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Monday, July 1, 2019

Contract Closeout In Small Business Federal Government Contracting



INTRODUCTION

If you are an off-the-shelf or purchased-finished supplier of goods to the federal government, your contact closeout is reasonably simple. You will make delivery at a firm, fixed price to the agency to which you have contracted and submit an invoice. The government will receive and inspect the delivery and approve your invoice for payment. Assuming there are no ongoing warranties, logistics support or similar contract line items involved, the government will then closeout the contract, as will you.

Contracts involving progress billing with retention, cost type contracts and those with intellectual property, government property, classified documents, provisional billing rates and similar more complex matters require astute attention to detail and considerably more administrative support and coordination between the contractor and the government for closeout. Successful contract closeout of these types of programs is an ongoing process beginning at contract award.

This article will discuss the principal features of the closeout process in small business federal government contracting and provide references for further process detail.


THE GOVERNMENT PERSPECTIVE


Below is a synopsis from the introduction to the Defense Contract Management Agency DCMA Manual 2501-07 Contract Closeout which is a free download from the  “References" File in the Box Net cube at the right margin of this site. The synopsis and the book should be read carefully by small business federal government contractors:

Communication and information sharing is key to timely contract closeout. Contract Closeout occurs when all the terms of a contract/order have been met and all administrative actions are completed, all disputes settled, and final payment has been made. This includes those administrative actions that are contractually required; i.e. property, patents and royalties" 

TIPS TO INSURE SUCCESSFUL CONTRACT CLOSEOUT

  • Consider the type of contact under which you are operating and locate that type in the manual Insure the processes specified in are followed in your contract administration from the onset of your contact. Government contract types are discussed at the following link:  Contract Types


Note the manual discusses both the role of the government and the contractor in closeout and the stages in achieving closeout. 

  • Support Cost-Type Contracts With Timely Incurred Cost Proposal Rates and Submissions – Several articles at this site have addressed the development of forward pricing rates and associated DCAA audits and submissions. Here are the most important articles with respect to contract closeout:




  • To close out a cost type contract that has been billed throughout its life at provisional rates, regular incurred cost submissions must be submitted by the contractor and verified by DCAA. Provisional rates must then be adjusted to audited applied actual costs and the final billing determined. This could result in net excess funding on the program that must be returned or a requirement for addition funding at closeout. In either case, the business impact could be substantial for a small enterprise.

Note the following Simplifying Techniques:

  • Verify payment accuracy and report discrepancies immediately.
  • Provide Contracting Officer with cost estimates of projected cost (usually 60 days in advance) in compliance with Limitation of Cost/Funds Clauses (FAR 52.232.20 through 21) for cost reimbursement and facilities contracts.
  • Submit patent reports on time to the Administrative Contracting Officer when required by the patent 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.”
SUMMARY

Becoming informed on government contract closeout steps and putting in place processes to support them in your business system is the most important general principal to remember. Consider the type of contract you are releasing for incurred cost. Bear in mind how an individual contract impacts on your business system and insure your business system supports the type of contact you are putting into play. Develop a good working relationship with your contracting officers, DCMA and DCAA.  For more on the roles of these government functions, please see the following link:

Federal Government Contracting Customer Relations





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