1. A Quick Guide To Quick Closeout
Presented by David Guinasso,
supporting OSD A&S DPC

2. The steps of Quick Closeout
Agenda
What is Quick Closeout
When can it be used
Why Quick Closeout
The steps of Quick Closeout 2

3. FAR 42.708 - Quick-closeout Procedure
What Is Quick Closeout?
FAR Quick-closeout Procedure
Requires the contracting officer responsible for contract closeout to negotiate the settlement of direct and indirect costs for a specific contract, task order or delivery order ready to be closed, in advance of the determination of final indirect rates based on risk assessment. 3

4. Benefits of Using Quick Closeout
Highlighted Benefits Identified by Workforce:
Reduces Overage Backlog
Reduces administrative costs
Removes need for audit on low risk contracts
Enables reuse of expiring funds
Prevents cancelling funds and need for replacement funds
Close contracts before data is too old
People who worked the program are still likely to be employed and make it easier to close contract
Maintain employee’s skill to closeout contracts
Will not have to maintain obsolete systems 4

5. When can you use Quick Closeout
FAR
The contracting officer responsible for contract closeout shall negotiate the settlement of direct and indirect costs for a specific contract, task order, or delivery order to be closed, in advance of the determination of final indirect rates, if –
The contract, task order, or delivery order is physically complete;
The amount of unsettled direct costs and indirect costs to be allocated to the contract, task order, or delivery order is relatively insignificant.
The contracting officer performs a risk assessment and determines that the use of the quick-closeout procedure is appropriate.
Agreement can be reached on a reasonable estimate of allocable dollars. 5

6. The Contract is Physically Complete
Physically Completed Contracts.
A contract is considered to be physically completed when --
The contractor has completed the required deliveries and the Government has inspected and accepted the supplies or services and all options have expired or the Government has given the contractor a notice of complete contract termination.
Rental, use, and storage agreements are considered to be physically completed when the Government has given the contractor a notice of complete contract termination or the contract period has expired. 6

7. Relatively Insignificant
Class Deviation – Quick-Closeout Procedures Threshold (2019-O0009) Approved May 2, 2019
Effective immediately, contracting officers shall deviate from the quick-closeout
procedures in Federal Acquisition Regulation (FAR) (a) for cost reimbursement, time and material, labor hour, fixed-price incentive, and fixed-price redeterminable contracts, task orders, and delivery orders. Specifically, in lieu of the thresholds at FAR (a)(2)(i) and (ii), contracting officers shall consider cost amounts to be relatively insignificant when the total unsettled direct and indirect costs to be allocated to any one contract, task order, or delivery order do not exceed $2 million.
Defense Contract Management Agency (DCMA) Administrative Contracting Officers
(ACOs) are further authorized to deviate from FAR (a)(2) and negotiate the settlement of direct and indirect costs for a specific contract, task order, or delivery order to be closed in advance of the determination of final direct costs and indirect rates set forth in FAR regardless of the dollar value or percent of unsettled direct or indirect costs allocable to the contract. This class deviation supersedes and incorporates the DCMA Quick-Closeout Procedure Class Deviation (DCMA ), dated August 15, 2017. 7

8. Impact of Deviation Unsettled costs must be $1M $2M or less
Changes to FAR
Requirements
Estimated
Impact
Unsettled costs must be $1M $2M or less
AND
10% or less of total contract value
Only 16.6% 76.3% of the target population of DoD contracts are eligible for Quick Closeout 8

9. Amount of Unsettled Costs Eligible for Quick Closeout
Quick Closeout Eligibility
Description
Amount of Unsettled Costs
Eligible for Quick Closeout
$10M FFP with $1M Cost line item
$1,000,000
Yes
$1M FFP with $150K Cost Line Item
$150,000
$10M Cost with $2M in Final Year
$2,000,000
$80K Cost, All Performance in 1 Year
$80,000
$100,000 T&M with $15,000 in Material
$15,000
$1M T&M with $100,000 in Material
$100,000
$1M T&M with $105,000 in Material
$105,000
$2M Cost with $250,000 in final year
$250,000
$2M Cost, All Performance in 1 year 9

10. Risk Assessment
The contracting officer performs a risk assessment and determines that the use of the quick-closeout procedure is appropriate. The risk assessment shall include—
Consideration of the contractor’s accounting, estimating, and purchasing systems
Other concerns of the cognizant contract auditors
Any other pertinent information 10

11. The Risk
Ultimately the risk is that there may be unanticipated significant audit finding that cannot be recovered on closed contracts 11

12. Reporter: Why do you rob banks?
Risk Assessment – Sutton’s Law
Reporter: Why do you rob banks?
Willie Sutton: Because that’s where the money is.
Be concerned about risks that impact your settlement 12

13. Status of Contractor Systems
Contract Business Analysis Repository
CBAR is an eTool that captures contract-related information about companies.  CBAR began development in 2010 by DCMA at the request of the Director of Defense Pricing, to provide DoD PCOs access to the unique information DCMA maintains for the contracts it administers.   Indirect and Direct rates 
Status of Business Systems and withholds 
CAS Disclosure statements 
CAS non compliances 
FPRA/FPRR with historical actual costs 
IR&D and B&P information.  13

14. Concerns of the Auditor*
Timeliness of rate submissions
Business System issues
Cost Accounting Standards
History of unsupported costs
Litigation
Fraud
*Or the Divisional Administrative Contracting Officer 14

15. Other Pertinent Factors
Documented history of Federal Government approved indirect cost rate agreements
Changes to contractor’s rate structure
Volatility of rate fluctuations during affected periods
Mergers or acquisitions
Special contract provisions limiting contractor’s recovery of otherwise allowable indirect costs under cost reimbursement or time-and-materials contracts 15

16. Steps for Quick Closeout
Select candidate contract(s)
Co-ordinate
Contractor
DCAA
DACO
Obtain information
Analyze information
Negotiate
Execute Agreement
Identify contracts and schedule for submitting
Process final vouchers/invoices 16

17. Selecting Candidates
Fixed-Price Contracts or Orders with a Cost Line Item
T&M Contracts or Orders
Low Dollar Cost Contracts or Orders
Higher Dollar Contracts or Orders Where There is a Small Amount of Unsettled Costs
Fixed-Price Incentive Contracts or Orders within dollar range 17

18. Where to Find Rates for Quick Closeout
Audit recommended rates
DACO negotiated Quick Closeout rates
The final indirect cost rates agreed upon for the immediately preceding fiscal year;
The provisional billing rates for the current fiscal year
Estimated rates based on the contractor's actual data adjusted for any historical disallowances found in prior years’ certified final incurred cost proposals.
Decrement Factor Method
Decrement Percentage Method
CBAR can be the source of the above information 18

19. Analyzing Information
Sample Training Table:
Comparing the proposed rates to the settled rates for the three years historical audit/settlement information provided by the contractor/DACO/DCAA
Notice the difference between the proposed and settled rates. Reviewing this history will let you know if proposed rates for the unsettled fiscal year should be adjusted. 19

20. Decrement Factor Method
(Proposed Rate –Settled Rate)/Proposed Rate = Decrement Factor
Add decrement factors for 3 prior years and divide by 3 to get the Average Factor
(Proposed Rate)(Average Factor) = Decrement Rate
Proposed Rate –Decrement Rate = Rate Objective 20

21. Sample Decrement Factor
G&A
Proposed Rate
Settled Rate
Proposed-Settled
(Proposed-Settled)/Proposed Rate
2008
15.23%
15.57%
-0.34
-0.022
2009
22.00%
21.85%
0.15
0.007
2010
22.30%
19.86%
2.44
0.109
Sum of three years
3 year average
Unsettled Year Proposed G&A 18.41%
Decrement Rate: % X 0.031=0.57%
Rate Objective: % % = 17.84% 21

22. Decrement Percentage Method
Divide the Settled Rate by the Proposed Rate to get the Decrement Percentage
Add decrement percentage for 3 prior years and divide by 3 to get the average decrement percentage
Multiply the Proposed Rate times the Average Decrement Percentage to get the Rate Objective 22

23. Sample Decrement Percentage
G&A
Proposed Rate
Settled Rate
Decrement Percentage
2008
15.23%
15.57%
1.022
2009
22.00%
21.85%
.993
2010
22.30%
19.86%
.891
Sum of 3 Years
2.906
Average
.969
Unsettled Year Proposed G&A 18.41%
Rate Objective: 18.41% X .969 = 17.84% 23

24. Gaining Agreement Quick Closeout Escalation Matrix 24 Initial Contact
Personnel
Action
Remarks
1. Contracting Officer
Divisional Administrative Contracting Officer
Request Segment Level Rates
If No, continue to thru ACO
2. Contracting Officer
Contractor (Contract Specialist)
Agree to list of contracts eligible for QCO
If No, continue to escalate
3. Contracting Officer
Contractor (Senior Contract Specialist)
Explain benefits of QCO vs traditional Closeout
4. Contracts Supervisor
Contractor (Comptroller)
Demonstrate benefits:
Cash Flow
Cost of contracts
5. Contracts Directors/Branch Chief
Contractor VP Finance/Contracts
Present beneficial cases that reflect 3. & 4. 24

25. To Succeed Create a Culture of Negotiation Intelligence:
Thinking Critically
Assessing and Understanding Risk
Business Systems
Company Structure/History
Mergers & Acquisitions
Calculating & Negotiating Rates
Overcoming Roadblocks (Escalation) 25

26. Best Practices Best Practices Created by DCMA QCO SMEs:
Create Training Guides/Job Aides
Risk Assessment Checklist*
Quick Reference Guides (Blue Card)*
QCO Formula Spread Sheet*
Training Videos
Early and Ongoing Communication with Contractor, DACOs, and DCAA
*Available at Procurement Toolbox 26

27. Any Questions? 27

28. For more information www.dodprocurementtoolbox.com FAQs Policy
Training
Contact DPC PDI
Capability Summaries 28

29. Thanks to DCMA for their assistance in creating this presentation29