Can You Lose a GSA Contract?

Can You Lose a GSA Contract?

Your GSA contract will normally last for a minimum of 5 years. Nevertheless, it is possible to lose your GSA Schedule and nullify all the hard work that was done to obtain it. There are instances where the government decides to terminate it. You must be well prepared to prevent GSA contract termination. In this article, we will explain what some of the reasons for termination are, and how they can be avoided.

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. Regardless of the underlying cause, the consequences will be devastating. Not only do you lose the opportunity to make profit and suddenly find yourself out of business; you can also face the requirement of having to return previous payments in full or partially, or even face liability for any excess costs or reprocurement. Furthermore, a terminated contract stains your past performance record and hence, impedes your further work with the government.

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 no binding relationship between government and contractor ever 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 it inconvenient to continue with 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 either does not 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 complete 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 may be terminated for default.

No progress or low performance

This is a bit trickier, but still simple. If you keep up with obligations of your contract, 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

Violation or failure to comply with various parts of the contract may also result in contract termination. For instance, fraud, newly emerged TAA incompliance, failure to meet subcontracting plans, and so on – all of these may result in the loss of your GSA contract.

Anticipatory breach

Ok, this one is more complex. Anticipatory breach or anticipatory repudiation is a legal term that describes a situation, when one party to a contract unequivocally, unconditionally, and definitely declares that it does not intend to fulfill contract requirements. Whenever there is failure to perform according to contract terms (and regardless of whether you think there is a reason for it or not), you are at risk of losing your contract without notice; this can be interpreted as your declaration of unwillingness or inability to meet contract requirements.

Exclusions

Here are some exclusions that can justify your inability to meet requirements of the contract and hence save you from termination:

  • Excusable delay, i.e. your fault was caused by either acts of God ( flood, fires etc.) or the government.
  • Defective specifications. You failed to meet specifications because they are erroneous (and you can prove it).
  • Waiver of contract due date. If a deadline is missed, the government may terminate your contract, but may also waive the due date.
  • Contracting officer’s failure. Sometimes, the CO would either fail to properly inform a contractor about contract termination, or abuse 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 a substantial portion of the work is already done, but there are still punch list items to complete.

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 down the line. If you are not sure of your capabilities, do not bid on the RFQ in the first place.

Always review specifications closely

In fact, you better do it at least twice. First, you need to carefully read the solicitation to see whether or not you are able to fulfill what the government requires. Then, you have to read every single document of the Schedule contract.

Never refuse to perform

Do not stop the work, do not undermine performance. Never say “no”. Even if there are current disputes with the government, 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 be willing to waive the due date, for instance. Make sure to communicate with your assigned contracting officer in a good manner, respond promptly, speak politely, and relevantly.

Provide options

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 for putting termination of the contract on hold. So make sure to provide such considerations: reduce contract cost, reduced rates, work performed on other contracts and so on.

Comments
  • How to act now, when many of the subcontractors have suspended or significantly reduced their activities and my company simply cannot get all the necessary for its own production? I can prove it. Could it be a reason to terminate the contract?

  • The last thing a person with a GSA contract needs right now is to lose him. Hundreds and thousands of stable businesses all over America are collapsing in a crisis. I think losing a contract in this situation is the end of everything. Thank you for this article, but I sincerely wish that no one could use it.

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