Contract Law Gives U.S. Government Options For Automatic Cuts: Report

August 29, 2012

U.S. courts have found that the government has certain contractual rights because of its sovereign standing, including the right to unilaterally change the terms of its contracts, delay or stop work on contracts or terminate them outright, a congressional report found.

Companies would be entitled to some compensation for contract changes in some cases, according to a report by the nonpartisan Congressional Research Service that was issued in April but has not been made public until now.

In other cases, "the government could potentially avoid liability for actions that delayed or increased the costs of the contractor's performance because it acted in its sovereign capacity," said the report, which was completed in April but has not been widely publicized or circulated.

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