Your GSA contract will normally last for 5 years at minimum. Nevertheless you can lose your so hard achieved GSA Schedule if the government decides to terminate your contract. You must be well prepared to prevent GSA contract termination. In this article, we’ll explain what possible reasons for termination are, and how you can avoid it.
Losing your GSA Schedule contract is real
FAR 52.212-4 and FAR 12.403 regulate termination of GSA contracts. The ongoing GSA contract can be terminated for a number of reasons we’ll discuss below, but apparently, regardless of reasons the consequences will be devastating. Not only you lose opportunity for profit and suddenly find yourself out of business. You can also face the requirement to return previous payments in full or partially, or even find yourself liable for any excess costs or reprocurement. Further more, a terminated contract stains your past performance record and hence impedes your further government business cooperation.
Importantly, GSA contract termination must not be confused with contract cancellation. That’s not the same. Cancellation effectively renders a contract non-valid, as if all bindings between the government and the contractor never existed. Termination simply ends the contract prematurely.
How the government terminates your GSA contract
FAR 52.212-4 formulates two options for the government to terminate an existing GSA contract:
- Termination for Convenience. This termination occurs when the government finds inconvenient to continue following the terms of a GSA contract. This is often the case when the supplied product becomes obsolete, or the need of the government in the supplied product or service is no longer actual.
- Termination for Cause, also called Termination for Default. The government may terminate a contract if the contractor fails to meet certain requirements of the contract or fails to assure the government of the required performance.
Reasons for termination of a contract for government’s convenience are only of marginal interest, actually, because you as a GSA schedule holder cannot do anything about termination for convenience other than trying to maximize settlements afterwards.
Common causes for GSA contract termination
Failure to meet delivery times
This one is simple: if you fail to deliver the supply or do the work before the due date specified in the contract, the government reserves the right to terminate your contract for default.
Failure to meet specifications
If you fail to ensure quality compliance and/or fail to meet project’s specifications, your contract is terminated for default.
No progress or low performance
This is a bit trickier, but still simple. If you do what your GSA contract obliges you to do, but do it slower than you should, that is, fail to demonstrate the anticipated job progress and hence endanger the entire contract fulfillment, the government may terminate your contract completely or partially.
Other contract violations
Violating or failing to comply with various parts of the contract may also result in contract termination. For instance, fraud, emerged TAA incompliance, failure to meet subcontracting plan, and so on. – all of these may result in loss of your GSA contract.
Ok, this one is more complex. Anticipatory breach or anticipatory repudiation is a legal term that describes a situation when one party of a contract unequivocally, unconditionally and definitely declares that it does not intend to fulfill the contract requirements. Whenever you stop performing in disregard of the contract (and regardless of whether you think there is a reason for that or not), you are at risk of losing your contract without notice. Because this can be interpreted as your declaration of unwillingness or inability to meet the contract requirements.
Here are some exclusions that can justify your inability to meet the requirements of the contract and hence save you from contract termination:
- Excusable delay, i.e. if you fault was caused by acts of God or the government, flood, fires etc.
- Defective specifications. If you failed to meet specifications because they are erroneous (and you can prove it).
- Waiver of contract due date. If you missed the deadline, the government may terminate your contract, but also may waive the due date.
- Contracting officer’s failure. Sometimes, the CO fails to properly inform a contractor about contract termination, or abuses the discretion to terminate without looking into other options first. In this case termination of a contract would be invalid.
- Substantial completion. The government cannot terminate your contract if the substantial portion of the work is done, but there are still punch list items to be done.
How to avoid GSA contract termination?
Always meet time and quality specifications
This sounds very old and obvious, but indeed the majority of terminated contracts are terminated because of inability to meet contract’s requirements. If you signed the contract, you must fulfill its terms.
Never promise anything you cannot fulfill
Bid responsibly. Never offer conditions, rates or due dates you would not be able to meet further. If you are not sure in your capabilities, do not bid on the RFQ in the first hand.
Always review specifications closely
In fact, you better do it at least twice. First, you carefully read the solicitation to see whether or not you are able to fulfill what the government requires. Then, you read the Schedule contract, every single document of it.
Never refuse to perform
Do not stop the work, do not undermine performance. Never say “no”. Even if there are disputes with the government going on right now, you are still obliged to continue working until the disputes are resolved.
Build good relationships with COs
In many cases, the final decision is up to the contracting officer. He or she may or may not waive the due date, for instance. Make sure to communicate with your assigned contracting officer in a good manner, respond promptly, speak politely and be relevant.
After all, the government is also interested in keeping the existing contractor instead of looking for another one, and often accepts considerations from contractors in exchange to putting termination of the contract on hold. So make sure to provide such considerations: reduce contract cost, reduced rates, works on other contract and so on.