Understanding Termination for Convenience (T4C)
Federal contractors should be aware of the potential for contract termination for convenience (T4C) following the Trump Administration’s latest cost-cutting efforts. An executive order issued on February 26, 2025, as part of the “cost efficiency initiative,” has placed government contracts under scrutiny.
The Department of Government Efficiency (DOGE) has been tasked with identifying federal contracts, grants, and loans that may be subject to cancellation. As a result, many contractors may soon receive a termination for convenience order.
Is Termination for Convenience Legal?
Yes, termination for convenience is generally legal under federal contract law. The U.S. government can unilaterally terminate contracts for nearly any reason, even if a contractor has fully complied with the contract terms.
However, there are limited exceptions, such as “bad faith” terminations—a rare but legally challengeable situation. If you suspect your contract was terminated unfairly, legal counsel may be necessary to determine if you have grounds for an appeal.
Additionally, termination for cause (default termination) is a separate legal category that applies when the government believes a contractor has failed to meet contractual obligations. If your contract is terminated for cause, it’s essential to seek immediate legal assistance from experienced government contract attorneys to protect your interests.
What to Do If Your Contract is Issued a Termination for Convenience (T4C)
If you receive a termination for convenience notice, you may be eligible for compensation through a termination settlement proposal. This proposal can include:
- Payment for completed work before the termination
- Reimbursement for materials and supplies ordered but now unusable
- Labor and administrative costs directly related to the termination
To protect your financial interests, follow these key steps:
1. Review Your Contract’s T4C Clause
The Federal Acquisition Regulation (FAR) outlines different T4C clauses depending on your contract type. Carefully review your contract’s specific termination for convenience provisions to understand your rights and obligations.
2. Check the Scope of the Termination Order
The government may issue a partial or full T4C order. A partial T4C means some contract obligations may still be in effect, so ensure you understand what work remains valid.
3. Confirm Stop-Work Requirements
If the contracting officer has issued a stop-work order, continuing to work may disqualify you from reimbursement. Cease operations immediately and document compliance with the order.
4. Identify and Calculate Your Recoverable Costs
- Assess outstanding payments for completed work
- Identify materials, equipment, and supplies that can no longer be used
- Review projected profits and unrecovered overhead costs
- Seek ways to mitigate financial losses
5. Document Everything
Keep detailed records of:
- Emails and communications regarding the termination
- Invoices, purchase orders, and receipts
- Project timelines, approvals, and work logs
- Expenses incurred due to the termination
If you suspect a bad-faith termination, thorough documentation is critical for a potential legal challenge.
6. Don’t Delay – T4C Settlement Proposals Have Strict Deadlines
Federal contractors typically have one year to submit a termination settlement proposal. Missed deadlines or incomplete filings could mean losing compensation owed to you.
7. Contact Federal Practice Group for Legal Guidance
The T4C process is complex, and working with experienced government contract attorneys can ensure you receive the maximum compensation.
Protect Your Business – Get Legal Assistance for Termination for Convenience
If you’ve been affected by a termination for convenience, taking immediate action is critical. Don’t leave potential compensation on the table—seek legal guidance today.
Federal Practice Group specializes in federal contract regulations and is dedicated to helping government contractors of all sizes and geographical locations navigate the entire process and understand their legal options. If you have concerns about your contract termination, we are here to help.
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