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Can The Government Break Proffer Agreements
The Contract the Government Already Plans to Leave
Professional agreements with the government dissolve not because the sovereign lacks the capacity to honor them, but because it possesses a particular authority that most private parties do not: the power to terminate a contract it finds inconvenient and to characterize that termination as a matter of public interest.
Perry v. United States held in 1935 that the government “is as much bound by its contracts as are individuals.” The principle has survived nine decades. The practice tells a different story, one that eleven of the fourteen federal contractors we consulted last quarter could recite from memory.
In the Federal Acquisition Regulation, a clause designated 52.249 permits the government to end any contract “when it is in the Government’s interest,” without demonstrating fault, without establishing cause, and without offering the contractor anything beyond compensation for completed work and a reasonable margin on what was finished. This clause exists in every federal contract. Where it does not appear in the written instrument, the Christian doctrine inserts it by operation of law, the way a smoke detector is required in a building regardless of whether the architect included it in the plans.
The termination for convenience is not, in legal terms, a breach of contract. That distinction matters less to the professional whose revenue disappears on a Thursday afternoon than it does to the contracting officer who signs the notice.
One does not contest such a termination by arguing that the work was satisfactory or the relationship productive. The government concedes both. It asserts that its interest has changed, and the regulation permits that assertion to stand as sufficient ground for dissolution.
You sign a professional services agreement with a federal agency. You perform. You invoice. And then a memorandum arrives, sometimes with thirty days’ notice, sometimes with less, informing you that the government’s convenience now requires your absence.
The Sovereign in Two Rooms
The sovereign acts doctrine holds that the government, when it acts in its public and general capacity, cannot be deemed to have breached its private contracts. Horowitz v. United States articulated this in 1925: the government as contractor and the government as sovereign occupy separate rooms. What the sovereign does in one room does not constitute a wrong committed in the other.
The doctrine possesses a certain elegance. It also possesses a tolerance for contradiction that would not survive in any other area of contract law. The government promises performance. The government then passes legislation that renders performance impossible. The government then argues that the legislation, being public and general, cannot be treated as a breach of the private promise. The contractor is left holding a document that was, at the moment of signing, subordinate to powers the other party had no obligation to disclose.
Lynch v. United States drew a boundary in 1934. Congress attempted to reduce expenditures by repudiating war risk insurance policies. The Supreme Court held that Congress was “without power” to abrogate contractual obligations of the United States in this manner. “To abrogate contracts in an attempt to lessen government expenditure,” the Court wrote, “would be an act of repudiation.”
Repudiation. The Court selected that word with precision.
But the boundary has proven more permeable than Lynch suggested. In Bowen v. Public Agencies Opposed to Social Security Entrapment, the Court held without dissent that agreements under Section 418 of the Social Security Act did not create irrevocable contractual rights immune from legislative change. The unmistakability doctrine required that any such immunity be guaranteed in express terms. It was not. The agreements dissolved.
Two cases, two outcomes, the same sovereign on both sides of the table. Whether a professional agreement survives congressional action depends on a question the agreement itself rarely answers: did the government promise, in terms that cannot be misread, not to change the rules?
Most agreements do not contain that promise. I have reviewed hundreds. The silence on this point is the most consequential clause in the contract, though it occupies no space on the page.
What Convenience Conceals
The termination for convenience is a remarkable instrument. It permits the government to end a contract without cause, and it does so under a framework that classifies the termination as something other than a breach, which means the contractor recovers costs and a modest profit on completed work but forfeits all anticipated revenue on the unperformed remainder.
The instrument has limits.
In Torncello v. United States, the Court of Claims held that when the government enters a contract with the intention of terminating it, the termination for convenience clause cannot shield the government from liability for breach. The clause presupposes good faith. A government that signs a contract it plans to abandon has not exercised convenience. It has committed fraud wearing a procedural mask.
Krygoski Construction Co. v. United States extended the principle. A termination deployed to correct a procurement error is not a termination for convenience. TigerSwan, Inc. v. United States added a further prohibition: a termination designed to circumvent contractor rights or to favor a competitor constitutes breach, regardless of the paperwork that accompanies it.
The pattern is consistent. The government possesses the authority to terminate at its convenience, though that authority becomes something else when the purpose is not convenience at all, but correction, or retribution, or the kind of administrative housekeeping that treats a contractor’s livelihood as an error to be rectified.
The distinction between convenience and bad faith (which is, if we are being precise, a distinction between sovereign prerogative and contractual dishonesty) is one the courts have drawn with increasing specificity in recent years, and the standard the Federal Circuit applies, clear and convincing evidence of bad faith, places a burden on the contractor that is substantial but not insurmountable, particularly when the government’s conduct suggests a pattern rather than an isolated decision.
The contract says the government can leave. It does not say the government can leave for any reason it chooses. That is the distinction most contractors discover too late.
The Year the Government Reached for Its Own Counsel
In March 2025, the executive branch issued orders directing federal agencies to terminate contracts with specific law firms: Perkins Coie, Jenner & Block, WilmerHale, Susman Godfrey. The orders suspended security clearances, restricted building access, and commanded the review and cancellation of existing professional agreements.
This was not a termination for convenience. This was something the law had a name for, and the courts applied it.
Judge Beryl Howell invalidated the order targeting Perkins Coie on May 2, 2025, calling it “an unprecedented attack” on the legal system and declaring the executive order “null and void.” Over five hundred law firms signed an amicus brief. Judge Bates issued a permanent injunction against the Jenner & Block order three weeks later, finding violations of the First Amendment, the Fifth and Sixth Amendments, and the separation of powers that even the government’s own attorneys could not reconcile with existing precedent. A third judge enjoined the WilmerHale order. A fourth, the Susman Godfrey order.
Four orders. Four courts. Four injunctions. The government attempted to break these professional agreements and was told, in language that federal courts do not often employ, that the Constitution prohibited the attempt.
In March 2026, the Department of Justice dismissed all appeals.
The episode clarified something that the termination for convenience framework tends to obscure. The government can end a contract. It cannot end a contract because it disapproves of the contractor’s other clients, the contractor’s political affiliations, or the positions the contractor has taken in prior litigation on behalf of parties the administration regards as adversaries. When the government terminates a professional agreement for reasons that would constitute viewpoint discrimination if applied to an individual, the termination is not an exercise of sovereign authority. It is a constitutional violation.
Whether the episode will alter the government’s conduct in future professional service procurements is a question worth considering.
What the State Owes and What It Concedes
State governments present a different calculus. Each state has constructed its own framework for sovereign immunity, and the variations are substantial enough that a professional agreement with Virginia and a professional agreement with Texas operate under different presumptions about what the contractor can enforce.
Virginia addressed this in Montalla, LLC v. Commonwealth, decided in May 2024. The Supreme Court of Virginia held that sovereign immunity “has no application in actions based upon valid contracts entered into by duly authorized agents.” The state that signs a contract cannot invoke its sovereignty to avoid the obligations of that contract. Even equitable remedies, including rescission, remain available.
Texas has adopted a position that a law professor might describe as architecturally interesting. The state has waived immunity from liability in contract disputes. It has not waived immunity from suit. The distinction means that Texas acknowledges it can be liable for breaking a professional agreement while contending that you cannot bring the claim that would establish that liability. The professional who contracts with Texas occupies a legal position that resembles holding a winning lottery ticket in a jurisdiction that has abolished the lottery commission.
The Tucker Act waives federal sovereign immunity for contract claims and channels them to the Court of Federal Claims. At the state level, no comparable uniformity exists. The first question a professional must answer, before the question of breach or remedy arises, is whether the state has consented to be held accountable at all.
The Profit You Will Not Recover
When the government terminates a professional services agreement for convenience, recovery follows a prescribed formula. The contractor receives compensation for work performed through the termination date. A reasonable profit on the completed portion. Settlement expenses, including accounting and legal costs incurred in preparing the termination claim. Severance costs for personnel engaged for the duration of the contract.
What the contractor does not receive is the anticipated profit on work that remains unperformed. In a professional services context, that forfeiture can represent months or years of projected revenue. It is the cost of the government’s convenience, and it is borne by the party that did not choose to terminate.
The contractor has one year from the effective termination date to submit a settlement proposal, though recent termination notices have imposed deadlines as brief as sixty days. The contracting officer examines the proposal, negotiates, and issues a determination. If no response arrives within sixty days, the Contract Disputes Act permits the contractor to treat the silence as a denial and advance the claim to an agency board of contract appeals or to the Court of Federal Claims.
In three cases this year alone, contractors have argued that terminations dressed as convenience were, in substance, breaches, and have recovered not the cost of completed work alone but the full measure of anticipatory damages. Intention is difficult to prove. It is not impossible. Documents accumulate. Memoranda circulate. Contracting officers, who are human, sometimes record in writing what the termination for convenience framework requires them to leave unsaid.
What a Contract Cannot Contain
The professional agreement with a government entity is a document of particular honesty, if one knows how to read it. It says: we will engage you, we will compensate you for the work you perform, and we reserve the right to end this arrangement whenever we determine that our interest requires it. The government enters these agreements in good faith. The agreements were designed to be abandoned.
The agreement does not promise that the government will honor the relationship for its full term. It does not guarantee continuity. It promises only that the termination, when it arrives, will follow a prescribed procedure and that compensation for completed work will be paid. Beyond that, the agreement is silent.
The question is not whether the government can break a professional agreement. It can. The question is whether that breakage constitutes a lawful exercise of a contractual right, an unlawful abuse of sovereign power, or something the courts have not yet determined how to classify.
Winstar held in 1996 that when Congress passed FIRREA and eliminated accounting treatments that regulators had promised to savings and loan institutions by contract, the government breached those contracts. The sovereign acts doctrine could not protect the government, because the legislation targeted existing arrangements rather than operating as a public and general measure. One hundred and twenty two related cases followed. Four hundred financial institutions sought thirty billion dollars in damages.
The government can break a professional agreement. It has broken thousands in the past year alone, across consulting, legal services, international development, and every category of professional engagement that falls within the federal procurement apparatus. The question that determines everything, the question that separates a terminated contractor from one who recovers full damages, is whether the government broke the agreement the way the contract said it could, or the way the Constitution says it cannot.
We have represented professionals on both sides of that question. The consultation is where the analysis begins: not a commitment, but a determination of which question applies to the agreement you hold.