Few things are more alarming for a government contractor than receiving a notice of default termination. If you’ve been awarded a federal contract, you’ve likely invested substantial time, personnel, and resources to fulfill your obligations. When an agency suddenly terminates that contract for default, it not only disrupts your business; it threatens your future in the federal contracting arena. Knowing how to respond quickly and strategically is essential.
At Downey & Associates, we help businesses throughout Denver and nationwide defend their rights when they face adverse actions under federal contracts. If you’re dealing with a termination for default (T4D), here’s what you need to know and what you should do immediately.
What Is a Termination for Default?
A termination for default occurs when a federal agency ends a contract because it believes the contractor has failed to meet key obligations. This could include missing deadlines, delivering subpar goods or services, failing to comply with contract terms, or any action the agency views as a material breach.
This is different from a termination for convenience, where the government ends the contract even if the contractor has done nothing wrong. While a termination for convenience allows for partial compensation, a termination for default can result in severe consequences, including financial penalties and negative performance ratings that could impact future awards.
Common Reasons Agencies Issue Default Terminations
Federal agencies are required to follow specific guidelines before terminating a contract for default. Some of the most common reasons they cite include:
- Failure to deliver goods or services on time
- Consistently substandard performance or deliverables
- Noncompliance with technical specifications or terms
- Failure to make progress on the project
- Violations of federal laws or regulations
Agencies often issue a “cure notice” or “show cause notice” before taking final action. These notices are a warning and an opportunity to explain or fix the issue. How you respond at this stage can determine whether the contract is salvaged or terminated.
Immediate Steps to Take After Receiving a Termination Notice
Once you receive a T4D notice, time is of the essence. Here’s what you should do:
1. Review the Contract and the Termination Notice Carefully
Start by reviewing your contract terms, especially the Federal Acquisition Regulation (FAR) clauses related to default (such as FAR 52.249-8 for fixed-price supply and service contracts). Compare the agency’s claims to the actual contractual requirements. In many cases, agencies incorrectly assert default when the contractor was acting within the contract’s scope or was delayed due to excusable causes.
2. Document Everything
Gather all records related to performance, including emails, delivery logs, progress reports, subcontractor communications, and change orders. This documentation can help prove that you fulfilled your obligations or that delays were caused by factors outside your control, such as government interference or supply chain disruptions.
3. Identify Excusable Delays
FAR allows for “excusable delays” in some situations, including extreme weather, acts of God, labor disputes, or other unforeseen events. If one of these conditions contributed to your inability to perform, it might negate the default. You’ll need strong documentation and timely communication to support this defense.
4. Respond Promptly to Cure or Show Cause Notices
Before finalizing a termination for default, agencies typically issue a cure notice (giving you time to correct deficiencies) or a show cause notice (asking you to explain why the contract should not be terminated). Respond to these notices with detailed explanations, supporting evidence, and a commitment to corrective action when appropriate. Your response should be strategic, factual, and professional; it will become part of the administrative record.
5. Consult a Federal Contracts Attorney
This is not a situation to handle alone. The stakes are high: a default termination can result in claims for excess reprocurement costs, contract debarment, and a black mark on your record with the System for Award Management (SAM). An attorney experienced in federal contract law can help you build a defense, prepare a formal dispute, or negotiate a conversion to a termination for convenience, which is far less damaging to your business.
Can You Appeal a Termination for Default?
Yes. Contractors have the right to challenge a termination for default by filing an appeal. You can appeal to either:
- The appropriate Board of Contract Appeals (such as the Civilian Board of Contract Appeals or Armed Services Board of Contract Appeals), or
- The U.S. Court of Federal Claims
Appeals must typically be filed within 90 days of the final decision (for Board of Contract Appeals cases) or within 12 months if filing in the Court of Federal Claims. Your appeal must clearly explain why the default was improper and present strong evidence that supports your position.
Why Early Legal Involvement Matters
Too often, contractors wait until the termination is finalized before seeking legal help. By that point, opportunities to correct or mitigate the situation may be lost. Involving a federal contracts attorney early allows you to evaluate your risk, respond appropriately to agency notices, and potentially resolve the issue without the need for formal litigation.
At Downey & Associates, we represent contractors across a wide range of industries who do business with federal agencies. Whether you’re a defense contractor, IT provider, construction firm, or SBA-certified small business, we know how to protect your rights and your reputation when things go wrong.
Call Downey & Associates Today for Legal Support
If you've received a cure notice, show cause letter, or a formal termination for default, we can help you assess the facts, develop a sound response strategy, and take decisive legal action. Our federal government contracts attorneys are here to help you challenge unjust actions and keep your business moving forward.
Don't let a default termination define your company’s future. Contact us today for a confidential consultation and take the first step toward protecting your government contract and your livelihood.
