Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO: KRS Chapter 45A
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
45A.210(2) and (3) authorize
the Secretary of the Finance and Administration Cabinet to promulgate
administrative regulations for the termination of contracts for the procurement
of supplies or services, or both supplies and services. This administrative
regulation establishes requirements for the termination of contracts.
Section 1. General Terms.
(1) Any contractor who is determined in
writing by the purchasing officer to be in breach of any of the terms and
conditions of a contract with the commonwealth of Kentucky, shall be declared
in default and the contract may be terminated.
(2) Termination notice. The purchasing
officer shall terminate a contract by written notice to the contractor. The
notice to the contractor shall be sent certified mail, return receipt
requested, and shall state:
(a) The contract
is being terminated for the convenience of the commonwealth, for default by the
contractor, or for nonappropriation, in accordance with Sections 2 to 4 this
administrative regulation;
(b) The
effective date of termination;
(c)
The extent of termination; and
(d)
Any special instructions.
Section 2. Termination for Default.
(1) The commonwealth may terminate a contract
because of the contractor's failure to perform its contractual
duties.
(2) If a contractor is
determined to be in default, the commonwealth shall notify the contractor of
the determination in writing, and may include a specified date by which the
contractor shall cure the identified deficiencies. The commonwealth may proceed
with termination if the contractor fails to cure the deficiencies within the
specified time.
(3) A default in
performance by a contractor for which a contract may be terminated shall
include, but shall not necessarily be limited to:
(a) Failure to perform the contract according
to its terms, conditions and specifications;
(b) Failure to make delivery within the time
specified or according to a delivery schedule fixed by the contract;
(c) Late payment or nonpayment of bills for
labor, materials, supplies, or equipment furnished in connection with a
contract for construction services as evidenced by mechanics' liens filed
pursuant to the provisions of KRS Chapter 376, or letters of indebtedness
received from creditors by the purchasing agency;
(d) Failure to diligently advance the work
under a contract for construction services;
(e) The filing of a bankruptcy petition by or
against the contractor; or
(f)
Actions that endanger the health, safety or welfare of the commonwealth or its
citizens.
(4) The
commonwealth shall not be liable for any further payment to a contractor under
a contract terminated for the contractor's default after the date of
termination as determined by the purchasing officer except for commodities,
supplies, equipment or services delivered and accepted on or before the date of
termination and for which payment had not been made as of that date. The
commonwealth may require the contractor to transfer title and deliver to
commonwealth completed supplies and manufacturing materials. The contractor,
and his surety, if a performance or payment bond has been required under the
contract, shall be jointly and severally liable to the commonwealth for all
loss, cost or damage sustained by the commonwealth as a result of the
contractor's default. A contractor's surety liability shall not exceed the
final sum specified in the contractor's bond.
(5) The contractor shall be liable to the
commonwealth for any excess costs incurred in acquiring supplies and services
similar to those terminated for default, and for any other damages or remedies
available either at law or in equity, whether or not repurchase is
affected.
Section 3.
Termination for Convenience of the commonwealth.
(1) The commonwealth may terminate a contract
for convenience if the purchasing officer has determined that termination will
be in the commonwealth's best interests. The commonwealth shall provide the
contractor thirty (30) calendar days written notice of termination of the
contract, unless the secretary of the Finance and Administration Cabinet, or
his designee, makes a written determination that a shorter notice of
termination for convenience is in the best interest of the
commonwealth.
(2) If a contract is
terminated for the convenience of the commonwealth, the contractor shall have
the burden of establishing the amount of compensation to which the contractor
believes he is entitled by the submission of complete and accurate cost data
employed in submitting his bid or proposal for the contract, and evidence of
expenses paid or incurred in performance of the contract from the date of award
through the date of termination. The contractor shall specify and provide
documentation of all revenues resulting from the contract, expenditures
associated with the contract, and all profit or loss attributable to the
contract. The purchasing officer may request the contractor submit additional
documents and data, and may request appropriate accounting, investigations and
audits.
(3) After issuing a notice
of termination for convenience, the purchasing officer may negotiate a
settlement with the contractor according to terms deemed just and equitable by
the purchasing agency and in accordance with this administrative regulation.
The settlement shall be subject to the prior approval of the Secretary of the
Finance and Administration Cabinet, or his designee. If the contractor and the
purchasing officer cannot negotiate a settlement, the Secretary of the Finance
and Administration Cabinet shall issue a determination of the amount, if any,
due the contractor.
(4) Contractor
responsibilities. After receipt of the notice of termination, the contractor
shall take all steps necessary to minimize waste, including:
(a) Stop work immediately on the terminated
portion of the contract;
(b)
Terminate all subcontracts related to the terminated portion of the prime
contract;
(c) Immediately advise
the purchasing office of any special circumstance precluding the stoppage of
work;
(d) Perform the continued
portion of the contract;
(e) Take
action to protect and preserve property in the contractor's possession in which
the commonwealth has or may acquire an interest, and, if directed by the
purchasing officer, deliver the property to the commonwealth;
(f) Promptly notify the purchasing officer in
writing of any legal proceedings resulting from any subcontract or other
commitment related to the terminated portion of the contract;
(g) Settle outstanding liabilities and
proposals arising out of the termination; and
(h) If there is a terminated construction
contract, ensure the cleanup of the site, protection of serviceable materials,
removal of hazards, and other actions necessary to leave a safe and healthful
site.
(5) Payment.
(a) Payment of the sum agreed to in
settlement of a contract terminated for convenience of the commonwealth shall
be made from the same source of funds or account as the original
contract.
(b) The commonwealth
shall not pay interest on the amount due under the settlement.
Section 4. Funding Out
Provision. The commonwealth may terminate a contract if funds are not
appropriated to the contracting agency or are not otherwise available for the
purpose of making payments without incurring any obligation for payment after
the date of termination, regardless of the terms of the contract. The
contracting agency shall provide the contractor thirty (30) calendar days
written notice of termination of the contract.
STATUTORY AUTHORITY:
KRS
45A.210(2),
(3)