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Contract Closeout Guide Chapter 2 – Closeout: An Overview

Topics on this page:

  1. Closed Contract
  2. Responsibilities
  3. Strategies to facilitate timely and effective contract closeout
  4. FAR/HHSAR closeout time standards
  5. HHS closeout performance metrics
  6. Record retention

This chapter provides general information about contract closeout, including responsibilities, strategies to facilitate timely and effective closeout, time standards, and HHS performance metrics.

A.  Closed contract. A contract is considered closed when it is physically, as well as administratively completed, i.e., the contractor has completed performance/delivery of required supplies/services in accordance with contract terms and conditions, and the Government has completed all required administrative actions (such as those involving property disposition, patents, and royalties). The end result of the closeout process is a closed contract, or in common usage, a “closed contract file.”

  1. Physically completed. FAR 4.804-4 states that a contract is physically completed when —

    • the contractor has delivered required supplies and the Government has inspected and accepted them; or the contractor has performed all services, which the Government has accepted (termed “completion of delivery of property or services”); and
    • all option provisions, if any, have expired; or
    • the Government has given the contractor a notice of complete contract termination.

    NOTE: Facilities contracts and rental, use, and storage agreements are considered physically completed when the Government has issued a notice of complete contract termination or the contract period has expired.

  2. Administratively completed.  A contract is considered administratively completed when the applicable FAR requirements have been met.  See Chapter 3 of this Guide for the table of closeout requirements that apply to different contract types.

    NOTE: Certain requirements, such as warranty clauses and invention reporting, may continue to apply after a contract is physically and administratively completed, i.e., closed out.  For example, FAR Subpart 46.7 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 a contract. As long as there is not a specific contract line item or funding attached to an extended warranty, the Contracting Officer (CO) should not delay the closeout of a contract just for warranty purposes.  Also, closing a contract does not relieve the contractor of the contractual responsibility to perform under a warranty clause.  The CO and Contracting Officer’s Representative (COR) must work together with a contractor to ensure that they address any warranty provision and its implementation before completing contract closeout.

B.  Responsibilities. The individuals and organizations shown in Table 1 are integral to the closeout process. The table addresses their general closeout responsibilities. However, in some areas, these responsibilities apply more broadly to post-award administration. Specific closeout-related responsibilities and activities are specified in Chapter 3.

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TABLE 1: Contract Closeout Responsibilities

Official

Responsibilities

Contracting Officer (CO)The CO is responsible for overseeing the entire closeout process and ultimately must ensure that all required administrative actions have been satisfactorily completed.
Contract Specialist (CS)The CS serves as the CO’s representative for the closeout process and is responsible for much of the closeout activity described in this Guide. In some instances, OPDIVs may use Government contract administrators or contractor support staff to assist in the closeout process. Regardless of who might serve in this capacity, only the CO may take actions that affect contract funding or formal acceptance or rejection of contractor submissions.
Contracting Officer’s Representative (COR)

The COR, or other authorized official,( if a COR is not appointed for an .acquisition, e.g., for an order under the simplified acquisition threshold), is responsible for providing assistance to the CO/CS by—

  • ensuring that all technical requirements of the contract have been satisfactorily met, including provision of all deliverable items and the final report, if any;
  • participating in the settlement of any outstanding claims, change orders, or value engineering change proposals;
  • completing the technical portions of the contractor’s performance assessment required by FAR 42.15;
  • advising the CO about the disposition of Government- furnished property, if applicable; and
  • reviewing and recommending approval/disapproval of the final invoice or completion voucher. (NOTE: While the terms “voucher” and “invoice” are often used interchangeably, for purposes of this Guide “invoice” refers to a contractor’s request for payment under a FP contract, while “voucher” refers to a contractor’s request for payment under a CR contract.)
OPDIV Finance Office

The OPDIV finance office is responsible for—

  • alerting the CO to any excess funds that may remain on the contract; and
  • coordination with the CO to secure new obligations when necessary or process modifications for deobligation of funds, as required for closeout, per the direction of the CO.
OPDIV Property Administrator

The OPDIV property administrator is responsible for—

  • verifying that the contractor’s inventory of residual Government property (Government-furnished or contractor-acquired) is accurate; or, in the case of non-profit organizations, including educational institutions where title vests in the contractor, obtaining a listing of contractor-acquired property;
  • coordinating with the COR to provide timely instructions to the CO regarding disposition of residual Government property; and
  • working with the CO to ensure that the contractor complies with the disposition instructions for residual Government property.
HHS Office of the General Counsel (OGC)OGC is responsible for working with the CO and COR in the resolution of claims and resolving any issues concerning contractor submittals, such as the final patent report and royalty reporting.
Cognizant Audit AgencyThe cognizant audit agency is generally responsible for performing incurred-cost audits through an on-site or desk review.
Contractor

Among other things, the contractor is responsible for— FAR Part 4.804-5 in listed order

  • furnishing indirect cost rate proposals for all years in which a proposal was not previously submitted;
  • submitting a final property inventory (excluding intellectual property);
  • settling all subcontract costs and any issues thereunder;
  • submitting subcontracting compliance reports for all years to the electronic subcontract reporting system  at http://www.esrs.gov (formerly Standard Forms 294 and 295);
  • submitting the final patent and royalty reports; and
  • submitting a contractor’s release of claims, i.e., contractor’s closing statement; and submitting a Contractor’s Assignment of Refunds, Rebates, and Credits; preparing and submitting a final invoice or completion voucher.

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C.  Strategies to facilitatetimely and effective contract closeout. While closeout occurs after a contract is physically completed, OPDIVs may undertake a variety of general activities, as well as award-specific actions throughout the acquisition process, to facilitate timely and effective contract closeout. These actions include the following:

  1. General.

    • Establish a separate closeout function or dedicated resources within the contracting organization, or use contractor support, to complete contract closeouts and emphasize the importance of contract closeout.
    • If dedicated resources or contractor support are not available, complete closeouts during that time of a fiscal year, e.g., normally the first and second quarters, when new contract award activity may be limited.
    • Request that the OPDIV finance office regularly, e.g., monthly, provide a listing of contracts for which funds will be lost if timely closeout does not occur and assist in targeting contracts that may be closed through use of a quick closeout procedure. This listing should include all awards whose performance period has ended (not just a month-to-month listing).
    • Incentivize individual performance consistent with organizational closeout goals.
  2. Planning and pre-award phase.

    • Develop well defined contract requirements.This includes developing clear and concise, Statements of Work/Performance Work Statements/Specifications and delivery schedules, Section B “Payment Schedule” and/or any specific provisional rates or Ceiling rates as applicable; and state clear requirements regarding patents, copyrights, use of Government property/information, and any other similar considerations.
    • Use FP contracts to the maximum extent practical, which, in addition to other benefits, reduces the number and complexity of closeout requirements and eliminates the need for final contract audits and establishment of indirect cost rates.

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  1. Contract administration phase.

    • Resolve contract administration issues before they become a problem and document significant activities and events as a contract progresses.
    • Educate the contractor, e.g., by using a post-award orientation session to apprise the contractor of important administration and closeout requirements, particularly if the contractor is a small business or a business with little or no Government contract experience.
    • Consider including an alternative dispute resolution (ADR) process (see FAR 33.201) in construction contracts or other complex contracts in lieu of formal contractor claims procedures, which may cause closeout problems.

D.  FAR/HHSAR closeout time standards. As summarized in Table 2 below, OPDIVs should ensure that contracts are closed within the time frames specified in FAR 4.804-1(a) or, in the absence of FAR coverage, HHS-specified time frames.

TABLE 2: FAR/HHSAR Closeout Time Standards

Type of Contract

Closeout Time Standard

Purchase card order at or below the micro-purchase thresholdWithin 30 days after physical completion.
Simplified acquisitions, including purchase card orders exceeding the micro-purchase threshold, and orders awarded using simplified acquisition proceduresConsidered closed when the CO receives evidence of receipt of property (or services) and final payment, unless otherwise specified by agency regulations. HHS requires that simplified acquisitions, and those awards made using simplified acquisition procedures pursuant to FAR 13.500 (a) and (e), be closed within 60 days after physical completion.
FP contracts (other than simplified acquisitions and awards made using simplified acquisition procedures)Within 6 months after the date on which the CO receives evidence of physical completion.
Contracts requiring settlement of indirect cost ratesWithin 36 months of the month when the CO receives evidence of physical completion. 
Indefinite-delivery/indefinite-quantity (IDIQ) contractWithin 3 months after the date the CO closes the files for all task or delivery orders issued. (NOTE: This is an HHS requirement to ensure that the base indefinite-delivery/indefinite-quantity (IDIQ) contracts are closed.)
All other contractsWithin 20 months of the month in which the contracting officer receives evidence of physical completion.

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E.  HHS closeout performance metrics. HHS has established performance metrics for contract closeout under its Acquisition Dashboard as a means of improving the timeliness of closeout. The Acquisition Dashboard performance indicator, assessment criteria, and basis for measurement are specified below.

  1. Performance indicator: Number of contracts/orders eligible for closeout (change from baseline), excluding simplified acquisitions.

  2. 2.Assessment criteria:

    • Decrease from established baseline;
    • No change from established baseline;  
    • Increase from established baseline; and
  3. Basis for measurement. Departmental Contracts Information System (DCIS) contract closure reports. Type of contract and timeframes for closeout (based on ultimate completion date field).

F.  Record retention. OPDIVs must maintain the contents of contract files consistent with FAR 4.805. For additional information regarding record retention, including e-mail and records, see the National Archives website at http://www.archives.gov/records-mgmt/handbook/. Also, please consult the designated OPDIV Records Management Officer to determine the types of records which may have historical significance, their proper treatment, and any applicable OPDIV- or program-specific requirements.

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