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FAR 52.249-2, “Termination for Convenience of the Government (Fixed-Price)”, is the standard clause that lets a federal contracting officer end a fixed-price contract, in whole or in part, when doing so serves the Government’s interest, and that sets the deadlines and payment rules the contractor then follows. The deadlines are the part that costs people money: 120 days for inventory schedules, 90 days to ask for a price adjustment after a partial termination, and one year for the settlement proposal. This page is a plain-language summary of the clause based on the text on acquisition.gov (Apr 2012 edition, FAC 2026-01, checked 2026-10-29); it is not the clause text and not legal advice.
What FAR 52.249-2 is and where it appears
The clause sits in FAR Part 49 (Termination of Contracts). Under paragraph (a), the Government may terminate performance of work under the contract in whole or, from time to time, in part. The contracting officer starts the process by delivering a Notice of Termination that states the scope and effective date. Most of what follows in the clause is a timetable keyed to that effective date.
It is a termination-for-convenience clause for fixed-price contracts. It is different from a default termination, and it is different from the commercial vendor-contract version of the concept covered in termination for convenience vs. for cause in vendor contracts. For the wider federal buying context, see federal procurement for research institutions.
When the clause applies (and when it does not)
FAR 49.502(b)(1)(i) tells the contracting officer to insert 52.249-2 in solicitations and contracts when a fixed-price contract is contemplated and the amount is expected to exceed the simplified acquisition threshold. The same subsection lists exceptions:
- dismantling and demolition work (a separate clause, 52.249-3, covers dismantling, demolition or removal of improvements above the threshold);
- research and development with an educational or nonprofit institution on a no-profit basis;
- architect-engineer services;
- cases where the short-form clause 52.249-4 is appropriate, or where a clause prescribed or cited at 49.505(a) or (c) applies.
The no-profit R&D exception matters to universities and research institutes: a fixed-price contract with a research institution on a no-profit basis is not supposed to carry this clause. Alternates exist for construction (Alternate I) and for contracts with U.S. Government agencies or State, local or foreign governments (Alternates II and III).
For contracts at or below the simplified acquisition threshold, 49.502(a) points to the short form, 52.249-1. For services where the offeror will not incur substantial charges in preparing for and carrying out the contract, 49.502(c) points to 52.249-4 regardless of value.
What the contractor must do after a notice
Paragraph (b) sets the immediate duties. Under paragraph (b), the contractor must:
- stop work as directed in the notice;
- place no further subcontracts or orders except for any continued portion of the contract;
- terminate related subcontracts and, if directed, assign subcontracts to the Government;
- settle subcontract liabilities, with contracting officer approval or ratification where required;
- transfer termination inventory, plans and records as directed, complete any work that was not terminated, and protect Government property;
- use best efforts to sell termination inventory as the contracting officer directs; proceeds reduce amounts owed.
Deadlines at a glance
| Paragraph | What is due | Period (from effective date of termination unless noted) |
|---|---|---|
| (c) | Complete termination inventory schedules | 120 days; the contracting officer may extend in writing if the contractor asks within the 120 days |
| (d) | Unclaimed inventory after plant clearance: certified list; Government accepts title, removes it or agrees to storage | 15 days for the Government to act; the contracting officer may verify within 45 days of submission |
| (e) | Settlement proposal | Promptly, and no later than 1 year; extension in writing on timely request |
| (l) | Partial termination: request for equitable adjustment to the price of the continued portion | 90 days unless extended in writing |
| (n) | Keep records for the terminated portion | 3 years after final settlement |
The contracting officer may accept a late settlement proposal if the facts justify it. If none is submitted, the contracting officer may determine the amount owed from available information and pay it.
How the settlement is calculated
Paragraph (f) covers a negotiated settlement: it may include a reasonable profit on work done, and the total cannot exceed the contract price less payments already made and the price of work not terminated. If the parties do not agree, paragraph (g) lets the contracting officer settle unilaterally. That amount is built from the contract price for completed items the Government accepted, costs incurred plus subcontract settlement costs plus a fair and reasonable profit (no profit where the contract would have lost money), and reasonable settlement expenses such as accounting, legal and storage costs.
Other adjustments follow. The fair value of lost Government property is excluded from payment, with exceptions such as normal spoilage (h). Unliquidated advance payments, Government claims against the contractor and proceeds from sold or retained materials are deducted (k). Partial payments are allowed up to the amount the contractor is entitled to; any excess is repaid on demand with interest at the Treasury rate (m).
Costs are judged under FAR Part 31 as in effect on the contract date (i). For how cost allowability works in practice, see FAR 31.205 cost principles.
Partial terminations
If only part of the work is terminated, paragraph (l) lets the contractor file a proposal for an equitable adjustment to the price of the portion that continues. The request must be made within 90 days of the effective date unless the contracting officer extends it in writing. The settlement for the terminated portion still follows the one-year proposal rule in (e).
Appeals and the cost of missing a deadline
Under paragraph (j), the contractor can appeal a contracting officer determination made under paragraphs (e), (g) or (l) through the Disputes clause. There is no appeal if the contractor missed a settlement or adjustment deadline and did not request an extension. The practical lesson from the clause text is to request any extension in writing, inside the original period.
Common mistakes
- Waiting for the one-year settlement deadline to start the proposal, when paragraph (e) says “promptly.”
- Asking for an extension after the period has ended; the clause ties extensions to a request made within the period (c, e, l).
- Continuing subcontract commitments after the notice, contrary to paragraph (b).
- Treating profit as automatic: under (g) there is none where the contract would have lost money.
- Discarding records early; (n) sets a three-year retention period after final settlement.
Subcontracts under a prime contract
FAR 49.502(e)(1) lets a prime contractor use 52.249-2 (or 52.249-1) in fixed-price subcontracts when the contractor-subcontractor relationship is clearly indicated. Inapplicable conditions, for example paragraph (d), should be deleted, and periods should be shortened, for example to 6 months for the settlement proposal and 45 days for the request for an equitable price adjustment. A research institution acting as a prime therefore sees different clocks in its subawards than in its own prime contract.
Related clauses
| Clause | Where the FAR points to it |
|---|---|
| 52.249-1 (Short Form) | Fixed-price contracts not expected to exceed the simplified acquisition threshold (49.502(a)); also usable in fixed-price subcontracts (49.502(e)(1)) |
| 52.249-3 | Dismantling, demolition or removal of improvements above the threshold (49.502(b)(2)) |
| 52.249-4 | Service contracts regardless of value, where the offeror will not incur substantial charges (49.502(c)) |
For research offices that also hold grants, Uniform Guidance (2 CFR 200) is the parallel rulebook for awards, as opposed to contracts.
FAQ
What is FAR 52.249-2?
It is the contract clause titled Termination for Convenience of the Government (Fixed-Price). It lets the Government end a fixed-price contract in whole or in part and sets how the contractor is paid and by when it must submit its schedules and proposals.
How long does a contractor have to submit a settlement proposal?
Promptly, and no later than one year from the effective date of termination, under paragraph (e). The contracting officer may extend this in writing on a timely request or accept a late proposal if the facts justify it.
Does the clause apply to a university research contract?
FAR 49.502 excludes research and development with an educational or nonprofit institution on a no-profit basis from this clause. Other fixed-price contracts above the simplified acquisition threshold are covered by the general rule.
Does the contractor get profit on a terminated contract?
A negotiated settlement may include reasonable profit on work done (f). In a unilateral settlement the contracting officer includes fair and reasonable profit, but none where the contract would have lost money (g).
Sources
- FAR 52.249-2, Termination for Convenience of the Government (Fixed-Price) (Apr 2012): https://www.acquisition.gov/far/52.249-2, date checked 2026-10-29 (FAC 2026-01).
- FAR 49.502, Termination of fixed-price contracts, clauses: https://www.acquisition.gov/far/49.502, date checked 2026-10-29.
