FAR 49.502—Termination for convenience of the Government.
Plain-English Summary
FAR 49.502 tells contracting officers which Government termination-for-convenience clauses to include in fixed-price solicitations and contracts, and when special alternates or different clauses must be used instead. It covers short-form fixed-price contracts at or below the simplified acquisition threshold, standard fixed-price contracts above the threshold, construction, dismantling/demolition/removal of improvements, service contracts that qualify for the short-form clause, and research and development contracts with educational or nonprofit institutions on a no-profit or no-fee basis. It also addresses when the clause at 52.249-5 is required for those R&D awards, and how prime contractors may flow down termination clauses to fixed-price subcontracts and certain R&D subcontracts. In practice, this section is about matching the termination clause to the contract type, dollar value, and risk profile so the Government can terminate when needed while limiting disputes over settlement rights and costs. It matters because using the wrong clause, or omitting required alternates, can create settlement problems, inconsistent subcontract terms, and avoidable claims after termination.
Key Rules
Use short form below SAT
For fixed-price contracts not expected to exceed the simplified acquisition threshold, the contracting officer must insert 52.249-1, unless a more specific clause applies. This is the default short-form convenience clause for lower-dollar fixed-price awards.
Exceptions to short form
Do not use 52.249-1 when 52.249-4 is appropriate, for no-profit R&D with educational or nonprofit institutions, for architect-engineer services, or when another clause prescribed or cited in 49.505(a) or (c) applies. The rule requires the contracting officer to choose the more specific termination clause when the contract type calls for it.
Demolition needs Alternate I
If a below-SAT fixed-price contract is for dismantling, demolition, or removal of improvements, the contracting officer must use 52.249-1 with Alternate I. The alternate tailors the clause to the special nature of demolition/removal work.
Use standard clause above SAT
For fixed-price contracts expected to exceed the simplified acquisition threshold, the contracting officer must insert 52.249-2 unless the contract is for dismantling/demolition, no-profit R&D with educational or nonprofit institutions, architect-engineer services, or a situation where 52.249-4 or another clause under 49.505(a) or (c) applies.
Construction requires alternates
For construction contracts above the simplified acquisition threshold, the contracting officer must use 52.249-2 with Alternate I. If the contract is with a U.S. Government agency or with State, local, or foreign governments or their agencies and interest on excess partial payments is inappropriate, Alternate II is used; for construction, Alternate III is also required as stated in the rule.
Demolition above SAT uses 52.249-3
For fixed-price contracts above the simplified acquisition threshold involving dismantling, demolition, or removal of improvements, the contracting officer must use 52.249-3. If the contract is with a government agency and interest on excess partial payments is inappropriate, Alternate I must be used.
Short-form services clause
The contracting officer must use 52.249-4 for service contracts, regardless of value, when the work is fixed-price and the services are such that the contractor will not incur substantial startup or performance charges and termination settlement should be limited to services rendered before termination. The clause is intended for low-overhead, low-commitment services such as parking space rental or laundry/dry cleaning.
R&D nonprofit clause
For research and development work with educational or nonprofit institutions on a nonprofit or no-fee basis, the contracting officer must use 52.249-5 whether the contract is fixed-price or cost-reimbursement. This clause is specifically tailored to the nonprofit R&D setting.
Flow down to subcontracts
Prime contractors may use the fixed-price termination clauses in subcontracts when appropriate, but must clearly identify the contractor-subcontractor relationship. Inapplicable conditions should be deleted, and subcontract settlement and adjustment deadlines should be shortened to fit the subcontract context.
Special flow down for nonprofit R&D subs
For subcontracts with educational or nonprofit institutions on a no-profit or no-fee basis, the prime contractor may use 52.249-5 if the relationship is clearly stated, inapplicable conditions are removed, the settlement proposal period is shortened, the subcontract is on a no-profit or no-fee basis, and FAR Part 31 cost principles are incorporated or used as the negotiation basis.
Responsibilities
Contracting Officer
Select and insert the correct termination-for-convenience clause based on contract type, dollar threshold, and work category; use the required alternates for construction and demolition; determine when the short-form services clause is appropriate; and ensure the clause is not used when a more specific clause applies.
Contracting Officer
For contracts with government entities where interest on excess partial payments is inappropriate, decide whether to use the applicable alternate that removes or adjusts that interest requirement.
Prime Contractor
When drafting fixed-price subcontracts, choose an appropriate termination clause, clearly state the subcontractor relationship, delete inapplicable conditions, and shorten settlement and equitable adjustment deadlines as needed.
Prime Contractor
For nonprofit R&D subcontracts, ensure the subcontract is on a no-profit or no-fee basis, incorporate or negotiate using FAR Part 31 cost principles, and tailor the clause to the subcontract setting.
Educational or Nonprofit Institution
When performing R&D work on a nonprofit or no-fee basis, accept the termination clause structure applicable to that special contract type and support settlement under the clause and cost principles that govern the arrangement.
Agency/Customer
Provide the contract requirements and funding/relationship context that allow the contracting officer to determine the proper clause, especially for government-to-government or public-entity contracts where partial-payment interest treatment may need adjustment.
Practical Implications
Clause selection is not optional; it depends on contract type, value, and work category, so using the wrong clause can create termination settlement disputes or make the contract internally inconsistent.
Construction and demolition contracts often require alternates that change how partial payments and interest are handled, so contracting officers need to check the exact work scope and the identity of the customer before award.
The short-form services clause is only for services where the contractor will not incur major upfront costs; using it on a service contract with significant mobilization or startup costs can undercompensate the contractor and trigger claims.
Prime contractors should not simply copy the Government clause into subcontracts without tailoring it; subcontract deadlines, inapplicable paragraphs, and the relationship language must be adjusted to fit the subcontract.
For nonprofit R&D, both the no-profit/no-fee structure and the cost-principles framework matter; missing either can undermine the intended settlement approach and create compliance problems.
Official Regulatory Text
(a) Fixed-price contracts that do not exceed the simplified acquisition threshold (short form)- (1) General use . The contracting officer shall insert the clause at 52.249-1 , Termination for Convenience of the Government (Fixed-Price) (Short Form), in solicitations and contracts when a fixed-price contract is contemplated and the contract amount is not expected to exceed the simplified acquisition threshold, except- (i) If use of the clause at 52.249-4 , Termination for Convenience of the Government (Services) (Short Form) is appropriate, (ii) In contracts for research and development work with an educational or nonprofit institution on a no-profit basis, (iii) In contracts for architect-engineer services, or (iv) If one of the clauses prescribed or cited at 49.505 (a) or (c), is appropriate. (2) Dismantling and demolition. If the contract is for dismantling, demolition, or removal of improvements, the contracting officer shall use the clause with its AlternateI. (b) Fixed-price contracts that exceed the simplified acquisition threshold- (1) (i) General use. The contracting officer shall insert the clause at 52.249-2 , Termination for Convenience of the Government (Fixed-Price), in solicitations and contracts when a fixed-price contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold except in contracts for - (A) Dismantling and demolition, (B) Research and development work with an educational or nonprofit institution on a no-profit basis, or (C) Architect-engineer services; it shall not be used if the clause at 52.249-4 , Termination for Convenience of the Government (Services) (Short Form), is appropriate (see 49.502 (c)), or one of the clauses prescribed or cited at 49.505 (a) or (c), is appropriate. (2) Construction. If the contract is for construction, the contracting officer shall use the clause with its AlternateI. (i) Partial payments. If the contract is with an agency of the U.S. Government or with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess partial payments is inappropriate, the contracting officer shall use the clause with its AlternateII. In such contracts for construction, the contracting officer shall use the clause with its AlternateIII. (ii) Dismantling and demolition. The contracting officer shall insert the clause at 52.249-3 , Termination for Convenience of the Government (Dismantling, Demolition, or Removal of Improvements) in solicitations and contracts for dismantling, demolition, or removal of improvements, when a fixed-price contract is contemplated and the contract amount is expected to exceed the simplified acquisition threshold. If the contract is with an agency of the U.S. Government or with State, local, or foreign governments or their agencies, and if the contracting officer determines that the requirement to pay interest on excess partial payments is inappropriate, the contracting officer shall use the clause with its AlternateI. (c) Service contracts (short form). The contracting officer shall insert the clause at 52.249-4 , Termination for Convenience of the Government (Services) (Short Form), in solicitations and contracts for services, regardless of value, when a fixed-price contract is contemplated and the contracting officer determines that because of the kind of services required, the successful offeror will not incur substantial charges in preparation for and in carrying out the contract, and would, if terminated for the convenience of the Government, limit termination settlement charges to services rendered before the date of termination. Examples of services where this clause may be appropriate are contracts for rental of unreserved parking space, laundry and dry cleaning, etc. (d) Research and development contracts. The contracting officer shall insert the clause at 52.249-5 , Termination for the Convenience of the Government (Educational and Other Nonprofit Institutions), in solicitations and contracts when either a fixed-price or cost-reimbursement contract is contemplated for research and development work with an educational or nonprofit institution on a nonprofit or no-fee basis. (e) Subcontracts- (1) General use. The prime contractor may find the clause at 52.249-1 , Termination for Convenience of the Government (Fixed-Price) (Short Form), or at 52.249-2 , Termination for Convenience of the Government (Fixed-Price), as appropriate, suitable for use in fixed-price subcontracts, except as noted in paragraph (e)(2) of this section; provided, that the relationship between the contractor and subcontractor is clearly indicated. Inapplicable conditions ( e.g., paragraph (d)) in 52.249-2 should be deleted and the periods reduced for submitting the subcontractor’s termination settlement proposal ( e.g., 6 months), and for requesting an equitable price adjustment ( e.g., 45 days). (2) Research and development. The prime contractor may find the clause at 52.249-5 , Termination for the Convenience of the Government (Educational and Other Nonprofit Institutions), suitable for use in subcontracts placed with educational or nonprofit institutions on a no-profit or no-fee basis; provided, that the relationship between the contractor and subcontractor is clearly indicated. Inapplicable conditions ( e.g., paragraph (h)) should be deleted, the period for submitting the subcontractor’s termination settlement proposal should be reduced ( e.g., 6 months), the subcontract should be placed on a no-profit or no-fee basis, and the subcontract should incorporate or be negotiated on the basis of the cost principles in part 31 of the Federal Acquisition Regulation.