Contract Terminations— WHAT YOU NEED TO KNOW by BAYLEE WOODS-CARTHEN and RODGER D. PEARSON I n the beginning, contracts were awarded, and everything was good until it wasn’t. This led to the invention of termination. Essentially, terminations have been around almost as long as contracts themselves. For instance, shortly after the birth hold and some of their construction case of Alutiiq Manufacturing Con- of our nation, contracts were awarded materials sold or placed in storage. tractors, LLC v. United States (2019). to procure one of the frst major U.S. In our present political environ- weapon systems, which was six frig- ment, the topic of contract termina- Contract Termination ates, with the most famous being tions arises more frequently. Contrac- Most acquisition professionals use the USS Constitution (Old Ironsides). tors that never gave terminations a the term “contract termination.” How- Even within this weapon systems pro- second thought fnd themselves dis- ever, most are unaware of the difer- curement, some level of termination cussing the possibility their contract ent types of terminations, how they probably took place due to the exces- could be terminated. Today, good function, and who bears the fnancial sive cost overruns and a provision in quality, cost control, and adherence to loss resulting from them. the Naval Act of 1794 that required the performance schedule do not in- Some might argue that the govern- construction to stop should peace be sulate a contract from or preclude ter- ment can terminate a contract be- achieved with the Barbary States. The mination. In fact, sometimes the mere cause the government is all powerful. announcement of the Treaty of Tripoli lack of communication can cause a However, it is more straightforward meant that construction of three of company to be terminated as in the than that. All contracts have clauses the six frigates would be placed on agreed upon by the parties when they
24 | DEFENSE ACQUISITION | September-October 2025
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