Termination-for-Convenience in Grants: What Recipients Should Do Now—and Next

October 24, 2025

Why this matters

The Executive Order Improving Oversight of Federal Grantmaking directs OMB to revise the Uniform Guidance so all discretionary grants permit termination for convenience (e.g., if an award no longer advances agency priorities) and tells agencies to add/clarify termination terms in current and future awards—plus tighten drawdown controls (written justification per draw; affirmative authorization)

This isn’t theoretical—terminations are already happening

Recent actions show how quickly awards can be curtailed or canceled—well beyond policy on paper:

• Targeted project terminations: Federal agencies have terminated individual awards mid-stream, leaving reimbursable balances unspent and pushing recipients into dispute/settlement pathways.
• Program-level cancellations/withdrawals: Multi-billion-dollar programs have been paused or canceled under a “return to taxpayers” lens, with litigation and appeals already in motion.
• Liquidation/closeout whiplash: Rapid shifts in closeout and liquidation expectations have created exposure where deliverables or payments ran past deadline.

Implication: The EO formalizes termination-for-convenience and tighter cash controls, but the practice is already here. Structure awards as if a termination or policy shift could occur mid-stream—maximize value early, minimize long-tail/contingent payments, and keep drawdown documentation airtight.

A) Protect yourself now (current awards & live procurements)

1. Inventory termination exposure. For every active award, record the exact termination clause(s), cure/notice periods, allowable settlement costs, and appeal/DRP paths. Flag awards allowing unilateral convenience termination.
2. Harden your drawdowns. Formalize drawdown standards/process (contract/PO, invoice, performance proof, GL↔SEFA crosswalk, approvals) and add a brief written justification per draw (purpose, allowability, period).
3. Front-load acceptance. Break scopes into objective milestones that are completed, accepted, and payable early—so accepted value is banked if a termination lands.
4. Avoid long-tail payment dependencies. Minimize (or fund locally) retainage, success fees, warranty/holdbacks, or outcomes paid after performance—these are vulnerable if an award is partially/fully terminated.
5. Flow down the risk. Ensure subs/contracts flow down federal termination terms and define a fair settlement basis (payment for accepted work, reasonable closeout costs, documented non-cancellable commitments). Include stop-work language.
6. Scenario & comms plan. Keep a playbook: who you notify, what work pauses, how evidence is preserved, and how government-caused delay/termination is documented for settlement/closeout.

B) Prepare for Uniform Guidance & agency term updates (next 60–120 days)

1. Update your Grants Manual & templates. Add a Termination-for-Convenience section (triggers, notice/cure, settlement, recordkeeping). Insert a draw-justification template and internal sign-offs for higher-risk draws.
2. Negotiate smart in new awards. Seek terms confirming settlements include accepted work, reasonable closeout/admin costs, and non-cancellable commitments; require timely inspection/acceptance. Where possible, prefer partial termination over whole-award termination.
3. Engineer survivable milestones. Structure short, auditable phases with stand-alone deliverables payable upon acceptance.
4. Tune systems & roles. Configure ERP/GMS to capture draw narratives/attachments, tag accepted deliverables, store termination notices/settlements, and generate a settlement packet on demand.
5. Train staff. Train staff, subrecipients and vendors on termination basics, drawdown justifications, acceptance evidence, subrecipient flow-downs, and stop-work execution.
6. Maintain a shovel-ready reserve. Keep pre-cleared, eligible scopes you can fund quickly if a project is terminated or materially reduced.

What “good” looks like under the EO

• Award files show precise termination language, notice/cure periods, and a pre-baked settlement checklist.
• Each draw includes a short, specific justification with evidence.
• Subs/contracts have clear acceptance criteria and flow-down termination with fair settlements.
• Milestones are short, verifiable, and payable on acceptance—reducing stranded value.
• A termination playbook is socialized so action happens in hours, not weeks.

Bottom line: The environment has shifted from theoretical to operational. Lock in accepted, well-evidenced value early, keep cash documentation tight, and structure new work so you can settle fairly and redeploy quickly if priorities shift.

For more information about grant writing services and how Ambipar | Witt O'Brien's Government Advisory Services can support your organization's funding goals, contact our team. 

Managing grants efficiently, without compromising compliance and integrity, can be a challenging task. If your organization is navigating the complexities of grant management, we can help you enhance oversight, streamline processes, ensure outcomes and reduce the risks of waste, fraud, and abuse. Reach out today to learn how our expertise in grants management can ensure your programs meet their goals, stay compliant, and make the best use of taxpayer dollars. 

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