Role of Discretion in Terminations for Default

The consequences of a termination for default in a government contract are severe. A default termination may cause a contractor to lose everything it has put into a contract, as well as future business. It may also jeopardize the contractor's ability to obtain future government contracts. A termination for default may serve as a basis for finding a contractor non- responsible or for downgrading its past performance rating. Additionally, it may impair the contractor's ability to get future bonding. In a fixed price type contract for supplies, if the Government terminates for default and does not take possession of the supplies, it does not have to compensate the contractor for any of its work and the contractor must return any progress payments it received to the Government. The contractor remains liable for excess reprocurement costs. This is true even where the default is based on a minor breach such as insignificant delays in completing performance or small defects in the quality of performance. Even in other types of contracts, where the contractor's forfeitures are less severe, termination for default may subject the contractor to excess reprocurement costs or other damages.Air Force Inst of Tech Wright-Patterson AFB OH is the author of 'Role of Discretion in Terminations for Default', published 1997 under ISBN 9781423584544 and ISBN 1423584546.