Contract Close-Out Process - Part 1

Now that DCAA (Defense Contract Audit Agency) has essentially caught up with auditing or administratively closing contractor incurred cost submissions, there is a flurry of activity by contracting officer to close out contracts needing final indirect rates.

FAR (Federal Acquisition Regulations) 4.804 covers the procedures for closing out flexibly priced Government contracts. Flexibly-priced includes just about everything that is not fixed-priced such as CPFF, CPIF, CPAF, T&M, and FPI to name the more common types.

Contracts can only be closed when they are physically complete and administratively complete. Physically complete means that deliveries and/or supplies are complete, inspected, and accepted, and services have been performed and accepted by the Government. Administratively complete means that all administrative actions are accomplished, all releases executed, and final payment has been made.

The administrative closeout procedures can be complex and often requires a lot of time. The administrative closeout procedures per FAR 4.804-5 include all of the following:

• Disposition of classified material is completed
• Final patent and final royalty report is cleared
• There is no outstanding value engineering change proposal
• Plan clearance report and property clearance is received
• All interim or disallowed costs are settled
• Price revision is completed
• Subcontracts are settled by the prime contractor
• Prior year indirect cost rates are settled and final invoice has been submitted
• Termination docket is completed
• Contract audit and Contractor's closing statement is completed
• Contract funds review is completed and excess funds deobligated.

Don't worry if you don't know what a lot of these items entail. A lot of these items will be "not applicable" to many contracts. You don't need to be an expert because the contracting officer will advise you what you need to do. From the Government's perspective, they just want to ensure that there are no outstanding or potential liabilities or obligations arising from the contract. Once both parties are satisfied with their respective positions, the contract can be closed.

Tomorrow we will discuss the "Final Voucher" requirements.