Tuesday, May 8, 2018

Special Closeout Authority for Old Contracts

Closing out old contracts can be, and usually is, extremely time consuming for both the Government and contractors. Currently, contracting officers must have a complete history of contract and payment records in order to closeout a contract. Given that many contracts being closed these days are more than 10 years old, much of the information needed to close is difficult to find and in some cases, has been destroyed. A new class deviation however, will permit DoD to close out certain older contracts that no longer have the requisite documentation needed under the current closeout procedures.

The Department of Defense, last week, issued a class deviation to FAR 4.804-5(a)(3) through (15) to allow contracting officer to close out contracts (or groups of contracts) without completing a reconciliation audit or other corrective action under certain circumstances.

Each contract must meet the following requirements.

     1. Was entered into on a date that is at least 17 fiscal years before the current fiscal year (DoD should have really made that 10 fiscal years, or shorter);
     2. Has no further supplies or services due under the terms of the contract (hopefully DoD is not still buying decades-old technology); and
     3. Has been determined by an individual, at least one level above the contracting officer (that approval won't be hard to get), to be not otherwise reconcilable because,
          a. The contract or related payment records have been destroyed or lost (DoD paper shredders must really be humming right now); or
          b. Although contract or related payment records are available, the time or effort required to establish the exact amount owed to the U.S. Government or amount owed to the contractor is disproportionate to the amount at issue.

There's some related good news regarding the availability of offset funding. When closing out contracts under this authority, remaining contract balances,

     1. May be offset with balances in other contract line items within the same contract, regardless of the year or type of appropriation obligated to fund each contract line item and regardless of whether the appropriation obligated to fund such contract line item has closed and

     2. May be offset with balances on other contracts, regardless of the year or type of appropriations obligated to fund each contract and regardless of whether such appropriations have closed.

The class deviation announcement did not indicate the number of contracts that may qualify for this special closeout authority. To read the entire class deviation memo, click here.

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