Terminating a contractor is disruptive and, if done incorrectly, converts the owner into the breaching party.
Document the failures contemporaneously: schedule slippage against the baseline, defective work with photographs, failure to man the project, and non-payment of subcontractors evidenced by liens or notices.
Follow the contract. Most forms require written notice of default with a cure period, often seven days, and certification by the architect in some standard forms. Skipping a step is the most common owner error.
Notify the surety at the first sign of trouble, not at termination. Bonds typically require notice of contractor default and a conference before termination, and a surety not given the opportunity to participate may be discharged.
Secure the site. Materials on site, equipment, drawings, and control of access. Payment for stored materials should be confirmed before they are used.
Assess completion cost with a third party before terminating, since the measure of damages is the reasonable cost of completion less the unpaid balance.
Subcontracts. Consider assignment of subcontracts to the owner or the completion contractor, which most prime contracts permit as a conditional assignment for exactly this purpose.
Records. Daily reports, payment applications, correspondence and the change order file. The claim is proved from these, not from recollection.