General Dynamics Corporation and Subsidiaries - Page 16

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          cancellation, not all of the costs identified in clause I-6(f)              
          would necessarily be recoverable.  Only those costs that were               
          allowable could be recovered, and only in an amount that did not            
          exceed the negotiated cancellation ceiling.  The cancellation               
          ceiling agreed to in Contract 2034 was less than the amount                 
          GENDYN had originally estimated and proposed would be necessary             
          to make itself financially whole in the event the program was               
               In addition to its right to cancel Contract 2034 for lack of           
          funding or because it no longer needed the aircraft, the Air                
          Force possessed the right (which is standard and required in all            
          Government contracts) to terminate the contract for convenience             
          or for default.  In a termination for convenience, the Government           
          orders a contractor to stop work for any or no reason at any time           
          prior to the delivery of the last item required under the                   
          contract.  The contractor then submits a claim to recover its               
          incurred costs plus a reasonable profit.  Not all of the                    
          contractor's costs may be recoverable.                                      
               In a termination for default, the Government orders the                
          contractor to halt work because the contractor has not complied             
          with all of the material terms and conditions of the contract.              
          The Government may then have a claim against the contractor to              
          recover unliquidated advances and other contract damages.                   
               As of the execution of POO 2, Contract 2034 remained                   
          “undefinitized”, that is, unpriced.  It was not until March 11,             

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