Contract Closeout Guidebook

 

Defense Contract Management Agency

3901 A Avenue, Bldg 10500

Ft. Lee, VA  23801 


September 2011


TABLE OF CONTENTS

 

                                                                                                Page

Contract Closeout Time Standards                                     

 

Basic Contract Closeout                                                 4

 

Fixed Priced Contract Closeout                                      6

 

Cost Type Contract Closeout                                        14

 

Time and Material/Labor Hour Contract Closeout           21

 

Incentive Contracts                                                     21

 

Quick Closeout                                                           22

 

Early Closeout for IDIQ Contracts                                  29

 

Reconciliations and Section Four                                   33

 

MOCAS Maintenance of BOAs and BASICS                       36

                                         

Reopened Contracts in MOCAS                                      36

 

Other                                                                        37

 

Solutions for Problem Closures                                     41

 

Summary                                                                   52

 

Appendix A - R2 Delay Reason Codes                             53

 

Appendix B - Acronym List                                           55

 

Appendix C  - References                                                 57

 

Appendix D - Attachments                                                58

 

 

CONTRACT CLOSEOUT GUIDEBOOK

                                     

 

This guidebook provides instructions for correctly closing contracts.  Users are encouraged to submit recommendations for improvements to the Defense Contract Management Agency (DCMA):

 

    Defense Contract Management Agency

    ATTN: Contract Closeout Performance Advocate

    3901 A Avenue, Bldg 10500

    Ft. Lee, Virginia 23801    

 

Closing cost contracts can be more difficult than closing other contracts and require coordination among the administrative, procurement, and payment offices.  When closeout is accomplished properly, the administration, payment, and official contract files should close around the same time. 

 

                                                                  

 

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CONTRACT CLOSEOUT STANDARDS TIMEFRAMES

 

 


 

The standard timeframes for closing physically complete contracts are located in the Federal Acquisition Regulation (FAR) 4.804.  A contract is considered physically complete when the contractor has completed performance and the Government has inspected and accepted the supplies and services.   Furthermore, all optional provisions, if any, must have expired.  Firm Fixed Price contracts should be closed not later than 6 months after the physical completion date.  Cost Reimbursement, Time and Material (T&M) and Labor Hour (LH) contracts require settlement of indirect cost rates and should be closed not later than 36 months after the physical completion date.  All other contract types should be closed not later than 20 months after the physical completion date. 

 

 

Standard Closeout Timeframes

(FAR 4.804)

Timeframes

MOCAS Codes and Contract Types

6 Months

J  FIRM FIXED PRICE

36 Months

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

20 Months

A  FIXED PRICE REDETERMINATION

K  FIXED PRICE W/ECONOMIC PRICE ADJUSTMENT

O  OTHER – BASIC ORDERING AGREEMENT/BLANKET

    PURCHASE AGREEMENT (BOA/BPA)

 

 

 

 OVERAGE CONTRACT CODING

 

    DCMA ACOs are required to assign Delay Reason codes and input Estimated Completion Dates (ECD) for MOCAS Part A Section 2 overage contracts.  As a result PKX notifications of delays in closing are transmitted to the PCO.  The ACO is required to assign an "Office of Primary Responsibility" (OPR) code in the R9 remark MOCAS Field when entering Delay overage reason codes F, H, M, P, V, or W.  The OPR numeric codes are used to designate who has the primary responsibility to complete the coded closeout action: 71 - Services, 72 - Contractor, 73 - DCMA, 74 - DCAA, and 75 - DFAS.  See below for a complete listing of the R2 overage reason and OPR codes.  ACOs are encouraged to place additional closeout comments in the ACO notebook.  DFAS is responsible for automatic closeout of Part B contracts from CAR Section 2 following final payment.

 

 

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BASIC CONTRACT CLOSEOUT

 

 

The contract closeout process starts at contract receipt and review and proceeds throughout the life of the contract.  MOCAS input data must accurately represent the contract in order to ensure proper management, payment, and closeout.  When all contract requirements have been met and the contract is physically complete, it should be moved to MOCAS Section 2.  The easiest contracts to close are short term Firm Fixed Price contracts with one Accounting Classification Reference Number (ACRN) for each Contract Line Item Number (CLIN) and no special provisions.  Cost-Type contracts with multiple ACRNs for each CLIN and special payment provisions are the most difficult to close. 

 

Many closeout problems increase in difficulty over time.  The inability to locate transaction support documents and to read faded print in hard copies of documents are two recurring problems.  Furthermore, if funds cancel before closure, appropriation law limits the types of adjustments that can be used to correct lines of accounting payment errors.  Also, it can be difficult identifying and locating the responsible contracting officer because of reorganizations and closures directed by the Base Realignment and Closures Commission.  In addition, over the past 20 years thousands of companies have gone out of business or been purchased by larger companies.  Novation agreements may or may not have been signed by the gaining company.  These activities have contributed to the difficulty in closing old contracts.   

 

What You Can Do To Simplify Closeout

 

  • Make sure the contract funding, line items, special provisions and payment instructions as well as changes resulting from modifications are correctly entered into MOCAS.
  • Maintain support documentation for shipment and payment transactions.
  • Monitor payments for accuracy and compliance with special payment instructions when applicable.   
  • Aggressively manage the Overhead Rate process to insure that contractors submit their proposals and negotiation rates within established timeframes. 

 

 

Check for Payment Instructions

 

ACOs are reminded to review contract payment instructions to determine compliance with DFARS Procedures, Guidance and Information (PGI) 204.7108 Payment instructions. 

 

·         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.

 

  • Special payment instructions are usually placed in Section G of the contract when required.  DFAS is responsible for inputting these instructions to MOCAS Provision Level Special Payment Instructions fields (BVN-INST, PROGPAY-INST, and SPCL-PAY-INST).  These instructions may also be input by a DCMA trusted agent.  If the ACO determines payment instructions are required and were not included in the contract, the ACO should request payment instructions from the Procuring Contracting Officer.  

 

  • Defense Procurement and Acquisition Policy issued  PG 204.7108 Payment instructions to remind contracting officers to include payment instructions when applicable.  

 

 

What Contractors Should Do To Simplify Closeout

 

  • Verify payment accuracy and report discrepancies immediately.
  • Provide Contracting Officer with cost estimates for 75% and 100% of projected cost (usually 60 days in advance) in compliance with Limitation of Cost/Funds Clauses (FAR 52.232.20 through 21) for cost re-imbursement and facilities contracts.
  • Submit patent reports on time to the Administrative Contracting Officer when required by the patient clause.
  • Submit Overhead Rate Proposals no later than 6 months after the end of the contractor's fiscal year.
  • Prepare final voucher no later than 4 months after settlement of overhead rates.
  • Consider Quick Closeout procedure when it's determined that normal closeout will be delayed. 
  • Execute government property disposition instructions expediently. 

 

 

Physical Completion

 

Once the contract is physically complete and moved to section 2, MOCAS will transmit a Contract Completion Statement (interim PK9/EDI 567) to the contracting office.   The completion statement will automatically be sent to the buying activity to provide notice of physical completion.  The contract should be closed within the FAR standard timeframe.  However, it should not be closed if the contract is in litigation, under appeal, or pending termination (Ref. FAR 4.804-1(c)).  These contracts should be assigned the appropriate dormancy code and moved to MOCAS section 3.  Once contracts have been entered into section 3, they should be reviewed periodically to update their status.  A contract, for example, was originally moved to section 3 awaiting review by the Armed Services Board of Contract Appeals.  When the appeal was denied, the contractor filed for bankruptcy.  Accordingly, the Dormancy Reason Code should be updated from BCA to BKRPT.  In addition, if the closeout date is expected to exceed the overage date, an estimated closeout date must be entered into MOCAS and revised as necessary.

 

 

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 the contract.  The administrative contracting office must review the contract funds status and notify the contracting office of excess funds available for deobligation.  Next, follow the checklist of closeout administrative actions below that must be accomplished when applicable to the contract.

 

  • Issue interim contract completion statement
  • Ensure disposition of classified material is completed
  • Receive final patent/royalty report clearance
  • Ensure there are no outstanding value engineering change proposals
  • Ensure property clearance is recorded in MOCAS
  • Receive and file plant clearance report  
  • Settle all interim or disallowed costs 
  • Complete price revision
  • Ensure Prime contractor has settled Subcontracts 
  • Settle prior year indirect cost rates
  • Ensure submission of final subcontracting plan report
  • Complete termination docket
  • Completed contract audit 
  • Ensure receipt of contractor's closing statement (release)
  • Review/submit contractor's final invoice/voucher 
  • Ensure final voucher has been paid
  • Complete contract funds review and deobligate excess funds

 

Once all applicable actions are completed, the contracting officer processes the Final Payment NLA in MOCAS or E-Tools.  MOCAS transmits a contract completion statement (PK9/EDI 567) to the contracting office.   If for some reason the contract is not in MOCAS, the ACO will prepare a contract completion statement on DD Form 1594. 

 

 

Closed-Contract Database (CCDB)

 

The Closed-Contract Database (CCDB) system was activated on December 4, 2000 and acts as a repository of MOCAS  contracts closed after the date.  It stores contract data on an optical storage device that may be viewed on line for ten years after the contract has closed, Chapter 11 contains instructions for using the CCDB.

 

 

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FIRM FIXED PRICED (FFP) CONTRACT CLOSEOUT

 

 


Difficulties closing fixed price contracts are usually associated with documentation of deliverables and 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/Receiving Report or other final 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 variances of the contract.

 

The final shipment document should alert the Industrial Specialists or Procurement Technician to input production history which generates a “Production Complete” remark on the R8 Remarks field within MOCAS.  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/EDI 567, (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 FFP Contracts Moving to CAR Section 2

 

If Firm Fixed Price contracts do not automatically moving to section 2, the following checks are suggested:

 

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

 

  • Review the Line Item Schedule and Shipment Record (LISSR) for out of balance line items.

 

  • Identify contracts with production history in Section 1 that are 30 days past their final delivery date (FDD).  Determine if there is an error in the production history, if so, the Industrial Specialist or Procurement Technician should correct the error.

 

FPP Contracts Awaiting Final Acceptance

 

Obtaining destination final acceptance documents is DFAS' responsibility.  However, when final acceptance documents are not received by the contract management office (CMO) Terminal or payment office, the ACO can then request a statement of final acceptance from the customer and annotate the ACO notebook. 

 

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

 

The ACO reviews the contract file to ensure that all modifications have been entered into MOCAS.  DFAS, Receiving Activity, Buying Activity and Contractor may be able to provide copies of missing acceptance documents.   In all cases, if no final DD Form 250/Receiving Report is available, the contractor history will be input using “PROD001” as the shipment number.

 

The ACO should inform DFAS of actions taken by DCMA personnel to manually move contracts into CAR Section 2.  This is usually accomplished by entering remarks into the ACO Notebook.    

 

 

FFP Contracts After Movement to CAR Section 2

 

Movement of a contract into section 2 will prompt the ACO to perform several actions. The completion of the Contract Closeout Check List (DD Form 1597) is necessary to ensure all closeout administrative requirements are completed on other than firm fixed price type contracts and firm fixed price contracts with special closeout requirements. The DD 1597 is optional for all other contracts.  

 

Closeout Checklist

 

  • All Deliveries Accepted

 

  • Identify and Deobligate Excess Funds

 

  • All Actions Definitized

 

  • Subcontracts Closed

 

  • Disposition of Government Property

 

  • Disposition of Classified Material

 

  • Final Patent Report

 

  • Final Royalties Report

 

  • No Outstanding Value Engineering Change Proposals (VECPs)

 

  • Terminations/Claims/Disputes

 

  • Litigation Resolved

 

  • Warranty

 

 

All Deliveries Accepted on FFP Contracts

 

The ACO ensures that all contract items such as hardware, data, software, spares, and support equipment have been delivered and accepted by the government before the contract is closed.

 

 

Identify and Remove Excess Funds on FFP Contracts

 

FAR 4.804-5 states 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 accounting classification reference number (ACRN) level to determine the cause.

 

  • If it is determined that excess funds remain because of contractually acceptable unperformed work or undelivered product, the ACO shall issue a modification to deobligate the excess funds and quantity.  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 unliquidated obligated (NULO) at the contract or ACRN level, a request for reconciliation (DCMA Form 1797) with supporting documentation should be sent to DFAS explaining the discrepancy.                                                                                                 

 

  • The work in process unliquidated obligation (WIP ULO) balance should 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 determine status of balance.

Final shipment and acceptance of the product/service on firm fixed price contracts entitles the contractor to receive final payment.  Cost and Fixed Price Incentive (FPI) contracts require settlement of final overhead rates and incentives.  In some cases, obligated funds are no longer required because of quantity variance.  Excess funds may exist on maintenance and repair contracts where the repairs cost less than originally estimated.  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 after settlement of indirect rates; however, the contracting officer should accomplish an initial funds review within 30 days of contract completion.   The PCO or ACO should issue a deobligation modification to remove excess funds as early as possible.  It is equally important to avoid deobligating funds that may be required for final payment.  

 

The .01 ULO has often been used to identify cancelled funds prior to the alpha cancelled funds indicator.  Send DCMA Form 1797 to DFAS to request adjustment of the "penny down" and to close the contract.  

 

 

All Actions Definitized

 

Occasionally, urgent or unusual circumstances necessitate authorizing a contractor to start work before the contract has been negotiated.  The contract 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

 

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.  The government will review the report and provide specific instructions to ship, leave in place, or scrap the property.

 

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 the DCMA Property Administration Data System 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

 

All classified documents must be dispositioned in accordance with government security regulations and accounted for by the contractor.  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

 

If the contract contains a patent rights clause, FAR 52.227-11 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 -- Ownership by the Contractor, 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 two (2) months after completion of the contracted work.   The PCO should forward the clearance request and patent report to the cognizant patent counsel for clearance. 

 

Negative DD 882s

If the final patent report is negative, the ACO may include language in their letter to the PCO "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 closure, 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 an invention, the ACO should not impose a 60-day suspense for a patent clearance response.

 

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 Value Engineering Change Proposals (VECPs) requiring payment or disposition exist before closing contract.

 

 

Terminations/Claims/Disputes

 

All open actions and liabilities must be resolved prior to closeout.  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 by failing to perform in accordance with contract requirements.   Under termination for default, the contractor is liable for any additional costs to the government to obtain terminated items.  The government may also terminate a contract for convenience.  Termination for convenience can occur when Congress or the program office withholds funding or the user determines 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 contractor the right 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 is closed.

 

 

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”. 

 

 

Excess vs. Remaining Funds

 

After contracts are physically complete and ready to be closed, except for funds, there may be instances where unliquidated funding remains on the contract.  In these instances a review must be accomplished to determine if 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” or Q final-ed because they are remaining funds.

 

Excess funds are funds relating to a specific line item or deliverable that was not performed on a contract.  A contract modification must be issued to deobligate 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 funds left on contract due to price variance, rounding or cost underrun and where all contract performance as required by the contract has been completed and paid in full.  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, the 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 or E-Tools.  This allows the mechanical removal of funds in MOCAS, alerts the PCO not to reopen the contract, and generates the PK9/EDI 567 transaction (notifies PCO that the contract is administratively closed) and identifies “remaining funds.”  PCO is responsible for notifying the funding station.
  • 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.

 

 

Movement to CAR Section 5

 

Once all required closeout actions have been completed, the ACO should take the following actions to move the contract out of MOCAS and provide closeout notification to the buying activity. MOCAS will generate a notice of last action (NLA) when final payment has been processed for Part A contracts.  Verify that a Final Pay NLA has been issued.  (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 a final pay FNLA 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/EDI 567, Contract Completion Statement, in lieu of a DD Form 1594, which notifies the buying activity that the contract is closed.

 


 

 

FIXED PRICE CLOSEOUT CHECKLIST

 

Action

Completed

Date

Final Acceptance Received?

 

 

Final Acceptance Entered in MOCAS?

 

 

LISSR Data Balanced (Line Items)?

 

 

PSCN Data Entered ("Production Complete" in R8 Remarks field )?

 

 

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? (55 Code)

 

 

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:

  • Contract is in CAR Section 2
  • 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 stated in the ACRNs (S33181, S33184, S44073, S36054, SC0100)
  • Code 56 must not be entered in the R9 Remarks field*

 

*If the ACO wants to prevent automatic closeout of a DLA ODO contract, enter code 56 in the R9 remarks field.  Code 56 will cause the contract to be bypassed by the automatic closeout process.  The ACO must manually close the contract by entering 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.  The sources for Payment Information are as follows:  Pay Office, My Invoice, PCO, & Contractor.
  • Contract must be manually closed.  Prepare a DD 1593 or other closeout documentation to show that all actions are complete and execute a G and F NLA or E-Tools closeout action to close the contract.  Complete DD 1594, Contract Completion Statement and sent it to the PCO.

 

Back To TOC


 


COST TYPE CONTRACT CLOSEOUT

 

 

Cost type contracts are the most complex contracts to administer and close.  Their final price is based mostly on a negotiated settlement of allowable and allocable cost that may not be decided for several years after physical completion.  There are several initiatives in place such as Real Time Rates and Quick Closeout (further detail provided below) that can minimize the impact that delays in settling indirect cost rates often have on closeout.  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 Defense Contract Audit Agency (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 and 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 Contracts

 

Cost type contracts will remain in section 1 until completion of contract performance.  Upon evidence of contract completion (receipt of final acceptance document or PCO statement), the Industrial Specialist or Procurement Technician will input the production history and balance the Line Item Schedule and Shipment Record (LISSR).   

 

After final acceptance, if the contract does not automatically move to section 2, then the ACO shall request that the Trusted Agent move the contract 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/EDI 567, “Physically Completed and Accepted”, will automatically be sent to the buying activity providing notice of a start date for contract closeout.

 

 

Awaiting Final Acceptance for Cost Contracts

 

Contracts with destination acceptance requirements may hold up movement to section 2.  Obtaining this acceptance is a DFAS responsibility.  Destination final acceptance documents are often delayed or not received at all by the payment office or contract management office.  The ACO can, however, request a statement of final acceptance from the customer and once received, should annotate the ACO Notebook and request that the Trusted Agent move the contract to section 2. 

 

Data items on Contract Data Requirements List (DD Form 1423) that do not require a DD Form 250/Receiving Report 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.

 

After Movement to CAR Section 2

 

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

 

Closeout Checklist

 

The completion of the DLA 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 DLA 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 Deliveries Accepted

 

  • Excess Funds Identified and Deobligated

 

  • All Actions Definitized

 

  • 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 Firm Fixed Price Section of the Guidebook.

 

 

Work with DCAA on Final Indirect Rates for Cost Contracts

 

Determination of final overhead rates is dependent on a review of the contractor’s incurred direct and indirect costs.  FAR 52.216-7 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 with DCAA to obtain indirect cost proposals from the appropriate contractors.  
  • The ACO and DCAA should prioritize the list of indirect cost rate audits that are needed to support closing physically complete contracts. 
  • It is recommended that the ACO maintain a list of the contractors and the status of their final indirect rates settlement by fiscal year.

 

DCAA is responsible for auditing the yearly submission of the contractor's final overhead cost proposals and providing a formal report of its findings to the ACO.  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 "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, unless an extension has been 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. The contracting officer determination must be issued as a final decision in accordance with FAR 33.211.

 

 

DCAA Audit of Final Voucher and Cumulative Allowable Cost Worksheet (CACWS)

 

A CACWS summarizes total cumulative allowable costs for all open flexibly priced contracts.  (see Cumulative Allowable Cost Worksheet).  ACO should encourage contractors to submit a CACWS with their annual indirect cost rate proposal for audit by DCAA and update it within a reasonable time after rate settlement.  The Contractor's ability to track cumulative allowable cost by contract is essential for an adequate billing system and necessary to ensure that cumulative amounts billed do not exceed total estimated contract cost ceilings.

 

The CACWS is designed to expedite contract closeout by eliminating the need for DCAA to audit the final voucher and prepare a separate contract audit closing statement.  This saves time and resources for both the contractor and government.  The ACO can ensure that the total payment amount stated in the CACWS equals the total amount requested for each contract as stated in the final voucher payment support documentation.  However, if the ACO cannot determine the cumulative allowable costs by contract using the CACWS, or if there are subcontractor costs, he should request that DCAA audit the final voucher.

 

 

Credit Final Vouchers

 

Credit Vouchers cannot be submitted electronically.  In the past, an ACO would receive a contractor refund check attached to a final voucher reflecting a credit amount.  However, by the time all government parties processed the voucher and check, the date of the refund checks was over 6 months old.  The National City Bank Corporation received these checks from DFAS.  Their policy prohibited accepting non-Treasury checks older than six months unless the check explicitly specified a longer period.  These checks were known as "stale dated checks."

 

To eliminate the above circumstances, and to comply with the government's paperless goals, the Automated Cash Collection System (http://www.pay.gov/)  was created.  ACCS provides the ability for contractors to submit refunds/payments to DFAS electronically.  When contracts are ready to close and contractors are required to submit a refund/payment to the Government, they are encouraged to use ACCS to process a credit interim voucher.  After the refund/payment posts to the contract, then the contractor should submit a zero-final voucher to the ACO for review/approval.

 

 

Excess vs. Remaining Funds

 

After contracts are physically complete and ready to be closed, except for funds, there may be instances where money remains on the contract.  In these instances a review must be accomplished to determine if 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 by modification because they were excess or Q final-ed because they are “remaining” funds. An explanation of the difference between Excess and Remaining funds can be found under the FFP contract closeout.

 

 

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” in the position of the voucher number

 

  • Approval for payment with ACO signature and date (paper submissions only)

 

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

 

  • Approving/submitting 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  

 

 

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 and F NLA or E-Tools closeout application.

 

 

Contract Completion Statement

 

The ACO is required to report final payment and completion of all administrative actions to the buying activity on DD 1594.  When contracts close in MOCAS, the system will generate a MILSCAP Format PK9/EDI 567 Notice which is used in lieu of the DD 1594.

 

If a contract is closed with a ULO balance, MOCAS will automatically generate a Q Final transaction to reduce the ULO to zero.  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.

 

Back To TOC


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 the presence of a payment coded as a type 1 final payment and R9 Remarks code 55 to indicate that all property actions are complete if a government property clause is in the contract.

 

 

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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."

 

 

Back To TOC

 


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 direct costs and indirect cost to be allocated to the contract, task order, or delivery order is relatively insignificant.  Direct costs and indirect cost amount are insignificant when:

 

o       The total unsettled direct and indirect cost to be allocated to any one contract, task or delivery order does not exceed $1,000,000.00 or 10% of the total contract amount.

o       Unless otherwise provided in agency procedures, the cumulative unsettled direct costs and indirect cost to be allocated to one or more contracts in a single fiscal year do not exceed 10% of the estimated total unsettled direct costs and indirect costs allocable to cost-type contracts for that fiscal year.  The contracting officer may waive the 10% 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 05

      

Overhead                                  123.22%                                     122.10%

 

G&A                                          10.00%                                      9.50%

 

FY 06

      

Overhead                                  124.51%                                     122.50%

 

G&A                                          10.50%                                      10.00%

 

FY 07

      

Overhead                                  125.00%                                     123.59%

 

G&A                                          12.00%                                      10.00%

 

Unsettled Year

      

FY 08

      

Overhead                                  125.79%   

 

G&A                                          12.57%

 

   

ACO Analysis of the above

 

The contractor has proposed using FY 08 certified rates for quick-closeout of contracts completed in their fiscal year 07 (fiscal year 08 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 08 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 08 proposed rates are higher than what the final determined rates will be.  The ACO should consider decrementing the proposed FY 08 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

 

2005             15.23%          15.57%          -.0223          (15.23 - 15.57) / 15.23

 

2006             22.00%          21.85%            .0068          (22.00 - 21.85) / 22.00

 

2007             22.30%          19.86%            .1094          (22.30 - 19.86) / 22.30

 

2008             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 2008:  G&A:  18.41 - .57 = 17.84%

 

 

 

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

 

     Fiscal Year       Proposed      Audited        Factor             Formula

 

2005             15.23%          15.57%          102.23%        (15.57 / 15.23)

 

2006             22.00%          21.85%          99.32%          (21.85 / 22.00)

 

2007             22.30%          19.86%          89.06%          (19.86 / 22.30)

 

2008             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 2008:  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

 

    • estimated rates for the final fiscal year of contract performance based on the contractor's actual date 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. 

 

 

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 2007 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 2008.  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 to the contracts covered by this agreement.  These indirect cost rates are hereby established for applicable to Government contracts as listed in ATTACHMENT A only.

 

FISCAL YEAR:  2008                

 

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 2007 is less than 10% 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 (September 30, 2011) and terminating on September 30, 2013.

 

 

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 performance 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.

 

 

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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 procedures 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 completion voucher(s) (SF1034, Public Voucher for Purchases and Services Other than Personal) to pay/recoup the billable amount.

 

    • Prepare completion voucher(s) (SF1034, Public Voucher for Purchases and Services Other than Personal) 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 Performance

 

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 is suggested the ACO 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 Performance. 

 

FAR Clause 52.216-8, Fixed Fee, states that ". . . the Contracting Officer may withhold further payment of fee until a reserve is set aside . . ." and "This reserve shall not exceed 15 percent of the total fixed fee or $100,000, whichever is less."

 

If the ACO decides to withhold fee, a sufficient number of orders should be held open to maintain the 15% or $100,000 withhold.  This should satisfy the requirements of the FAR clause.  There should be no need to exercise the option of withholding fee for a contractor with a record of timely submission of final cost vouchers and certified final indirect cost proposals, and that complies with other contract terms and conditions. 

 

When an ACO determines that fee withholds are necessary, the ACO should advise the contractor as to the specific reasons why fee withholds are necessary, and should describe the curative measures that the contractor can take to eliminate the need for fee withholds. If the ACO determines that it is necessary to withhold fee to protect the Government's interests, written direction should be issued to the contractor by modification of the contract. The following paragraph provides suggested wording for the modification:

o        This modification is issued to incorporate fee withholding in accordance with FAR Clause 52.216-8 (or -9 or -10, as appropriate).  In order to protect the Government's interest, [contractor] is hereby directed to begin withholding fee from billings under this contract until a reserve is set aside in the amount of $______ (amount of reserve shall not exceed 15% of the total fixed fee or $100,000, whichever is less).  Fee shall be released in accordance with FAR Clause 52.216-8 (or -9 or -10, as appropriate).

 

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RECONCILIATIONS AND SECTION FOUR

 

 

Normally, at the end of the contract the total of funds obligated should match the total payments made to the contractor, inclusive of the final payment. Cost underruns, mistakes in payments, unearned incentives, withheld fees, etc., result in unliquidated obligations at the completion of the contract.  When remaining funds balances or unliquidated obligations exist that can't be explained, reconciliation is required to compare hard copy documents with the MOCAS database.

 

This section covers how to ensure a contract gets into the reconciliation “pipeline" at DFAS.  This requires proper completion and submission of DCMA Form 1797, Request for MOCAS Action/Information and an Obligation Recap. 

 

When all administrative closeout actions are completed, DFAS will assign contracts to MOCAS section 4 upon receipt of a properly completed DCMA Form 1797, Request for MOCAS Action/Information.

 

 

Reconciliation

 

Requests for DFAS action on MOCAS funds reconciliation are submitted on DCMA Form 1797, Request for MOCAS Action/Information.  This form is used both for requests for adjustment and for requests for "full-scope" disbursement reconciliation.

 

  • DCMA Form 1797 requests for adjustment contain a description of the problem and an explanation of the corrections that are needed in the MOCAS records.  Requests for adjustment cover readily identifiable errors and corresponding corrections.

 

  • DCMA Form 1797 requests for full-scope disbursement reconciliation differ from requests for adjustment in that the corrections needed cannot be identified by the ACO.

 

o     Requests for disbursement reconciliation are accompanied by a spreadsheet showing contract obligations to the ACRN level. This includes the identification of all funding obligated/deobligated by the basic contract and all subsequent modifications.  The audit is required to be performed to the Contract Line Item Number (CLIN) and Accounting Classification Record Number (ACRN) levels.

 

o       The ACO signature on the DCMA Form 1797 is the certification that the obligation information is accurate.

 

 

DFAS Columbus is responsible for contract disbursement records and for any adjustments/ corrections to the disbursement records.  When submitting a DCMA Form 1797 requesting reconciliation, DCMA will send an Obligation Recap.  DCMA will not send an audit of the disbursement records.

 

 

Submission of Contract Obligation Data

 

The recommended format for submitting contract obligation data in support of a request for disbursement reconciliation is an Excel spreadsheet.

 

Use of E-Mail for Submitting Requests for Adjustment and Disbursement Reconciliation

 

Requests for adjustment and disbursement reconciliation may be submitted to DFAS via e-mail to DFAS Recon Mail Log cco-reconciliation-maillog@dfas.mil.

 

  • When submitting via e-mail, include in the subject line "1797 -- MOCAS Database MOC_."

 

o      Add the appropriate indicator to "MOC_" so that DFAS can identify the DFAS payment division responsible for the reconciliation action -- either "H" for the East Payment Division, "G" for South, or "L" for West.

 

 

MOCAS Delay Reason Code "P"

 

One of the MOCAS section 2 delay reason codes is "P" -- reconciliation with the paying office and contractor being accomplished.  Entry of code "P" into MOCAS does not by itself trigger DFAS action:  If adjustment or disbursement reconciliation is required on "P" coded contracts, the 1797 process shall be used.

 

 

DFAS CAR Reconciliation Report

 

When DFAS receives a DCMA Form 1797 (along with an Obligation Recap) requesting contract reconciliations, the contract is registered in the CAR Recon Report (Open Audit Log).  When DFAS completes the reconciliation, the contract number is posted to the Closed Audit listing.  These reports can be found on the DCMA DFAS Columbus Center Information web page or DFAS Information on the DCMAW MOCAS Bulletin Board.

 

 

Movement of Contracts to MOCAS Section 4

 

MOCAS Part A and B contracts, requiring DFAS disbursement reconciliation are to be assigned to section 4 when the following conditions are met:

 

  • The contract is physically complete in accordance with FAR 4.804-4.

 

  • All acceptance documents were obtained and processed in MOCAS.

 

  • The MOCAS ACO Notebook is annotated IAW MOCAS Data Integrity Document, paragraph O if the contract was moved to MOCAS section 2 with an out of balance Line Item Schedule Summary Record (LISSR).

 

  • All administrative closeout actions identified in FAR 4.804-5 were completed.

 

  • All invoices/vouchers have been paid.

 

  • Unliquidated amounts do not remain on the MOCAS withhold lines. 

 

  • Unliquidated amounts do not remain on the MOCAS Work-in-Process (WIP) finance line unless the contract is at DFAS for WIP reconciliation.

 

  • Known contract debt or related disputes are resolved.

 

  • Remaining funds are annotated in the MOCAS ACO Notebook.          

 

 

Once all of the above conditions are met, DFAS will assign contracts to MOCAS section 4 upon receipt of a properly completed DCMA Form 1797, Request for MOCAS Action/Information.  The 1797 shall include:

 

  • A request to move the contract to section 4.

 

  • An annotation the contract is physically complete and all administrative actions are complete.

 

  • A request for reconciliation/closeout audit.

 

  • An obligation recap. This includes the identification of all funding obligated/deobligated by the basic contract and all subsequent modifications.  The audit is required to be performed to the Contract Line Item Number (CLIN) and Accounting Classification Record Number (ACRN) levels.
  • If the recap reveals that corrective modifications are needed, these must be issued and submitted to DFAS for processing prior to submitting the 1797.  

 

If the 1797 does not meet the conditions for movement to section 4 as set forth above, DFAS will return the 1797 to the originator and the contract will not be moved to section 4.  Once the conditions are completed, the 1797 will need to be resubmitted as described above.

 

Contracts presently at DFAS for disbursement reconciliation that meet the above criteria can also be moved to section 4 by requesting the move via the 1797 process.  In this case, Part II of the 1797 should include a comment that the contract is registered in the CAR Recon Report (Open Audit Log). 

 

A MOCAS R4 remark will be input by DFAS once the contract is moved to section 4.  It will read “ADMN COMPLT PENDING RECON”. 

 

Most contracts will remain in section 4 until reconciliation and corresponding adjustments are completed and the contract is ready to close.  CAR will close the Part B contracts by issuing a G and F NLA.  DFAS will move Part A contracts to section 2 for closeout and will generate a MOCAS R5/6 remark to read "RECON CMP".  The Part A contracts will receive a G NLA from the CAR clerk, but will require the ACO to issue the F NLA to close the contract.

 

If DFAS' reconciliation reveals that a corrective modification is required, the contract will be moved to section 2 and the ACO will be notified via a DD Form 1716, Contract Data Package Recommendation/ Deficiency Report.  The 1716 will list the corrective action required and will contain the statement   “RECON CMP - MOD REQ FOR CLOSEOUT”.  The MOCAS R5/6 remark will also be updated to include the same statement.  If any other actions are required (i.e. refund) a similar R5/6 remark identifying the required action will be included.

 

Use of electronic 1797s and retention of delivery confirmation is encouraged.  MOCAS coding should be updated as appropriate. 

 

 

Unreconciled Contracts

 

After a contract has been moved to section 4, DFAS Columbus will conduct a Request and Inspection of Documents (RAID).  DFAS will try to locate critical documents required to conduct the audit.   They will perform an extensive search for missing documentation required for the reconciliation.  DFAS may send requests to the ACO, PCO, and Accounting Station asking for assistance in locating the missing documentation.

 

When sufficient documentation cannot be located to support contract reconciliation, a contract will be designated as unreconcilable. Further action to close these contracts will be placed on hold until a mechanism for disposing of the contracts is introduced.

 

 

 

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MOCAS MAINTENANCE OF

BASIC ORDERING AGREEMENTS (BOAs)

AND

INDEFINITE DELIVERY TYPE BASICS (IDTs)

 

 

For Basic Ordering Agreements (BOAs) or Indefinite Delivery Type (IDTs), the Final Delivery Date (FDD) will be the expiration date of the contract/agreement.  When orders are issued under the contract/agreement, the Final Delivery Date (FDD) of the Basic/IDT may be updated to reflect the latest delivery date applicable to any of the orders issued.  If this is done, the ordering period expiration date of the Basic/IDT should be shown on either the R5 or R6 line of the Remarks Data Record.

 

After the ordering period has expired, the Basic can stay in section 1 until all delivery orders are closed. 

 

Upon expiration of the ordering period and closeout of all orders, the ACO shall complete a DD Form 1593 (Contract Administration Completion Form, stating all administrative actions are complete.  The ACO shall request the Trusted Agent move the contract/agreement from CAR section 1 to section 2.  The Trusted Agent should then process closeout via the E-Tool Closeout application or via MOCAS, applying a “G” and “F” NLA in the same cycle.  This will result in the transmission of the PK9/EDI 567 to the PCO.

 

 

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REOPENED CONTRACTS IN MOCAS

 

 

Each month contracts reopen because MOCAS data discrepancies were not resolved prior to closure.  The R5 line in MOCAS will show the date the contract was reopened. In many instances, the ACO is not notified when or why these contracts reopen. 

   

The MOCAS Closeout Checklist identifies discrepancies or reasons why contracts reopen (red flags).  The major reasons contracts reopen are open line items, unpaid invoices or unexplained dollars on the ULO line.   DFAS prepares a monthly Research Tool.  For each reopened contracts, the Research Tool identifies the reasons why the contract reopened and shows the associated MOCAS screens.  DCMA and DFAS personnel will use this report to manage the reopened contracts, resolve their discrepancies and close the contract.

 

To improve communications, DCMA and DFAS personnel should enter comments in the ACO Notebook field by using the following general format:  date of remarks ddmmyy, remarks, phone number and email address. 

 

 

Explanations for the R5 remarks field

 

  • REOPEN_OL - (Manual) - assigned when a contract is manually reopened, within the first 14 days after closure, prior to records being purged from MOCAS.  Reopens at this phase are generally a result of reviews during the Q-Final process.
  • REOPEN CCDB - (Manual) - assigned when a contract is manually reopened using copy of contract data stored in the contract close-out database (CCDB).  This allows a contract to be fully restored to its pre-closure state.  Applies only to contracts closed after December 2000.
  • REOPEN ULO NOT ZERO - (System) -assigned when a contract is systemically reopened during end of month (EOM) processing.  This indicates failure of the Q-Final process due to missing data on the MOCAS master appropriation table or out-of-balance financial conditions.
  • REOPEN-PP - (System) - rarely used, systemically assigned code resulting from remaining WIP balance at EOM processing.
  • Other – (Manual)  - varying reopen reasons, generally assigned when a contract, closed prior to December 2000, must be manually re-established in MOCAS.  This remark is often descriptive in nature (e.g. Reopen to process demand letter, Reopen per ACO request, etc.)

 

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OTHER

 

 

Closing Support Contracts (Part C)

 

On Support Contracts, functional support personnel from the delegated function track performance and completion of all designated activities within MOCAS.  CMO Personnel will input, correct, and close out all support contracts.

 

When all items and services delegated for support have been completed, final updates are made in MOCAS.  When these updates are complete for functional Support Contracts entered into the MOCAS database, functional team personnel perform the MOCAS transaction to move the Support Contract from Section 1 (active) to Section 5 (closed).

 

Corrections/Maintenance of Support Contracts are made through MOCAS YCU2.  Manual closeout of Support contracts is required.

 

  • Closeout through contract corrections
  • Change Section 1 to Section 5
  • Summary Edit

 

Payment Only contracts (Assignment Code “G”) are the SOLE responsibility of DFAS for input, change and closeout.   Other than ensuring the ACO code reads "PAY", CMOs should not make changes to, or attempt to close out these contracts since there is no DCMA involvement.

 

Cancelled Unilateral Purchase Orders

Unilateral small purchase orders may be cancelled at no cost to the government via  modification (FAR 13.302-4).  The following procedures apply:

 

·        Cancellation processed in MOCAS and contract remains in section 1:  Forward a DLA Form 1797 to the trusted agent requesting:  manual movement of the contract to CAR Section 2, entry of an R5 Remark “Contract Cancelled per MOD P0000*”, and processing of an NLA G and F to close the contract.

 

·        Cancellation modification not processed or cancellation modification is not on the backlog in MOCAS and the contract remains in CAR Section 1:  Send a DLA Form 1797 to the trusted agent requesting a manual movement of the contract to CAR Section 2, entry of an ACO Notebook Remark “contract cancelled per MOD P0000*, with the cancellation modification attached to be forwarded to DFAS for action. 

             

 

What are current vs expired vs cancelled funds?

 

  • Current - When funds can be obligated (e.g., to buy new widgets)
  • Expired - Funds can no longer be obligated for new requirements, but are still available to pay the bills.
  • Canceled - Funds are no longer available to pay the bills.

 

Do not deobligate Cancelled Funds unless they are determined to be “Excess funds” (funds relating to a specific line item or deliverable that was not performed on a contract).

 

 

Differences between replacement and additional funds

 

Replacement funds are those needed to cover cancelled appropriations.  DFAS is responsible for all actions to prevent the need for replacement funds.  If however, replacement funds are required, DFAS is responsible for requesting replacement funds from the funds holder.  When a Final Voucher is submitted and enough funding has been obligated to cover Final Voucher amount, the ACO will use the Final Voucher Review  process and then submit Final Voucher to DFAS.  The voucher will reject for insufficient funds and DFAS will code it “DFAS Merged Account (DMACT)” in the invoicing screen of MOCAS.  DFAS will then request replacement funding from the funding activity.

 

Additional funds involve obligating more money on the contract.  ACOs are responsible for notifying PCOs of the amount of additional funds required to complete the contract.  ACOs will not submit Final Vouchers to DFAS until additional funds have been obligated to the contract via contact modification.

 

Examples:

 

If the funds are current:

 

Obligation = $100

ULO = $25

 

  • Contract submits a final voucher for $25, DCMA would send final voucher to DFAS for payment.
  • If contractor incurred costs on contract of $125 ($25 over obligated amount), the ACO would notify the PCO that $25 of additional funds would be required to complete the contract.  If PCO concurred, a modification for $25 would be issued.

 

If the funds have cancelled):

 

Obligation = $100

ULO = $25

 

  • Contract submits a final voucher for $25, DCMA would send final voucher to DFAS for payment.  DFAS would request replacement funds through the DMACT process.
  • If contractor incurred costs on contract of $125 ($25 over obligated amount), the ACO would notify the PCO that $25 of additional funds would be required to complete the contract.  If PCO concurred, a modification for $25 would be issued.   Since the funds originally on the contract have cancelled, and costs exceed the original obligation, both the additional and replacement funds will have to come from current year appropriation.  After modification is issued, DCMA would send final voucher to DFAS and DFAS would request $25 in replacement funds through the DMACT process.

 

 

Overpayment – Credit final vouchers

 

If the ACO has any indication that a contractor may owe money to the Government, the ACO shall promptly determine whether an actual debt is due the Government and the amount of the debt.  The ACO shall complete any negotiations regarding debt determinations.  If the ACO and contractor are unable to reach agreement on the existence or amount of a debt the ACO shall make a unilateral debt determination. The ACO shall issue a demand for payment as soon as the ACO has computed the amount of refund due.  For all unilateral debt determinations, the ACO shall issue the demand for payment as a part of the final decision. The ACO shall not offset a debt against amounts otherwise due the contractor instead of issuing a demand for payment. The ACO should encourage the contractor to liquidate debts by lump sum payment.  The ACO shall not compromise or waive a debt.  The department/agency CFOs have sole compromise authority (DFARS 232.616). 

 

ACO and CAs should encourage contractors to use the Automated Cash Collection System (ACCS) to submit refunds/payments to DFAS electronically.  When contracts are ready to close and contractors are required to submit a refund/payment to the Government, they are encouraged to use ACCS to process a credit interim voucher.  After the refund/payment posts to the contract, then the contractor should submit a zero-final voucher to the ACO for review/approval.  Contractors who are unwilling/unable to use ACCs will make check payable to the "Treasury of the United States" and remit the check, along with a copy of the demand for payment, directly to- DFAS Columbus, ATTN:  DFAS-ADPBD/CA, P.O. Box 182249, Columbus, OH 43218-2249.

 

 

EDW 4.0

 

For DCMA, EDW and WAWF are the official file/records management systems for contractual/invoice documents respectively, and replaces the hardcopy 5 part folders.  As such, any document that would normally be filed in hardcopy folders as referenced in the FAR would be placed in EDW and all electronically-submitted invoices are stored in WAWF.

 

Original contract documents will need to be placed into records management as soon as practical but definitely before contract closeout.  Examples of originals (including attachments) that must be records-managed prior to contract closeout include the following:

·        Any document bearing an original signature

·        Correspondence with or without signature requiring action by DCMA

·        ACO issued modifications

·        ACO issued BOA and IDT orders

·        Contract-related E-mail sent by the CMO

·        Contract-related E-mail received by the CMO requiring DCMA action

·        Correspondence generated or altered by the CMO

·        Bilateral agreements: the page(s) showing all signatures

 

DCMA now has a certified system (Open Text eDOCS 6.0) for archiving electronically managed contracts in EDW.  All contracts indicated as closed in EDW will automatically be Records Managed (held for retention and dispose in accordance with the DCMA Records Management.  It is therefore recommended that contracts not be indicated as closed until the contract is at least in Section 5 or greater of MOCAS.

 

The Records Management Officer (Records Officer) is responsible for the disposition of contract folders/documents in eDOCS in accordance with established CMO procedures.

 

 

Wide Area Work Flow (WAWF)

 

Wide Area Workflow (WAWF) is a web-based software application that allows DoD vendors to submit and track their invoices, as well as receipt and acceptance documents electronically.

 

Contractors complete invoices and inspection/acceptance documents interactively on the Internet or submit these documents electronically using EDI or FTP. WAWF-RA notifies the government official automatically of document submission. Once the receipt and acceptance process is complete, payment officials issue payments via appropriate DFAS payment system using Electronic Funds Transfer (EFT). An electronic folder documents the entire process and is accessible to the contractor and authorized federal personnel.

 

 

DCMA/DFAS Partnership Agreement for Operations

The agreement identifies each agency's inputs and outputs for shared process touch-points, establishes indicators that the agencies will use to monitor the health of shared processes and provides the operating principles the agencies will use to facilitate interactions and promote continual shared process improvements.  This agreement succeeds the DCMA/DFAS Concept of Operations (CONOPS).

 

MOCAS Data Sharing Initiative

In May 2002, DCMA initiated an effort to share MOCAS data with selected contractors for the purpose of assisting in resolution/avoidance of payment problems and contract closeout.  Contractors will be provided with data extracts on a monthly basis.  The data is in an electronic format and reflects contract deliveries, payments, obligations, modifications, and similar data. 

Uses for this data may include a comparison of MOCAS data to contractor data to identify discrepancies.  The contractors will investigate the discrepancies between their systems and MOCAS data, make corrections to their own data bases, and identify apparent MOCAS discrepancies to DFAS or the ACO for correction.  Typical discrepancies requiring DFAS or ACO assistance might be modifications not entered, incorrect obligation amounts or missing DD250s.  The ACO’s role in this effort will be minimal and should only involve correction of the MOCAS database as appropriate.     

Remedies available to the ACO for delinquent Incurred Cost Claims and Final Vouchers

 

Non-contractual remedies:

 

  • Notification to PCO/PM, enlistment of support
  • Inclusion of comments concerning the contractor’s delinquent incurred cost status and its ramifications in pre-award surveys
  • Escalation through the contractor’s and the Agency’s management chain
  • Agenda topic at Management Councils
  • Appropriate systems reviews Initiation
  • Removal from Direct Billing
  • Extension of due date for exceptional circumstances only

 

Contractual Remedies:

 

  • Suspend interim financing payments
  • Disallow or recoup previously paid costs
  • Decrement bidding/billing rates
  • Maintain fee withholds

 

 

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SOLUTIONS FOR PROBLEM CLOSURES

 

 

Background

 

This chapter addresses those "problem closures" that exist in every Contract Management Office.  A "problem closure" is considered to be a contract that has unusual circumstances barring the use of traditional closeout methods. 

 

IMPORTANT!  While this guidebook offers possible closeout solutions, ACOs are encouraged to tailor each of the procedures to fit their individual situation.

 

Examples of circumstances and possible solutions follow:

 

  1. Contractor is No Longer in Business

 

  1. Contractor is Bankrupt

 

  1. Contractor Has Failed to Submit Indirect Cost Data

 

  1. Contractor is Unable to Submit Supporting Indirect Cost Data

 

  1. Contractor Has Failed to Submit Final Invoice/Voucher

 

  1. Negotiated Settlement

 

Traditional closeout procedures are, for the most part, dictated by the payment clauses contained in affected contracts.  When the circumstances mentioned above exist, it is sometimes virtually impossible to close contracts using traditional methods.  In these instances, the ACO shall perform a cost risk analysis and exercise business judgment in accordance with FAR 1.602-2 to ensure that the Government’s interests are protected and administrative actions are reasonable.  With the goal of minimizing loss to the Government, exercising and implementing efficient business practices and processes, the following guidelines are offered as a solution to these "problem closures".

 

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CONTRACTOR IS NO LONGER IN BUSINESS

 

Unfortunately, it is not uncommon to have open contracts for companies that are no longer conducting business.  In these instances, the Government shall take every reasonable measure to locate the company and/or its principals.  It is suggested that the ACO:

 

  • Attempt to contact company/company officials by telephone (using “directory assistance” to verify that the company hasn’t simply relocated).

 

  • Attempt to locate company in writing, via certified mail, return receipt requested. 

 

  • Contact/inquire about company’s status from other Government officials (PCO, QAR, IS, PA, SBA, DCAA).

 

  • Visit or request plant visit by the CMO designee (IS, QAR).

 

  • Contact the Bankruptcy Court of the state in which the company is located to determine if company has filed for bankruptcy.

 

The contract file should be documented with every attempt made to locate the company and its officials.  If all of the above attempts prove unsuccessful, it is recommended that the ACO begin the Administrative Unilateral Closeout process.

 

Administrative Unilateral Closeout begins with a thorough review of the official contract file(s).  The following should be ascertained during that review:

 

  • Is the contract physically complete and has Government acceptance of goods/services been received?

 

  • Was the contractor previously paid any funds?

 

  • What is the status of indirect cost rate settlement (if contract is other than firm fixed price)?

 

  • Have all reasonable measures been taken to locate the company and documented in the contract file?

 

  • Has the contract been terminated for convenience or default?

 

  • Any other pertinent information relative to the contractor or performance of the contract (e.g., unsettled subcontract cost, unliquidated progress payments, litigation, etc.) should be considered.  It is recommended that the ACO check with Office of General Counsel to ascertain if any actions are pending.

 

After completing your review, you should notify the PCO of your intent to perform Administrative Unilateral Closeout.  It is recommended that you obtain PCO concurrence prior to issuing an Administrative Unilateral Closeout modification.

 

Recommended actions for Administrative Unilateral Closeout and, if required, determination of final contract price can be found in Contractor Has Failed to Submit Final Invoice/Voucher.

 

 

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CONTRACTOR IS BANKRUPT

 

 

The ACO should coordinate with counsel on any closeout action. The final contract price should be established at the amount previously paid to the contractor and any excess funds deobligated at the ACRN level.

 

In accordance with FAR 42.9, when notified of bankruptcy proceedings, agencies must, as a minimum --

 

  • Furnish the notice of bankruptcy to Office of General Counsel and other appropriate agency offices (e.g., contracting, financial, property) and affected buying activities;

 

  • Determine the amount of the Government's potential claim against the contractor (in assessing this impact, identify and review any contracts that have not been closed out, including those physically completed or terminated);

 

  • Take actions necessary to protect the Government's financial interests and safeguard Government property; and

  • Furnish pertinent contract information to the Office of General Counsel representing the Government.

 

If you discover that the contractor is bankrupt, contact the Office of General Counsel prior to taking any action in furtherance of contract closeout.  A thorough review of the contract and the status of bankruptcy are required.   

 

Once a bankruptcy petition is filed, an automatic stay goes into effect.  This stay generally precludes any action to collect from the debtor or that would interfere with the debtor’s property interests.  Contracts can be considered property of the bankrupt estate. Contract closeout actions could interfere with this property interest and violate the stay.  Consequently, contract closeout actions should generally not be initiated without relief from the stay.  Violation of the stay can subject responsible parties to contempt citations.   DCMA legal offices have been successful in getting relief from stays by working with bankruptcy trustees. 

 

Another reason for immediate coordination with the legal office is that any claim against the contractor must be filed with the court in the form of a Proof of Claim.  With the filing of a bankruptcy petition, the court usually will set a date by which the Proof of Claim must be filed (the Bar Date).  Potential claims against the contractor must be compiled and analyzed to determine whether a Proof of Claim is in the best interests of the Government and, if so, that information must be provided to DFAS.  DFAS has the responsibility for preparing the Proof of Claim and providing it to the cognizant U.S. Attorney for filing with the bankruptcy court.  If the Government doesn’t file a timely proof of claim (a form filed by DFAS establishing us as a creditor), we’re not going to get any money back.  If we missed deadline for filing proof of claim, send 1797 to DFAS seeking write-off (debt not collectible).

 

  • If the ACO sees a contractor going south financially – accelerate contract closeout efforts.
  • If the ACO would like to close out contracts after stay issued, contact trustee through counsel for relief from stay.
  • If contracts have been fully performed/paid, inform trustee that we intend to close contracts.
  • The ACO may be able to leave open just a few contracts by year/color of money & close the rest but consult Counsel before taking any action.

 

Two types of Bankruptcy the ACO might encounter are:

 

  • Chapter 7 – liquidation – non-exempt items sold by trustee; proceeds distributed to creditors or
  • Chapter 11 – corporate debt reorganization in which reorganization plan must be approved by a majority of creditors.

 

Recommended actions for Administrative Unilateral Closeout and, if required, determination of final contract price can be found in Contractor Has Failed to Submit Final Invoice/Voucher.

 

 

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CONTRACTOR HAS FAILED TO SUBMIT INDIRECT COST DATA

 

 

In accordance with FAR 52.216-7, the contractor is required to submit a final indirect cost proposal to the Government within the 6-month period following the expiration of each of its fiscal years.  Regardless of whether rates are ACO or Audit determined, it is the ACO’s responsibility to secure certified final rate claims,  pursuant to FAR Part 42.705.  The ACO should work with DCAA to obtain overdue proposals.   Other recommended actions for the ACO:

 

  • Become proactive as early as practicable and supplement /complement DCAA’s efforts.

 

  • Apprise contractors of obligations, repetitively at strategic junctures throughout the lifetime of a contract, starting early in the cycle.

 

  • Offer technical guidance to ensure an adequate submission.

 

  • Remember to stay on top of the situation and document all discussions and meetings, including telephone conversations in order to support any resulting unilateral decision.

 

The ACO should issue a letter to the contractor ninety days before the end of a contractor's fiscal year, requesting submission of the indirect cost proposal.  If the contractor does not submit their proposal in a timely manner, measures shall be taken to protect the Government's financial interest.  The ACO should issue a letter expressing concern over non-receipt of the proposal.  The letter should include a reminder that failure to submit a proposal is considered to be an internal control deficiency and request a response within 30 days. 

 

If a contractor remains non-responsive, the ACO should work with DCAA on possible actions. 

 

  • DCAA removal from Direct Billing

  • Presenting the contractor with a letter informing them that continued non-responsiveness will result in a billing rate decrement. 

 

Perhaps nothing better captures a contractor’s attention than the unilateral decrementing of the billing rates so as to impede cash flow. This action is not to be punitive in nature, but rather a precautionary step to safeguard the government’s interests in that it is incumbent upon the ACO to preclude overpayments.  Because of the lack of the required rate claim, such concerns may be warranted.  Accordingly, the decrement factor would equate to the reasonable uncertainties related to costs paid or to be paid, as a result thereof.

 

 

More than likely, a contractor will respond to a billing rate decrement.  However, continued non-receipt of incurred cost data dictates an aggressive approach by the ACO.  Contracts are physically complete and the closeout time clock is ticking.

 

Based on these factors, the ACO should proceed with unilateral determination of indirect cost rates (FAR 42.703-2(c)) and/or unilateral determination of final contract price.   

 

 

 

 

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CONTRACTOR IS UNABLE TO SUBMIT SUPPORTING INDIRECT COST DATA

 

 

On rare occasions, contractors are unable to provide final vouchers because they have not retained their financial records for a fiscal year.  When this happens, the contractor does not have the ability to support an audit or the incurred cost previously billed on contracts. 

 

In these instances, Administrative Unilateral Closeout is recommended.  As with all Administrative Unilateral Closeout efforts, a thorough review of the contract file is essential.  You may want to do a risk assessment to ensure the financial security of the contractor.  Upon completion of your review, you should have an understanding as to why the contractor is unable to provide the final voucher.  If Administrative Unilateral Closeout is still deemed suitable under the circumstances, it is recommended that the ACO proceed with the closeout as follows:

 

  • Contact the cognizant DCAA office and obtain an opinion as to the Administrative Unilateral Closeout of the contract. 

 

  • Upon receipt of DCAA recommendation, the ACO should send a notice to the PCO.

 

  • PCO concurrence is recommended prior to issuance of contract modification.  However, if after 30 days the PCO has not responded, the ACO should proceed with the closeout.

 

  • Calculate the final price based on previous amounts paid to date.

 

  • Issue a modification establishing the final price at the amount previously paid to date and deobligate any excess funds at the ACRN level.

 

The steps outlined above are a summation of the Administrative Unilateral Closeout process and more detailed list of recommended actions for Administrative Unilateral Closeout and, if required, determination of final contract price can be found in Contractor Has Failed to Submit Final Invoice/Voucher.

 

 

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CONTRACTOR HAS FAILED TO SUBMIT FINAL INVOICE/VOUCHER

 

 

Different circumstances and solutions are described below.

 

 

Firm Fixed Price:  Contractor Fails to Submit Final Invoice

 

On occasion, contractors complete performance but fail to submit a final invoice on firm- fixed price contracts.  After making a reasonable number of requests to the contractor, the following actions should be taken.

 

·        Verify that the government has accepted all shipments/performance.

 

·        Send the contractor a letter asking if paid complete or when they will submit final invoice.

 

·        If contractor fails to respond by suspense date in first letter, send a certified letter; return receipt requested, to the contractor advising them of the intent to administratively close the contract.

 

·      If the contractor responds that an amount is owed, but they will not submit a final invoice, the contract should be closed via Final Pay NLA with remaining funds noted on the ACO Notebook.  If the contractor fails to respond by the suspense date in the certified letter, the contract should be closed via Final Pay NLA with remaining funds noted on the ACO Notebook.

 

 

Cost Reimbursable: Contractor Fails to Submit Final Voucher

 

The ACO has the responsibility of obtaining final vouchers and closing documents in accordance with FAR regulations.  The contractor is contractually required to submit final vouchers within 120 days after settlement of final indirect cost rates.  As soon as rates are settled and the contractor has signed an indirect cost rate agreement, the ACO should request that final vouchers be submitted in accordance with FAR 52.216-7(d)(5).

 

In situations where indirect cost rates have been settled and the contractor has failed to adhere to FAR 52.216-7(d)(5), it is recommended that the ACO research and determine the reason for non-submission.  Many times the contractor may not be able to submit final vouchers because:

 

  • They are awaiting final subcontractor costs

 

  • There is a lack of accounting staff to prepare final vouchers

 

  • There is a lack of sufficient financial records needed to prepare cumulative cost (CUM) sheets and ultimately the final vouchers

 

  • The final voucher would result in a credit balance due to the Government

 

  • The final voucher would equal $0.00

 

When the contractor fails to submit a final voucher within 120 days after settlement of final indirect cost rates, and has not provided a reasonable explanation along with an acceptable plan to become current in the submittal of final vouchers and has not received an extension from the ACO, the ACO should take action.  Remedies available to the ACO include:

 

  • Escalation to Management Councils, CMO Commander, and District Director

 

  • Other non-contractual remedies such as inclusion of comments in Preaward Surveys

 

  • Suspend interim financing payments

 

  • Disallow or recoup previously paid costs

 

  • Decrement bidding/billing rates

 

  • Initiate appropriate systems reviews

 

  • Maintain fee withholds

 

  • Recommend removal from Direct Billing

 

After the ACO determines the reason for non-submission of final vouchers, several alternate methods exist that will enable the contracts to be closed.  They include:

 

  • Unilateral Determination

 

  • Accelerated Final Voucher Preparation and Review Process

 

 

Administrative Unilateral Closeout

 

The ACO should pursue a unilateral determination of final contract price when the contractor is non-responsive or has not provided a reasonable explanation for not submitting a final voucher.  After issuance of the initial request for submission of final vouchers and the expiration of the 120-day suspense, the ACO should:

·        Verify that all shipments/performance have been accepted by the government.

 

·        Issue Initial Letter of Request for Final Voucher (Recommended suspense of 14 Days for Contractor to submit Final Voucher).

 

·        Notify PCO of intent to perform Unilateral Determinations.  PCO concurrence is recommended prior to issuance of contract modification.  However, if after 30 days the PCO has not responded, the ACO should proceed with the closeout.

 

·        Coordinate with DCAA to determine allowable cost and/or obtain applicable incurred cost audits.

 

·        Determine the total previous payments made to the contractor according to MOCAS.

 

·        Coordinate with legal council, and/or other advisors as appropriate.

 

·        Issue a letter to the contractor, which will serve as a notice of intent to unilaterally determine the final contract prices if the final vouchers are not received within 30 days from date of the notice.  (Return, Receipt Requested).

 

·        If no final vouchers submitted, calculate the final price based on previous amounts paid to date.

 

·        If overpayment has occurred, request a refund from the contractor.  If the contractor refuses to provide the refund within 30 days from the date of the request, forward the debt to DFAS Columbus, via DCMA Form 1797, for collection action.

 

    • If it is determined that excess funds remain on the contract, accomplish deobligation within the unilateral determination modification.

 

·        Issue a modification establishing the final price at the amount previously paid to date and deobligate any excess funds at the ACRN level.

 

·        Notify PCO that all actions are complete by using a DD Form 1594 or a MILSCAP Format Identifier PK9/EDI 567.

 

·        Monitor movement of contract through MOCAS to ensure closeout.  The ACO should:

 

    • Verify that the modification has been processed in MOCAS.

 

    • Verify that the unliquidated balance equals $0.00 at the ACRN level.

 

    • Verify that the contractor was paid complete.

 

    • Verify any refund checks received have been posted in MOCAS and excess funds deobligated.

 

    • Forward any delinquent refund request to DFAS Columbus, via DCMA Form 1797, requesting collection action.

 

Document all contacts, telephone conversations and meetings, as evidence of Government initiated attempts to engage the contractor in remedying issue.

 

 

Accelerated Final Voucher Preparation and Review Process

 

There are times when a contractor may be able to prepare the final voucher but it will take an unreasonable amount of effort and expenditure of resources to pull the cumulative cost sheets together.  As a result, final voucher submission will be delayed and often cause the contract to become overage for closeout. 

 

The ACO may want to consider an accelerated final voucher preparation and review process in order to close the contracts in a timely manner.  The procedure is applied on a fiscal year basis and may include all contracts or a partial list of contracts.  Basically four team players will need to concur in each case - the ACO, the Auditor, the Contractor and DFAS. 

 

There are three steps recommended for this process:

 

  • The ACO and the Contractor agree on the final contract amount. 

 

  • DCAA agrees to perform a risk analysis and cumulative cost sampling for the contracts.

 

  • The Contractor agrees to submit a non-detailed final voucher for each contract.

 

  • DFAS concurs that they will pay a non-detailed final voucher.

 

 

ACO Actions: 

 

  • Perform Initial Risk Analysis - As with each of the alternate closeout methods, the ACO will need to perform an initial risk analysis and decide if this procedure is appropriate for a particular contractor.  Factors that should be considered include:

 

o       Status of Contractor Accounting and Billing Systems

 

o       Variances Between Proposed and Settled Rates for Previous Fiscal Years

 

o       Total Amounts Remaining to Be Disbursed (ULO Balance)

 

  • Decide Whether to Use the Procedure - After the ACO has decided to pursue the accelerated procedure, the following steps should be taken:

 

o       Prepare a List of Candidates - A list of contract candidates should be prepared and all necessary parties notified.  The list should include only those contracts for the specific fiscal year(s) for which the procedure is being used.  In addition to the contract numbers, the ACO should also include contract type, final acceptance date, total disbursed amount, obligated amount, ULO balance.  This list will serve as the ACO’s initial worksheet.

 

o      Determine if you have agreement with DCAA and the Contractor – Then, the ACO should schedule a meeting with the contractor and DCAA to discuss the use of an accelerated final voucher preparation and review process.  The list of proposed contracts should be provided to all parties at the meeting or distributed via e-mail.  IMPORTANT!!!  It is necessary that all parties agree that the process is a practical solution for expediting closeout and will result in little or no risk to the Government.

 

o      Request the Contractor Review Accounts Receivable Records - The ACO should request the contractor review the list of contracts and determine the amounts that remain on their accounts receivable records for each contract.

 

 

Contractor Actions: 

 

  • Review List of Candidates.

 

  • Weed out "high-risk" contract candidates.

 

  • Meet with ACO -

 

o       Provide final billable amount (credit or payment), by contract.

 

o       Confirm and agree to final candidates and contract prices.

 

  • Discuss finalized list of contracts and final prices with DCAA.

 

 

DCAA Actions:

 

If DCAA has agreed to assist in this process, request they perform a risk analysis for the entire procedure.  The following factors should be considered:

 

  • Contract Type

 

  • Accounts Receivable Definition and Content

 

  • Past Indirect Rate Settlement - Billing Rates versus Settled Rates

 

  • Billing System Status

 

  • CUM Sampling of Contracts

 

Request that the risk analysis includes the CUM sampling results and assist the ACO in exercising the proper business judgment when finalizing the process.

 

 

Final Actions:

 

  • ACO will review the risk analysis and resolve any outstanding issues -

 

  • Adjust final contract amounts as necessary

 

  • Remove questionable candidates from list and instruct contractor to provide a final voucher through the traditional method.

 

  • ACO will document the official contract file.  The document should:

 

  • State the purpose of the procedure

 

  • State the benefits

 

  • Identify the affected contracts and final prices

 

  • Contractor should submit a non-detailed final voucher for each contract directly to the ACO. 

 

  • The ACO should proceed with the review and approval process for each final voucher.

 

 

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NEGOTIATED SETTLEMENT

 

 


Negotiated Settlement is the process of reaching a settlement among all parties to close a contract (including all government parties responsible for final closing actions). The process allows wide latitude to exercise business judgments in order to accomplish the contract closeout process in a reasonable and efficient manner.  The negotiated settlement process allows closure based on the best available data.   The negotiated settlement process is applicable to those contracts that are determined to be complete, shipped and accepted and the contract is determined to be unreconcilable, or the normal reconciliation process would be inefficient or require an extended cycle time.  Many factors may contribute to the reasons for not having adequate documentation that would be necessary for a full reconciliation or why the normal reconciliation process would be inefficient.  Included, but not limited to, are:

 

·        Multiple payment offices during the life of the contract

·        Contract mergers or reorganizations

·        Loss of key players - Government and Contractor

·        Old contracts with missing/many modifications

 

ACOs should identify all contracts that are likely candidates for negotiated settlement from the pool of contracts where the closeout procedures are complete except that final payment issues need to be resolved before closure can occur.   ACOs should maintain documentation that identifies the contract is in the negotiated settlement process and keep a chronology of events as it moves through the process.  The ACO will put a remark in MOCAS in the ACO notebook that the contract is being worked as a negotiated settlement.

 

The ACO should review the obligated and unliquidated obligations (ULO) balances at both the total contract level and at the ACRN level.  Negotiated settlement should be pursued only for those contracts where:

  • MOCAS reflects positive unliquidated obligations (ULOs) at both the total contract and ACRN levels. 
  • Sufficient ULO exists at contract level to cover any unliquidated financing payments that have been made on the contract. 
  • There are sufficient documented funds in both MOCAS and in the accounting systems to cover any anticipated settlement payment to the contractor that might be negotiated.    

What to do when Negative ULOs (NULOs) exits:

 

·        When MOCAS reflects a positive ULO at the contract level but a NULO exist against one or more ACRN, the ACO should request that DFAS make the necessary adjustments to clear the NULO.  If DFAS can resolve the adverse conditions, then the contract can became a candidate for Negotiated Settlement.  DFAS will try to locate critical documents required to conduct the audit.   They will perform an extensive search for missing documentation required for the reconciliation.  When sufficient documentation cannot be located to support contract reconciliation, a contract will be designated as unreconcilable.

·        When MOCAS reflects a negative unliquidated obligation (NULO) at the total contract level, the ACO must request that DFAS conduct disbursement reconciliation.  DFAS will try to locate critical documents required to conduct the audit.   They will perform an extensive search for missing documentation required for the reconciliation.  When sufficient documentation cannot be located to support contract reconciliation, a contract will be designated as unreconcilable.

·        If the MOCAS balances are all positive ULO and the Accounting Station records have NULOs; the accounting station will be responsible for reconciling their records.

 

Also, if a DCMA Form 1797 has been previously sent to DFAS requesting reconciliation, the ACO will notify DFAS that the contract closeout is being pursued under Negotiated Settlement.  This is to ensure that DFAS will not spend time trying to reconcile the contract. 

 

As with each of the alternate closeout methods, the ACO will need to perform an initial risk analysis and decide if this procedure is appropriate for a particular contractor.  Factors to consider include:

 

·        Does using Negotiating Settlement support an orderly and economical process for closing this contract with little or no additional financial risk to the Government? 

·        Can the Government be made whole at the total contract level although full contract reconciliation has not been accomplished at the ACRN level and there is uncertainty about the amount owed to the Government or the Contractor?

 

The steps in the procedure:

 

The ACO should contact the PCO and obtain agreement on the best path for closing this contract.  At this point the ACO and PCO should:

 

  • Agree that the amount owed (either the contractor or the government) is in question.
  • Make a decision to use negotiated settlement with the contractor and the PCO should coordinate their decision with their accounting station personnel.
  • Identify who will be the Responsible Contract Reconciliation Agent (RCRA).
  • Register the contract in the Standardized Contract Reconciliation Tool (SCRT) and identify that the negotiated settlement process is being used.  This will ensure that another party will not start additional reconciliation efforts.

 

The ACO should conduct a meeting or conference with the responsible/affected government parties to include the PCO, fund manager(s), DFAS accounting station personnel, DFAS or disbursing office personnel, DCAA and any other party that will assist in negotiating a settlement or assume responsible for closing the official accounting records for the PCO.

 

  • The parties will develop a plan of action to ensure the process described below works efficiently.
  • The ACO will assess available government data and establish an initial government negotiating position for administrative closeout.
  • As required, the ACO will initiate a DCAA or other audit to assist in establishing a final negotiating position based on the best available records, including contractor records.
  • The ACO should negotiate a settlement with the contractor.
  • The ACO might want to coordinate with DFAS prior to issuance of modification to verify that the contract can be adjusted and closed.
  • The ACO will issue a bilateral modification.  The final document should cite any payment amount due the contractor.  If there are funds still on the ULO line, the ACO will determine if the funds are “remaining funds” or “excess funds.  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 or if the funds are excess, the bilateral modification should administratively remove the excess funds.  The modification should also state the contract performance by the Contractor has been completed and accepted by the Government, and that all obligations of the Contractor under this contract have been satisfied.  The modification should also direct DFAS to close the contract.

 

The ACO will distribute a copy of the modification to all parties. 

 

The ACO should document the contract file to include:

·        the efforts made by the ACO team to obtain the necessary closeout data

·        the situations and/or factors affecting the ACO team's inability to obtain and/or complete the required steps of this procedure

The ACO must include a statement in the contract file which states, “To the best of my knowledge, the contract requirements have been fully satisfied, therefore it is my determination to proceed with a negotiated closeout

 

 

 


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SUMMARY

 

 

The Defense Contract Management Agency (DCMA) Contract Closeout Guidebook describes steps for successful contract closeout, continuous performance improvement, and customer satisfaction.  The objective of this guidebook is to institutionalize practices to close contracts in a timely manner. 

 

The Contract Closeout Guidebook provides instructions on standard closeout.  It also addresses solutions for problem closures using methods such as quick closeout, early closeout, unilateral rate determination, unilateral administrative closeout and negotiated settlement. The recommended techniques, samples and tools were developed with the entire closeout team in mind.  The team consists of individuals from DCMA, the contractor, DFAS, DCAA, and the Buying Office.  All have interrelated and interdependent closeout tasks that must be completed prior to closing the contract.  DCMA leads the contract closeout process and coordinates with all parties to complete all administrative actions, settle all disputes, and make sure final payment has been made. Communication and information sharing is key to timely contract closeout.

 

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                                                                                        R2 Overage Reason Codes

APPENDIX A

 

R2 OVERAGE 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.  

DCMA (73)

 

 

APPENDIX B

ACRONYM LIST

 

ACO             Administrative Contracting Officer

 

ACRN           Accounting Classification Reference Number

 

ASBC           Armed Services Board of Contract Appeal

 

BOA             Basic Ordering Agreement

 

BSM             Business System Modernization

 

CA               Contract Administrator

 

CACO           Corporate Administrative Contracting Officer

 

CACS            Contract Audit Closing Statement

 

CAR             Contract Administration Report

 

CAS              Contract Administration Services

 

CCN             Contract Completion Notice

 

CLIN             Contract Line Item Number

 

CLR              Contingent Liability Report

 

CMO             Contract Management Office

 

COA             Certificate of Acceptance

 

COTR           Contracting Office Technical Representative

 

CRS             Contract Reconciliation System

 

CUM            Cumulative

 

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

 

          DIS              Defense Industrial Security

 

DLAM           Defense Logistics Agency Manual

 

DMACT             DFAS Merged Account

 

DODAAD       Department of Defense Activity Address Directory   

 

DPADS          DCMA Property Administration Data System

 

          ECD             Estimated Completion Date

 

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

 

G&A             General & Administrative

 

GFE             Government Furnished Equipment

 

GFM             Government Furnished Material

 

GFP              Government Furnished Property

 

IDIQ             Indefinite Delivery Indefinite Quantity

 

IS                 Industrial Specialist

 

LH                Labor Hour

 

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

 

PKX              Unclosed Contract Status

 

PK9/EDI 567  Contract Completion Statement

 

          PLCO            Plant Clearance Officer

 

POP             Period of Performance

 

PO                   Purchase Order

 

QA               Quality Assurance

 

QAR             Quality Assurance Representative

 

R&D             Research and Development

 

SAMMS          Standard Automated Material Management Systems

 

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

 


Back To TOC

APPENDIX C

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

 

APPENDIX D

LIST OF ATTACHMENTS

 

 

 

The attached are sample letters, modifications and memos to file for use in closing contracts. 

 

Letters to Contractors

 

  • Initial Request for Final Voucher and List of Identified Contracts
  • Request for Initial Closeout Actions
  • Notice of Intent to Unilaterally Determine Contract Price and Final Contract Price Worksheet
  • Notice to Contractor of Early Closeout
  • Request to Contractor for Final Invoice Status 1
  • Request to Contractor for Final Invoice Status 2
  • Request to Contractor for Final Patent Report
  • Request to Contractor for Royalty Report
  • Request to Contractor for Final Voucher Submission 2.1
  • Request to Contractor for Final Voucher Submission 2.2
  • Request to Contractor for OH Proposal 1
  • Request to Contractor for Oh Proposal 2
  • Request to Contractor for OH Proposal 3
  • Request to Contractor for OH Proposal 5
  • Request to Contractor for Refund
  • Request to Contractor for Status of Outstanding VECPs
  • Request to Contractor for Subcontractor Patent Report
  • Request to Contractor for Waiver of Final Payment


Letters to DCAA

 

  • Notice to DCAA of Early Closeout
  • Request to DCAA for Audit Assistance on FV

 

Letters to DFAS

 

  • Authorizing Release of Withholds

 

Letters to DIS

 

  • Request for Disposition of Classified Material

 

Letters to PCO

 

  • Notice to PCO of Early Closeout
  • Notice to PCO Final Patent Report
  • Notice to PCO Final Patent Report (Negative DD 882)
  • Notice to PCO Final Royalty Report
  • Notice to PCO of Nonsubmittal of Indirect Cost  Proposal
  • Notice to PCO of Unilateral Action
  • Notice to PCO of Contractor No Longer in Business
  • Request to PCO for Certificate of Acceptance
  • Request to PCO for Determination of Overrun 1
  • Request to PCO for Determination of Overrun 2
  • Request to PCO for Status on VECPs

 

Memos to File

 

  • Memo to File - Contractor No Longer in Business
  • Memo to File – Unilateral for Small Business

 

Sample Modifications

 

  • Contractor Underpaid  - Final Price equal Amount Paid
  • Contractor Overpaid - Refund Due
  • No Adjustment in Previous Payments 
  • Contractor No Longer in Business
  • Final Indirect Rates Not Settled

 

 

 

 

 

Back To TOC


 


Sample Letter

Initial Request for Final Voucher and List of Identified Contracts

 

 

 

DCMA-______                                                                                   Date

 

 

[Contractor Address]

 

 

 

Dear [Contractor]:

 

            Our records indicate that the contracts identified on the attached list are physically complete and the indirect cost rates applicable to the period of performance have been determined and agreed to by [Contractor] for fiscal year _____.

 

In accordance with FAR 52.216-7(d)(4) and Final Indirect Cost Rate Agreement signed by your office on _________, you are hereby reminded of your contractual requirement for submitting, within 120 days after settlement of final indirect cost rates, final voucher(s), assignment(s), and release(s).  Your final voucher packages should be submitted to this office with a copy to the cognizant DCAA office by [120 days from date of signed rate agreement].  If you cannot meet this deadline, provide to the undersigned, by [60 days after date of this letter], a firm date and milestone plan for submitting these documents.

 

            The submission of these documents will permit timely closeout and minimize funds lost due to the cancellation of obligations.  Should you have any questions, contact the undersigned at (   ) ___-_____, email ___________.

 

                                                            Sincerely,

 

 

 

                                                Administrative Contracting Officer

 

Attachment

1.      List of Contracts

2.      DCAA Indirect Cost Audit (optional)

 

 


CC:

DCAA

 

Back to List

 


Attachment

[Contractor Name]

List of Physically Completed Contracts

For Fiscal Year Ending ________

Final Indirect Cost Rates Determined on [date of signed rate agreement]

Date Final Voucher(s) Due [120 days after date of signed rate agreement]

 

 

Contract Number

Contract Type

Final Acceptance Date (FAD)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Back to List

 

 


 

Sample Letter
Request for Initial Closeout Actions

 

 

 

DCMA ______                                                                                   Date

 

 

[Contractor Address]

 

 

 

Dear [Contractor]:

 

In order to facilitate closing out contract                                          please provide the following information no later than ______________:

 

(  )  Has all classified material been dispositioned?

 

(  )  Have all patent invention disclosures and royalty reports been submitted?

 

(  )  Are there any outstanding subcontracting issues?

 

(  )  Have all value engineering change proposals (VECP) been settled?

 

(  ) In order to permit evaluation of the contract for either excess or needed funds, please provide the following data from your records:

 

            Estimated Final Contract Price (Actual cost plus profit/fee)

            Total Amount Billed To Date

            Estimated Amount of Final Voucher

 

            When negative answers are provided to any of the above questions, please provide comments and a target completion date.

 

            Should you have any questions, contact the undersigned at (   ) ___-_____ or email ___________.

           

 

Sincerely, 

 

 

Administrative Contracting Officer

 

Back to List

 



Sample Letter

Notice of Intent to Unilaterally Determine Contract Price and

Final Contract Price Worksheet

 

DCMA-_______                                                                                                             Date

 

 

[Contractor Address]

 

 

Dear [Contractor]:

 

            Reference is made to DCMA_-_____ letter dated ________, which requested submission of final voucher(s) for an identified list of contracts.  These contracts are physically complete and the incurred cost rates applicable to the period of performance have been determined and agreed to by [Contractor] for fiscal year _____.

 

Earlier efforts to acquire final vouchers and closing documents have been unsuccessful.  Therefore, you are hereby notified that you must submit your final voucher packages by [30 days after date of this letter].  The packages should be submitted to this office with a copy to the cognizant DCAA office.  If you cannot meet this deadline, provide to the undersigned, by [14 days after date of this letter], a firm date or milestone plan for submitting these documents.

 

In order to assist you, our final contract price worksheet is attached stating the allowable cost and fee and amount previously paid to you for each contract, according to our records.  

 

            Your failure to adhere to FAR 52.216-7(d)(4) and to respond to this letter will necessitate the action to unilaterally determine the final contract prices and administratively close the contracts.  [Contractor] will forfeit any other funds due.  In the event that it is determined that [Contractor] has been overpaid, a demand letter will be issued. 

 

            Any questions may be directed to the undersigned at (   ) ____-______. 

 

                                                                        Sincerely,

                                                            Administrative Contracting Officer

 

Attachment    

  Final Contract Price Worksheet

 

CC:

DCAA

 

Back to List

 



Attachment - Final Contract Price Worksheet by Contractor

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Contractor:

 

 

 

 

 

 

 

 

 

Total Allowable Costs for Contracts Ready to Close for FY:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

References

 

 

 

 

 

 

 

 

 

 

DCAA Audit Report Number and Date:

 

 

 

 

 

 

 

 

Date of Fully Executed Rate Agreement:

 

 

 

 

 

 

 

 

Date of DCMA Initial Request for FV's:

 

Suspense:

 

 

 

 

 

 

Date of DCMA Notice of Intent:

 

Suspense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Date FV

 

 

Contract

 

Final Acceptance

               Allowable

 

Total Allowable

 

Previously

Underpayment - $ Due to Ktr

 Overpayment - Refund Due

 

Excess Funds

Submitted

Contract Number

Type

Date

Cost

Fee

Cost + Fee

Paid

 

to Gov't

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Back to List

 



Sample Letter

Notice of Early Closeout

 

 

DCMA-______                                                                                   Date

 

 

[Contractor Address]

 

 

Dear [Contractor]:

 

            Reference is made to Contract ______________________, FAR Clause 52.232-7, Payments under Time & Materials and Labor Hour Contracts.

 

            In order to allow for the timely closeout of delivery orders issued under the aforementioned contract, early closeout procedures are recommended.  The early closeout would involve the provisional approval of “completion” vouchers for each order that has been fully accepted by the Government, with the exception of certain order held open to satisfy the Government’s right to withhold five percent of payments otherwise due, up to a maximum of $50,000.  The early closeout procedure is detailed as follows:

 

a.       Upon final acceptance by the Government, the contractor will prepare a completion voucher for each task order.  Each completion voucher will include a certification signed by the Government Representative reading substantially as follows:  “I certify that the requirements of this task order have been satisfactorily completed and that final acceptance has been made.”

 

b.      Contractor XX will then forward the certified completion voucher to the Administrative Contracting Officer (ACO) for provisional approval.

 

c.       The ACO will verify that all contractual requirements have been satisfied.  The ACO will sign the completion voucher approving for payment and will forward it to DFAS Columbus for payment.

 

d.      Certain delivery orders will be held open for contract settlement until the last year of incurred costs has been audited by DCAA.  At that time, a “Final” Voucher will be prepared and submitted to DCAA along with the 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 utilization of early closeout procedures not only allows timely closeout of delivery orders but also prevents the systematic cancellation of money due to the National Defense Authorization Act (PL 101-510, 5 Nov 90).  You are requested to complete the 1st Endorsement and return it to the undersigned no later than ____________.

 

            Should you have any questions or require additional information, please contact the undersigned at (xxx) xxx-xxxx, or at e-mail _____.

 

 

 

 

                                                                        Administrative Contracting Officer

 

______________________________________________________________________________

1st Endorsement

 

 

FROM:            Contractor Address

 

 

TO:                  DCMA Address

 

 

 

SUBJECT:      Contractor _____________

                        Contract ____________________, Early Closeout Procedures

 

 

____    I concur with the use of Early Closeout Procedures.

 

 

____    I object to the use of Early Closeout Procedures for the following reason:

 

 

 

 

_____  Other:  _________________________________________________________________

 

 

 

 

 

 

Authorized Signature/Title                                                                             Date

 

 

Back to List


Sample Letter

Request for Final Invoice Status

 

 

DCMA-______                                                                                   Date

 

 

[Contractor Address]

 

 

 

Dear [Contractor]:

 

            Our records indicate contract _______________ is physically complete.  However, there still remains an unpaid balance of $_________.    

 

            To assist us in the closeout effort, you are requested to complete the 1st Endorsement and return it to this office.  Your response is requested by <Date>.  Should you have any questions or require additional information, please contact <POC> at (   ) ___-_____ or email ___________.

 

                                                                                    Sincerely,

 

 

 

                                                                                    Administrative Contracting Officer

 

1st Endorsement

 

TO:      DCMA _______________

            ATTN:  (ACO)

            Street Address

            City, State  Zip code

 

___      Final Payment, Check Number _______________ was received on ________________, the subject contract is paid in full.  Funds unliquidated are considered excess.

 

___      Final invoice was submitted on _______________ for the amount of $______________,  however, payment has not been received.  (Please attach a copy of invoice.)

 

___      Final invoice for the amount of $__________ will be submitted on ________________.

 

 

            Signature/Title_________________________                       Date______________

           

Back to List

 


Sample Letter

Request for Final Invoice Status

 

 

 

DCMA-______                                                                                   Date

 

 

[Contractor Address]

 

 

 

Dear [Contractor]:

 

            It is requested that your company’s records be reviewed to verify that all shipments were completed and that full payment was received for the following Government Contract:

 

 

                                            XXXXXX-XX-XX-XXXX/xxxx    

 

            Upon completion of your research, please mark the appropriate box below and return this letter.  If you have any questions regarding this request, please do not hesitate to contact me at (   )___-_____ or email  ___________. Thank you for your time and cooperation.

 

                                                                                    Sincerely,

 

 

 

                                                                                    Administrative Contracting Officer

 

 

Back to List

 


1st Endorsement

 

TO:      DCMA _______________

            ATTN:  (ACO)

            Street Address

            City, State  Zip code

 

___      <Contractor’s> records indicate that shipments were made and payment-in-full was received.  Funds unliquidated are not needed for payment.

 

___      <Contractor’s> records indicate that there are still open issues pertaining to contract number _____________, and requests DCMA ______contact  __________________at _____________ to resolve these remaining issues.

 

___      Final invoice for the amount of $_____________ will be submitted on _____________.

 

 

                                                                                    ____________________________________

            Signature/Title                                    Date

           

 

 

Back to List

 


Sample Letter

Initial Request for Final Patent Report

 

 

 

DCMA ______                                                                                   Date

 

 

[Contractor Address]

 

 

 

Dear [Contractor]:

 

     Reference is made to the following:

a.       Contract ____________

b.      FAR Clause___________

 

     I have been advised that your effort under the referenced contract is complete.  Therefore, you are requested to submit the final report of Inventions and Subcontracts required by the Patent Rights Clause contained in your contract.

 

     Please complete the DD Form 882 and forward to my attention no later that _____.  Please list subject inventions or certify that there were no such inventions and list all subcontracts at any tier containing a Patent Rights Clause or certify that there were no such subcontracts.

 

     Should you have any questions, contact the undersigned at (   )___-_____ or email  ___________.

 

Sincerely,

 

 

 

 

Administrative Contracting Officer

 

Back to List

 


Sample Letter

Request for Royalty Report

 

 

DCMA ______                                                                                   Date

 

 

[Contractor Address]

 

 

 

Dear [Contractor]:

 

     Reference is made to the following:

a.  Contract ____________

b.  FAR Clause 52.227-9

 

     In accordance with reference b,

a.       The term "royalties" refers to any costs or charges in the nature of royalties, license fees, patent or license amortization costs, or the like, for the use of or for rights in patents and patent applications in connection with performing this contract or any subcontract hereunder. 

 

b.      The Contractor shall furnish to the Contracting Officer, before final payment under this contract, a statement of royalties paid or required to be paid in connection with performing this contract and subcontracts hereunder together with the reasons.   

 

     I have been advised that your effort under contract ______________ is complete.   Therefore, you are requested to submit a final royalty report. 

 

     The submission of this document will permit timely closeout.   Should you have any questions, contact the undersigned at (   )___-_____ or email  ___________.

 

Sincerely,

 

 

 

 

Administrative Contracting Officer

 

Back to List

 


Sample Letter
2nd Request for Final Voucher and List of Identified Contracts

 

 

DCMA-______                                                                                   Date

 

 

[Contractor Address]

 

 

 

Dear [Contractor]:

 

     To date, I have received no response to the Government’s letters of _______ and _______ requesting final vouchers.  Your company is delinquent in providing over XXX final vouchers and related closing documents.  I am again requesting that XXX Inc provide final vouchers for contracts listed at the enclosure no later than _____.

 

            As you are aware, DCMA _______ is making a concerted effort to close overage contracts.  In our recent meeting, we reiterated the necessity for full cooperation between the Government and XXX Inc.  If you do not respond by the suspense date, I will begin administrative closeout of the contracts listed herein.  Please be advised that this action may affect your company’s determination of responsibility for future contract award, in accordance with FAR Part 9.

 

            Although I do not want to use administrative (unilateral) closeout procedures, I will have no choice since both this office and DCAA have requested your cooperation without success.  Therefore, I do look forward to your timely response.

 

            Should you have any questions, contact the undersigned at (   ) ___-_____, or email ___________.

 

                                                            Sincerely,

 

 

 

                                                          Administrative Contracting Officer

 

Attachment

List of Contracts

 

CC:

DCAA