With large concentrations of personnel being stationed at or near remote desert-like locations, the Main Personnel Transport Vehicles (or MPTV) are the main source of transportation for the personnel assigned at these sites globally

With large concentrations of personnel being stationed at or near remote desert-like locations, the Main Personnel Transport Vehicles (or MPTV) are the main source of transportation for the personnel assigned at these sites globally. Due to the unusually high number of sandstorms (and the almost microscopic particles of dirt and dust generated), the forces are beginning to experience more vehicles failure due to sand-related engine failures. 

As a result of analysis, it was also determined that existing air filtration systems were inadequate for these conditions and that modification or replacements were needed for the vehicles. This resulted in the requirement, solicitation and the eventual competitive contract award for 8000 specialty air intake manifolds to the I. B. Goode Company. The FFP contract was $1.6 million, was broken into 4 lots of 2000 manifolds each and required the final lot delivery 12 months after the date of contract award. And you have been assigned as the ACO.

Things are proceeding quite well on the contract. Within the first 8 months, the contractor made delivery of the first 3 lots (6000 units) -- one month ahead of schedule. According to your COR, 1400 of the remaining 2000 are now ready for final inspection and shipment. The COR has also informed you that the final 600 units should be complete by the end of the month.

Just when you thought everything was going great, the MPTV program office calls and informs you that due to the reassignment of forces, no more of the specialty manifolds will be needed beyond the 3 lots already accepted. To mitigate any further costs being incurred, the program office instructs you to immediately cancel all of the remaining manifolds that the Government has not accepted delivery on. A quick review of the original contract reveals that the Variation in Quantity clause is not in the contract.

Questions

What are the key determinants and the business case analysis in processing the termination for convenience?

Explain the process which you would follow in case an agreement cannot be reached during negotiations on the termination settlement proposal?