Closeouts – Unilateral Right

Home Forums Acquisitions Closeouts – Unilateral Right

This topic contains 15 replies, has 5 voices, and was last updated by  Pattie Buel 5 years, 10 months ago.

  • Author
    Posts
  • #150663

    Natia Johnson
    Participant

    Why are contractors allowed to delay the closeout process for several years without the government using its unilateral right to closeout overage contracts?

    FAR 4.804 requires FFP contracts to closeout within 6 months. Cost type contracts should closeout within 3 years.

    If the contractor’s failure to meet these FAR mandated time standards are because of their failure to submit a final voucher/invoice, then the government should unilaterally closeout those contracts. I would not recommend unilaterally closing a contract if DCAA rates are not settled or if there are DFAS/PCO issues.

    Why do we keep these contracts open for so many years past the FDD? Why are we allowing contractors to delay the closeout of these contracts?

  • #150693

    Pattie Buel
    Participant

    It’s a bad answer but because we’re busy with the ongoing contracts and awarding new contracts and unless an invoice comes across the desk that says FINAL in big bold letters, we just don’t make time to focus on the close-outs. Until, of course, we get an audit finding about all those technically complete but not closed contracts we have on our books. Then we scramble, only to find out the vendor archived their files years ago nad has to hunt for the documentation.

  • #150691

    Mark Forman
    Participant

    This same issue occurs in federal grants. The Virginia governor found substantial unused funds that the state accessed when he did a close out audit (I think he got a no-cost extension to use the funds). Often, it seems that organizations delay close-out because they fear the audit of expenditures, want to keep the vehicle open for modifications, or dont have the staff for the workload associated with closeout. I suspect that the latter is a big issue with small to medium contractors.

  • #150689

    Natia Johnson
    Participant

    Thanks for your comment Pattie. I do not like the fact that there are so many ‘physically complete’ contracts waiting to be closed. It would not bother me so much if the contract closeout process was only delayed for a few months or one year. Some of these contracts are 7 years overdue and the only excuse is ‘we are waiting for the contractor to submit a final voucher/invoice’. Well, how long do we have to wait??? If ‘we’ (the government) are the cause of the delay, then I wouldn’t make much of a fuss about this issue. However, when the delay is because of a contractor’s failure to submit a FINAL, the government should step in and make things happen.

  • #150687

    Natia Johnson
    Participant

    Thanks for your comment Mark. This is also an issue with large contractors. I understand that the government is understaffed. I am actually concerned with the contractors who claim to be understaffed.

    My argument has always been this:

    *As government employees, we do not select our workload. Our supervisor assigns us to a contract/task and that is the end of it.

    *Contractors select their own workload. If they are unable to submit required contract closeout documents by the FAR mandated time standards because of understaffing issues, then they should stop bidding on new contracts. The PCO or CAO should not have to request Finals over and over again. The contractor knows when and what documents are due, but they choose to drag their feet because they know the government will not do anything about it.

  • #150685

    Mark Forman
    Participant

    I suspect that you are correct about many contractors not having the post-award discipline in contract close-out. it would be worthy of more focus from OMB, and perhaps enforcement along the lines of inclusion in past performance ratings, delay of award, overhead rate re-imbursement reqts (since i presume close-out systems and people are already funded in the indirect rates that have been negotiated). i do think that there are some contractors who don’t want to end the contract due to a desire to keep it open via no cost extensions and some who don’t want to have to payback the government for unallowable costs identified in the close out audit. Perhaps, IGs or whistleblowers should go after companies that the government has funded for close-out (under indirect costs) and who are not doing that work…could be an interesting false claims act issue.

  • #150683

    Natia Johnson
    Participant

    Wow, you bring up some good points Mark. Thank you for your comment!

  • #150681

    Mark Forman
    Participant

    you are very welcome! keep going…this is important work for building trust and protecting taxpayers. thanks for all you are doing,

  • #150679

    Jaime Gracia
    Participant

    There should be an expiration date for when final invoices should be submitted. Granted the assumption is no outstanding claims, contractors should be required to submit their final invoices within a certain period (say 6 months or whatever makes sense given the contract type and ), or else they forfeit the final payment and the contract is closed. Failure to return property within certain time restrictions results in penalties, etc.

    Assuming that the delay is the contractors fault, they need to be held accountable. Regretfully, the delays are not usually because of missing invoices, but rather because of outstanding issues with rates, especially with continued issues with perceived unallowable costs.

  • #150677

    Natia Johnson
    Participant

    I agree with you 100%! If the delay is the fault of the contractor, then they need to be held accountable. Rates are a DCAA issue, so of course we would not hold them accountable for that.

  • #150675

    Don Mansfield
    Participant

    Natia,

    FAR 4.804 does not give the Government the right to unilaterally closeout contracts, nor are the prescribed time periods binding on contractors. Some contractors are reluctant to sign a release of claims, which is required for some closeouts, while the time period for submitting claims (6 years from accrual of a claim) has not expired.

  • #150673

    Natia Johnson
    Participant

    Don,

    I never stated FAR 4.804 gives the Gov’t the right to unilaterally closeout contracts. FAR 4.804 does state the required closeout time period for each contract type. Contractors have 120 days after rates are settled on cost type contracts to submit a Final. If they do not meet this timeframe, then the Gov’t can use its right to unilaterally close out the contract.

    “Once final annual indirect cost rates are settled for all years of a physically complete contract, the contractor must submit a completion invoice or voucher reflecting the settled amounts and rates within 120 days, unless an extension has been approved in writing by the contracting officer. To determine whether a period longer than 120 days is appropriate, the contracting officer should consider whether there are extenuating circumstances as listed in FAR 42.705 (b) (1) through (5). If the contractor fails to submit a completion invoice or voucher within the specified time period, the contracting officer may:

    • Determine the amounts due to the contractor under the contract.
    • Record this determination in a unilateral modification to the contract.

    FAR 42.705 explicitly states the right of the contracting officer to unilaterally determine the final contract payment amount when the contractor does not submit the final invoice or voucher within the time specified in the contract. The contracting officer determination must be issued as a final decision in accordance with FAR 33.211.

  • #150671

    Don Mansfield
    Participant

    Hi, Natia,

    I understand what you’re saying, but in your original post you wrote:

    FAR 4.804 requires FFP contracts to closeout within 6 months. Cost type contracts should closeout within 3 years.

    If the contractor’s failure to meet these FAR mandated time standards are because of their failure to submit a final voucher/invoice, then the Government should unilaterally closeout those contracts.

    The time standards at FAR 4.804 do not apply to contractors.

  • #150669

    Natia Johnson
    Participant

    I see how your looking at this, but if the contractor does not meet the time standards listed, we can recommend a unilateral closeout. It does not matter if the exact words in the 4.804 says ‘for the contractor’ or ‘for the government’. We are covered by 42.705.

    Thanks for your participationin this discussion.

  • #150667

    Pattie Buel
    Participant

    Big issue is that, in general, the Government doesn’t know for cost-type type contracts when the vendor has received their final DCAA audited rates for a given year. I may know that Vendor A typically receives its final rates in late August (for 5 years ago) because they send me a rate adjustment invoice on 1 Oct each year that I wind up paying with current FY funds since the funds valid for the POP cancelled on 30 Sept, but I don’t know that there’s an authoritative source I can use to find out if a vendor has received its final rates for any given year. So maybe the answer is that DCAA develop/maintain a database that is searchable by other Government personnel and shows only the following info – DUNS number, Vendor FY start and end dates, Date (if completed) that DCAA issued the rate letter. Then a CO/CS/COR could look up the company and figure out if a contract can be closed out. You’d still have to contact the company to get a copy of the actual letter but you’d be able to say “the DCAA website shows they issued your 2007 rate letter on 30 Nov 2011 so I’m looking for the final invoice for this contract”

    I know of at least one vendor that is 8 years behind with DCAA. But I also know Government folks who will say they have to wait on the final rate letter because there was $100K in ODCs over the life of the contract and the vendor had G&A or MH on the ODC cost. That’s when I ask if a Quick Close-out can be done because FAR 42.708 gives dollar thresholds for the unsettled indirects.

  • #150665

    Natia Johnson
    Participant

    Wow Pattie, we are experiencing some of the same issues. For one of my contractors, DCAA settled rates are 6 years behind.

You must be logged in to reply to this topic.