Mandatory provision for all construction contracts:

"Termination for Convenience of the State

“(1) The performance of work under this contract may be terminated by the State in accordance with this clause in whole, or from time to time in part, whenever the procurement officer shall determine that such termination is in the best interest of the State. Any such termination shall be effected by delivery to the Contractor of a Notice of Termination specifying the extent to which performance of work under the contract is terminated, and the date upon which such termination becomes effective.

“(2) After receipt of a Notice of Termination, and except as otherwise directed by the procurement officer, the Contractor shall:

1. (a) Stop work under the contract on the date and to the extent specified in the Notice of Termination;
2. (b) Place no further orders or subcontracts for materials, services or facilities, except as may be necessary for completion of the portion of the work under the contract as is not terminated;
3. (c) Terminate all orders and subcontracts to the extent that they relate to the performance of work terminated by Notice of Termination;
4. (d) Assign to the State in the manner, at the times, and to the extent directed by the procurement officer, all of the right, title, and interest of the Contractor under the orders and subcontracts so terminated, in which case the State shall have the right, in its discretion, to settle or pay any or all claims arising out of the termination of such orders and subcontracts;
5. (e) Settle all outstanding liabilities and all claims arising out of the termination of orders and subcontracts, with the approval or ratification of the procurement officer, to the extent the procurement officer may require, which approval or ratification shall be final for all the purposes of this clause;
6. (f) Transfer title and deliver to the State, in the manner, at the times and to the extent, if any, directed by the procurement officer,(i) the fabricated or unfabricated parts, work in process, completed work, supplies, and other material produced as a part of, or acquired in connection with the performance of, the work terminated by the Notice of Termination, and (ii) the completed or partially completed plans, drawings, information, and other property which, if the contract had been completed, would have been required to be furnished to the State;
7. (g) Use the Contractor’s best effort to sell, in the manner, at the times, to the extent, and at the price or prices directed or authorized by the procurement officer, any property of the types referred to in (f) of this clause; provided, however, that the Contractor(i) shall not be required to extend credit to any purchaser, and (ii) may acquire any such property under the conditions prescribed by and at a price or prices approved by the procurement officer; and provided further that the proceeds of any such transfer or disposition shall be applied in reduction of any payments to be made by the State to the Contractor under this contract or shall otherwise be credited to the price or cost of the work covered by this contract or paid in such other manner as the procurement officer may direct;
8. (h) Complete performance of such part of the work as may not have been terminated by the Notice of Termination; and
9. (i) Take such action as may be necessary, or as the procurement officer may direct, for the protection and preservation of the property related to this contract which is in the possession of the Contractor and in which the State has or may acquire an interest. The Contractor may submit to the procurement officer a list, certified as to quantity and quality, of any or all items of termination inventory not previously disposed of, exclusive of items the disposition of which has been directed or authorized by the procurement officer, and may request the State to remove such items or enter into a storage agreement covering them. Not later than 15 days thereafter, the State shall accept title to such items and remove them or enter into a storage agreement covering the same; provided, that the list submitted shall be subject to verification by the procurement officer upon removal of the items, or if the items are stored, within 45 days from the date of submission of the list, and any necessary adjustment to correct the list as submitted shall be made prior to final settlement.

“(3) After receipt of a Notice of Termination, the Contractor shall submit to the procurement officer the Contractor’s termination claim, in the form and with certification prescribed by the procurement officer. Such claim shall be submitted promptly but in no event later than one year from the effective date of termination, unless one or more extensions in writing are granted by the procurement officer, upon request of the Contractor made in writing within such one year period or authorized extension thereof. However, if the procurement officer determines that the facts justify such action, the procurement officer may receive and act upon any such termination claim at any time after such one year period or any extension thereof. Upon failure of the Contractor to submit its termination claim within the time allowed, the procurement officer may determine, on the basis of information available to the procurement officer, the amount, if any, due to the Contractor by reason of the termination and shall thereupon pay to the Contractor the amount so determined.

“(4) Subject to the provisions of paragraph (3) of this clause, the contractor and the procurement officer may agree upon the whole or any part of the amount or amounts to be paid to the Contractor by reason of the total or partial termination of work pursuant to this clause, which amount or amounts may include a reasonable allowance for profit on work done; provided, that such agreed amount or amounts, exclusive of settlement costs, shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. The contract shall be amended accordingly, and the Contractor shall be paid the agreed amount. Nothing in paragraph (5) of this clause, prescribing the amount to be paid to the Contractor in the event of failure of the Contractor and the procurement officer to agree upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, shall be deemed to limit, restrict, or otherwise determine or affect the amount or amounts which may be agreed upon to be paid to the contractor pursuant to this paragraph.

“(5) In the event of the failure of the Contractor and the procurement officer to agree, as provided in paragraph (4) of this clause, upon the whole amount to be paid to the Contractor by reason of the termination of work pursuant to this clause, the procurement officer shall pay to the Contractor the amounts determined by the procurement officer as follows, but without duplication of any amounts agreed upon in accordance with paragraph (4) of this clause.

1. (a) With respect to all contract work performed before the effective date of the Notice of Termination, the total (without duplication of any items) of:

   1. (i) The cost of the work;
   2. (ii) The cost of settling and paying claims arising out of the termination of work under subcontracts or orders as provided in paragraph (2)(e) of this clause, exclusive of the amounts paid or payable on account of supplies or materials delivered or services furnished by the subcontractor before the effective date of the Notice of Termination of Work under this contract, which amounts shall be included in the cost on account of which payment is made under subdivision(i) above; and
   3. (iii) A sum, as profit on subdivision(i) above, determined by the procurement officer, to be fair and reasonable; provided, however, that if it appears that the contractor would have sustained a loss on the entire contract had it been completed, no profit shall be included or allowed under this subdivision (iii) above and an appropriate adjustment shall be made reducing the amount of the settlement to reflect the indicated rate of loss; and
2. (b) The reasonable cost of the preservation and protection of property, incurred pursuant to paragraph (2)(i) of this clause; and any other reasonable cost incidental to termination of work under this contract, including expense incidental to the determination of the amount due to the Contractor as the result of the termination of work under this contract.

The total sum to be paid to the Contractor under paragraph(a) of this clause, shall not exceed the total contract price as reduced by the amount of payments otherwise made and as further reduced by the contract price of work not terminated. Except for normal spoilage, and except to the extent that the State shall have otherwise expressly assumed the risk of loss, there shall be excluded from the amounts payable to the Contractor under paragraph(a) of this clause, the fair value, as determined by the procurement officer, of property which is destroyed, lost, stolen, or damaged so as to become undeliverable to the State, or to a buyer pursuant to paragraph (2)(g) of this clause.

“(6) Costs claimed, agreed to, or determined pursuant to paragraphs (3), (4), (5), and (9) hereof shall be in accordance with COMAR 21.09 as in effect on the date of this contract.

“(7) The Contractor shall have the right of appeal, under the clause of this contract entitled “Disputes”, from any determination made by the procurement officer under paragraphs (2), (5), or (9) hereof, except that if the Contractor has failed to submit its claim within the time provided in paragraph (3) or (9) hereof, and has failed to request extension of such time, the Contractor shall have no such right of appeal. In any case where the procurement officer has made a determination of the amount due under paragraphs (3), (5), or (9) hereof, the State shall pay to the Contractor the following:(a) if there is no right of appeal hereunder or if no timely appeal has been taken, the amount so determined by the procurement officer, or (b) if an appeal has been taken, the amount finally determined on such appeal.

“(8) In arriving at the amount due the Contractor under this clause there shall be deducted(a) all unliquidated advance or other payments or account theretofore made to the Contractor, applicable to the terminated portion of this contract, (b) any claim which the State may have against the Contractor in connection with this contract, and (c) the agreed price for, or the proceeds of sale of any materials, supplies, or other things acquired by the Contractor or sold, pursuant to the provisions of this clause, and not otherwise recovered by or credited to the State.

“(9) If the termination hereunder be partial, the Contractor may file with the procurement officer a claim for an equitable adjustment of the price or prices specified in the contract relating to the continued portion of the contract (the portion not terminated by the Notice of Termination), and such equitable adjustment as may be agreed upon shall be made in such price or prices. Any claim by the Contractor for an equitable adjustment under this clause shall be asserted within ninety (90) days from the effective date of the termination notice, unless an extension is granted in writing by the procurement officer.

“(10) The State may from time to time, under such terms and conditions as it may prescribe, make partial payments and payments on account against costs incurred by the Contractor in connection with the terminated portion of this contract whenever in the opinion of the procurement officer the aggregate of such payments shall be within the amount to which the Contractor shall be entitled hereunder. If the total of such payments is in excess of the amount finally agreed or determined to be due under this clause, such excess shall be payable by the Contractor to the State upon demand, together with interest computed at the legal rate for the period from the date such excess payment is received by the contractor to the date on which the excess is repaid to the State; provided, however, that no interest shall be charged with respect to any such excess payment attributable to a reduction in the Contractor's claim by reason of retention or other disposition of termination inventory until ten days after the date of the retention or disposition, or a later date as determined by the procurement officer by reason of the circumstances.

“(11) Unless otherwise provided for in this contract, or by applicable statute, the Contractor shall, from the effective date of termination until the expiration of three years after final settlement under this contract, preserve and make available to the State at all reasonable times at the office of the Contractor but without direct charge to the State, all its books, records, documents and other evidence bearing on the costs and expenses of the contractor under this contract and relating to the work terminated hereunder, or, to the extent approved by the procurement officer, photographs, microphotographs, or other authentic reproductions thereof.”

Authority: State Finance and Procurement Article, §§12-101, 13-216, 13-218, 13-225, 15-226, and 17-801—17-804, Annotated Code of Maryland

Effective date: July 1, 1981 (8:13 Md. R. II-5)

Regulation .09 amended effective May 6, 1985 (12:9 Md. R. 816)

Chapter revised effective January 9, 1989 (15:27 Md. R. 3138)

Regulation .02 amended effective July 15, 2019 (46:14 Md. R. 623)

Regulation .03 amended effective July 15, 2019 (46:14 Md. R. 623)

Regulation .04 amended effective January 2, 2017 (43:26 Md. R. 1449); July 15, 2019 (46:14 Md. R. 623)

Regulation .05 amended effective July 15, 2019 (46:14 Md. R. 623)

Regulation .05-1 adopted effective October 6, 1997 (24:20 Md. R. 1405)

Regulation .05-1E amended effective January 24, 2000 (27:1 Md. R. 78)

Regulation .05-2 adopted effective October 2, 2000 (27:19 Md. R. 1730)

Regulation .05-2 amended effective July 9, 2001 (28:13 Md. R. 1216); September 18, 2023 (50:18 Md. R. 800); March 3, 2025 (52:4 Md. R. 221)

Regulation .05-3 adopted effective July 9, 2001 (28:13 Md. R. 1216)

Regulation .06 amended effective July 15, 2019 (46:14 Md. R. 623)

Regulation .07 amended effective July 15, 2019 (46:14 Md. R. 623); June 29, 2020 (47:13 Md. R. 643)

Regulation .08 amended effective July 15, 2019 (46:14 Md. R. 623)

Regulation .09 amended effective July 15, 2019 (46:14 Md. R. 623)

Regulation .10 amended effective May 20, 1996 (23:10 Md. R. 733); February 23, 2009 (36:4 Md. R. 355); March 16, 2015 (42:5 Md. R. 488)

Regulation .10A amended effective March 11, 2019 (46:5 Md. R. 310); March 3, 2025 (52:4 Md. R. 221)

Regulation .11 adopted effective July 15, 2019 (46:14 Md. R. 623)

Regulation .12 adopted effective May 17, 2021 (48:10 Md. R. 401)