CONTRACT CLOSEOUT

1. Overview.

a. Contract close-out is a part of Contract Administration; therefore, it shares the same general purpose: to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or Purchase Orders. The contract close-out process can vary from very simple in the case of a fixed price Purchase Order for supplies to very complex in the case of a multi-year cost-reimbursement contract. The Contract Closeout Checklist at Attachment 13 is available to ensure all necessary steps have been completed.

b. Timely contract close-out may result in recovery of excess funds for possible use elsewhere, identifies the need for additional funds in a timely manner, and minimizes administrative costs for both the contractor and the Agency.

2. Initiation of Closeout Procedures The contract or purchase order closeout process begins when the contract or purchase order is physically complete.

a. A contract or purchase order shall be considered physically complete when any of the following has occurred (27 DCMR § 1205.1):

i. The contractor has completed the required deliveries, and the OCFO has inspected and accepted the goods and/or services;

ii. The contractor has performed all services, and the OCFO has accepted these services; iii. All contract option provisions, if any, have expired; or,

iv. The OCFO has given the contractor a notice of complete contract termination. b. Facilities contracts and rental, use, and storage agreements shall be considered physically

completed when either of the following has occurred:

i. The OCFO has given the contractor a notice of complete contract termination; or ii. The contract period has expired.

iii. Closeout Procedures c. Contract Close-Out.

i. The close-out process is more complex for contracts, especially if they contain progress payments, have partial deliveries, and involve many contract modifications. However, the end objective is the same; to determine if the contractor fulfilled all requirements of the contract and if the Agency fulfilled its obligations.

ii. The COTR is responsible for informing the Contracting Officer when the contract is physically complete. The Contracting Officer must then request submission of a Final Invoice from the contractor.

iii. If final payment has not yet been made, a request for approval for final payment should be forwarded to Financial Operations. A copy of the final payment needs to be sent to the OCFO Office of Contracts. The COTR also needs to notify the OCFO Office of Contracts. of the status of any collateral agreements, such as maintenance agreements, fidelity bonds, grants, etc. The COTR should also retain a copy of the final payment verification for his/her files.

iv. The OCFO Office of Contracts shall verify with Financial Operations that final payment has been made.

v. A contract completion statement, which acknowledges that the contractor fulfilled all requirements under the contract and that the OCFO has fulfilled its obligations, must be signed by the COTR and placed in the contract file. In executing the contract

completion statement, the COTR must note acceptance together with a listing of items/services under warranty with a notation of each warranty expiration date, if any. vi. If the amount due under a contract is subject to set-off, the Program Office or COTR

will provide the OCFO Office of Contracts with the vendor name, contract number, dollar amount to be set-off, and the reason(s) for set-off. A determination of set-off rights is very important because set-off provides an expeditious means of debt

collection without the need to initiate formal collection procedures, wince the OCFO is already in possession of the funds.

3. Timeliness.

a. To ensure the timely close-out of contracts, these close-out lead time standards should be followed:

i. Small Purchases – Close-out should occur immediately upon completion of delivery of goods or services and payment. 27 DCMR § 1204.2.

ii. Contracts- Within 6 months of confirmation of contract completion. 27 DCMR § 1204.3.

iii. Files for contracts requiring settlement of indirect cost rates shall be closed within thirty-six (36) months after the end of the month in which the contracting officer receives evidence of physical completion.

b. These standards apply unless there are circumstances involving litigation, appeal, termination, or audit or financial issues. In such cases, the issue(s) must be resolved prior to close-out, regardless of the applicable time standard.

5. Close-Out Areas of Interest. The closeout process should address the following areas, as appropriate to the particular contract action:

b. All allowable cost issues are settled; c. Price revisions, if any, are completed;

d. Subcontracts are settled by the prime contractor; e. Termination actions are completed;

f. Contract audit is completed;

g. Contractor’s final invoice has been submitted;

h. A general release of claims has been executed by both parties; and i. Contract funds review is completed and excess funds deobligated.