to terminations are primarily found in FAR Parts 8, 12, 13, and 49, depending on the type of termination or circum- stance. The following paragraphs describe each of the three specifc types of ter- minations, when to invoke them, and potential pitfalls to avoid. Termination for Default Despite what its name implies, this termination is probably the easiest to accomplish. Assuming the govern- ment is keeping up with the contrac- tor’s progress or, in this case, lack of progress, the government will inquire about why the contractor’s delivery is late, why progress is not being made, or why a contract term was violated. Typically, the root cause is that the company is having fnancial problems. For those that have not been in- volved in a termination for default, the FAR outlines a formal process that in- cludes a cure notice, show cause letter, and a termination notice. Most in the acquisition world have heard these terms but may not understand when or how to properly use them in ex- ecuting and administering a contract.
The frst is a cure notice. For any- thing other than a late delivery, the contracting ofcer is to send a cure notice requiring the contractor to state how they plan to correct the condition endangering the contract. This notice is sent if at least 10 days— or another realistic period—still re- mains in the contract. It is crucial that the government state contract failures in the cure notice, so that the contractor clearly understands how it relates to the alleged contract breach. A time limit is given for the contrac- tor’s response. A second notice is the show cause letter. This is issued when the con- tractor fails to fulfl the contract terms and not enough days (e.g., 10 days) are left in the contract performance period to permit a cure. A show cause letter also could be issued if the con- tractor failed to act on a previously sent cure notice. The show cause let- ter states that the government is con- sidering terminating the contract but is willing to consider reasons for the contractor’s failure to perform. The last notice is a notice of ter- mination. This notice is sent to the
contractor that states, in part, the acts or omissions constituting the default, any contractor rights to appeal, and that re-procurement costs may apply. The government cares about ter- minating a contract for default be- cause a termination means that the government will not receive a product or service. The contractor should care as well. It is worth noting that small businesses usually react to a potential termination for default in a very dif- ferent manner than large businesses. Small businesses do not seem to always understand the seriousness of a termination. When I was a con- tracting ofcer, I had multiple small businesses tell me to go ahead and terminate them because they could make more money on the other con- tracts they had in-house. I pointed out to them that they could be held responsible for reprocurement costs. I also explained that this term meant charging them for the diference be- tween their contracted price and what the government eventually must pay to obtain the item or service. I further explained it could also in- clude administrative cost associated with the termination and that small businesses will have a mark against their past performance record that could hinder their eligibility for future contracts. Once contractors under- stood this, they seemed more inter- ested in avoiding termination. It pays for contractors to read and under- stand the contract. You seldom will see a large con- tractor terminated for default, primar- ily because they have deeper pockets and can spend money to fx issues. Large businesses typically have legal representation skilled in pointing out government failures that contributed to the perceived termination. They also understand the severe conse- quences of reprocurement costs as well as how a termination for default record impacts their past perfor- mance record and future business opportunities. Potential corporate embarrassment also can motivate
26 | DEFENSE ACQUISITION | September-October 2025
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