Contract Closeout
Overview
There is a belief that a contract is completed when final delivery is made of the required goods and services and the Government has made acceptance and final payment to the
contract. However, a contract is not completed, until it is closed out. Contract closeout is the administrative action ensuring all parties have complied with the terms of the contract. This may include administrative actions that are contractually required such as property, security, patents and royalties finalizations.
Closeout is completed when all administrative actions have been completed, all disputes settled, and final payment has been made[1].
Once a contract has come to term, it's period of performance is over, and all actions such as product or service delivery are complete, a contract must be administratively
closed out.
Administratively closing a contract makes sure that certain actions have been completed by each party. A contractor must complete a contract closeout package, and a contracting
officer should issue a final modification to the contract. That modification is to administratively close the contract.
The closeout process can be simple or complex depending on the contract type. Contract closeout requires coordination between the contracting office, finance office, program
office, auditing office and the contractor.
Key Regulations
- FAR 4.804 - Closeout of Contract Files
- FAR 42.708 - Quick-Closeout Procedure
- FAR 52.216-7 - Allowable Cost and Payment (Clause)
Contract Closeout Time Standards[2]
Except as provided in paragraph (c) of this section, time standards for closing out contract files are as follows:
- (1) Simplified Acquisition Procedures - should be considered closed when the contracting officer receives evidence of receipt of property and final payment, unless otherwise specified by agency regulations.
- (2) Files for firm-fixed-price contracts[3], should be closed within 6 months after the date on which the contracting officer receives evidence of physical completion.
- (3) Files for contracts requiring settlement of indirect cost rates should be closed within 36 months of the month in which the contracting officer receives evidence of physical completion.
- (4) Files for all other contracts should be closed within 20 months of the month in which the contracting officer receives evidence of physical completion.
A contract file shall not be closed if—
The contract is in litigation or under appeal, or in the case of a termination, all termination actions have not been completed.[4]
When is a Contract Physically Completed[5]
A contract is considered to be physically completed when—
The Contract has come to term
- (i) The contractor has completed the required deliveries and the Government has inspected and accepted the supplies;
- (ii) The contractor has performed all services and the Government has accepted these services; and
- (iii) All option provisions, if any, have expired
Contract Termination
- The Government has given the contractor a notice of complete contract termination.
Rental, Use and Storage Agreements
- Rental, Use, and Storage Agreements are physically completed when:
- (1) The Government has given the contractor a notice of complete contract termination; or
- (2) The contract period has expired.[6]
Closing Flexibly Priced Contracts
Closing Flexibly Priced Contracts is usually done after the contractor and US Government agree on the final indirect rates for the period covered by the contract. This is usually done through the Incurred Cost Submission, and audit of that submission.
Cumulative Allowable Cost Worksheet
FAR 4.804-5 Procedures for Closing Out Contract Files
When closing out contract files the contracting officer shall use the closeout procedures at 4.804-5. However, these closeout actions may be modified to reflect the extent of administration that has been performed. Quick closeout procedures (see 42.708) should be used, when appropriate, to reduce administrative costs and to enable de-obligation of excess funds.[7]
Forms
Contract Closing Checklist
http://www.govcwiki.org/index.php?title=File:SF_DD_1597_-_Contract_Closeout_Checklist.pdf
Contract Closing Form
http://www.govcwiki.org/index.php?title=File:DD_1594_-_Contract_Closing_Form.pdf
Resources
See the link below to open the DCMA Contract Closeout Guidebook
http://www.govcwiki.org/index.php?title=File:DCMA_Manual_-_Contract_Closeout.pdf
See the link below to open the DoD Contract Closeout Guidebook
http://www.govcwiki.org/index.php?title=File:DoD_Contract_Closeout_Guidebook_Oct._2019.pdf