Termination for Convenience (T4C)

The right lives in the termination clause, and FAR 49.101 limits its use to cases where termination is in the government's interest. Under FAR 52.249-2 the contracting officer issues a Notice of Termination; the contractor stops work as directed, terminates affected subcontracts, protects termination inventory, and submits a settlement proposal no later than one year from the effective date unless the contracting officer extends the period in writing.

Settlement is a negotiation, and FAR 49.201 says so: business judgment, not strict accounting, is the heart of it. The contractor recovers costs incurred on the terminated work and a reasonable profit on that work, but FAR 49.202 bars anticipatory profits and consequential damages, and FAR 49.203 applies a loss ratio when the contract would have lost money at completion. If nothing was incurred, the TCO executes a no-cost settlement.

Commercial contracts run on a different clause. FAR 12.403 excludes Part 49, and 52.212-4(l) pays a percentage of the contract price matching the work performed plus demonstrable termination charges, with no obligation to follow Part 31 cost principles. On the noncommercial side, the deadline is where contractors lose: miss the one-year window without a written extension and 52.249-2(j) takes the appeal right with it.