What type of termination should our office use in this scenerio?
Depending on whether the purchase order was for a commercial item or not, FAR 13.302-4 states:
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(a) If a purchase order that has been accepted in writing by the contractor is to be terminated, the contracting officer shall process the termination in accordance with --
(1) 12.403 and 52.212-4(l) or (m) for commercial items; or
(2) Part 49 or 52.213-4 for other than commercial items.
FAR 12.403(c)(3) requires the contracting officer to send a written notice to the contractor on the termination for cause and include the items show therein.