This guidebook is designed to assist with the closeout of contracts. Few issues within the defense acquisition community today share the importance and visibility associated with our efforts to improve the contract closeout process. This issue is critical to our mission.

There is a general belief that a contract is completed when final delivery is made of the required goods and services and the Government has made acceptance and final payment to the contract. However, in the administrative contracting arena, a contract is not complete and ready for closeout until the contractor complies with all the terms of the contract. This includes those administrative actions that are contractually required; i.e. property, security, patents and royalties. Closeout is completed when all administrative actions have been completed, all disputes settled, and final payment has been made.

The closeout process can be simple or complex depending on the contract type. Contract closeout requires coordination between the contracting office, finance office, program office, auditing office and the contractor.

The objective of this guidebook is to provide you with practical techniques and practices that DCMA CMOs are using to close contracts. The contents are discretionary and are intended only as a guide and may be supplemented locally. All DCMA personnel are encouraged to submit suggestions to the HQ Performance Advocate for publication and sharing throughout DCMA.

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ACRONYM LIST

ACO Administrative Contracting Officer

ACRN Accounting Classification Reference Number

BOA Basic Ordering Agreement

CA Contract Administrator

CACO Corporate Administrative Contracting Officer

CACS Contract Audit Closing Statement

CAR Contract Administration Report

CAS Contract Administration Services

CLIN Contract Line Item Number

CMO Contract Management Office

COA Certificate of Acceptance

COTR Contracting Office Technical Representative

DACO Divisional Administrative Contracting Officer

DCAA Defense Contract Audit Agency

DCAAM Defense Contract Audit Agency Manual

DCMA Defense Contract Management Agency

DFARS Defense Federal Acquisition Regulation Supplement

DFAS Defense Finance and Accounting Service

DLAM Defense Logistics Agency Manual

DMACT DFAS Merged Account

DODAAD Department of Defense Activity Address Directory

DIS Defense Industrial Security

FAR Federal Acquisition Regulation

FAD Final Acceptance Date

FDD Final Delivery Date

FNLA Final Notice of Last Action

FOIA Freedom of Information Act

FST Field Support Team

FY Fiscal Year

GFE Government Furnished Equipment

GFM Government Furnished Material

GFP Government Furnished Property

IDIQ Indefinite Delivery Indefinite Quantity

IS Industrial Specialist

LISSR Line Item Schedule Summary Record

MOCAS Mechanization of Contract Administration Services

MOD Modification

NLA Notice of Last Action

NULO Negative Unliquidated Obligation

ODO Other Disbursing Office

OPR Office of Primary Responsibility

OT Other Transactions

PA Property Administrator

PCO Procuring Contracting Officer

PSCN Production Schedule Completion Notice

PIIN Procurement Instrument Identification Number

PLCO Plant Clearance Officer

POP Period of Performance

PO Purchase Order

QA Quality Assurance

QAR Quality Assurance Representative

R&D Research and Development

SBA Small Business Administration

SDW Shared Data Warehouse

SPIIN Supplemental Procurement Instrument Identification Number

ST Special Tooling

STE Special Test Equipment

TCO Terminating Contracting Officer

T&M Time and Material

ULO Unliquidated Obligation

VECP Value Engineering Change Proposal

VIQ Variation in Quantity

WIP Work in Process

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REFERENCES

FAR 4.804, Closeout of Contract Files

FAR 31.201-2, Determining Allowability

FAR 42.708, Quick Closeout Procedures

FAR 42.705, Final Indirect Cost Rates

FAR 52.211-16, Variation in Quantity

FAR 52.216-2, Economic Price Adjustment

FAR 52.216-7, Allowable Cost and Payment

FAR 52.216-8, Fixed Fee

FAR 52.216-16, Incentive Price Revision

FAR 52.232-7, Payments under Time and Material/Labor Hour Contracts

DFARS 204.804, Closeout of Contract Files

Trusted Agents Procedural Guide

DLAM 8000.3, MOCAS Manual, Part 2, Chapter 4, Prime Contract Closeout Procedures

DCMA Contract Closeout Center Web Page

DCMA Integrity of MOCAS Delivery Performance Data Document

Acquisition Community Connection: Contract Closeout

Air Force Material Command (AFMC) Contract Closeout Guide

Indirect-Cost Management Guide (Navigating the Sea of Overhead)

MOCAS Closeout Checklist

Information for Contractors by DCAA - January 2004

EDW 3.1 Documentation

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CONTRACT CLOSEOUT TIME STANDARDS

FAR 4.804 establishes specific time periods for closing contracts. Timely closeout deobligates and returns funds for possible use elsewhere. It also minimizes the costs associated with administration and closeout processes. This benefits all parties and allows all affected activities to concentrate on current and future requirements.

Based on Physical Completion

The time period for closing a contract is based upon both the type of contract and date of physical completion. A contract is considered to be physically complete when:

The contractor has completed the required deliveries and the Government has inspected and accepted the supplies.
The contractor has performed all services and the Government has accepted these services.
All Option provisions, if any, have expired.
The Government has given the contractor a notice of complete contract termination.
Facilities contracts and rentals, use and storage agreements are considered to be physically complete when:

o The Government has given the contractor a notice of complete contract termination.

o The contract period has expired.

Time Standards (in accordance with FAR 4.804)

Files for contracts using simplified acquisition procedures should be considered closed when the contracting officer receives evidence of receipt of property and final payment, unless otherwise specified by agency regulations.

Files for firm-fixed-price contracts, other than those using simplified acquisition procedures, should be closed within 6 months after the date on which the contracting officer receives evidence of physical completion.

Files for contracts requiring settlement of indirect cost rates should be closed within 36 months of the month in which the contracting officer receives evidence of physical completion. (Cost-Reimbursement Contracts including Time and Material (T&M) and Labor Hour (LH) contracts)

Files for all other contracts should be closed within 20 months of the date in which the contracting officer receives evidence of physical completion. (All Other Contract Types)

Closeout timeframe prior to a contract becoming overage:

Contract Type*

Fixed Price Unilateral Contracts 3 Months J

Under $25,000

All other Fixed Price Contracts 6 Months J

Contracts that require the

Settlement of overhead rates 36 Months L, R, S, T, U, V, Y and Z

All other contracts 20 Months A, K, and Basics/BOAs

*TYPE OF CONTRACT CODES

A FIXED PRICE REDETERMINATION

J FIRM FIXED PRICE

K FIXED PRICE W/ECONOMIC PRICE ADJUSTMENT

L FIXED PRICE INCENTIVE

R COST-PLUS AWARD FEE

S COST CONTRACT

T COST SHARING

U COST-PLUS-FIXED-FEE

V COST PLUS INCENTIVE FEE

Y TIME AND MATERIALS

Z LABOR HOUR

An Overage List can be obtained from the Reveal (UYCM 22) or by reviewing section 2 of the Contract Administration Report (CAR) - (UYCM 16).

PCO Notification

DFARS 204.804-2(2) states that if the Administrative Contracting Officer (ACO) cannot close a contract within the specified time period, the ACO shall notify the Procuring Contracting Officer (PCO). To accomplish this requirement, the current DCMA policy requires the input of a reason for the delay (R2 Delay Reason Code) and a new target date for closeout into MOCAS as soon as you know the contract will become overage. If the contract still is not closed out by the new target date, the ACO shall again notify the PCO by updating the Delay Reason Code and a new target date for closure. To facilitate timely notification to the PCO, the ACO shall input an Estimated Completion Date (ECD) and a Delay Reason code in the R2 line of MOCAS. This will transmit an unclosed contract status notification (PKX) to the PCO (which is the DFARS allowed electronic equivalent of the interim DD 1594).

R2 CODING FOR OVERAGE CONTRACTS

The ACO is responsible for coding overage Part A, section 2 contracts with an Estimated Completion Date (ECD) and R2 Reason for Delay code. The R2 codes identify factors that contribute to the delay in closing the contract within the mandated FAR timeframes. DCMA policy requires the input of a reason for the delay and new target date for closeout as soon as you know that the contract will become overage. To provide a better explanation as to why the contract is overage, you may add information in the ACO notebook. The ACO must input an “Office of Primary Responsibility” (OPR) code in the R9 remark line when certain R2 Delay overage reason codes (Codes F, H, M, P, V, or W) are used. The OPR codes (70 Series) are:

71 – Services
72 – Contractor
73 – DCMA
74 – DCAA
75 – DFAS

The ACO is not responsible for inputting codes for Part B, section 2 contracts. DFAS is responsible for the administration and closeout of Part B contracts. If DFAS has problems closing Part B contracts, they may request the assistance from the ACO.

List of reason codes

R2 Codes	MOCAS/MILSCAP Description	Clarifications	OPR
A	Contractor has not submitted final invoice/voucher	Contractor has not submitted a final bill for payment. For cost contracts, final indirect rates have been established.	Contractor (72)
B	Final acceptance not received	Awaiting destination acceptance from the Buying or Receiving Activity.	Services (71)
C	Contractor has not submitted patent/royalty report	For Patents—DD Form 882 or equivalent has not been received from the contractor per applicable FAR clauses.	Contractor (72)
D	Patent/royalty clearance required	Contractor has submitted the final DD Form 882, or equivalent. The Form has been forwarded to the Buying Activity for approval.	Services (71)
E	Contractor has not submitted proposal for final price redetermination	Use this code until the contracting officer receives an adequate final price redetermination proposal.	Contractor (72)
F	Supplemental agreement covering final price redetermination required	Use this code while the final price redetermination proposal is being reviewed or negotiated. An OPR code is required to signify which party’s actions are currently open.	Services (71) Contractor (72) DCMA (73)
G	Settlement of subcontracts pending	Pending settlement of subcontract(s); may impact final voucher submission.	Contractor (72)
H	Final audit in process	DCAA performing final Contract Audit Closing Statement on final voucher or DCMA using Cumulative Allowable Cost Worksheet (CACWS) and/or risk based approach for auditing final voucher.	DCMA (73) DCAA (74)
J	Disallowed cost pending	ACO in process of resolving DCAA Form 1 issue or similar disallowed cost issue.	DCMA (73)
K	Final audit of Gov property pending	DO NOT USE: Use Reason Code “V” for Property Issues.	N/A
L	Independent research & development rates pending	DO NOT USE: The Reason Code is obsolete for contracts after October 1992. Use Reason Code "M" for rates.	N/A
M	Negotiation of overhead rates pending	Identification of OPR combined with “M” code will provide visibility of the current O/H action (e.g. awaiting KTR proposal, audit or negotiation.	Contractor (72) DCMA (73) DCAA (74)
N	Additional funds requested but not yet received	The PCO has been requested to provide additional funds for various reasons (e.g. cost overruns). When contract is awaiting replacement funds for canceled appropriations, use Reason Code "Y" when final invoice/voucher has been forwarded to DFAS.	Services (71)
P	Reconciliation with paying office and contractor being accomplished	Provide visibility as to the basis for the reconciliation delay (e.g. disbursement audit in process (DFAS), obligation audit in process (DCMA), or awaiting payment history and/or information (Contractor).)	Contractor (72) DCMA (73) DFAS (75)
Q	Armed Services Board of Contract Appeals case	Contract should be moved to Section 3 once the ASBCA docket number is assigned. The docket number should be entered in the R3 Remarks.	DCMA (73)
R	Public Law 85-804 case	50 USC [Chapter 29] 1431 - P.L. 85-804 applies to Extraordinary Contractual Actions.	DCMA (73)
S	Litigation/investigation pending	Either fraud investigation activity is in process, or contractual issue is not resolved or claim has been received by contracting officer. Contract should be moved to Section 3 (BCA/CIL/CLL) once contract is in Federal Courts and/or DOJ opens a case.	DCMA (73)
T	Termination in process	Mainly used for Termination for Default. DCMA provides assistance to PCO on contract history (e.g. delivery, financing payments, excess funds, reprocurement costs, etc.) Termination for Convenience contracts should be moved to Section 3.	DCMA (73)
U	Warranty clause action pending	Open warranty action(s) currently being processed IAW FAR 46.709 and -10.	DCMA (73)
V	Disposition of Gov Property pending	Identification of OPR combined with "V" will provide visibility into delay (e.g. awaiting PCO disposition instructions (Services), contractor submittal of inventory schedules (KTR), or actions by Property Administrator (PA) and/or Plant Clearance Officer (DCMA). PA inputs R9 55 once all property actions are closed.	Services (71) Contractor (72) DCMA (73)
W	Contract modification pending	Contract modification awaiting contractor signature, PCO issuance of modification or ACO modification actions.	Services (71) Contractor (72) DCMA (73)
X	Contract release and assignment pending	Awaiting contractor’s submission of the release and assignment.	Contractor (72)
Y	Awaiting notice of final payment	Proper final invoice/voucher forwarded to DFAS for payment, awaiting payment.	DFAS (75)
Z	Disposition of classified material pending	Awaiting disposition instructions on classified materials from the Buying Activity. The ACO is responsible for notifying DIS that the contract is complete and classified material should be dispositioned.	Services (71)
1	Canceled Funds	DO NOT USE: Use Reason Code “Y" when final invoice/voucher has been forwarded to DFAS.	N/A
2	Appropriations in Red	DO NOT USE	N/A
3	Prevalidation Action Pending	Voucher/invoice at DFAS pending prevalidation process before payment.	DFAS (75)
6	Fee Withheld	Fee withheld awaiting resolution of issue before final payment can be made.	DCMA (73)
7	Awaiting Removal from Excess Funds	The ACO has deobligation authority. (Reference Policy Change Notice 00-212)	DCMA (73)

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BASIC CONTRACT CLOSEOUT

This section will focus on the basics of closing a contract. In closeout, the contract administration office files feeds into the closeout process at the buying office. “All other contract files shall be closed as soon as practicable after the contracting officer receives a contract completion statement from the contract administration office.” (Ref. FAR 4.804-2(b)) In general, closeout of a contract should not be a very difficult task. The easiest contracts to close are Firm Fixed Price contracts without special provisions, short term and with simple funding (as opposed to complex funding with multiple ACRNs to CLINs). The most difficult are Cost-Type contracts with special provisions, long term (years of effort), complex funding (CLINs have multiple ACRNs for various funding sources).

In addition, the biggest factor that drives the level of difficulty in closeout of a contract is how well the contract was managed from the start of the period of performance though physical completion to the point of closeout. Contracts that require the most effort to close are the ones that have had the least amount of attention during the life of the contract. Waiting this long can allow difficulties to develop, for example, if it is a Firm Fixed Price contract you may have difficulty finding evidence of acceptance (Destination Acceptance), as the amount time that passes increases, so can the difficulty. Contracts that are other than Firm Fixed Priced have the potential for even more difficulties to develop as time passes. These difficulties range from tracking down such things as Patent Reports that were required years ago during the life of the contract to balancing the Line Item Schedule Summary Record (LISSR) or reconciling the funds in the contract file with those in the payment office or customer office. The basic assumption for this section, Basic Contract Closeout, is that if during the contract receipt and review process any special provisions were identified and the contract was managed through it’s active life, the contract should be able to be closed without difficultly.

The contract closeout process should start with the contact receipt and review process and proceed throughout the life of the contract. Special provisions of the contract should be identified and annotated in any way that will flag the need for some type of action as required by the special provisions. This is especially true for the MOCAS remarks sections (i.e. R9 or ACO remarks) both for data integrity and management of the contract. With all contract requirements having been met and the contract physical complete, it should automatically move to section 2 in MOCAS.

What You Can Do To Simplify Closeout

Make your plans for closeout as soon as you get the contract. Initial input is a determinant impacting contract closeout. If it goes in right the first time, it’ll close with the least amount of pain.
Work on contracts before they become a problem.

Each contract and closeout stands on its own. Very few are the same.
Keep good notes in the file all along. Even though you think you will remember what has gone on with a contract, you probably will not as the days, months, and years pass by. The more information that you keep in the file, the less time you will spend trying to re-invent history.
Get to know your contractors, and let them get to know you. Take the time to go over the regulations. It is worth the effort.
The more informed a contractor gets, the easier it is to do your job. If the contractor does not know the rules, you will always have problems with administration and closeout.
In order to keep contractors up on things, you must also keep up yourself. Try to read up on changes and updates on a regular basis.

Check for Payment Instructions

ACOs and CAs are reminded to review all contracts for specific payment instructions on how to allocate payment amounts to Accounting Classification Record Numbers (ACRNs) as required by DFARS 204.7107(e)(3)(i).

All contracts containing multiple-funded contract line items must include adequate payment instructions.
Payment instructions must be revised if additional ACRNs are added to the contract.

After contract review, when the ACO and CA determine payment instructions are in the contract, they must ensure the payment instructions are annotated in MOCAS.

If the ACO/CA determines payment instructions are required and have not been included in the contract, they should request payment instructions from the Procuring Contracting Officer. Once received, they then need to ensure they are annotated in MOCAS.

Defense Procurement and Acquisition Policy issued a memorandum September 9, 2003, DoD Contract Payments - DFARS 204.7107(e)(3)(i) to remind contracting officers to include payment instructions as required by DFARS 204.7107(e)(3)(i).

What Contractors Should Do To Simplify Closeout

Prepare and distribute DD 250s properly.
Prepare and distribute invoices and vouchers properly.
Track payments and verify accuracy.
Track funds accordingly and respond to the Limitation of Cost/Funds Clause.
Immediately report any overpayments.
Adhere to the patent requirements of the contract.
Furnish Overhead Rate Submission within 6 months after the end of their fiscal year.
Upon settlement of overhead rates - prepare final vouchers within 4 months or prepare adjustment vouchers for contracts that will remain open with additional unsettled Overhead years.
Review any contracts that may be qualified for Quick Closeout.

Physical Completion

If the contract is physically complete and not in section 2, the first step would be to verify that the contract is physically complete and if so, determine why it did not move to section 2. After identifying the error(s) preventing the contract from moving to section 2, correct the error(s) and move the contract to section 2 and proceed with closeout.

Once the contract moves to section 2, MOCAS will generate an interim PK9 (which is required by DFARS 204.804-2 (1)(i), “Provide the contracting office an interim contract completion statement when the contract is physically completed and accepted. The interim PK9 will automatically be sent to the buying activity providing notice of physical completion and represents a start date for contract closeout. The contract should be ready for closeout and closeout of the contract should happen within the FAR required time periods (see CONTRACT CLOSEOUT TIME STANDARDS). Caution, even if a contract is physically complete, it should not be closed if the contract is in litigation or under appeal or in the case of a termination, all termination actions have not been completed (Ref. FAR 4.804-1(c)). In the case of a contract being in litigation or under appeal it should be in MOCAS section 3. When moving a contract to section 3, enter the appropriate dormancy reason code. Refer to the MOCAS Manual, DLAM 8000.3, section 2.1.9 “MOVEMENT OF CAR PART A CONTRACTS INTO SECTION 3” for both the movement of the contract and review of dormancy reason codes. Once contracts have been entered into section 3, they should be reviewed periodically to see if the Reason for Dormancy Code originally entered accurately reflects the current status of the contract. If not, that code should be updated. For example, a contract was originally entered into section 3 with the Reason Code BCA (Armed Services Board of Contract Appeals (ASBCA) Case). Since then, the appeal has been disposed of but the contractor has filed for protection under the Bankruptcy Act. Accordingly, the Reason Code should be updated to BKRPT (Bankruptcy). In addition, if the Estimated Completion/Closing date is anticipated to exceed the allowed Overage date then an ECD must be entered. This transaction will cause a PKX notification of delay in closing be transmitted to the PCO as required by MILSCAP

Section 3 Dormant Reason Codes

CODE EXPLANATION

BCA Armed Services Board of Contract Appeals (ASBCA) Case

TERM-C Termination for Convenience

PL Public Law-Claim Pending (e.g., PL 85-804)

BKRPT Bankruptcy

CIL Contractor in Litigation

CLL Under Investigation

GUA Contract containing provisions for extended testing periods after

shipment and before final notice of acceptance from an estimation

where final payment is withheld from contractor

LLD Labor Law Determination

VE Contingent Value Engineering Payment

DEBT Deferred DEBT - Request for Debt DEFERRAL has been approved by the

Finance Officer

NOTES:

R3 Reason Code DEBT must be used in Conjunction with R9 - 64, Deferred Debt
TERM-D (Termination for Default) is not a valid section 3 code

Now the actual closeout can occur

If all contract terms and condition were met, then follow FAR 4.804-5, Procedures for Closing Out Contract Files. At the outset of this process, the contract management office must review the contract funds status and notify the contracting office of any excess funds the contract administration office might deobligate. The next part of the process is basically a checklist of actions that must be accomplished as they are applicable to the contract and these are:

Issue an interim contract completion statement
Ensure disposition of classified material is completed
Final patent report submitted
Final patent report is cleared
Final royalty report submitted
Final royalty report is cleared
Ensure there are no outstanding value engineering change proposals
Property clearance is received
Plant clearance report 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
Final subcontracting plan report is submitted
Termination docket is completed
Contract audit is completed
Contractor's closing statement (release) is completed
Contractor's final invoice/voucher has been submitted
Evidence of final voucher paid
Contract funds review is completed and excess funds deobligated

Once all applicable actions are verified as completed, the contracting officer administering the contract signs the NLA and processes the Final Payment NLA in MOCAS. MOCAS will send a contract completion statement (PK9) electronically to the contracting office and one should be placed in the appropriate contract management office file.

If for some reason the contract is not in MOCAS, the ACO has to initiate a contract completion statement (DD Form 1594), containing the contract administration office name and address; contracting office name and address; contract number; last modification number; last call or order number; contractor name and address; dollar amount of excess funds, if any; voucher number and date, if final payment has been made; invoice number and date, if the final approved invoice has been forwarded to a disbursing office of another agency or activity and the status of the payment is unknown; a statement that all required contract administration actions have been fully and satisfactorily accomplished; name and signature of the contracting officer; and date. Since the contract was not in MOCAS, the original contract completion statement must be sent to the contracting office and a copy placed in the appropriate contract administration file.

The contract is closed

The contract management office file is now closed. All of the efforts made during the performance of the contract to make sure the contract requirements are met, support the closeout effort. In other words, if the contract was managed during its active phase and problems taken care of; the easier the contract is to close. However, if problems were not resolved upfront, they will haunt you in the closeout phase. If the terms and conditions of the contract were not met, then areas that are lacking will make difficulties in the closeout process. The aim of this guidebook is to help in dealing with not only these difficulties but also other problems that may be encountered during the closeout process.

Closed-Contract Database (CCDB)

The Closed-Contract Database (CCDB) system acts as a repository of MOCAS closed-contract data that may be viewed on-line. The CCDB will allow all MOCAS data related to a contract to be saved onto an optical storage device and retained for ten years. The data will be viewable and retrievable. Authorized users may use it as the source of data required to reopen a closed contract in MOCAS. When contracts are closed in MOCAS (section 5), all contract data is copied to an optical storage device. CCDB was implemented in December 2000 – contracts closed after this date are stored in the CCDB. DLAM 8000.3 MOCAS Users Manual For Contract Administration, Chapter 11 contains instructions for using the CCDB.

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FIXED PRICED CONTRACT CLOSEOUT

Difficulties encountered in closing out fixed price contracts are more than likely associated with documentation of deliverables or with unliquidated obligation balances.

Contracts will remain in CAR section 1 until both of the following conditions have been met:

A final acceptance document (Z-DD250 or other acceptance document) has been received and entered into MOCAS.
The LISSR shows that the quantity of items shipped equals the quantity of items ordered (e.g., all line items are balanced), or are within the authorized quantity overrun/underrun variances of the contract.

The final shipment document should be the alert to the Industrial Specialists or Procurement Technician to input production history in MOCAS which will generate a “Production Complete” remark on the R8 line of the MOCAS data record. The presence, or lack thereof, the production complete remark has no bearing on whether a contract moves automatically to section 2.

The contract should automatically move to section 2 after the final acceptance information has been processed. The movement of a contract into section 2 causes several things to happen.

A Final Acceptance date (FAD) appears on the R2 line of the MOCAS Data record.

The MOCAS 6-month closeout clock starts when the contract moves to Section 2 (physical completion date).

An interim PK9, (Physically Completed and Accepted) will automatically be sent to the buying activity providing notice of physical completion and represents a start date for contract closeout.

Problems with Contracts Moving to CAR Section 2

If problems are encountered with contracts not automatically moving to section 2, the following checks are suggested:

Has the final acceptance document (Z-DD250 or other acceptance document) been entered into MOCAS?

If not, that action should be coordinated with the CMO Terminal (DD 250 input), QAR and/or contractor to make sure that the final acceptance document is input into MOCAS.

Screen the LISSR for out of balance line items.

Use norm analysis in Contract Management Paperless Support System (COMPASS) or Shared Data Warehouse (SDW) to identify contracts in Section 1 that are 30 days past their FDD and have production history built into MOCAS.

Action should also be taken to ascertain the appropriateness of the R8 remark. If the production history was entered in error, the Industrial Specialist or Procurement Technician should take appropriate action.

Awaiting Final Acceptance

Contracts with destination acceptance requirements may hold up movement to section 2. Obtaining this acceptance is a DFAS responsibility. However, many times final acceptance documents will not be received at the CMO Terminal or at the payment office. The ACO can then request a statement of final acceptance from the customer and annotate the ACO notebook.

Data items on a DD Form 1423, Contract Data Requirements List (CDRL) that do not require a DD Form 250 and are not separately priced, are consolidated into a single ‘dummy’ service line item in MOCAS. A DCMA Notice of Completion may be utilized to signify completion of this item. See DCMA Integrity of MOCAS Delivery Performance Data Document for information on how to process the DCMA Notice of Completion.

A thorough review of the contract file ensures all modifications are accounted for and determines proof of missing acceptance documents. For missing documents check with the contractor, DFAS, the receiving activity, or the buying activity. In all cases, if no final DD Form 250 is available, the contractor history will be input using “PROD001” as the shipment number.

The presence of the ACO Notebook In-the-Clear remarks is critical. They are the sole indicator to DFAS that proper actions have been taken by DCMA personnel to manually move these contracts to CAR Section 2 and that they should NOT move them back to CAR Section 1.

After Movement to CAR Section 2

Movement of a contract into section 2 will prompt the ACO to perform several actions.

Closeout Checklist

The completion of the DD Form 1597 should be used as a tool for ensuring all necessary steps in the closeout process are completed on other than firm fixed price type contracts and firm fixed price contracts with special close out actions. The DD 1597 is optional for all other contracts. It is a good idea to begin filling out a checklist when a contract moves into section 2. All closeout actions are listed on one sheet and the ACO will not have to dig through a folder to find out when or what happened with a closeout action.

All Deliveries Accepted

Identify and Deobligate Excess Funds

All Actions Definitzed

Subcontracts Closed

Disposition of Government Property

Disposition of Classified Material

Final Patent Report

Final Royalties Report

No Outstanding VECPs

Terminations/Claims/Disputes

Litigation Resolved

Warranty

All Deliveries Accepted

The ACO must ensure that all separately deliverable contract items such as hardware, data, software, spares, and support equipment have been delivered and accepted by the government before the contract can be closed out.

Identify and Remove Excess Funds

FAR 4.804-5 explains that once a CMO receives evidence of physical completion, they will review the contract funds status and notify the PCO of any excess funds available for deobligation at the outset of the closeout process. It is recommended that this notification be done by e-mail with a return receipt to confirm notification.

When excess or negative unliquidated funds exist, a funds review should be performed at the ACRN level to determine the cause.

If it is determined those excess funds are as a result of unperformed work due to a specific line item or deliverable on the contract, these should be removed and the ACO shall issue a modification accomplishing the deobligation. The CMO is no longer required to obtain PCO authorization prior to deobligating excess funds, however, the ACO should notify the PCO before the action is taken.

If there is a Negative ULO (NULO) at the contract or ACRN level, any adjustments shall be made by sending a DD 1797 to DFAS explaining the discrepancy and the action required.

Does the WIP ULO balance equal $0.00? Unliquidated progress payment balances shall be cleared prior to closeout. In order to clear the WIP ULO, it is recommended that research be conducted with the contractor and DFAS to resolve problems.

Final shipment and acceptance of the product/service on firm fixed price contracts entitles the contractor to receive final payment. The same is not true for cost and fixed price incentive (FPI) contracts. These contract types require settlement of final overhead rates and of the incentive aspects of the contracts. In some cases, funds that will no longer be required have been obligated on the contract; e.g., underruns, quantity variance, or situations such as maintenance and repair contracts where the quantities repaired were less than the originally funded estimate. Because ACO settlement of overhead rates with DoD contractors can be a lengthy process, it is important to review contracts to identify and remove excess funds at the time of physical completion. Working with the contractor, the ACO should estimate the total government monetary liability under the contract. Historically, funds have generally not been declared excess until completion of the settlement process; however, the contracting officer should accomplish an initial funds review within 30 days of contract completion. Issuing a contract modification deobligating excess funds as early as possible is in the Procurement Office's best interest, but it is equally important to avoid deobligating funds that may be needed for final payment.

On occasion, problems arise in closing out contracts with a .01 ULO remaining on the ACRNS. The .01 ULO was used to identify cancelled funds process prior to the alpha cancelled funds indicator process. Send a 1797 to DFAS asking them to adjust the “penny down” and close the contract. DFAS has been working on reducing their backlog of 1797 adjustment requests from ACOs and are making progress. If you have one or a group of adjustments that you feel should have been taken care of by now, please contact your District Performance Advocates or Field Support Team (FST) member for assistance.

All Actions Definitzed

Occasionally, urgent or unusual circumstances under a DoD contract necessitate authorizing a contractor to start work on a contract action/change without the price being definitively negotiated. The contract modification authorizing such effort must include a NOT-TO-EXCEED (NTE) or ceiling price and a schedule for definitization. Prior to contract close-out, the ACO and PCO must work together to ensure that all actions under the contract have been definitized.

Subcontracts Closed

The prime contractor must go through procedures with its subcontractors who are similar to those used by the government. The ACO must ensure that all of the prime's subcontracts have been paid and closed before the prime contract can be eligible for contract close-out.

Disposition of Government Property

Has all Government Furnished Property (GFP) been dispositioned? Government property provided to the contractor during contract performance and not consumed must be dispositioned at the end of the contract. Any property acquired or manufactured by the contractor, but is excess to the contract at completion, may also become government property under certain conditions. This property also must be dispositioned before the contract can be closed out. The FAR provides procedures for the proper disposition of government property, which include contractor reporting of all government property, government review of the report, and specific instructions to the contractor as to whether the property is to be shipped, left in place, or scrapped.

If the contract contains property clauses, a DD 1593, Contract Administration Completion Record, is automatically generated by MOCAS when the contract becomes physically complete and can be retrieved by the CMO through REVEAL. When the property has been cleared the property administrator inputs the disposition into DPADs and an R9 code “55” will appear in MOCAS. If the Code 55 is missing, a DD 1593 should be submitted to the Property Administrator for review and clearance. The contract will not close unless the Code 55 remark is indicated.

Disposition of Classified Material

Does the contract contain classified material (DD 254)? All classified documents involved in the contract must be dispositioned in accordance with government security regulations and accounted for by the contractor before the contract may be closed. This can be accomplished when a final DD Form 254, DoD Contract Security Classification Specification, is issued indicating disposition or the contractor provides written certification that all data has been properly processed. (See DODD 5220.22-M, National Industrial Security Program Operating Manual about disposition and retention). Be sure the prime contractor has cleared all subcontracting DD 254s.

Upon physical completion of a contract, a copy of the DD Form 1593, marked "Information Copy" is sent to cognizant Industrial Security Office. The cognizant Industrial Security Office can be found on the contract DD 254. The ACO does not need confirmation or certification of completed actions from the security office to proceed with closeout.

Final Patent Report

Have all final reports been obtained and forwarded to the buying activity? If the contract contains a patent rights clause, FAR 52.227-11, 12, or 13, a final patent report must be submitted by the contractor, preferably on a DD Form 882, Report of Inventions and Subcontracts, within 3 months after physical completion of the contract. It must list all patent claims made under the contract or certify that there were no inventions and list all subcontracts which include a patents rights clause or certify that no subcontracts were issued with this requirement. If the contract contains FAR 52.227-11, Patent Rights -- Retention by the Contractor (Short Form), a final patent report is required only if there is an invention. If DFARS 252.227-7039, Patents--Reporting of Subject Inventions, is also in the contract a final report is required within three (3) months after completion of the contracted work, listing all subject inventions or stating that there were no such inventions. Finally, if the contract contains FAR 52.227-12, Patent Rights -- Retention by the Contractor (Long Form), whether DFARS 252.227-7039, Patents--Reporting of Subject Inventions, is in the contract or not, there would be a final report required.

In accordance with contract provisions, the contractor will submit a final report of inventions (DD Form 882 – reports of Inventions and Subcontracts). The ACO will also obtain a copy of the DD 882 and will forward the report (including negative reports) to the PCO requesting that the report be sent to the program office and cognizant patent counsel for clearance.

Negative DD 882s

If the final patent report is negative and there is nothing to indicate otherwise, the ACO may include language in their letter to the PCO requesting patent clearance that if DCMA does not receive a response to its request for patent clearance within 60 days, patent clearance will be deemed to have been issued.

Use of the 60-day response deadline should be limited to instances where the final patent report reflects an absence of patentable invention. If the ACO forwards the DD 882 to the PCO together with a cover letter stating that “if the PCO fails to issue a response within 60 days, patent clearance will be deemed to have been issued”, the following is required:

The DD 882 or patent report is negative.
ACO proactively verifies information on the negative DD 882 and includes the basis for his/her opinion (progress report, lab report, interim patent reports, comments from quality assurance specialists/program integrators, final technical report etc.) in the request for patent clearance letter.
Documented aggressive follow-up by the ACO on the status of the pending request for patent clearance during the 60-day period.
Include an invitation to the PCO/patent counsel to voice their objection to the 60-day response if he/or she desires.

It is important to note that pursuant to FAR 227-12(n)(3), the Government has a 3-year look-back period after final payment on the contract to examine the books and records of the contractor for the purpose of asserting title and/or determining ownership rights to patentable subject inventions if the final patent report is found unacceptable. The contractor has a regulatory duty to retain its books and records for 3 years after final payment on the contract. As such, if in the unlikely event an unreported invention is discovered after final payment, the contract can be reopened and the invention issues addressed.

Other than Negative DD 882s

If the DD 882 contains a report of patentable subject inventions or if the ACO has reason to believe that a negative DD 882 has failed to disclose a subject invention, the ACO will not use the 60-day response in their forwarding letter to the PCO. In instances where there is reason to suspect that subject inventions should be reported, it is appropriate to wait for the performance of a thorough and complete review by the PCO/patent counsel.

It would not be appropriate to use the 60-day response in instances where patentable subject inventions are reported on the contract or if cognizant personnel have reason to believe that subject inventions should be considered for a patent.

Final Royalties Report

If the contract contains a refund of royalties’ clause, FAR 52.227-9, a final royalty report must be submitted by the contractor stating the royalties paid or required to be paid. This report must be submitted before final contract payment

Value Engineering Change Proposals

If the contract includes FAR 52.248-1, verify no outstanding VECPs requiring payment or disposition exist before closing contract.

Terminations/Claims/Disputes

All open actions and liabilities must be resolved prior to close-out. The government may at any time during contract performance fully or partially terminate contracts for default or for convenience. The government may terminate a contract for default when the contractor has materially breached the contract, i.e., failed to deliver contract items on schedule. Under termination for default, the contractor is liable for any subsequent acquisition costs of the terminated items. The government may also terminate a contract for convenience. Termination for convenience can occur as the result of Congress withholding funding of the project, or the program office or user determining that the item is no longer required. Pursuant to the Termination for Convenience clause the government is liable for certain costs.

A contractor at any time has a right to submit a claim against the government for a perceived government liability which at the time is not recognized in the contract. An example of such a claim is when the contractor submits a proposal because it asserts that a government individual by his actions required the contractor to accomplish effort not specified in the contract.

If a claim is denied by the government, or the government and the contractor cannot agree on certain other contract issues, the Disputes clause of the contract allows, under certain circumstances, the contractor to submit its dispute to a third party such as the Armed Services Board of Contracts Appeal (ASBCA) for resolution. Alternate Dispute Resolution is another means available to both parties.

Litigation Resolved

The contractor, under the Disputes Clause, may appeal a decision of the contracting officer directly to the Court of Federal Claims. Also, the prime contractor may sue or be sued by a subcontractor for damages related to the contract in question. The ACO and PCO must work together to ensure that any litigation and resulting cost impact is resolved under the contract before the contract may be closed out.

Warranty

The FAR contains a number of warranty clauses suitable for use in different acquisition situations. Some of the warranty clauses can extend well beyond the physical completion of the contract. As long as there is not a CLIN or money attached for extended warranty, the contract should not be held open just for warranty. The contractor should have a process on how to handle a warranty item and if necessary; the contract can always be reopened through the CCDB. Just because a contract is closed in MOCAS does not relieve the contractor of his contractual responsibility to perform under the warranty clause. Contract containing provisions for extended testing periods after shipment and before final notice of acceptance where final payment is withheld from contractor should be moved to MOCAS section 3 and coded “GUA”.

The ACO and PCO must work together to ensure that any and all of the above situations have been settled before either can complete the contract close-out process.

Excess vs. Remaining Funds

After contracts are physically complete and ready to be closed, except for funds, there may be instances where money is still on the contract. In these instances a review must be accomplished to ascertain whether the funds are “excess” or “remaining” to the contract requirements. Upon completion of the review, the circumstances that cause the funds balance will dictate whether funds must be deobligated via modification because they were “excess” to contract requirements, or Q finaled because they are “remaining” funds.

“Excess funds” are defined as “funds relating to a specific line item or deliverable that was not performed on a contract.” If the funds are “Excess Funds”, a contract modification will be issued to deobligate these excess funds. Some examples of contracts that have “excess funds” follow:

Deliverable CLIN: Contract required 10 widgets. 8 widgets have been delivered and 2 widgets will not be delivered. Because the contract required 10 widgets and the contractor is not going to deliver (perform as required by contract), the funds associated with the 2 widgets are “excess funds” and must be deobligated via modification.
Non-Deliverable CLIN: Contract called for 5 trips. 3 trips were accomplished and 2 were not. Because 2 trips were not performed as required by the contract, the monies associated with these 2 trips are considered “excess funds” and must be deobligated via a modification.

“Remaining funds” are those funds left on contract due to price variance, rounding or cost underrun funding and where all contract performance as required by the contract has been completed. If the funds are “Remaining Funds”, the ACO Notebook will be annotated with a remark that the $XX (Amount of Funds) funds are remaining funds. Some examples of contracts that have “remaining funds” follow:

Deliverable CLIN: Contract required 10 widgets. 10 widgets were delivered. However, they contractor billed less than the price contained in the contract and does not plan to bill at the contract price. The money leftover is “remaining funds” and is systematically removed via the “Q Final” process in MOCAS. The ACO must annotate the ACO Notebook in MOCAS with the amount of the remaining funds and process the F NLA in MOCAS. This allows the mechanical removal of funds in MOCAS, alerts the PCO not to reopen the contract, and generates the PK9 transaction (notifies PCO that contract is administratively closed) and identifies “remaining funds.” PCO is responsible for notifying the funding station so it may close contract.
Non-Deliverable CLIN: Contract is for travel. The number of trips is not specified and performance is complete and accepted. The money leftover is “remaining funds” and ACO should follow the “Q final” process to close the contract.

If there is not a defined deliverable, the ACO must determine whether contract performance as required by the contract is acceptable/complete. If it is, the funds are considered “remaining” and the “Q Final” process should be utilized.

Movement to CAR Section 5

Once all required closeout actions have been completed, the ACO should take the following actions to effect the movement of the contract out of MOCAS and to provide closeout notification to the buying activity.

Verify that a Final Pay NLA has been issued. For Part A contracts, MOCAS will generate the NLA when final payment has been processed. (Reminder: If MOCAS does not contain final payment information on the CCN screen (final voucher number and final payment date), the ACO should create a G NLA, which will populate those fields and allow an F NLA to process.

Once the Final Pay NLA remark is entered on the R7 line of the MOCAS data record, the ACO can proceed with closeout in accordance with MOCAS Manual, DLAM 8000.3, chapter 4, Section 2.4.5. On the following workday, the ACO should verify that the contract actually moved to Section 5.

MOCAS will automatically generate a PK9, Contract Completion Statement, in lieu of a DD 1594, which notifies the buying activity that the contract is closed.

FIXED PRICE CLOSEOUT CHECKLIST

Action	Completed (Y/N)	Date
Final Acceptance Received?
Final Acceptance Entered in MOCAS?
LISSR Data Balanced (Line Items)?
PSCN Data Entered ("Prod Complete" Remark on R8)?
Contract Moved to Section 2?
ULO Balance Equal $0.00
PCO Notified of Excess Funds?
ACO Deobligated Excess Funds with Modification?
WIP ULO Balance Equal $0.00? (Progress Payment ULO)
Has Government Property Been Cleared?
Has Industrial Security Office Been Notified, for classified contracts?
Final Royalty Report Received from Contractor?
Final Royalty Report Clearance Received from PCO?
Final Report of Inventions (DD882) Received from Contractor?
Final Report of Inventions Clearance Received from PCO?
Final Pay NLA or DD1593 Issued?
Final NLA or DD1593 Signed and Processed by ACO?
Contract Moved to Section 5?
Non-MOCAS Contracts - DD1594 Completed for Contract File?

Closing DLA Other Disbursing Office (ODO) Contracts

When DCMA entered into the agreement to administer contracts paid out of SAMMS for DLA, a Class Deviation was issued which relieved the ACO from the FAR/DFARS requirement to track final payment and perform an excess funds review/ recommendation on these contracts. DLA ODOs close automatically if they are in MOCAS Part A and coded correctly.

Criteria for DLA ODO Auto Closeout:

Dept Code = S
Contract Level Pay Office = “9”
R-9 Remark Contains “70”
Physical Completion Date is at least 30 days prior
One of 5 SAMMS Pay Office DODAACs is on the ACRNs (S33181, S33184, S44073, S36054, SC0100)
No R-9 56 Is Present

If in the rare instance the ACO wants to prevent automatic closeout of DLA ODOs, a R9 remark 56 should be entered. This remark (56) in combination with the R9 70 will cause this contract to be bypassed by the automatic closeout process. The ACO will have to enter a G and F NLA to close these contracts.

Closing Non DLA Other Disbursing Office (ODO) Contracts

For Other Disbursing Office (ODO) contracts, with the exception of DLA ODOs verification should be made with the payment office that final payment has been made and that the ULO balance equals zero.

Criteria for NonDLA ODO:

Ensure all non DLA ODOs have the R9 remark code 54.
Ensure all ACO/ PCO modifications and DD 250s are entered into MOCAS.
Verify that the Line Item Schedule Summary Record (LISSR) is balanced.
Ensure all contractual actions have been completed. Contact payment office and verify that final payment has been made and that the ULO balance equals zero. Sources for Payment Info: Pay Office, VPIS System, PCO, & Contractor
Manually closeout, through the G and F process (trusted agent).

Prepare a DD 1593 or other closeout documentation to show that all actions are complete, create a G NLA and process the F NLA. Complete DD1594, Contract Completion Statement, and send to the PCO with a copy retained in the contract file.

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COST TYPE CONTRACT CLOSEOUT

Cost type contracts are usually the most complex contracts to administer and to close. They rely upon actual costs that may not be agreed to for years after physical completion. There are several initiatives in place that would preclude delays in setting indirect cost rates, including Real Time Rates. However, to prevent closeout problems, the contractor and contract should be monitored.

Monitoring Cost-Reimbursable Contracts

Contractor areas that should be monitored include:

Indirect Cost Settlement

What year are rates settled through?

Are there any overdue cost proposals?

What is the status of DCAA audit of the incurred cost proposal?

What is the status of final voucher submission, by fiscal year?

DCAA Form 1 Issues

Corporate Allocations

Utilization of Quick Closeout

It is helpful when individual contracts are monitored in the following areas:

Period of Performance Timely Submittal of Required Reports and Data Items

Funding Status

Total Obligations by ACRN

Canceling Funds Identified

Current Funding Balance Correct in MOCAS

Public Vouchers

Previous Amounts Paid

Obligated Funds Correct

Fee Withholding

By monitoring contractor and individual contract status, the problems associated with the closeout process, including final reconciliation of funds, will be minimal.

Movement to Section 2 – Physical Completion

Cost type contracts will remain in section 1 until completion of contract performance. Upon evidence of contract completion (receipt of final acceptance document), the Industrial Specialist or Procurement Technician will input the production history and balance the Line Item Schedule and Shipment Record (LISSR). Upon evidence of physical completion, the ACO should request the Trusted Agent (TA) to move the contract to section 2.

After final acceptance, if the contract does not automatically move to section 2, then the ACO shall request the TA to move it to section 2, which causes several things to happen:

A Final Acceptance Date (FAD) and Overage Date now appears on the R2 line of the MOCAS data record.
The MOCAS 36-month closeout clock starts on the date the contract moved to section 2 (physical completion date).
An interim PK9, “Physically Completed and Accepted”, will automatically be sent to the buying activity providing notice of a start date for contract closeout.

Awaiting Final Acceptance

After Movement to CAR Section 2

Movement of a contract into section 2 will prompt the ACO to perform several actions.

Closeout Checklist

The completion of the DD Form 1597 should be used as a tool for ensuring all necessary steps in the closeout process are completed on other than firm-fixed-price type contracts and firm-fixed-price contracts with special closeout actions. The DD 1597 is optional for all other contracts. It is a good idea to begin filling out a checklist when a contract moves into section 2. All closeout actions are listed on one sheet and the ACO will not have to dig through a folder to find out when or what happened with a closeout action.

All Deliveries Accepted

Identify and Deobligate Excess Funds

All Actions Definitzed

Subcontracts Closed

Disposition of Government Property

Disposition of Classified Material

Final Patent Report

Final Royalties Report

No Outstanding VECPs

Terminations/Claims/Disputes

Litigation Resolved

Warranty

These actions are explained in After Movement to CAR Section 2 in the Firm Fixed Price Section of the Guidebook.

Work with DCAA on Final Indirect Rates

Determination of final overhead rates is dependent on a review of the contractor’s incurred direct and indirect costs. FAR 52.216-7 and FAR 52.216-13 requires the contractor to submit a final indirect cost proposal to the Government within 180 days of the close of its fiscal year. The ACO should work jointly with DCAA to prioritize the list of overhead rate audits that are or will be needed to support closing all physically complete contracts.

ACO should work jointly with DCAA to identify contractors for which CMOs will need a final overhead audit and negotiation support from DCAA in order to accomplish closeout of those contracts that will be final indirect rates.
For each contract requiring rates, the ACO may want to maintain a list of all contractors' overhead years where final indirect rates are needed to close the contract.

DCAA is responsible for reviewing the yearly submissions of the contractor's final overhead cost proposals. The agency is responsible for ensuring that all proposed overhead costs are consistent with both the Cost Accounting Standards (CAS), if applicable, and the cost principles in FAR Part 31. The DCAA is also responsible for providing a formal report of its findings to the ACO.

The "Allowable Cost and Payment" clause, FAR 52.216-7, provides for reimbursement of costs incurred in contract performance that are deemed "allowable" by the contracting officer, in accordance with procurement regulations and contract terms. In establishing the allowable indirect costs under a contract, indirect cost rates are applied to the allowable contract base cost. Indirect cost rates are generally accumulated into logical cost groupings to permit distribution of expenses in relation to benefits received by the cost objectives. One such example of these indirect costs pools is manufacturing overhead, which represents costs incurred by the company that cannot be directly attributed to the contract (such as management salaries, buildings and maintenance). The ACO must determine whether or not all overhead rates that apply to a contract have been negotiated. The contractor is not eligible to submit a final voucher until all the applicable indirect costs and overhead rates have been negotiated or established.

Contractor Submission of Final Voucher

Once final annual indirect cost rates are settled for all years of a physically complete contract, the contractor must submit a completion invoice or voucher reflecting the settled amounts and rates within 120 days (or longer, if approved in writing by the contracting officer). To determine whether a period longer than 120 days is appropriate, the contracting officer should consider whether there are extenuating circumstances as listed in FAR 42.705 (b) (1) through (5). If the contractor fails to submit a completion invoice or voucher within the specified time period, the contracting officer may:

Determine the amounts due to the contractor under the contract.

Record this determination in a unilateral modification to the contract.

FAR 42.705 explicitly states the right of the contracting officer to unilaterally determine the final contract payment amount when the contractor does not submit the final invoice or voucher within the time specified in the contract. This contracting officer determination must be issued as a final decision in accordance with FAR 33.211.

DCAA Audit of Final Voucher

The ACO in coordination with DCAA may determine that an audit is not required on a final voucher. The ACO can utilize the Cumulative Allowable Cost Worksheet included in the indirect cost audit report. This worksheet contains cumulative allowable costs by contract and also indicates if the contract is ready to close. If the ACO cannot determine the cumulative allowable costs or if a labor hour review is required, the ACO should ensure that a Contract Audit Closing Statement (CACS) is received.

Credit Final Vouchers

Sometimes ACOs receive contractor checks along with final vouchers on cost-type contracts reflecting a credit amount. By the time all Government parties review and process these vouchers, these checks can be quite old by the time they reach DFAS Disbursing. DFAS has advised us that National City Bank Corporation, the bank it uses for received checks, has a policy requiring them to not accept non-Treasury checks older than six months unless the check explicitly specifies a longer period. These checks are known as “stale dated checks.” ACOs should review contractor checks received with final vouchers for this condition and make arrangements as necessary.

Excess vs. Remaining Funds

1. Deliverable CLIN: Contract required 10 widgets. 8 widgets have been delivered and 2 widgets will not be delivered. Because the contract required 10 widgets and the contractor is not going to deliver (perform as required by contract), the funds associated with the 2 widgets are “excess funds” and must be deobligated via modification.

2. Non-Deliverable CLIN: Contract called for 5 trips. 3 trips were accomplished and 2 were not. Because 2 trips were not performed as required by the contract, the monies associated with these 2 trips are considered “excess funds” and must be deobligated via a modification.

“Remaining funds” are those funds left on contract due to price variance, rounding or cost underrun funding and where all contract performance as required by the contract has been completed. If the funds are “Remaining Funds”, the ACO Notebook will be annotated with a remark that the funds are remaining funds and the amount of funds. Some examples of contracts that have “remaining funds” follow:

1. Deliverable CLIN: Contract required 10 widgets. 10 widgets were delivered. However, they contractor billed less than the price contained in the contract and does not plan to bill at the contract price. The money leftover is “remaining funds” and is systematically removed via the “Q Final” process in MOCAS. The ACO must annotate the ACO Notebook in MOCAS with the amount of the remaining funds and process the F NLA in MOCAS. This allows the mechanical removal of funds in MOCAS, alerts the PCO not to reopen the contract, and generates the PK9 transaction (notifies PCO that contract is administratively closed) and identifies “remaining funds.” PCO is responsible for notifying the funding station so it may close contract.

2. Non-Deliverable CLIN: Contract is for travel. The number of trips is not specified and performance is complete and accepted. The money leftover is “remaining funds” and ACO should follow the “Q final” process to close the contract.

Final Voucher Review/Approval

ACO review/approval of a final voucher should include:

Verification that all contractual requirements have been satisfied

Completion of fee adjustments

Verification that contractual funding limitations have not been exceeded

Identification of the application of any DFAS offsets

Accuracy of Contractor Release and Assignment

Verification that all previous contractor vouchers have been paid

Verification that the final voucher is identified as a “Final Voucher” and has a “Z” next to the voucher number

Approval for payment with ACO signature and date

A deobligation modification processed and distributed for any funds determined to be excess

Forwarding the final voucher to the payment office for processing

Personnel involved in the final payment process should be aware of the significant differences in the appointment qualifications and responsibilities for a certifying officer and a contracting officer.

Certifying and disbursing officers depend on ACOs to support the contract payment process. They have potential for significant financial liability for erroneous payments made based on improper certifications.
Contracting Officers are the only individuals authorized to bind the Government and direct the contractor. They play a critical role in ensuring the Government’s interests are protected during contract performance and serve as the principal point of contact for industry and buying commands on matters pertaining to contract interpretation, execution and compliance.

Considering these differences, it is important that ACOs exercise care when approving final/completion vouchers and be certain to sign in the appropriate approval block on the SF 1034, Public Voucher (see attachment 1).

DFAS policy only requires the ACO signature and date on the final/completion voucher as approval to consider it sufficient to pay and initiate the final payment closeout process. No other final payment supporting documentation or cover letter is required by DFAS. (DCMA Information Memorandum No. 03-017, Subject: ACO Approval of Final / Completion Vouchers and Required Documentation)

Closeout of Cost Contracts

Upon processing and payment of the final voucher by DFAS, the contract should move to section 5. If payment is made and the contract does not close, the ACO should first verify that all prior vouchers have been paid and the payment was coded as a final payment (type 1 code) in the disbursement history. If this is the case, then the ACO can request their trusted agent to generate a G NLA to be processed by the ACO. If the payment is coded as a type 2 and there are remaining funds, the ACO should annotate the notebook and process a “G NLA” and an “F NLA.”

Contract Completion Statement

The ACO is required to report a final payment and completion of all administrative actions to the buying activity on a DD 1594. When contracts close in MOCAS, the system will generate a MILSCAP Format PK9 Notice, which is used in lieu of the DD 1594 per DFARS.

If a contract is closed with a ULO balance, MOCAS will automatically generate a Q Final transaction to reduce the ULO to zero only in MOCAS. As a result of the Q Final transaction, a “CLR Obligation Auto-Adjustments Resulting From CNN Action” list is generated. DFAS reviews the list to determine which contracts shall be reopened and/or adjusted for financial reconciliation.

DFAS will automatically reopen those contracts where reconciliation is necessary. The contract may reopen in section 1 or section 4. If ACO assistance is necessary, DFAS will contact the ACO directly.

Canceled Funds (Replacement Funds Required)

If adequate funding is still on the contract but has since canceled, the ACO will submit the final voucher to DFAS for payment. The voucher will reject for insufficient funds and DFAS will code it “DFAS Merged Account (DMACT)” in the invoicing screen of MOCAS. After verification, DFAS will request replacement funding from the funding activity.

ACOs should monitor final vouchers that require replacement funds ensuring that the invoice is coded as “DMACT” and included on the current DMACT list posted to the DCMA Canceling Funds page. Partial payments can occur against the final voucher possibly resulting in premature closeout.

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TIME AND MATERIAL/LABOR HOUR CLOSEOUT

Where early closeout is not applicable, the closeout procedure is identical to the cost-reimbursable closeout procedure. If an audit is required, DCAA will review material costs and labor hours expended to make sure that the charges are consistent with the contract.

Upon receipt of a contract audit completion statement, the ACO should proceed with closeout.

Note: These contracts will close automatically in MOCAS based on a payment being coded as final (type payment code 1 based on disbursement history) and property (if PA code is present) being completed (R9 55 present).

DCMA Virginia and DCAA Mid-Atlantic Region developed a practice for closing Time & Material (T&M) type contracts. Best practices were identified for the following areas:

Selection of contractors for potential participation
Performance of risk assessments of potential participants
Getting contractors to participate
Getting contractors to submit final vouchers in a timely manner
Spot checks of final vouchers
Closing contracts when subcontractors have not submitted final vouchers

See TM Initiative for details.

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INCENTIVE FEE CONTRACT CLOSEOUT

Incentive type contracts are still subject to submission and negotiation of the cost elements that will be used in the formula for the incentive arrangement.

Final Settlement Proposal Submitted

If the contract is an incentive contract and all overhead rates applicable to the contract have been negotiated, the contractor is eligible to submit its repricing settlement proposal. The provisions of the incentive arrangement incorporated in the contract provide a formula procedure to determine the amount of profit the contractor has earned and this formula is not renegotiated. However, cost elements used in incentive formulas, or cost type CLINs, are subject to this final settlement proposal. The final repricing proposal would include all outstanding cost issues including such items as unsettled claims and undefinitized contract modifications.

DCAA Audit and PCO Negotiates Settlement

Based on DCAA and ACO input, the PCO negotiates the final settlement proposal, and then normally processes a contract modification adding or subtracting funds. The negotiating of final settlement proposal may be delegated by the PCO to the ACO.

Completion Statement and Final Voucher Submitted

After either receipt of the final modification adding or reducing funds for an incentive contract, the contractor submits its voucher (SF 1034) or commercial invoice for the final payment. The final voucher/invoice is part of the "contract completion package," which includes the release of claims and other required documents. The release of claims is a signed dated statement from the contractor, substantially the same as the following:

"Release of Claims, Contract No. _______, (Program Name), Pursuant to the terms of the above contract, the government of the United States, its officers, agents, and employees are hereby released and discharged from all liabilities, demands, obligations, and claims arising under or by virtue of said contract."

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QUICK CLOSEOUT

Background

The quick closeout process offers an alternative to holding contracts open until indirect cost rates are settled. When it becomes apparent that there will be a delay in the settlement of final indirect rates, it is recommended that the ACO utilize quick closeout where applicable.

Use of quick close-out procedures should be the first area looked at when deciding how to close a contract. Frequently current billing rates are used as the quick close-out rates. Because these rates are established by the contractor and reviewed by DCAA and the ACO, they are considered credible and can be used to invoice and close the contract at a relatively small cost.

FAR Regulation

The procedure is identified in FAR 42.708. Specifically, quick closeout procedures may be used if:

· The contract is physically complete.

· The amount of unsettled indirect cost to be allocated to the contract is relatively insignificant. Indirect cost amount are insignificant when:

o The total unsettled indirect cost to be allocated to any one contract does not exceed $1,000,000.00.

o Unless otherwise provided in agency procedures, the cumulative unsettled indirect cost to be allocated to one or more contracts in a single fiscal year do not exceed 15% of the estimated total unsettled indirect costs allocable to cost-type contracts for that fiscal year. The contracting officer may waive the 15% restriction based upon risk assessment that considers contractor’s accounting, estimating and purchasing systems; other concerns of the cognizant contract auditors, and any other pertinent information.

· Agreement can be reached on a reasonable estimate of allocable dollars.

Quick Closeout Not a Binding Precedent

Unlike early closeout procedures, the determinations of final indirect costs under quick closeout procedures are final for the contracts it covers and no adjustments are made to other contracts for over or under recoveries of costs allocated or allocable to the contracts covered by the advance agreement. Additionally, indirect cost rates used in the quick closeout of a contract are not considered a binding precedent when establishing the final indirect cost rates for other contracts.

Identifying Quick Closeout Candidates

The ACO should maintain close coordination between DCAA and the contractor in determining quick closeout candidates. The candidates can be identified in various ways:

· ACO – The ACO usually is the primary person who can identify candidates for quick closeout. The ACO should consider the volume of contracts awaiting settlement of indirect rates and that will be affected by canceling funds. Quick closeout is an excellent way to close contracts and preclude millions of dollars from canceling. Another area that ACOs may consider is time and material type contracts. These contracts are ideal for quick closeout because the only redeterminable amount is usually the general and administrative (G&A) costs associated with the other direct costs (ODCs) in the contract.

· DCAA – Sometimes the auditor will contact the ACO and recommend particular contracts for quick closeout. Often times the auditor is approached by a contractor regarding quick closeout. When these recommendations are received, the ACO should review the contracts and any other contracts for that particular fiscal year and determine if quick closeout procedures are practicable.

· PCO – A PCO will sometimes contact an ACO concerning closeout status of a particular contract and will often inquire about quick closeout possibilities.

· Contractor – The contractor will occasionally request quick closeout procedures for a given contract or group of contracts.

Negotiating Quick Closeout Rates

Once the quick closeout candidates are identified, the ACO should coordinate with the contractor and DCAA before beginning the negotiation of quick closeout rates.

The first step the ACO should take is to officially contact the contractor regarding quick-closeout procedures. The letter should include the list of contracts and should request the following information:

Proposed/Certified indirect cost rates for three years preceding the fiscal year for which you are pursuing quick closeout.

The settled indirect cost rates for three years preceding the fiscal year for which you are pursuing quick closeout.

The calculated variance factor between the proposed and settled rates.

The proposed/certified indirect cost rates covering the period of performance for the referenced contracts.

A contract status for each contract.

Once the ACO receives the indirect cost history for the last three settled years, an analysis should be performed. The information that you receive from the contractor may look like the following:

XYZ COMPANY

INDIRECT COST RATE HISTORY

LAST 3 SETTLED YEARS PROPOSED CERT. RATE FINAL RATE

FY 00

Overhead 123.22% 122.10%

G&A 10.00% 9.50%

FY 01

Overhead 124.51% 122.50%

G&A 10.50% 10.00%

FY 02

Overhead 125.00% 123.59%

G&A 12.00% 10.00%

Unsettled Year

FY 03

Overhead 125.79%

G&A 12.57%

ACO Analysis of the above

The contractor has proposed using FY 03 certified rates for quick-closeout of contracts completed in their fiscal year 02 (fiscal year 03 rates have not been determined by DCAA). In looking at this history, it is clear that contractor proposed rates were higher than the final determined rates in the past three years. If the ACO should use the contractor proposed FY 03 rates for use in quick-closeout, it is likely that the Government will be overcharged. Since the last three years proposed rates were higher than the audited rates, it is likely that FY 03 proposed rates are higher than what the final determined rates will be. The ACO should consider decrementing the proposed FY 03 rates using the following options.

The ACO has two options for determining a rate decrement

By use of a factor

By use of a percentage

When using the decrement factor method, the ACO would

Calculate the difference between the proposed/certified rates and the settled rates for the last three years, which will be the basis for the decrement factor.

Calculate the average decrement factor

Apply the average decrement factor to the unsettled rate to determine the proposed final rate.

Fiscal Year Proposed Audited Factor Formula

2000 15.23% 15.57% -.0223 (15.23 - 15.57) / 15.23

2001 22.00% 21.85% .0068 (22.00 - 21.85) / 22.00

2002 22.30% 19.86% .1094 (22.30 - 19.86) / 22.30

2003 18.41%

Factor Sum: .0939 (.0223) + .0068 + .1094

Average: .0939 / 3 = .0313

Decrement Factor: 18.41 x 3.13 = .57

Proposed Rate: 18.41 - .57 = 17.84

Fiscal year 2003: G&A: 18.41 - .57 = 17.84%

When using the decrement percentage method, the results are as follows:

Fiscal Year Proposed Audited Factor Formula

2000 15.23% 15.57% 102.23% (15.57 / 15.23)

2001 22.00% 21.85% 99.32% (21.85 / 22.00)

2002 22.30% 19.86% 89.06% (19.86 / 22.30)

2003 18.41%

Factor Sum: 290.61% (102.23 + 99.32 + 89.06)

Average: 290.61 / 3 = 96.87

Decrement Factor: 18.41% X 96.87% = 17.83%

Proposed Rate: 17.83%

Fiscal year 2003: 18.41% x 96.87% = 17.83%

It is important to analyze the contractor’s history. If the contractor has a history of including “unallowable” costs in their indirect cost proposal or inflating indirect rates, it is important to decrement their unsettled year by either establishing a decrement factor or applying a percentage of the difference. By using a decrement, the ACO will ensure that the Government’s financial interest is protected.

The decrement factor is the most commonly used means of establishing a fair and equitable quick closeout rate. However, the Defense Contract Audit Manual (DCAAM 7640.1, paragraph 6-1010(e)), recommends that the rates be representative of conditions during the final fiscal year of contract performance. Some alternative rate sources are:

the final indirect cost rates agreed upon for the immediately preceding fiscal year;

the provisional billing rates for the current fiscal year; or

o estimated rates for the final fiscal year of contract performance based on the contractor's actual data adjusted for any historical disallowance found in prior years' certified final incurred cost proposals.

After the ACO has developed the Government proposed quick-closeout rate, the DCAA auditor should be contacted. Although a written request for audit is not required when the contracting officer exercises quick closeout procedures, the auditor should provide comments regarding any contract being considered for quick-closeout and express any specific concerns related to the criteria. The comments may be received verbally, by facsimile, or in a written format.

The final step is the negotiation of a quick closeout rate. The actual negotiation can be conducted by telephone.

Preparing an Advance Agreement

Once an agreement is reached for the final rate, the ACO should prepare an advance agreement. Both the contractor and the ACO should sign the agreement. A sample Advance Agreement follows:

QUICK CLOSEOUT AGREEMENT with XYZ COMPANY

1. This agreement is entered into by and between the Defense Contract Management Agency [name of office], a Department of Defense activity and XYZ COMPANY organized and existing under the laws of [State], having offices in [City].

2. This agreement is entered into under the authority of Federal Acquisition (FAR) 42.708, “Quick-Closeout Procedure” and FAR 52.232-7 “Payments under Time-and-Materials and Labor-Hour Contracts” and/or FAR 52.216.7 “Allowable Cost and Payment.”

3. The purpose of this agreement is to set forth indirect cost rates for fiscal year 2002 to be assessed against: “other direct costs” only, which are included in contracts priced on a time and material basis (unless otherwise specified in the contracts) and/or appropriate direct costs only, which are included in contracts priced on a cost plus fixed fee basis (unless otherwise specified in the contracts).

These contracts will be closed prior to the establishment of indirect cost rates for fiscal year 2003. The subsequent audit of and the establishment of final indirect cost rates for this year will have no affect on the final price and closure of these contracts. There will be no adjustments made to other contracts for over or under recoveries of costs allocated or allocable to the contracts covered by this agreement. These indirect cost rates are hereby established for application to Government contracts as listed in ATTACHMENT A only.

FISCAL YEAR: 2003

OVERHEAD RATE: 124.28%

G&A RATE: 11.57%

Establishment of these rates shall not be considered a binding precedent when establishing the final indirect cost rates for other contracts.

4. Upon full execution of this agreement, XYZ Company will perform audits of the affected contracts and reconcile all applicable accounts using the indirect cost rates established herein. Once this is accomplished, or within thirty (30) days after full execution of this agreement, whichever is sooner, XYZ Company will submit to the Administrative Contracting Officer, a final voucher for each of the affected contracts.

5. It is understood and agreed that the affected contracts are physically complete. It is also understood and agreed that the amount of redeterminable indirect costs associated with any one of the affected contracts is less than $1,000,000.00 and the total amount of determinable indirect costs to be allocated to the affected contracts in 2002 is less than 15% of the total redeterminable indirect in that year.

6. Notwithstanding the provisions of paragraph 3, 4 and 5 above, this agreement shall not change any monetary ceiling, contract obligation or specific allowance or disallowance established by the terms and conditions of the affected contracts.

IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed by its duly authorized representative.

DEFENSE CONTRACT MANAGEMENT AGENCY XYZ COMPANY

[OFFICE NAME]

DEPARTMENT OF DEFENSE

BY: _____________________________ BY: __________________________

TITLE: ___________________________ TITLE: ________________________

DATE: ___________________________ DATE: _________________________

Important: If Quick Closeout Rates are established based on the DCMA Deviation, paragraph 5 of the agreement will need to be revised.

DCMA Class Deviation (Quick Closeout Rates)

This deviation authorizes Administrative Contracting Officers (ACOs) to close specific contracts prior to the establishment of final indirect cost rates regardless of dollar value or the percent of unsettled indirect costs allocable. This deviation may be used provided the contractor has submitted a final certified indirect cost rate proposal which is audited by the Defense Contract Audit Agency (DCAA). This deviation is subject to the following conditions:

It applies to cost-reimbursement, fixed-price incentive, fixed-price redeterminable, and time-and-materials contracts.

ACOs shall use either the DCAA-recommended rates or other rates mutually agreed to by the ACO and the contractor in determining the final indirect expenses.

In selected instances, the audit requirement may be waived when compelling reasons exist. The decision to waive the audit shall be made by the cognizant ACO in consultation with DCAA.

ACOs shall ensure contract closeout under this deviation does not impact the Government’s negotiation flexibility on the remaining unsettled contracts. Indirect cost rates used under this deviation shall not be considered as setting precedent when establishing the final indirect cost rates for other contracts. This deviation shall not be used if there are significant open cost issues, such as Cost Accounting Standards noncompliances or issues in litigation.

This deviation covers the period commencing with the date of this deviation and terminating on September 30, 2005.

Submission of Final Vouchers for Quick Closeout

As stated in the Advance Agreement, the contractor will have 30 days after execution of the advance agreement to submit a final voucher on the affected contracts. The final voucher should be provided to DCAA for final audit. The Defense Contract Audit Manual (DCAAM) paragraph 10.903 “Quick Closeout Procedure Reports” indicates that:

“The auditor should issue a contract audit closing statement when (i) a contractor requests final payment on a contract meeting the criteria for quick closeout under FAR 42.708 (also see DCAAM paragraph 6-1010) and (ii) the contracting officer requests DCAA’s advice regarding the final payment and use of quick closeout procedures. This is an application of agreed-upon procedures; follow the guidance in DCAAM paragraph 10-1000, as supplemented in the following paragraphs. When preparing the closing statement in this situation, the report will clearly indicate what costs and fiscal periods have been audited and which have not been audited. Suggested wording for the “Scope” paragraph follows:

“This application of agreed-upon procedures is in response to your request for assistance in closing out the contract using the administrative quick closeout procedures under FAR 42.708. The costs of $___________ claimed on the subject contract represent costs recorded for the contract during FYs ______. Of this amount, $__________ represents amounts incurred during FYs _______. We have completed the annual audits of incurred costs for these years. The remaining claimed cost of $__________ were recorded during FY ____. The audit of [contractor’s name] FY___ incurred costs is in process. We do not expect that the FY ____ audit results will find a significant exception to the claimed costs.”

Once the final audit report is received, contract closeout may proceed as normal.

Back To TOC

EARLY CLOSEOUT FOR IDIQ CONTRACTS

Background

Early closeout for Task Orders on T&M and LH type IDIQ contracts offers a solution to problems resulting from delays in audit of indirect cost rates. The utilization of early closeout not only allows timely closeout of task orders but the procedure:

Prevents the systematic cancellation of funds.

Allows the ACO to identify/deobligate excess funds upon physical completion of task orders.

The process was initiated as a method for ACOs to close task orders prior to settlement of indirect cost rates. The practice is acceptable because the task orders are not considered to be individual contracts. Quick Closeout procedures may be used in conjunction with Early Closeout.

Candidates for Early Closeout

Candidates for early closeout procedures are those IDIQ contracts that contain FAR Clause 52.232-7. The clause provides the Government the right to withhold 5% of payments otherwise due, up to a maximum of $50,000. Withholds are directly linked to the contractor release which discharges the Government from all liabilities, obligations and claims. In addition, withholds are applied against the estimated amount of the entire instrument - not against individual task orders.

ACOs should consider the adequacy of contractor accounting and billing systems. Adequate systems indicate that minimal adjustments would be required for the final voucher. If a contractor has inadequacies in their accounting and billing system, the nature of the inadequacy should be considered.

Early Closeout Procedures

While it is recommended that early closeout be established at the on-set of the contract, the procedure may be implemented:

During Contract Performance, or

After Physical Completion of Task Orders

By establishing early closeout procedures at the on-set of the contract, the ACO will be better able to monitor the process in accordance with FAR Clause 52.232-7.

The following is offered as a guide in establishing early closeout:

During initial contract review, the ACO should determine if early closeout procedures are applicable. (Does the contract contain FAR Clause 52.232-7)

Communicate with the PCO - The ACO should issue a letter to the PCO recommending that Early Closeout procedures be utilized.

Communicate with the Contractor - After PCO concurrence is received, the ACO should notify the contractor that Early Closeout will be utilized. The letter should include detailed procedures.

Communicate with DCAA - The ACO should notify DCAA that Early Closeout procedures will be utilized.

Detailed early closeout procedures are as follows:

Upon final acceptance by an authorized representative of the Government, the contractor will prepare a completion voucher for each task order. Each completion voucher will include:

Certification signed by the authorized representative of the Government reading substantially as follows: “I certify that the requirements of this task order have been satisfactorily completed and that final acceptance has been made.”

Total unaudited allowable costs.

The contractor will then forward the certified completion voucher to the ACO for provisional approval.

ACO review/approval -

Verify that all contractual requirements have been satisfied,

Sign the completion voucher approving for payment, and

Forward it to the payment office for processing.

The ACO should hold open enough delivery orders to satisfy the 5% or $50,000 withhold requirement. To the greatest extent possible, the orders that are held open should include costs for each fiscal year of contract performance. The orders should remain open until settlement of indirect cost rates for the applicable period of performance.

After settlement of the indirect cost rates, the contractor will prepare a “final” voucher to be submitted to DCAA along with one Assignment of Refunds, Rebates and Credits, one Claim Release, and a recapitulation of costs for each order issued under the contract. The auditor will provide only one Contract Audit Closing Statement for the entire contract, which will include a review of the allowable and allocable costs for each delivery order.

The ACO will process the "final" voucher through normal closeout procedures.

If more than one order has been held open to meet the required 5% or $50,000 withhold amount, the ACO should review the final voucher and contract audit closing statement (CACS).

Verify that the contractor has complied with the contract terms and conditions.

Verify that the contractual limitations have not been exceeded.

Review level of effort and make any necessary adjustments.

Verify the net billable amount.

After reviewing the final voucher, the ACO should:

Make one copy of the final voucher for each delivery order held open.

Decide which order will be used to pay/recoup the billable amount.

Provide written notice to the contractor concerning how the billable amount will be processed.

If the contractor will not submit revised vouchers reflecting the new billable amounts, the ACO should:

Prepare SF1034(s) to pay/recoup the billable amount.

Prepare SF1034(s) for a $0.00 amount for remaining open orders.

Sign the final voucher and forward to the payment office for processing.

Establishing Early Closeout - After the Fact

When it is not practical or cost effective for the contractor to submit a completion voucher, a bilateral modification may be executed to administratively close the orders. The modification would not include those orders held open for withholding purposes.

If the ACO is establishing Early Closeout after the fact, the following procedures are recommended:

Identify the contracts that are candidates for early closeout. The ACO should coordinate with DCAA and the contractor when identifying potential closeout candidates.

Identify which task orders should be closed and which ones should be held open to maintain the required withholding. Considerations when identifying orders should include:

Unliquidated Balances

Canceling Funds

Period of Performance

Prepare letters to the PCO, DCAA and the contractor outlining the early closeout procedure and identifying which orders will be held open.

Request that the contractor prepare completion vouchers for each order ready to be closed. An order is ready for closure after the Government has made final acceptance.

The ACO should complete the closeout as stated above under the paragraph titled "Early Closeout Procedures".

Maintaining Early Closeout Records

The key to successful execution of early closeout is maintaining information on the orders that were closed by completion vouchers.

Upon physical completion of the last order and settlement of indirect cost rates, the contractor will prepare a final voucher showing a recapitulation of all task order issued.

As part of the review of the final voucher, the ACO should verify billings, payments and in some cases, hours of all delivery order closed under the early closeout process. Therefore, it would be a good idea for the ACO to maintain information regarding:

Order Number

Obligated Amount

Billed Amount Through Completion Voucher/Modification

Excess Funds

If the Contract is Level of Effort (LOE), the ACO should also maintain information regarding:

Order Fee Ceiling Amount

Level of Effort Required

Actual Level of Effort Expended

Fee Billed Through Completion Voucher/Modification

Early Closeout for Cost Plus Fixed Fee Type Task Orders Issued Under an IDIQ

The use of early closeout for cost plus fixed fee type orders issued under an IDIQ contract is considered to be an acceptable practice because the task orders are not considered as individual contracts. In addition, the clauses governing the closeout process do not prohibit the use of this procedure.

When implementing early closeout for Cost Plus contracts, the ACO should follow the procedures in Early Closeout Procedures and Establishing Early Closeout - After the Fact.