Cancellation, Close, Termination


What is the difference between closing out (liquidating), cancelling and terminating a purchase order?
Closeout liquidation, cancellation, and termination are used to eliminate the purchase order commitments that may remain open in SAP. Although they have the same end result, each process is used under different circumstances and has different requirements.

Closeout (liquidating)
This informal process is used whenever you have an open dollar commitment on a purchase order that has been completely received and paid and is not the result of actual content change. This open commitment is usually the result of minor variations in the pricing of the items or processing of the invoices or a consultant not using all of the hours originally estimated. Closeout liquidation of a purchase order can be easily requested by simply sending an email with reference to the original purchase order number and vendor name. Please note that this type of closeout should not be confused with the formal closeout procedure required for subcontracts.

Cancellation
This formal process needs to be followed when the actual content of an order is changed; that is, the order is to be partially or completely canceled with the mutual agreement of the vendor. An example would be when a vendor cannot ship all or a portion of the goods or services listed on the purchase order. In order to request this formal cancellation process, an approved requisition must be forwarded to the Procurement Office (NE49-4122) with reference to the original purchase order number, vendor name, the nature of the change necessary for cancellation, and documentation that the vendor agrees with the cancellation.

Termination

Termination is a formal process for ending a contractual relationship prior to its being completed without the mutual agreement of the vendor. There are two types of terminations – Termination for Convenience and Termination for Default.

“Termination for Convenience” means the exercise of the right to completely or partially terminate performance of work under a contract when it is in MIT’s interest.

“Termination for Default” means the exercise of the right to completely or partially terminate a contract because of the contractor’s actual or anticipated failure to perform its contractual obligations.

Either type of termination is a formal process which requires the early involvement of Procurement and may also involve MIT Legal. Procurement should be contacted as early as possible to determine the proper method to proceed.