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U.S. Department of Transportation U.S. Department of Transportation Icon United States Department of Transportation United States Department of Transportation

Contract Terminations

Frequently Asked Questions

Q. How does FTA get involved in termination actions?

A. FTA Circular 4220.1F requires that all contracts and subcontracts contain contractual provisions or conditions that allow for “Termination for cause and for convenience by the grantee or subgrantee including the manner by which it will be effected and the basis for settlement (all contracts in excess of $10,000).” Frequently terminations occur because of problems in contract performance. Section 54 of the FTA Master Agreement, entitled “Disputes, Breaches, Defaults or Other Litigation” provides the following:

  1. Notification to FTA. The Recipient agrees to notify FTA in writing of any current or prospective major dispute, breach, default, or litigation that may affect the Federal Government’s interests in the Project or the Federal Government’s administration or enforcement of Federal laws or regulations. If the Recipient seeks to name the Federal Government as a party to litigation for any reason, in any forum, the Recipient agrees to inform FTA in writing before doing so. At a minimum, each notice to FTA under Section 54 of this Master Agreement shall be provided to the FTA Regional Counsel within whose Region the Recipient operates its public transportation system or implements the Project.
  2. Federal Interest in Recovery. The Federal Government retains the right to a proportionate share of any proceeds derived from any third party recovery, based on the percentage of the Federal share awarded for the Project, except that the Recipient may return liquidated damages recovered to its Project Account in lieu of returning the Federal share to the Federal Government.
  3. Enforcement. The Recipient agrees to pursue its legal rights and remedies available under any third party contract or available under law or regulations.
  4. FTA Concurrence. FTA reserves the right to concur in any compromise or settlement of any claim involving the Project and the Recipient.
  5. Alternative Dispute Resolution. FTA encourages the Recipient to use alternative dispute resolution procedures, as may be appropriate.

(Revised: May 2010)

Q. When mass public contracts need to be terminated due to lack of funding, what are the required steps and the recommended steps?

A. The contract should have a Termination for Convenience clause, which is required for all FTA funded contracts over $10,000. The clause will state the sequence of events and the basis for compensating the contractor for partially finished work. Anticipatory profits on unfinished work are not allowed. You may want to read the coverage of contract terminations for convenience in the Federal Acquisition Regulation (FAR). The FAR will give you guidance on the steps taken on a federal government contract when it is terminated for convenience. (Posted: June 2010)

Q. This question has to do with the area of "Termination for cause and termination for convenience provisions in contracts exceeding $10,000. We are a Transit Management non-profit organization that provides services to governmental jurisdictions that receive sub-recipient FTA monies through the recipient, the Maryland Transit Administration. Our question is there anything that precludes us to have the ability to terminate a contractor/vendor without giving a window? Can we terminate without cause with no notice?

A. Federal Government contract clauses for the Convenience of the Government do not have a requirement that the Government provide advance notice to the contractor when the Government decides to terminate for convenience. See FAR clause 52-249-2, "Termination for Convenience of the Government." FTA does not require recipients or sub-recipients to impose an advance notification requirement on themselves when they determine that a convenience termination is necessary. (Posted: January, 2013)

Q. We are in the process of terminating our contract with an ITS vendor (who was selected through the RFP process). What is our next step? Do we have to solicit another RFP? Can we award to the second highest scoring vendor? Is there a time constraint?

A. You will have to solicit new proposals with a new RFP. It appears from your information that the original proposals are about two years old, and the firms that originally proposed must be given an opportunity to make new offers based on current conditions. Also you must give other firms that did not respond in 2012 or were not aware of the project to submit proposals. (Posted: December, 2014)

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