his sureties shall be liable to the Government for liquidated damages, as specified in the contract, or if liquidated damages are not so specified, for any actual damages occasioned by the failure of the contractor to complete the work in accordance with the terms of the contract.

8.650-8 Documentation in Contract File. In all cases where a contractor's right to proceed is terminated for default or where the procedure authorized by 8.650-7 is followed, the contract file shall be well documented to explain fully the reasons for the action taken.

8.650-9 Withholding for Labor Violations. Any amounts necessary to pay laborer and mechanic wages due under the contract shall be withheld until evidence of proper payment is given, or such amounts shall be transferred to the Comptroller General.

8.650-10 Liquidation of Liability. In accordance with the provisions of the contract, the contractor and his surety are liable to the Government for resultant damages. All retained percentages of progress payments previously made to the contractor and any progress payments due for work completed prior to the termination of the right to proceed shall be used for the purpose of liquidating the liability of the contractor and his surety to the Government for such damages. Where the retained and unpaid amounts are insufficient to liquidate such liability, steps shall be taken to recover the additional sum from the contractor and his surety.

8.650-11 Excusable Default. Paragraph (e) of the clause in 8.709 provides that if, after the issuance of a notice of termination of the contractor's right to proceed, it is determined for any

8.650-6

CFR TITLE 41 CHAPTER 18

TERMINATION FOR DEFAULT

reason that the contractor was not in default or that the default was excusable, the rights and obligations of the parties shall be the same as if the notice of termination had been issued pursuant to the termination for the convenience of the Government clause.

NASA PROCUREMENT REGULATION

8.650-11

Subpart?

8.700 Sense of Suboart. This Subpart contains contract clauses related to the contracts for the convenience of the Government and for defaunt.. 8.701 Termination Clause for Fixed-Price Contractss

(a) Except as otherwise permitted ov 4.705. he following clause shati be used in any fixedprice contract in excess of $10.000 for supplies or experimental, developmental or research work. other than experimental. Jevetoomental or research work with educational or nonprofit Insututions, when no profit a contemplated. The following clause shall be used uso mixed-once construction contracts in excess of $10.000 except that paragraph (e) nereor snail be deleted and the paragraphs in (b) below snail be used.

TERMINATION FOR CONVENIENCE OF THE GOVERNMENT DECEMBER 1981)

i) stop work under the contract on the date and to the extent specifi in the Notice of Termination:

lace no urther orders or subcontracts for maternis, er

completion of such portion of the work under the contract is is not termin

(n) terminate all orders and subcontracts to the extent that they relate to the performance of ris terminated by the Notice of Termination:

(v settle all outstanding abilities and ul Craims arising approval or "atification of the Contracting Officer. La the final for all the purposes of this clause:

(vi) transfer title and denver to the Government Contracting Officer. A) ne abricated or unfabricated material produced as a part of or acquired in connection Termination, and the completed or partially com contract had been completed, would have been requ

and to the extent, if any, directed by the work in process, Completed work, supplies, ind xter in the performance of, he work ormanice by the Nouce of ans, Grawings, Jormation, and other property watch. „í the aca la the Governmen

vm) use is best efforts a sett. n the manner. sahe extent, in a he once or onces directed or authorized by the Contracting Officer, any property of the types referred to in (vi) soove; Yonues, Towever, hat d Contractor (A) shall not be required to extend credit to any purchaser, and (3) may acquire any such property under the conditions prescribed by and it a once or inces approved by the Contracung Officer; and provides utter that proceeds of any such transfer or disposition shall be applied in reduction of any payments (o be made by the Government to the Contractor inder his contract or all otherwise be created to the once or com of the work covered by the contract or card is such other manner as the Contracting Officer may direct

(vii) complete performance of such part of the work as snail nos dave been terminated by the Notice of Termination: and

(a) take wich setion is may be necessary, or as the Contracting Officer may direct, (or the protection and preservation of the orberty related to this contract which is in the possession of the Contractor and in watch the Government has or

may acquire an interest.

At any sme after expiration of the plant clearance period, as defined in Part 8. NASA Procurement Reguiation is it may se amended from time to time, the Contractor may submit to the Contracting Officer at certtien as to quantity quality of any or all items of termination aventory not creviously disposed of, excrave of items dhe dispontion of which has seen Tirected or authorized by he Contracting Officer. And may request he Government to remove such tem enter into a storage igreement covering them. Not ater han ifteen (15) days thereater, he Government will accept title to uach items and remove hem or enter into a storage agreement covering he same provided, has the ist submitted shail be subject to verification by the Contracting Officer con removal of the stems, or, if the items are stored, within fortyfive (45) days from the date of submission of the list, and any necessary adjustment to correct the sist na suomitted shail be made prior to final settlement.

(6) After receipt of a Notice of Termination, he Contractor shall submit the Contracting Officer is termination

w the form and with certification presented by he Contracting Officer. Such cam sail be submitted promptly bor a ne ment, ater than one (1) year from the effective date of termination, uniese one or more extensions in writing tre granted by the Contracting Officer upon request of the Contractor made a writing within such one (1) year period or authorized extension thereof. However of the Contracting Officer determines that the facts ustify such action, he may recéve and act upon any such termination claim at any time after such one (1) year period or any extension thereof.

NASA PROCUREMENT REGULATION

8.701

TERMINATION OF CONTRACTS

Upon failure of the Contractor to submit his termination claim within the time allowed, the Contracting Officer may, subject to any Settlement Review Board approvals required by Part 8 of the NASA Procurement Regulation in effect as of the date of execution of this contract, determine, on the basis of information available to him, the amount, if any, due to the Contractor by reason of the termination and shall thereupon pay to the Contractor the amount so determined. (d) Subject to the provisions of paragraph (c), and subject to any Settlement Review Board approvals required by Part 8 of the NASA Procurement Regulation in effect as of the date of execution of this contract, the Contractor and the Contracting Officer may agree upon the whole or any part of the amount or amounts to be paid to the Contractor by reason of the total or partial termination of work pursuant to this clause, which amount or amounts may include a reasonable allowance for profit on work done; provided, that such agreed amount or amounts, exclusive of settlement costs, shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount. Nothing in paragraph (e) of this clause, prescribing the amount to be paid to the Contractor in the event of failure of the Contractor and the Contracting Officer to agree upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, shall be deemed to limit, restrict, or otherwise determine or affect the amount or amounts which may be agreed upon to be paid to the Contractor pursuant to this paragraph (d).

(e) In the event of the failure of the Contractor and the Contracting Officer to agree as provided in paragraph (d) upon the whole amount to be paid to the Contractor by reason of the termination or work pursuant to this clause, the Contracting Officer shall, subject to any Settlement Review Board approvals required by Part 8 of the NASA Procurement Regulation in effect as of the date of execution of this contract, pay to the Contractor the amount determined by the Contracting Officer as follows, but without duplication of any amounts agreed upon in accordance with paragraph (d): (i) for completed supplies or services accepted by the Government (or sold or acquired as provided in paragraph (b)(vii) above) and not theretofore paid for, a sum equivalent to the aggregate price for such supplies or services computed in accordance with the price or prices specified in the contract, appropriately adjusted for any saving of freight or other charges;

(ii) the total of

(A) the costs incurred in the performance of the work terminated, including initial costs and preparatory expense allocable thereto, but exclusive of any costs attributable to supplies or services paid or to be paid for under pararaph (e)(i) hereof;

(B) the cost of settling and paying claims arising out of the termination or work under subcontracts or orders, as provided in paragraph (b)(v) above, which are properly chargeable to the terminated portion of the contract (exclusive of amounts paid or payable on account of supplies or materials delivered or services furnished by subcontractors or vendors prior to the effective date of the Notice of Termination, which amounts shall be included in the costs payable under (A) above); and

(C) a sum, as profit on (A) above, determined by the Contracting Officer pursuant to 8.303 of the NASA Procurement Regulation, in effect as of the date of execution of this contract, to be fair and reasonable; provided, however, that if it appears that the Contractor would have sustained a loss on the entire contract had it been completed, no profit shall be included or allowed under this subdivision (C) and an appropriate adjustment shall be made reducing the amount of the settlement to reflect the indicated rate of loss; and

(iii) the reasonable costs of settlement, including accounting, legal, clerical, and other expenses reasonably necessary for the preparation of settlement claims and supporting data with respect to the terminated portion of the contract and for the termination and settlement of subcontracts thereunder, together with reasonable storage, transportation, and other costs incurred in connection with the protection or disposition of property allocable to this contract.

The total sum to be paid to the Contractor under (i) and (ii) of this paragraph (e) shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. Except for normal spoilage, and except to the extent that the Government shall have otherwise expressly assumed the risk of loss, there shall be excluded from the amounts payable to the Contractor as provided in (e)(i) and (ii)(A) above, the fair value, as determined by the Contracting Officer, of property which is destroyed, lost, stolen, or damaged so as to become undeliverable to the Government, or to a buyer pursuant to paragraph (b)(vii).

(f) Costs claimed, agreed to, or determined pursuant to (c), (d), and (e) hereof shall be in accordance with Part 15 of the NASA Procurement Regulation as in effect on the date of this contract.

(8) The Contractor shall have the right of appeal, under the clause of this contract entitled "Disputes," from any determination made by the Contracting Officer under paragraphs (c) or (e) above, except that if the Contractor has failed to submit his claim within the time provided in paragraph (c) above and has failed to request extension of such time, he shall have no such right of appeal. In any case where the Contracting Officer has made a determination of the amount due under paragraph (c) or (e) above, the Government shall pay to the Contractor the following: (i) if there is no right of appeal hereunder or if no timely appeal has been taken, the amount so determined by the Contracting Officer, or (ii) if an appeal has been taken, the amount finally determined on such appeal.

(h) In arriving at the amount due the Contractor under this clause there shall be deducted (i) all unliquidated advance or other payments on account theretofore made to the Contractor, applicable to the terminated portion of this contract, (ii) any claim which the Government may have against the Contractor in connection with this contract, and (iii) the agreed price for, or the proceeds of sale of, any materials, supplies, or other things acquired by the Contractor or sold, pursuant to the provisions of this clause, and not otherwise recovered by or credited to the Government.

(i) If the termination hereunder be partial, prior to the settlement of the terminated portion of this contract, the Contractor may file with the Contracting Officer a request in writing for an equitable adjustment of the price or prices specified in the contract relating to the continued portion of the contract (the portion not terminated by the Notice of Termination), and such equitable adjustment as may be agreed upon shall be made in such price or prices.

8.701

CFR TITLE 41 CHAPTER 18