Government Contract Termination Guide 2025: T4C vs T4D Explained
Complete guide to government contract termination. Learn about termination for convenience (T4C), termination for default (T4D), contractor rights, and how to respond to termination notices.
Quick Answer: Contract Termination Types
Government contracts can be terminated in two ways: Termination for Convenience (T4C) when the government no longer needs the work, and Termination for Default (T4D) when the contractor fails to perform. T4C allows cost recovery; T4D can result in no payment and negative consequences.
Types of Contract Termination
Termination for Convenience (T4C)
Government decides it no longer needs the work:
- ✓Not contractor's fault
- ✓Costs are recoverable
- ✓Reasonable profit on completed work
- ✓No negative past performance impact
Termination for Default (T4D)
Contractor fails to perform:
- ✗Contractor at fault
- ✗May receive no payment
- ✗Liable for excess reprocurement costs
- ✗Negative CPARS rating
Termination for Convenience (T4C)
The government can terminate any contract for convenience at any time. This is a unique government right not found in commercial contracts. It protects taxpayers when needs change.
Common T4C Reasons
- →Budget cuts or changes in funding
- →Program cancellation or restructuring
- →Change in mission requirements
- →Agency consolidation
T4C Recovery Elements
Allowable Costs
All costs incurred to date of termination
Settlement Costs
Costs of terminating subcontracts
Profit
Reasonable profit on work performed
Inventory
Cost of materials and WIP
Termination for Default (T4D)
T4D is a serious action with significant consequences. It occurs when the contractor fails to meet contract requirements and cannot cure the deficiency.
T4D Grounds
- •Failure to deliver on time
- •Failure to meet specifications
- •Failure to make progress (endangers performance)
- •Anticipatory breach
T4D Consequences
- ✗No payment for incomplete work
- ✗Liability for excess costs of reprocurement
- ✗Negative CPARS rating (Unsatisfactory)
- ✗Potential debarment referral
Responding to Termination
If You Receive a Cure Notice
Before T4D, the government usually issues a cure notice giving 10 days to fix the problem.
Converting T4D to T4C
If the default was due to excusable causes (acts of God, government actions, etc.), you may be able to convert a T4D to a T4C, recovering costs and avoiding negative consequences.
Cost Recovery After Termination
T4C Settlement Process
Submit Termination Proposal
Document all costs incurred and submit settlement proposal
Negotiate Settlement
Work with TCO to agree on reasonable costs
Receive Payment
Settlement payment for approved costs and profit
Frequently Asked Questions
Can I appeal a T4D?
Yes. You can appeal to the agency Board of Contract Appeals or the Court of Federal Claims. Time limits apply—typically 90 days from the contracting officer's final decision.
How long do I have to submit a T4C settlement?
Generally within one year of termination. Submit as soon as possible while records are fresh.
Does T4D affect other contracts?
T4D is reported in FAPIIS and can affect responsibility determinations for future contracts. In serious cases, it can lead to suspension or debarment.
Find Government Contract Opportunities
Build your portfolio with contracts that match your capabilities.
Get Started →Related Articles
Ready to Find Your Next Contract?
Get instant access to thousands of government construction bids with our AI-powered platform.
Get Started