Is it appropriate to terminate the original contract in place with the old vendor and negotiate a new purchase order with the new vendor, with basically the same terms and conditions (base year with options).
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This response is based on the limited information provided in the question: You indicate "after about 12 months of services...." You don't say that you exercised the first option year, so the contract with the first vendor is over once the base year of performance is complete (unless you exercised the option). There is no need to terminate a contract if the contract is complete. You would be free to award a new purchase order in accordance with FAR Part 12/13 procedures. On the other hand, if “about 12 months of services” was actually less than 12 months and the base performance period was not entirely complete, the contracting officer would normally terminate for convenience in accordance with FAR 52.212-4(l). I see nothing in the scenario you describe that would suggest having to “cancel” the purchase order.