FAR 8.406-5—Termination for the Government’s convenience.
Plain-English Summary
FAR 8.406-5 addresses how the Government may end performance under Federal Supply Schedule (FSS) orders and, separately, how the underlying schedule contract itself may be changed to stop offering certain supplies or services. It covers three related topics: the ordering activity contracting officer’s authority to terminate individual orders for convenience, the requirement that such terminations comply with FAR 12.403, the preference for negotiating a no-cost settlement before issuing a convenience termination, and the exclusive authority of the schedule contracting officer to modify the schedule contract to terminate any or all covered supplies or services for the Government’s convenience. In practice, this section draws a clear line between order-level actions and contract-level actions, which matters because different contracting officers control each level and different procedures apply. It also reflects the commercial-item framework used for schedule contracts, meaning terminations should be handled in a streamlined, commercially reasonable way rather than through more formal termination procedures used in other parts of the FAR. For contractors, this section signals that an order may end even if the schedule contract remains in place, and that the Government will usually try to resolve the matter without a termination settlement if possible. For contracting officers, it requires careful coordination to avoid overstepping authority or using the wrong termination process.
Key Rules
Order-level convenience terminations
The ordering activity contracting officer may terminate individual orders for the Government’s convenience. This authority applies to the specific order being performed, not automatically to the entire schedule contract.
Follow FAR 12.403 procedures
Any termination for convenience under this section must comply with FAR 12.403. That means the termination must be handled under the commercial-item termination framework applicable to schedule orders.
Seek a no-cost settlement first
Before terminating an order for convenience, the ordering activity contracting officer must try to reach a no-cost settlement agreement with the contractor. The rule favors an agreed closeout when the parties can resolve the matter without further payment.
Schedule CO controls contract-wide changes
Only the schedule contracting officer may modify the schedule contract to terminate any or all covered supplies or services for the Government’s convenience. Ordering activity contracting officers do not have authority to make that contract-level change.
Separate order and contract authority
This section distinguishes between ending a particular order and changing the schedule contract itself. The distinction is important because the authority, scope, and effect of each action are different.
Responsibilities
Ordering Activity Contracting Officer
May terminate individual schedule orders for the Government’s convenience, must follow FAR 12.403 when doing so, and must first endeavor to negotiate a no-cost settlement agreement with the contractor before issuing the termination.
Schedule Contracting Officer
Has exclusive authority to modify the schedule contract to terminate any or all supplies or services covered by the schedule contract for the Government’s convenience.
Contractor
Should participate in settlement discussions, consider a no-cost resolution where appropriate, and distinguish between an order termination and any broader change to the schedule contract.
Ordering Activity
Must ensure its contracting officer acts within order-level authority and coordinates with the schedule contracting officer when a broader schedule-contract change may be needed.
Practical Implications
An order can be terminated even though the schedule contract remains active, so contractors should not assume a convenience termination of one order affects all future orders.
The first practical step is usually settlement negotiation; if the parties can agree to a no-cost closeout, that can avoid administrative burden and dispute risk.
Using the wrong contracting officer is a common mistake: the ordering activity CO can end an order, but only the schedule CO can change the schedule contract itself.
Because FAR 12.403 applies, parties should use the commercial-item termination approach and not default to noncommercial termination procedures.
Contractors should document costs, work completed, and any settlement positions early, because even a no-cost settlement requires a clear record of what is being closed out and why.
Official Regulatory Text
(a) An ordering activity contracting officer may terminate individual orders for the Government’s convenience. Terminations for the Government’s convenience shall comply with FAR 12.403 . (b) Before terminating orders for the Government’s convenience, the ordering activity contracting officer shall endeavor to enter into a "no cost" settlement agreement with the contractor. (c) Only the schedule contracting officer may modify the schedule contract to terminate any, or all, supplies or services covered by the schedule contract for the Government’s convenience.