52.217-2 Cancellation Under Multi-year

Contracts.

As prescribed in 17.109(a), insert the following clause:

Cancellation Under Multi-year Contracts (Oct 1997)

(a) "Cancellation," as used in this clause, means that the Government is canceling its requirements

for all supplies or services in program years subsequent to that in which notice of cancellation is

provided. Cancellation shall occur by the date or within the time period specified in the Schedule,

unless a later date is agreed to, if the Contracting Officer-

(1) Notifies the Contractor that funds are not available for contract performance for any subsequent

program year; or

(2) Fails to notify the Contractor that funds are available for performance of the succeeding program

year requirement.

(b) Except for cancellation under this clause or termination under the Default clause, any reduction

by the Contracting Officer in the requirements of this contract shall be considered a termination

under the Termination for Convenience of the Government clause.

(c) If cancellation under this clause occurs, the Contractor will be paid a cancellation charge not

over the cancellation ceiling specified in the Schedule as applicable at the time of cancellation.

(d) The cancellation charge will cover only-

(1) Costs-

(i) Incurred by the Contractor and/or subcontractor;

(ii) Reasonably necessary for performance of the contract; and

(iii) That would have been equitably amortized over the entire multi-year contract period but,

because of the cancellation, are not so amortized; and

(2) A reasonable profit or fee on the costs.

(e) The cancellation charge shall be computed and the claim made for it as if the claim were being

made under the Termination for Convenience of the Government clause of this contract. The

Contractor shall submit the claim promptly but no later than 1 year from the date-

(1) Of notification of the nonavailability of funds; or

(2) Specified in the Schedule by which notification of the availability of additional funds for the next

succeeding program year is required to be issued, whichever is earlier, unless extensions in writing

are granted by the Contracting Officer.

(f) The Contractor’s claim may include-

(1) Reasonable nonrecurring costs (see subpart 15.4 of the Federal Acquisition Regulation) which
are applicable to and normally would have been amortized in all supplies or services which are

multi-year requirements;

(2) Allocable portions of the costs of facilities acquired or established for the conduct of the work, to

the extent that it is impracticable for the Contractor to use the facilities in its commercial work, and

if the costs are not charged to the contract through overhead or otherwise depreciated;

(3) Costs incurred for the assembly, training, and transportation to and from the job site of a

specialized work force; and

(4) Costs not amortized solely because the cancellation had precluded anticipated benefits of

Contractor or subcontractor learning.

(g) The claim shall not include-

(1) Labor, material, or other expenses incurred by the Contractor or subcontractors for performance

of the canceled work;

(2) Any cost already paid to the Contractor;

(3) Anticipated profit or unearned fee on the canceled work; or

(4) For service contracts, the remaining useful commercial life of facilities. "Useful commercial life"

means the commercial utility of the facilities rather than their physical life with due consideration

given to such factors as location of facilities, their specialized nature, and obsolescence.

(h) This contract may include an Option clause with the period for exercising the option limited to

the date in the contract for notification that funds are available for the next succeeding program

year. If so, the Contractor agrees not to include in option quantities any costs of a startup or

nonrecurring nature that have been fully set forth in the contract. The Contractor further agrees

that the option quantities will reflect only those recurring costs and a reasonable profit or fee

necessary to furnish the additional option quantities.

(i) Quantities added to the original contract through the Option clause of this contract shall be

included in the quantity canceled for the purpose of computing allowable cancellation charges.

(End of clause)

Parent topic: 52.217 [Reserved]