Contract Terminations

Q. How does FTA get involved in termination actions? A. Paragraph 15.b. of  FTA Circular 4220.1E requires that all contracts and subcontracts contain contractual provisions or conditions that allow for “Termination for cause and for convenience by the grantee or subgrantee including the manner by which it will be effected and the basis for settlement (all contracts in excess of $10,000).” Frequently terminations occur because of problems in contract performance. Section 43 of the FTA Master Agreement, entitled “Disputes, Breaches, Defaults or Other Litigation” provides the following: Notification to FTA. The Recipient agrees to notify FTA of any current or prospective major dispute, breach, default, or litigation that may affect the Federal Government’s interests in the Project or the Federal Government’s administration or enforcement of Federal laws or regulations. If the Recipient seeks to name the Federal Government as a party to litigation for any reason, in any forum, the Recipient agrees to inform the FTA before doing so. Federal Interest in Recovery. The Federal Government retains the right to a proportionate share, based on the percentage of the Federal share awarded for the Project, of any proceeds derived from any third party recovery, except that the Recipient may return any liquidated damages recovered to the Project Account in lieu of returning the Federal share to the Federal Government. Enforcement. The Recipient agrees to pursue all legal rights available under any third party contract. FTA Concurrence. FTA reserves the right to concur in any compromise or settlement of any claim involving the Project and the Recipient. Alternative Dispute Resolution. FTA encourages the Recipient to use alternative dispute resolution procedures, as may be appropriate.