Termination of Contract

General
Termination is an action taken by the contracting agency to cancel a contract. Federal-aid contracts exceeding $10,000 must contain suitable provisions for termination by the LG. The provisions must identify the manner by which the termination will be effected and the basis for settlement. There may be a number of grounds to warrant termination, including termination for cause, termination for convenience and termination for default.
Prior to termination of a federal-aid contract for which TxDOT concurred in the award, the LG shall consult with and receive the concurrence of TxDOT. Federal-aid participation in a terminated contract is decided by the individual merits of the particular case. However, in no instance will federal funds participate in any allowance for anticipated profits on work not performed.
If the LG awards a contract for completion of a federal-aid contract previously terminated for default, FHWA policy limits the amount eligible for federal participation. The amount eligible is the lesser of the original contract or the sum of the new contract plus the payments made under the original contract. The
LGPM Guide
provides a description of Termination for Cause or Convenience and Termination for Default and additional information related to notice to contractor and surety of default considerations.
Federal Requirements
  1. 23 CFR §635.125
    – Requires contracts exceeding $10,000 to contain provisions for termination of a contract, including the manner by which the termination will be effected and the basis for settlement. In addition, such contracts must describe conditions where the contract may be terminated for default as well as conditions where the contract may be terminated because of circumstances beyond the control of the contractor.
  2. 23 CFR §635.125(b)
    – Requires prior concurrence by FHWA for termination of a federal-aid contract.
State Requirements
  1. 43 TAC, §26.33(g)(1)
    – Requires a RMA to use specifications conforming to the latest TxDOT standard specifications on projects connecting with the state highway system.
  2. 43 TAC, §27.56(c)(3)
    – Requires a RTA to use specifications conforming to the latest TxDOT standard specifications on projects with state fund participation.
Required Practices
The LG must include termination language in the contract in conformance with state and federal statutes. The
LGPM Guide
describes the required practices and responsibilities of the LG and TxDOT.