Overview
This section prescribes the mandatory time standards, definitions of completion, and administrative procedures required to officially close out federal contract files. It establishes a systematic process for the contracting, administration, and paying offices to ensure all contractual obligations are met and excess funds are deobligated.
Key Rules
- Closeout Timeframes:
- Simplified Acquisition Procedures (SAP): Closed upon receipt of evidence of final payment and receipt of property.
- Firm-Fixed-Price (FFP): Should be closed within 6 months of physical completion.
- Contracts requiring indirect cost settlement: Should be closed within 36 months of physical completion.
- All other contracts: Should be closed within 20 months of physical completion.
- Physical Completion Definition: A contract is physically completed when the contractor has completed all deliveries/services, the Government has inspected and accepted them, and all option provisions have expired, or when the Government has issued a notice of complete termination.
- Mandatory Prohibitions: A contract file cannot be closed if it is in litigation, under appeal, or if termination actions are still pending.
- Administrative Requirements: Before closeout, the administration office must verify 15 specific actions, including the disposition of classified material, clearance of patents and royalties, settlement of subcontracts, completion of audits, and deobligation of excess funds.
- Contract Completion Statement: A formal statement (containing 12 specific data points) must be signed by the contracting officer to serve as the official authority to close the file.
Practical Implications
- Funds Management: The requirement to review funds status at the outset of closeout serves as a critical mechanism for the Government to identify and deobligate "unliquidated obligations" (ULOs), allowing those funds to be put to other uses.
- Audit Readiness: By requiring a standardized checklist (including audit and property clearance), these rules ensure that the official record is legally and financially defensible before it is moved to storage or destroyed.
- Tiered Complexity: The regulation acknowledges the administrative burden of different contract types, allowing for immediate closure of simple purchases while providing up to three years for complex cost-reimbursement contracts that require extensive DCAA audits and indirect rate negotiations.