Quick contract closeouts – Beneficial to both contractors and the federal government

    Every government contract that begins must have an end. However, contract closeouts often take much longer than contractors would prefer, resulting in constrained cash flow, disgruntled investors, documentation retention issues, and employee turnover. Fortunately, Federal Acquisition Regulation (FAR) 42.708 outlines instructions on how federal executive agencies may expeditiously close out certain flexibly priced contracts that have not been fully audited. These instructions are collectively known as “quick closeout procedures.” Government contractors should be more proactive with contracting officers about the quick closeout process when warranted.

    GAO report on contract closeouts

    The Government Accountability Office (GAO) released a report in September 2017 that evaluated contract closeout processes in five major executive agencies (Defense, State, Justice, Homeland Security, and Health and Human Services). GAO found many different issues that have impeded the contract closeout process. While it cited the Defense Contract Audit Agency’s (DCAA’s) significant audit backlog as a major reason for contract closeout issues, it also called out these agencies’ procedural and structural challenges with regards to contract closeouts.

    Most contracting groups were not easily able to summarize what stage of closeout each of their completed contracts were in. There were frequent examples of groups that did not know how many were eligible for closeout. GAO also noted that there were rarely any goals and performance measures in place to reduce contract closeout backlogs. Ultimately, in GAO’s words, “We found that closing out contracts is not the highest priority for contracting officers that are charged with awarding and administering contracts for products and services to meet mission needs.”

    A privilege, not a right: How to determine if you qualify for a quick closeout

    One tool federal executive agencies can lean on to help reduce the contract closeout backlog is quick closeouts. While many agencies’ procurement manuals instruct their contracting officers to utilize quick closeout procedures to the maximum extent practicable, it is not a guaranteed “right” for contractors (or the government) to use them when circumstances warrant the consideration of using these procedures. That being said, federal contractors should cooperatively work with their contracting officers to help identify contracts that are eligible for quick closeout.

    Conclusion: Quick contract closeouts can be beneficial

    Please note that quick closeout procedures are not suitable for prime contractors use on subcontracts.

    Subject matter expertise

    • Contact Jeffrey Jeffrey+Shapiro jeff.shapiro@cohnreznick.com
      Jeffrey Shapiro

      CPA, Partner

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    2019 GAUGE Report: Industry Roadmap of Benchmarks & Trends for GovCon

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