Difference between revisions of "Contract Closeout - Procedures"

Revision as of 09:43, 11 December 2015

Introduction

As required by the Federal Acquisition Regulation (FAR) 4.804 and/or 42.708, all contracts must be closed if a contract has been completed.

Contract closeout procedures may be straightforward or complicated depending on the contract type. Contract closeout requires coordination between Finance and Accounting Group (F&A), Contracts Group, and respective management and the government entity that administers the contract.

The overall contract closeout process consists of six areas as described in the contract closeout document. These are listed below along with the responsible departments/organizations.

1. Closeout initiation – Contracts

2. Document collection and Verification – F&A Closeout

3. Financial Analysis – F&A Closeout

4. Subcontractor Release – Contracts/Subcontracts

5. Closeout package creation - Contracts

6. US Government Certification and Archiving – US Government

Definitions/Acronyms

ACO Administrative Contracting Officer

ACRN Accounting Classification Reference Number

CA Contract Administrator

CACS Contract Audit Closing Statement

CLIN Contract Line Item Number

CPAF Cost-Plus-Award-Fee

CPFF Cost-Plus-Fixed-Fee

CPIF Cost-Plus-Incentive-Fee

DCAA Defense Contract Audit Agency

DCMA Defense Contract Management Agency

DFAS Defense Finance and Accounting Service

FAD Final Acceptance Date   FDD Final Delivery Date

FFP Firm-Fixed-Price

F&A Finance and Accounting

FY Fiscal Year

GFE Government Furnished Equipment

GFM Government Furnished Material

GFP Government Furnished Property

IDIQ Indefinite Delivery Indefinite Quantity

MOCAS Mechanization of Contract Administration Services

MOD Modification

PCO Procuring Contracting Officer

PO Purchase Order

POC Point of Contact

POP Period of Performance

T&M Time and Material

ULO Unliquidated Obligation

Overview

Prior to start the closeout process is imperative to determine which projects represent a high audit risk and need to be closed.

The universe of contracts to be closed will be determined by the Contract Closeout Specialist or any appointed person to perform this task. In addition, the Contract Closeout Specialist will assign the projects to be closed among the members of the Closeout team.

As part of the closeout procedures we will close five types of contracts:

• CPFF; • CPAF; • CPIF; • T&M; and • FFP

The following provides a description of the types of contracts:

Cost-Plus-Fixed-Fee (CPFF) Contracts (FAR 16.306)

The CPFF contract is a cost-reimbursement contract that provides for a payment of allowable costs plus a fixed fee. A CPFF may take one of two basic forms - completion or term.

• The completion form describes the scope of work by stating a definite goal or target and specifying an end product. This form of contract normally requires the contractor to complete and deliver the specified end product (e.g., a final report of research accomplishing the goal or target) within the estimated cost, if possible, as a condition for payment of the entire fixed fee.

• The term form describes the scope of work in general terms and obligates the contractor to devote a specified level of effort for a stated time period. Under the term form, if the performance is considered satisfactory by the Government, the fixed fee is payable at the expiration of the agreed-upon period upon contractor certification that the level of effort specified in the contract has been expended in performing the contract work. Renewal for further periods of performance is a new acquisition that involves new cost and fee arrangements.

Cost-Plus-Incentive-Fee (CPIF) Contracts (FAR 16.304; FAR 16.405-1)

The cost-plus-incentive-fee contract is a cost-reimbursement contract which provides for a fee which is adjusted by formula according to the relationship of total allowable costs to target costs. A target cost, target fee, minimum and maximum fee, and fee adjustment formula are negotiated at the outset. The fee is adjusted after contract performance, using the formula and the maximum and minimum fee limitations.   This contract type is appropriate when a cost-reimbursement contract is permissible and a target cost and a fee adjustment formula likely to motivate effective contract performance can be negotiated. (See FAR 16.404-1(b))

Cost-Plus-Award-Fee (CPAF) Contracts (FAR 16.305; FAR 16.405-2))

The cost-plus-award-fee contract is a cost-reimbursement contract with special fee provisions. The fee has two parts: (1) a fixed portion; and (2) an amount to be awarded for excellence in specific contract areas, such as quality, timeliness, ingenuity, and cost effectiveness, as determined by the Government.

This contract type is appropriate when achievement is measurable only by subjective evaluation rather than objective data.

Time and Materials/Labor Hour Contracts (FAR 16.601)

The Time and Materials/Labor Hour contracts provides for payment based on (1) direct and indirect labor, paid at specified labor rates; and (2) materials paid at cost. Material handling costs may be included, if appropriate. These contracts must include a ceiling price.

This contract type may be used only if no other contract type is suitable. It would typically be used for service rather than product procurements. It may be appropriate when the extent of labor required or the costs cannot be anticipated at the outset.

Firm-Fixed-Price (FFP) Contracts (FAR 16.202)

The firm-fixed-price contract provides for a price which cannot be adjusted because of the cost experience of the contractor in performing the contract.

Firm-fixed-price contracts are suitable for acquiring commercial items (see FAR Parts 2 and 12) or for acquiring other supplies or services on the basis of reasonably definite functional or detailed specifications (see FAR Part 11) and when the contracting officer can establish fair and reasonable prices at the outset.

Procedures

Quick Closeout Procedures

The first step is to determine whether a particular contract is subject to quick closeout. FAR 42.708 prescribes when contracts are eligible as follows:

1. The contract is physically complete,

2. The amount of unsettled indirect cost to be allocated to the contract is relatively insignificant

(i) The total unsettled indirect costs to be allocated to any one contract does not exceed $1,000,000

(ii) Unless otherwise provided in agency procedures, the cumulative unsettled indirect costs to be allocated to one or more contracts in a single fiscal year do not exceed 10 percent of the estimated, total unsettled indirect costs allocable for cost-type contracts for that fiscal year.

Full Closeout Procedures

The overall contract closeout process consists of six areas.

Contract Closeout Procedures for Cost-Plus-Fixed Fee (CPFF)

Contract Closeout Procedures for Time and Material (T&M)

Contract Closeout Procedures for Firm-Fixed Price (FFP)