Key Takeaways

  • A show cause notice or cure notice contracting process gives contractors a chance to correct failures before termination for default.
  • The government generally issues a cure notice when performance issues arise, requiring contractors to respond within at least 10 days.
  • A show cause notice is often more serious, signaling the government’s intent to terminate unless the contractor presents a strong defense.
  • Cure notices must clearly state the performance deficiencies, reference contract clauses, and allow time for correction.
  • Contractors should respond with documentation, explanations, and corrective action plans to avoid termination.
  • Terminations may occur either for default (contractor fault) or for convenience (government decision without fault).

A show cause notice government contracting occurs when the government thinks that a contract has been violated in some way. When this happens, it has the option to terminate the contract. Before a termination is enforced, though, the government will usually send out a notice to the contractor stating that a termination may take place. It is extremely important to heed this type of notice and to try and come up with a solution.

How Does the Government View Show Cause Notices?

A lot of the time, the government will allow you to remedy the issue before actually terminating the contract. If you receive a show cause notice, you need to contact the appropriate entity and see what can be done. Sometimes, this type of notice is referred to as a cure notice. If you fail to remedy the situation, there's a good chance the contract will be terminated.

Difference Between Cure Notices and Show Cause Notices

While the terms are sometimes used interchangeably, there are key distinctions. A cure notice is issued when the government believes performance failures can still be corrected. It requires the contractor to demonstrate how deficiencies will be fixed within the stated time, usually ten days. A show cause notice, on the other hand, often follows if the time to cure has expired or the breach appears irreparable. In this case, the contractor must justify why the government should not terminate the contract for default. Understanding the progression from cure to show cause is critical, since a show cause notice signals that termination is imminent unless compelling evidence is presented.

What to Do With a Show Cause Notice?

When you are looking at a cure notice, you need to make sure you carefully examine it to determine what has caused you to receive it. If you can pinpoint what went wrong, you will have a better chance of being able to come up with some type of solution. A cure notice must be provided with sufficient time to allow the contractor at least 10 days to try and remedy the situation. If not, the contractor can use this to his or her benefit and claim that the contract should not be terminated.

A cure notice must be sent as soon as the party issuing the notice wants to terminate the contract. This will give the contractor a sufficient period of time to try and remedy the situation. Usually, a contractor will be given one final chance to make right whatever went wrong.

Contractors should always take a show cause notice from the government seriously. It is in the contractor's best interest to come up with a full explanation as to why the contract should not be terminated.

If some type of change occurred that prevents the contractor from completing the job as outlined in the contract, and these changes were not communicated to the contractor, this can be used to keep the contract from being terminated. However, the contractor will need to state such defenses at the proper time and within the 10-day timeframe.

Best Practices for Responding to Cure Notices

When receiving a cure notice in contracting, contractors should act quickly and strategically:

  • Review the contract terms: Identify specific obligations, deadlines, and performance standards.
  • Document compliance efforts: Provide records of deliveries, communications, or obstacles that explain delays.
  • Prepare a corrective action plan: Outline how issues will be resolved and prevented in the future.
  • Maintain professional communication: Keep responses respectful, clear, and well-supported with evidence.
  • Seek legal guidance: Experienced counsel can help draft responses that align with Federal Acquisition Regulations (FAR) and protect contractor rights.

Failure to adequately respond can result in contract termination, negative past performance ratings, and possible debarment from future federal contracts.

What Does a Cure Notice Need to Include?

A cure notice will need to include the following:

  • Outline why the contract is being terminated
  • Provide the contractor at least 10 days to come up with a remedy for the situation
  • Alert the contractor to the fact that, unless a cure has been given, the contract will be terminated
  • Make sure the GSA schedule clause has been identified

Once a contractor has received a show cause notice, he or she will have the opportunity to try to correct the problem. This is the contractor's only opportunity to evaluate the situation and try and come up with a solution. If the contractor fails to act, the contract will be terminated.

Legal Authority and FAR Requirements

Cure notices and show cause notices in federal contracting are governed by the Federal Acquisition Regulation (FAR). Specifically, FAR 49.607 provides sample language that agencies often use. Notices must:

  • Reference the applicable FAR termination clauses.
  • Specify the failures in contract performance.
  • Provide the required time (minimum 10 days) for cure.
  • Inform the contractor of the government’s right to terminate for default if corrective action is not taken.

These legal requirements ensure that the contractor is afforded due process before termination. Contractors should recognize that any response becomes part of the administrative record and could be reviewed in later disputes or appeals.

Types of Contract Termination

There are two common types of contract termination. The first type is a general consideration. When certain conditions are present and they lead to the fact that a contract should be terminated, a number of factors should be considered, including performance liability. Common types of general considerations that cause for contracts to be terminated include funding changes and product development costing more than initially planned for.

If you are in a contract with someone and you know they are facing funding issues, it is in your best interest to tailor your practices to ensure you don't exceed any cost limits. Another reason a contract could be terminated is because the contractor's quality of service is sub-par. Late delivery of services is another reason to terminate a contract.

Another type of contract termination is a termination for convenience. This allows the government to terminate a contract at any point in time without having to provide a reason. When this happens, the government will usually issue some type of compensation for ending the contract early.

Consequences of Termination for Default

If a cure notice or show cause notice does not lead to satisfactory corrective action, the government may terminate the contract for default. This carries severe consequences, including:

  • Liability for excess costs incurred by the government to reprocure the work.
  • Negative performance ratings in the Contractor Performance Assessment Reporting System (CPARS).
  • Potential suspension or debarment from future government contracts.

By contrast, termination for convenience allows contractors to recover certain costs, such as work performed and reasonable termination expenses, but generally not lost profits. Knowing these consequences underscores the importance of responding thoroughly to cure and show cause notices.

Frequently Asked Questions

  1. What is the purpose of a cure notice in contracting?
    A cure notice gives contractors a final opportunity to correct performance issues before the government terminates the contract for default.
  2. How long does a contractor have to respond to a cure notice?
    Under FAR, contractors must be given at least 10 days to present a plan or take corrective action.
  3. What happens if I ignore a show cause notice?
    Ignoring a show cause notice almost always results in termination for default, financial liability, and negative performance ratings.
  4. Can the government terminate a contract without cause?
    Yes, through termination for convenience, the government may end a contract without contractor fault, though limited compensation is typically provided.
  5. Should I seek legal help when responding to cure or show cause notices?
    Yes. Legal counsel can help ensure responses are aligned with FAR requirements and protect your rights in case of disputes.

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