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This is contained in almost every government contract and allows the government to end a contract at any time without cause so long as it is in the government’s best interest. This is provided for by the Standard FAR clause that is inserted in the fixed price supply contracts and also found in FAR 52.249-2. A contract can be terminated for government’s convenience if a written notice of termination is issued. The notice must contain: a statement showing that the contract is being terminated for the government’s convenience; the effective date of termination; the termination extent; special instructions if any; and steps to be taken by the contractor to minimize impact on personnel. After all these, the contract is then terminated as set forth in the standard Termination for Convenience clause. The contractor is entitled to cover any costs as stipulated by the FAR regulations and clauses (Worthington, Goldsman, & Alston, 1998).
This is the most powerful clause in the government’s terms and conditions that enable the government to unilaterally make changes to contracts during performance provided the changes fall in the scope of the contract. The change should not necessarily work to the disadvantage of the contractor; he is entitled to an equitable adjustment. These changes can be informal or constructive. Failure to come to an agreement on the equitable adjustment will constitute a dispute as provided under the disputes act (Vacketta, 2010).
This resembles the termination for cause clause which is mostly used in the commercial market place. This allows the government to terminate a contract in a situation where the contractor has breached the contract. However the standard default clause excuses failure to perform if it arose from causes that are beyond control and without a contractor’s fault or negligence. The standard default clause just like the cover right, entitles the government to reprocure services or supplies needed under the contract that is terminated and therefore charge the excess costs to the contractors who is terminated. According to FAR 52.249.8 (b), this is an additional right to other rights that the government may have at law or under the contract (Vacketta, 2010).
There are three most complicated and burdensome requirements found in the non-commercial item government contracts. These mandate one to comply with: FAR’s cost principles; cost accounting standards; and the truth in negotiations act (Vacketta, 2010).
These are set out in part 31 and define the time and extent to what costs can be recovered in a government contract. If the principles apply before the contractor recovers a particular cost, it must be allowable, allocable, and reasonable. This part also establishes the general guidelines that are followed in the determination of the allocability and reasonableness of costs. A cost is allocable if it is chargeable or assignable to one or more cost objectives basing on relative benefits that are received or to any other equitable relationship (Vacketta, 2010).
These standards dictate how a contractor should maintain its accountability system and also instruct the contractors on how to account some types of costs. These standards cover any negotiated contract that is over $500,000. This does not apply to the sealed bid contracts. They are in two categories, the modified coverage, and the full coverage (Vacketta, 2010).
Under this act, a government contractor or subcontractor is called upon to submit what is called cost or pricing data, this is if any modification, contract or subcontract is expected to go beyond $500,000. This allows the contracting officer to determine the reasonableness of prices that are offered. The data is to be certified that it is accurate, current, and complete by the contractor or subcontractor. If found out otherwise after a contract has been awarded, then the contract price may be reduced accordingly (Vacketta, 2010).
There is put in place a special process that is followed to solve disputes that arise under government contracts between a contractor and the government. This process was initially governed solely by a disputes clause that is found in about all government contracts but in 1978, the process was codified by the Contract Disputes Act (CDA), 41 U.S.C. §§ 601, et seq, a process that applies to all government disputes that arise in or relate to government contracts. The Contracts Disputes Act is implemented by the FAR through the standards disputes clause that defines the rights and duties that cover a contractor in dispute with the government. It also allows a contractor to continue discharging his duties as he or she awaits the resolution of the dispute (Sisk, Noone, Steadman, & Lester, 2006).
A dispute process is initiated once a contractor presents a claim to the contracting officer. Under the disputes clause, a claim is defined as a written demand or assertion by one of the contracting parties that seek the payment of money in a certain sum, the interpretation or adjustment of terms of contract, or other reliefs that arise from the contract. If the claim under question exceeds $100,000, then it must be certified by the contractor according to FAR regulations 52.233-1(d) (2) (Vacketta, 2010).
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If it is possible for a resolution to be negotiated by the contractor and the government, the contracting officer must then issue a final decision. This is articulated in writing showing the agency’s position in regard to the claim, then there follows litigation by a contractor. However if a final decision is not made in time, then the contractor can appeal the deemed denial of the claim to a US court of federal claims or to a board of contract appeals. There are eleven agency boards of contract appeals with the Armed Services Board of Contract Appeals being the largest of them (Kelleher, 2008).
A proceeding can be initiated by a contractor at the Court of Federal Claims by filing a compliant. This should be within one year after he or she receives the final decision from the contracting officer. Failure to do this will result in dismissal as this will have defeated the Court of Federal Claims’ jurisdiction of hearing the case. But if followed accordingly, then the government will have sixty days within which to file an answer to the complaint (Ralston, 2007).