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Contract Closeout for Cost–Type Contracts
Breakout Session #: E16 Johanna P. Akinfenwa, MSA, Contracts Team Chief, DCMA
Jennifer Quinones, CPA, MSA, Deputy Assistant Director, Policy and Plans, DCAA
Cassandra McDuff, Chief, Program Coordination Division, MOCAS Joint Program Management Office (JPMO), DFAS
Date: Tuesday, July 26
Time: 2:30pm–3:45pm
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Break Out Section Objectives • Contract Lifecycle
• Why it is so important to consider closeout in all phases of the contract lifecycle?
• Stakeholder Roles and Responsibility through the life cycle of the contract
• Why timely and efficient closeout is important?
• Contract Closeout Overview • FAR Mandated Time Periods for Closeout • Major Steps in Contract Closeout
• Contract Closeout Challenges
• Financial Impacts • Appropriation Life Cycle
• DOD Wide Effort to Reduce Its Contract Closeout Backlog • Tri-Agency Working Group • DCAA, DCMA & DFAS Initiatives
• Closeout Best Practices and Guidance
• Solutions for Problem Closures
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Contract Life Cycle
Funding
Pre Contract Structure/Award
Contract Closeout
Contract Performance and
Administration
TIP: Consider closeout in the beginning stages of the contract though the contract performance to successfully close the contract in efficient and timely manner.
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Document Relevant
Information in CBAR
Analyze/Audit submission and Negotiation
Buying Command
DCMAACO
DCAA
Requirement
Solicitation
Source Selection
Award
Funding
Pre-Award Accounting System
Pre-Award Estimating System
DFAS
Set up LOA &
Financial Record
Pre-Award
Provides acquisition insight on business
intelligence
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Buying Command
DCMA ACO
DCAA
Annual Audit of Incurred Cost
DFAS
Accounting/Billing System Audit –
Process Withholds
Pay Vouchers
Process Contract
Modifications Adjust Funding &
Monitoring
Process Vouchers/ Perform Payment Reviews Maintain Gov.
Financial Record
Monitor Funding Accept Deliveries
Monitor Funding
During Performance
Close Out
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DCMA ACO
DCAA
Audit of Incurred Cost
DFAS Pay Final Voucher
Process Contract Modifications
Reconcile Quantity – before accepting final
voucher
Reconcile and Close
Accounting File
Accept Final Delivery
Preliminary ULO Review,
reconcile payment
differences
Reconcile and Close Out Contract Resolve remaining funds
Confirm all Audits are Complete and documentation is submitted
Consider Quick Close Out Process Sign & Process
Final Voucher
Support Quick Close Out Procedures
Provide Final CACWS or Evaluation of Final Voucher
Buying Command
Stakeholders Roles
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Additional Funding Property Disposition Replacement Funds Product Acceptance
Final OH Rates Indirect Cost Audits
CACWS Final Voucher
Review
Indirect Cost Rate Prop Year End Rate Adjustments
Final Invoice//Vouchers Settle Subcontracts
Funds Management
Negotiation of Rates
Complete all Closeout Actions
Reconciliations Part B (FFP<100K)
Final Payment
Additional Funding Property Disposition Replacement Funds Product Acceptance
Final OH Rates Indirect Cost Audits
CACWS Final Voucher
Review
Indirect Cost Rate Prop Year End Rate Adjustments
Final Invoice//Vouchers Settle Subcontracts
ONE FOCUS
Funds Management Negotiation of Rates Complete all Closeout
Actions
Reconciliations Part B (FFP<100K)
Final Payment
Services
Industry Expectations in the Contract Lifecycle
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● Submit Proposal ● Support Audit of Proposal and Business System if applicable
● Incurred Cost Rate Proposal ● Submission of Invoice/Voucher ● Year End Rate Adjustments ● Monitor Cancelling Funds ● Submit CDRLs per Contract Requirements
● Submit Final Invoice/Voucher ● Settled Subcontracts ● Submit Closeout Forms (Example: Final Patent Report DD 882) ● For Cost Reimbursable: Adhere to FAR 52.216-7 Allowable Cost of Payment Clause
Pre-Award
During Performance
Closeout
Why timely and efficient closeout is important? Save… Government Industry
Receive money due to Indirect cost rates under runs and disallow direct costs
De-obligated funds Limit future liability
Collect debt (Indirect Cost Rates Over Runs)
Receipt of final payment Expensive to maintain records
Reduce time awaiting for
support documentation Compliance with FAR
Requirements
Minimized time searching for documents
Personnel involved in the
pre-award and performance can proceed with the closeout
Personnel who worked on the contract can assist with the contract closeout process
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Contract Closeout Time Standards
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• Time Standard FAR 4.804
Final invoice submission Line items balance Property & Patents are cleared Contractor paid in full All contract terms & conditions satisfied
Overhead rates are negotiated Direct cost are negotiated Subcontract rates and cost are settled Line items balanced Property & Patents are cleared Final voucher processed Contractor paid in full All contract terms & conditions satisfied
Overhead Rates have been negotiated Direct Cost are negotiated Subcontract rates and cost are settled Line items balance Property & Patents are cleared Final voucher processed Contractor paid in full All contract terms & conditions satisfied
Fixed Priced (6 months)
All Other (20 months)
Cost-Type (36 months)
• FAR 4.804-3 directs payment office to close contract upon issuance of final invoice/voucher payment
Step 1
Step 2
Step 3 Step 4
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Final Incurred
Cost Proposal
Submission
Review and Approval of
Final Voucher
Submission of Final Voucher
Settlement of Final Indirect Rates
Annual Incurred Cost Submission (ICS) Audited/Low Risk Memo
Final Indirect Cost Rate Agreement Letter
Final Voucher for Physically Completed Contract within 120 days of Final Indirect Cost
Rate Agreement Letter
Cumulative Allowable Cost Worksheet
Picture of the Closeout Process How a cost contract moves from bucket to bucket and finally closes in MOCAS.
Closed
Major Steps in Contract Closeout
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Contract Closeout Challenges
• Awaiting Audit • Invoice against Cancelled
Funds • Contracts in Litigation • KTR Has Failed to Submit
Final Voucher and Closing Documents
• KTR Filed Bankruptcy • KTR No Longer in Business
• Canceling Funds • Reconciliation • Balancing of CLINS • Cancelled Funds - Requires Current Year Funds
• Submission of Adequate IC Proposals
• CACW • Incurred Cost Audit
Backlog
• Submission of Final Indirect Cost Rate Proposal • Final Invoice & Release of Claims • Rate Agreement not • Signed • Pending Settlement of Subcontractor
Contractor DCAA
DCMA DFAS
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FY16 Q2 DOD Non-Federal Accounts Payable $19.2B
Army $1.3B
Air Force $1.2B
Navy $887M
Marine Corps $109M
Defense Agencies
$32M
MOCAS Cancelled Unliquidated Obligations
Financial Impacts
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Appropriation Life Cycle
Appropriation Types
Available Expired Cancellation Date
O & M = 1 Year + 5 Years = September 30th of the 6th year
R & D = 2 Year + 5 Years = September 30th of the 7th year
PROC = 3 Year + 5 Years = September 30th of the 8th year
MILCON = 5 Year + 5 Years = September 30th of the 10th year
Current/Available Expired Cancelled
Available for Obligation and Payment
Must Obtain New Funding
Available for Payment
Tri-Agency Working Group
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Strategic Alignment of Priorities
DCMA’s Closeout Strategy
DCAA’s Audit Plan
DFAS (Service’s) Financial Records
Targeting funding cancelling in FY16 & FY17
DCAA Initiative • Incurred Cost Strategy
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• Eliminating the Incurred Cost Backlog is an initiative under DoD’s Better Buying Power 2.0 • Developed a multi-pronged approach to working down
backlog in an effective manner – Dedicated audit teams – Multi-year audit techniques – Increased staffing dedicated to Incurred Cost – Implemented a low-risk sampling approach
to performing incurred cost audits
Results of DCAA Initiatives
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$-
$50
$100
$150
$200
$250
0
2,000
4,000
6,000
8,000
10,000
12,000
FY 11 FY 12 FY 13 FY 14 FY 15
Dolla
rs E
xam
ined
(Bill
ions
)
Year
s Cl
osed
Years Closed Dollars Examined
DCMA Initiatives
• Acquisition Enterprise Initiative (Strategic Plan) – Reduce Overaged Contract Closeout Backlog
• Extended the Quick-Closeout Class Deviation to September 30, 2017
• Established Process Working Group – Contract Closeout Business Process Reengineering
• Dedicated Contract Closeout Teams – OCONUS (FFP and Cost Reimbursable) – CONUS (Cost Reimbursable)
• Developed Contract Closeout Training – DAU and DCMA
• Established Goal to reduce 20% of overage contracts in DCMA Control
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Result of DCMA Initiatives
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Result of DCMA Initiatives
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0
500
1000
1500
2000
2500Overage Fixed Price Contracts
Straight Line ReductionTotal FP Overage50% Reduction Target
79% Current Completion
June 2015 Baseline: 2224
DFAS Initiatives • Increased Simplified Contract Threshold
• Increased from $100K to $500K
• Partner on Legislative Relief Proposal
• Contracts Prior to FY2000 • No Further Deliverables • Un-reconcilable
• Published FY16 Yearend Guidance • Focused visibility of canceling funds balances • Highlight FYE invoicing instructions and submission deadlines
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Contract Closeout Best Practices
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• Timely Submission of Final Voucher • Adhere to contractual billing terms • Use MOCAS Data Sharing Initiative (MDSI)
[email protected] • Promptly report payment discrepancies
Payment
• Know appropriation life-cycle • Remember Fiscal Yearend – September 30th • Timely submission of invoice • Partner with your contracting officers
Canceling Funds
• Complex Contract Structures • Billing and payment errors • Delayed payment discrepancy reporting/resolution
Reconciliation Impacts
Contract Closeout Guidance and Best Practices
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• Adequate and Timely Submission of Incurred Cost Proposal
• Identify any contracts that may qualify for quick closeout • Adjust interim voucher within 30 days of settled final
indirect cost rates • Submission of Final Voucher within 120 days of Settled
Rates • Close subcontracts in a timely manner • Cumulative Allowable Cost Worksheet (CACWS) • Meetings with Stakeholders (Monthly or Quarterly)
Contractor Guidance and Best Practices
• DCAA Information Pamphlet for Contractor • DCMA Instructions 135, Contract Closeout • DD Form 1597 Contract Closeout Check-List • FAR 52.216-7(d) Allowable Cost and Payment Clause • FAR 4.804-5 – Procedures for Closing Out Contract Files • FAR 42,708 – Quick Closeout Procedures • FAR Home Site - http://farsite.hill.af.mil/ • www.dcaa.mil; www.dcma.mil and www.dfas.mil
Government Guidance
Solutions for Problem Closures
Unusual Circumstances Possible Solutions 1. Contractor is No Longer in Business
Administrative Unilateral Closeout
2. Contractor is Bankrupt Coordinate with Office of General Counsel
3. Contractor Has Failed to Submit Indirect Cost Data
o Unilateral Determination of Indirect Cost Rates
o Unilateral Determination of Final Rates/Prices
4. Contractor is Unable to Submit Supporting Indirect Cost Data
Administrative Unilateral Closeout
5. Contractor Has Failed to Submit Final Invoice/Voucher
Fixed Price Contracts o Administrative Unilateral Closeout Cost Reimbursable Contracts o Unilateral Determination of Final Price o Accelerated Final Voucher
Preparation/Review
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• Johanna P. Akinfenwa, Contracts Team Chief [email protected]
☎ (832) 918-4910
Jennifer Quinones, Deputy Assistance Director, Policy & Plans [email protected] ☎ (703) 767-3280
Contact Information
Cassandra McDuff, Chief, Program Coordination, MOCAS JPMO [email protected] ☎ (614) 701-4452
“One Team, One Voice delivering global acquisition
insight that matters.”
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