1. Rebecca Beck Director of Finance - DFAS Columbus
Contract Closeout
Rebecca Beck
Director of Finance - DFAS Columbus

2. Overview Contract Life Cycle Key Players
Major Steps in Closeout Process
Time Standards
Appropriation Life Cycle
Common Barriers
How Can You Help?
Initiatives
Disconnect with Accounting
Excess Funds
Resources
Group Discussion
These are the items I will discuss today – beginning at a very basic level, we’ll talk about the life cycle of a contract, the life cycle of an appropriation and the time standards involved.
Then we’ll look at the closeout process itself – a step by step explanation of what needs to happen within the closeout process- there’s a lot involved here.
Then, as I mentioned before, closeout is not always a smooth process. We’ll look at common closeout barriers from both the contractor and government perspectives and what can be done to mitigate them.
We’ll talk about the key players in this process, how you can help and contract closeout initiatives.
Finally, we’ll have time for a group discussion with the experts! I’d like to introduce them now: We have Ms. Rebecca Beck, Director, Accounts Payable Acquisition at DFAS Columbus, Ms. Geneieve Holmes from DCMA Orlando, and Ms. Esther Fischer from DCAA. Thank you all for being here.

3. Life Cycle of a Contract – Procure to Pay
Contract Performance
and Administration
Funding
This chart shows the lifecycle of a contract.
Pre Contract Structure/Award includes: Preparing the solicitation and releasing it, evaluating proposals and negotiating terms, then source selection and award. Clear and concise payment instructions must be included in the contract award document.
Contract Performance and Administration includes: providing the goods or services designated by the contract and performing the appropriate level of administration from DCMA, or other designated entity. Contracting Officers should monitor contract funds, ARNS, and Line items to ensure funding is applied and paid correctly. Use contract obligation recaps to ensure funds are tracked appropriately. Monitor contracts for cost overruns; request additional funds when needed; monitor contract delivery schedules and timely processing and distribution of contract extensions.
Contract Closeout is the final phase of the contract life cycle. The closeout process can vary from very simple in the case of a fixed price supply order using a simplified acquisition process to very complex in the case of a multiple year cost reimbursement type contract.
Timely contract close out is necessary since it may result in the 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 Government. The major closeout driver in causing contracts to go overage is awaiting submission of final voucher followed by negotiation of overhead rates, final audits and contract reconciliation. Current initiatives to address these problem areas are (Final Voucher Submission) Letters to CEOs & CFOs with delinquent final vouchers and Unilateral Price Determinations. (Negotiation of overhead rates) DCAA/DCMA Letters to rescind direct billing, unilateral final rate determinations and use of Quick Closeout. (Final Audit) Waive audits for Time & Materials/Labor Hour contracts and use of the Cumulative Allowable Cost Worksheet. (Reconciliation) Use of the Special Temporary Closeout Authority and pending Unreconcilable Guidance.
Pre Contract
Structure/Award
Contract Closeout

4. Services DCMA DCAA ONE FOCUS DFAS Industry
Contract Closeout Key Players
Services
Additional Funding
Property Disposition
Replacement Funds
Product Acceptance
Funds Management
Negotiation of Rates
Complete all Closeout Actions
DCMA
Final OH Rates
Indirect Cost Audits
CACWS
Final Voucher Review
DCAA
ONE FOCUS
Reconciliations
Part B (FFP<100K)
Final Payment
Indirect Cost Rate Prop
Year End Rate Adjustments
Final Invoice//Vouchers
Settle Subcontracts
DFAS
Industry

5. Major Steps in Contract Closeout
7. Dispose of contract file
6. Prepare contract
completion statement
5. Deobligate excess funds /
request additional funds
4. Initiate final payment to
or collection of overpayment
from contractor
3. Resolve all outstanding issues
2. Obtain all forms, reports,
and clearances, for closeout
1. Verify that contract
is physically complete

6. Time Standard FAR 4.804 Contract Type Calendar Months
Contracts Using Simplified
Acquisition Procedures
Evidence of Receipt
and Final Payment
All Other Fixed Priced contracts
6 Months
Cost-Reimbursement Contracts
(including T&M and LH contracts)
36 Months
All Other Contract Types
20 Months
To gain a perspective on the difficulty of the contract closeout mission, it is necessary to understand the types of contracts and the timeframes required for closeout.
FAR gives standard timeframes from the date of contract physical completion for closing them. As you can see, the longest timeframe is given to cost-type contracts.
Fixed-Price contracts are simple – the government knows up front what it is going to pay. The standard is 6 months to complete the closeout.
Cost-Type contracts including Time and Material (T&M) require audits. A cost contract allows a contractor to charge and be reimbursed for allowable actual costs, including direct and indirect expenses and profit. Cost-type contracts that procure and design military weapons are by their nature very complex.
FAR directs payment office to close contract upon issuance of final payment voucher

7. Appropriation Life Cycle
Current/Available
Expired
Cancelled
Available for Obligation
and Payment
Must Obtain
New Funding
Available for Payment
Current: Phase length varies, depending upon type of funds or “color of money”
(1, 2, 3, 5 years or Indefinite)
Appropriation/account is “open”
Funds available for obligation and disbursement
Expired: 5 year phase for all funds regardless of type
Account still open but no longer available for obligation
Available only for disbursements against previously incurred
obligations, or for certain adjustments to these obligations
Beginning of 5th fiscal year of expired phase, funds obligated but
not yet disbursed are flagged as “at risk of canceling”
Canceled: End of 5th fiscal year of expired phase, unliquidated balances cancel
Appropriation/account is “closed”
Funds no longer available for any purpose
Appropriation Types
Available
Expired
Cancellation Date
O & M =
1 Year +
5 Years
Sept. 30th of the 6th year
R & D
2 Year
Sept. 30th of the 7th year
PROC
3 Year
Sept. 30th of the 8th year
MILCON
5 Year
Sept. 30th of the 10th year

8. Contract Closeout Initiatives
Some closeout initiatives available to the ACO are provided by FAR others are closeout initiatives between Agencies.
Assist ACO in obtaining rate submissions and final vouchers
Provide recommendations for the ACOs to use in developing unilateral determinations
Prioritize and expedite final indirect cost rate audits
Provide recommendations for the ACOs to use in negotiating quick closeout rates
Provide Cumulative Allowable Cost Worksheets (CACWS)
Prioritize and expedite final voucher audits
Assist ACO with closeout settlement issues
Assist with contract cost reconciliations

9. Disconnect with Accounting System
MOCAS
EDI 567
(DD 1594)
Accounting
Acquisition

10. Contract Closeout Excess Funds
Process Flow
The ACO deobligates excess funds after final price determination; ensure funding is in accordance with contract terms
The excess funds available for deobligation are removed by contract modification (SF 30) after PCO permission
The ACO reviews unliquidated obligations (ULOs) against open and cancelled appropriations
Unexpended balances, both obligated and unobligated, retain a limited availability for five (5) fiscal years following expiration of the period for which the source appropriation was made. After 5 years the appropriation account expires and is no longer available for incurring new obligations. The expired appropriation remains available for 5 years for the purpose of paying obligations incurred prior to expiration and adjusting obligations that were previously unrecorded or under recorded. After 5 years the expired account is closed and the balances remaining are canceled.
FAR explains that once a CMO receives evidence of physical completion, you must review the contract funds status and notify the PCO of any excess funds available for deobligation at the outset of the closeout process. When excess or negative unliquidated funds exist, a funds review should be performed at the ACRN level to determine the cause. If it is determined those excess funds are as a result of unperformed work due to a specific line item or deliverable on the contract, these should be removed and the ACO must issue a modification accomplishing the deobligation. The CMO is no longer required to obtain PCO authorization prior to deobligating excess funds. If there is a negative ULO (NULO) at the contract or ACRN level, any adjustments must be made by sending a DD1797 to DFAS, explaining the discrepancy and the action needed. NOTE: Adjustment requests are completely different than a request for reconciliation (full blown audit). A request for reconciliation is required when the ACO cannot identify the disbursement problem. If you can identify the disbursement discrepancy, then you are requesting an adjustment or correction.
“Excess funds” are defined as “funds relating to a specific line item or deliverable that was not performed on a contract.” If the funds are “Excess Funds”, a contract modification will be issued to deobligate these excess funds. Some examples of contracts that have “excess funds” follow:
Deliverable CLIN: Contract required 10 widgets. 8 widgets have been delivered and 2 widgets will not be delivered. Because the contract required 10 widgets and the contractor is not going to deliver (perform as required by contract), the funds associated with the 2 widgets are “excess funds” and must be deobligated via modification.
Non-Deliverable CLIN: Contract called for 5 trips. 3 trips were accomplished and 2 were not. Because 2 trips were not performed as required by the contract, the monies associated with these 2 trips are considered “excess funds” and must be deobligated via a modification.
“Remaining funds” are those funds left on contract due to price variance, rounding or cost underrun funding and where all contract performance as required by the contract has been completed. If the funds are “Remaining Funds”, the ACO Notebook will be annotated with a remark that the $XX (Amount of Funds) funds are remaining funds. Some examples of contracts that have “remaining funds” follow:
Deliverable CLIN: Contract required 10 widgets. 10 widgets were delivered. However, they contractor billed less than the price contained in the contract and does not plan to bill at the contract price. The money leftover is “remaining funds” and is systematically removed via the “Q Final” process in MOCAS. The ACO must annotate the ACO Notebook in MOCAS with the amount of the remaining funds and process the F NLA in MOCAS. This allows the mechanical removal of funds in MOCAS, alerts the PCO not to reopen the contract, and generates the PK9 transaction (notifies PCO that contract is administratively closed) and identifies “remaining funds.” PCO is responsible for notifying the funding station so it may close contract.
Non-Deliverable CLIN: Contract is for travel. The number of trips is not specified and performance is complete and accepted. The money leftover is “remaining funds” and ACO should follow the “Q final” process to close the contract.
Excess Funds:
For CAR PART A – Close out occurs after ACO issues FNLA (cost)
For CAR PART B – Close out occurs when the final payments is coded “1” in MOCAS (fixed)
If excess funds remain, ACO needs to add a “R” remark stating such.
Excess funds do NOT include “remaining” funds due to price variance, rounding, or cost underrun funding
The PCO is notified of the contract closeout by a MILCAP EDI (electronic) or a DD form 1594 (manual)
Systemic deobligation of remaining funding is handled under the Q-Final process in MOCAS
* Request closeout contract payment history at

11. Common Closeout Barriers
Delayed Negotiation of Overhead Rates
Contractor Submission Delays
Delinquent incurred cost proposals
Awaiting Subcontractor Submissions
Submission of Final Cost Vouchers
Contract Writing
Cancelled Funds
Payment Delays
Reconciliation Issues

12. Submission of Cumulative Allowable Cost Worksheets (CACWS)
How Can You Help?
Electronic Commerce
Contract
Acceptance
Invoice
Submission of Cumulative Allowable Cost Worksheets (CACWS)
Timely Submission of Final Voucher

13. How Can You Help?
MOCAS Data Share Initiative
Monitor Cancelled Funds
Contract Structure
Standard Payment Instructions
Limit Contract Financing Rates

14. Discussion / Questions

15. Resources DCMA Homepage: DCMA Contract Closeout Page: DCAA Homepage:
DCMA Contract Closeout Page:
DCAA Homepage:
FAR Home Site
Rebecca Beck – DFAS-Columbus, Director of Finance
Lots of folks throughout the Department have been working for the past several years to improve the process for closing contracts so that delays are minimized. That starts with the contract writing, which makes administration and payment easier, which ultimately eliminates contract reconciliation and eases contract closeout.
DCMA and DCAA have been working together to mitigate the accounting problems associated with contract closeout and canceling funds as part of their normal responsibilities.