What type of profit is allowed under a fixed-price contract that has been terminated for convenience?

In the context of a fixed-price contract that has been terminated for convenience, the allowance for profit is specifically linked to the work that has been completed and the preparations made for the portion of the contract that has been terminated. This means that the contractor is entitled to recover costs incurred in relation to the work that was executed up to the point of termination.

Profit on preparations and work done for the terminated portion reflects the principle that the contractor should be compensated for the effort and resources already expended in good faith as part of fulfilling the contract obligations prior to the termination. This provision aligns with the intent of providing fair compensation while recognizing that the government has the right to terminate contracts for convenience.

In summary, recognizing profit in this context allows for a fair settlement that acknowledges the contractor's investments and efforts made before the termination, ensuring that they are not unduly penalized for circumstances beyond their control.