Tuesday, May 7, 2019

Defense Department to Increase Use of Quick-Closeout Procedures

FAR (Federal Acquisition Regulations) provide for quick closeout of contracts under certain circumstances. Delay's in closing out contracts is usually attributable to delays in finalizing indirect expense rates. To help reduce the backlog of cost reimbursement, time and material, labor hour, fixed-price incentive, and fixed-price re-determinable contracts, task orders, and delivery orders, the Government came up with quick-closeout procedures delineated in FAR 42.708. Briefly, quick-closeout procedures may be used if

  • The contracting officer and the contractor bilaterally agree to its use
  • DCAA (Defense Contract Audit Agency) is contacted and has no reason to recommend against quick closeout
  • The contract is physically complete and all services and commodities have been accepted, and
  • The amount of unsettled indirect cost to be allocated to the contract is relatively insignificant.

With respect to the "relatively insignificant" criteria, costs are insignificant when the total amount of unsettled direct and indirect cost to be allocated to any one contract does not exceed the lesser of $1 million or 10 percent of the total contract, task order or delivery order amount.

Under a new Class Deviation to FAR issued by the Defense Department (see Class Deviation - Quick-Closeout Procedures Threshold), the $1 million threshold is raised to $2 million and the 10 percent threshold is removed. The Class Deviation reads:
DCMA ACOs are further authorized to deviate from FAR 42.708(a)(2) (i.e. the $1 million or 10 percent threshold criteria) and negotiate settlement of direct and indirect costs for a specific contract, task order, or delivery order to be closed in advance of the determination of final direct costs and indirect rates ... regardless of the dollar value or percent of unsettled direct or indirect costs allocable to the contract.
Under this class deviation, there should be a much larger pool of contracts eligible for quick-closeout procedures. If you think you might have contracts that qualify, contact your ACO.

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