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DCMA Manual 2501-
Contract Closeout
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Office of Primary Responsibility Contract Maintenance Capability
Effective: January 14, 2019 Change 1 Effective: December 19, 2019
Releasability: Cleared for public release
Implements: DCMA-INST 2501, “Contract Maintenance," August 14, 2017
Incorporates: DCMA-INST 115, “Patents and Royalties,” August 9, 2016 DCMA-INST 124, “Contract Property Management,” January 26, 2016
Incorporates and Cancels: DCMA-INST 135, “Contract Closeout,” March 8, 2016
Internal Control : Process flow and key controls are located on the Resource Page
Labor Codes: Located on the Resource Page
Resource Page Link: https://360.intranet.dcma.mil/sites/policy/CM/SitePages/2501- 07r.aspx
Approved by: David H. Lewis, VADM, USN, Director
__________________________________________________________________
Purpose: This issuance, in accordance with the authority in DoD Directive 5105.64:
- Implements policy established in DCMA Instruction 2501.
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- Assigns responsibilities and provides and defines procedures for executing contract closeout.
- Identifies a Resource Page for additional information related to contract closeout. The Resource Page includes hyperlinks to stated references, additional administrative guidance, related correspondence, form letters, training materials, and focal point names(s), etc. The Resource Page enables enterprise-wide sharing of dynamic information.
T ABLE OF CONTENTS
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TABLE OF C ONTENTS 7
FIGURES
Figure 1. Receiving Report Example ..................................................................................................
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S ECTION 1: GENERAL ISSUANCE INFORMATION 8
SECTION 1: GENERAL ISSUANCE INFORMATION
1.1. APPLICABILITY. This Manual applies to all DCMA Organizational elements. DCMA Special Programs Directorate is required to comply with the intent of the manual, without the use of automation (i.e., Mechanization of Contract Administration Services (MOCAS)).
1.2. POLICY. It is DCMA policy that:
a. DCMA administered contracts are closed within Federal Acquisition Regulation (FAR) mandated timelines.
b. The Contract Closeout process begins after confirmation that all supplies and services have been delivered, accepted or completed.
c. The Contract Closeout Checklist is used to ensure all closeout actions have been satisfactorily accomplished. The DD Form 1597/MOCAS Contract Closeout (MCC) 1.5 eTool, “Contract Closeout Checklist,” is required to be periodically updated and is required to be signed by the Administrative Contracting Officer (ACO).
d. In accordance with FAR 4.804-1(c), a contract must not be closed if it is in litigation, under appeal, or pending a termination action.
e. Execute this Manual in a safe, efficient, effective, and ethical manner.
f. It should be noted that all discussion of “contract closeout” in this Manual refers to the administrative closeout of the contract file, as addressed in FAR 4.804. The actual contract (the enforceable agreement between the parties) is not “closed” except by expiration or completion of all obligations of the Government and the contractor. Some contract remedies may become unavailable before the file is ready to be closed; some other remedies may still be available to either party after the file has been “closed.”
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S ECTION 2: R ESPONSIBILITIES 10
a. Use the Contract Closeout Application to track and record closeout actions on the contract closeout checklist. Generate/process Final Pay Notice of Last Actions (NLA) for fixed-priced contracts and cost-reimbursement contracts administered in MOCAS, with the exception of all Other Disbursing Office (ODO) contracts.
b. Ensure that the correct current R2 overage delay reason code is input into the MOCAS system before the contract/order becomes overage and ensure the code is updated as the contract/order moves through the closeout process. The ACO/CA must input an office of primary responsibility (OPR) code in the R9 remark line when R2 overage delay reason codes F, H, M, P, V, or W are used.
2.5. TERMINATION CONTRACTING OFFICER (TCO). The TCO will complete all actions delineated in DCMA Manual (DCMA-MAN) 2501-06, “Terminations,” and notify the ACO before the ACO can proceed with closing contracts terminated for convenience.
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S ECTION 3: INTRODUCTION TO C ONTRACT C LOSEOUT 11
SECTION 3: INTRODUCTION TO CONTRACT CLOSEOUT
3.1. INTRODUCTION. The Defense Contract Management Agency (DCMA) Contract Closeout manual describes steps for successful contract closeout, continuous performance improvement, and customer satisfaction. The objective of this Manual is to institutionalize practices to close contracts/orders in a timely manner. The Contract Closeout manual provides instructions on standard closeout. It addresses solutions for problem closures using methods such as QCO, early closeout, unilateral rate determination, and unilateral administrative closeout. Recommended techniques, samples and tools are developed with the ACO/CA and functional specialist (PT) in mind. Sample letters, modifications and memos to file and other job aids are available on the contract closeout Resource Page. DCMA leads the contract closeout process and coordinates with all parties to complete all administrative actions, settles all disputes, and ensures final payment has been made. Communication and information sharing is key to timely contract closeout. Contract Closeout occurs when all the terms of a contract/order have been met and all administrative actions are completed, all disputes settled, and final payment has been made. This includes those administrative actions that are contractually required; i.e. property, patents and royalties. This Manual provides step-by-step procedures, techniques, and guidance to effectively execute the procedures in FAR 4.804-5, “Procedures for Closing Out Contract Files.”
3.2. CLOSEOUT TIME STANDARDS. FAR 4.804-1(a)(2) through (a)(4) provides standard timeframes for closing physically complete contracts. A contract is considered physically complete when the contractor has completed performance and the Government has inspected and accepted all supplies and services. The closeout timeframes for different contract types are set out in Table 1 as follows:
Table 1. Standard Closeout Timeframes Timeframes MOCAS Codes and Contract Types 3 Months FIXED PRICE UNILATERAL 6 Months J FIRM FIXED PRICE
20 Months
A
K
O
Z
L
FIXED PRICE REDETERMINATION
FIXED PRICE W/ECONOMIC PRICE ADJUSTMENT
OTHER – BASIC ORDERING AGREEMENT/BLANKET
PURCHASE AGREEMENT/INDEFINITE DELIVERY
LABOR HOUR
FIXED PRICE INCENTIVE
R COST-PLUS AWARD FEE
S COST CONTRACT
T COST SHARING
36 Months U COST-PLUS-FIXED-FEE V COST PLUS INCENTIVE FEE Y TIME AND MATERIALS NON-PROCUREMENT INSTRUMENTS (NPI)
a. Firm Fixed Price (FFP) contracts must be closed no later than 6 months after the physical completion date. Cost Reimbursement and Time and Material (T&M) contracts require
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S ECTION 3: INTRODUCTION TO C ONTRACT C LOSEOUT 13
Table 2. R2 Overage Delay Reason Codes R2 MOCAS/MILSCAP Clarifications OPR Codes Description
Final acceptance not DO NOT USE^ – if contract is awaiting final B (^) acceptance, move back to Section 1. Services (71) received For Patents—DD Form 882 or equivalent has not Contractor has not C been received from the Contractor per applicable^ Contractor submitted patent report (^) FAR clauses. (72)
Contractor has submitted the final DD Form 882, Patent clearance D (^) required or equivalent. The Form has been forwarded to Services (71) the Buying Activity for approval. Contractor has not Use this code until the contracting officer submitted proposal for receives an adequate final price redetermination^ Contractor E final price proposal.^ (72) redetermination Supplemental Use this code while the final price Services (71) agreement covering redetermination proposal is being reviewed or Contractor F final price negotiated. An OPR code is required to signify^ (72) redetermination which party’s actions are currently open.^ DCMA (73) required Settlement of Pending settlement of subcontract(s); may impact^ Contractor G (^) final voucher submission. subcontracts pending (72) DCAA performing final Contract Audit Closing Statement on final voucher or DCMA using DCMA (73) H Final audit in process Cumulative Allowable Cost Worksheet DCAA (74) (CACWS) and/or risk based approach for auditing final voucher. Disallowed cost ACO in process of resolving DCAA Form 1 issue J (^) or similar disallowed cost issue. DCMA (73) pending Final audit of Gov (^) DO NOT USE: K N/A property pending Use Reason Code “V” for Property Issues. Independent research (^) DO NOT USE: L & development rates The Reason Code is obsolete for contracts after N/A pending October 1992. Use Reason Code "M" for rates. Identification of OPR combined with “M” code Contractor Negotiation of will provide visibility of the current O/H action (72) M overhead rates pending (e.g., awaiting KTR proposal, audit or DCMA (73) negotiation). DCAA (74)
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S ECTION 3: INTRODUCTION TO C ONTRACT C LOSEOUT 14
Table 2. R2 Overage Delay Reason Codes R Codes
MOCAS/MILSCAP
Description Clarifications OPR
N
Additional funds requested but not yet received
The PCO has been requested to provide additional funds for various reasons (e.g., cost overruns). When contract is awaiting replacement funds for canceled appropriations, use Reason Code "Y" when final invoice/voucher has been forwarded to DFAS.
Services (71)
P
Reconciliation with paying office and Contractor being accomplished
Provide visibility as to the basis for the reconciliation delay (e.g., disbursement audit in process (DFAS), obligation audit in process (DCMA), or awaiting payment history and/or information (Contractor).)
Contractor (72) DCMA (73) DFAS(75)
Q
Armed Services Board of Contract Appeals (ASBCA) case
Contract must be moved to Section 3 once the ASBCA docket number is assigned. The docket number must be entered in the R3 Remarks.
DCMA (73)
R
Public Law 85- 804 case
50 USC [Chapter 29] 1431 - P.L. 85-804 applies to Extraordinary Contractual Actions. DCMA (73)
S
Litigation/investigation pending
Either fraud investigation activity is in process, or contractual issue is not resolved or claim has been received by contracting officer. Contract must be moved to Section 3 (BCA/CIL/CLL) once contract is in Federal Courts and/or DOJ opens a case.
DCMA (73)
T Termination in process
Mainly used for Termination for Default. DCMA provides assistance to PCO on contract history (e.g., delivery, financing payments, excess funds, reprocurement costs, etc.) Termination for Convenience contracts must be moved to Section
DCMA (73)
U
Warranty clause action pending
Open warranty action(s) currently being processed IAW FAR 46.709 and - 10.
DCMA (73)
V
Disposition of Gov Property pending
Identification of OPR combined with "V" will provide visibility into delay (e.g., awaiting PCO disposition instructions (Services), Contractor submittal of inventory schedules (KTR), or actions by Property Administrator (PA) and/or Plant Clearance Officer (PLCO)). PA inputs R 55 once all property actions are closed.
Services (71) Contractor (72) DCMA (73)
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S ECTION 3: INTRODUCTION TO C ONTRACT C LOSEOUT 16
d. Ensure documentation for shipment and payment transactions are accurate and complete in MOCAS and in Wide Area Work Flow (WAWF) formerly known as Invoicing, Receipt, Acceptance, and Property Transfer (iRAPT).
e. Monitor payments for accuracy, and compliance with any special payment instructions.
f. Diligently manage and monitor the Final Overhead Rate process to ensure contractors submit their incurred cost proposals and rates are negotiated within established timeframes. See DCMA-MAN 2201-03, “Final Indirect Cost Rates.”
g. Consider using QCO procedures to the greatest extent possible.
h. Ensure the contractor prepares and submits all final vouchers (FV) no later than 120 calendar days after settlement of final overhead rates.
i. Ensure the contractor executes Government property disposition procedures expediently.
3.5. FILE RETENTION AND MAINTENANCE. Official contract files are stored in document repositories such as the Integrated Workload Management System (IWMS) and WAWF. Documents normally filed in hardcopy folders as referenced in the FAR must be placed in IWMS and all electronically submitted documents are stored in WAWF. Retention for closed contract files and closeout files must be retained for 6 years after the final payment date. For more information on records management as it relates to Contract Closeout, please see Section 17.4 of this Manual.
3.6. MOCAS SECTION DESIGNATIONS. For the purpose of this Manual, Section refers to MOCAS Contract Administration Report (CAR) Section Numbers depicted in Table 03, MOCAS Section Numbers and Titles:
Table 3. MOCAS Section Numbers and Titles Section # Section Title 1 ACTIVE CONTRACTS 2 PHYSICALLY COMPLETED CONTRACTS 3 DORMANT CONTRACTS^ –^ PART A ONLY 4 PAYMENT ADJUSTMENTS 5 CLOSED CONTRACTS (DAILY PROCESSING) 8 THIS SECTION CONSISTS OF ALL CONTRACTS PREVIOUSLY MOVED TO SECTION 5 9 CLOSED CONTRACTS (MONTHLY PROCESSING)
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S ECTION 4: DATA INTEGRITY ACTIONS FOR M OVEMENT TO S ECTION 2 17
SECTION 4: DATA INTEGRITY ACTIONS FOR MOVEMENT TO
SECTION 2
4.1. INTRODUCTION TO CONTRACT CLOSEOUT DATA INTEGRITY.
a. Fixed Priced contracts. Before a Fixed Priced contract is considered physically completed and eligible to move to MOCAS Section 2, make sure all line items identified on the Line Item Schedule and Shipment Record (LISSR) are shipped and accepted via a DD250(s) with the last DD250 being a final “Z”, 2-in-1 invoice(s) with the last invoice coded with a “Z”, PCO certification (PCO Cert) with updated ACO Notebook, or other supporting documentation that all goods and services have been received. If the PCO cert, 2-in-1 invoice(s), or other supporting documentation used to support goods and services have been accepted, the LISSR will remain unbalanced and the contract can be moved to Section 2. Note: An ACO memorandum stating that all goods and services have been accepted without supporting documentation does NOT meet this requirement. Also, all modifications must be processed in MOCAS (unless generated manually by Special Programs) or documentation in the contract file why modification is missing or not processed.
b. Flexibly Priced contracts. For Flexibly Priced contracts, the LISSR is not required to be balanced. The functional specialist is required to obtain documentation to support that all work required in the contract has been completed and/or accepted by the Government prior to the contract moving from Section 1 to Section 2. Once the contract is physically complete and moved to Section 2, MOCAS will automatically transmit a Contract Completion Statement (interim PK9/EDI 567) to the contracting office (Special Programs may have to manually move the contract to Section 2 depending on the environment or data base of record).
c. Effective 1 April 2020, all contracts including flexibly priced contracts that contain DFARS 252.232-7003 clause (Electronic Submission of Payment Requests and Receiving Reports) or DFARS 252.246-7000 clause (Material Inspection and Receiving Report) must either have a balanced LISSR or all line items identified on the Line Item Schedule and Shipment Record (LISSR) are shipped and accepted via a DD250(s) (with the last DD250 being a final “Z”), 2 in 1 invoice(s) with the last invoice coded with a “Z”, PCO Cert with updated ACO Notebook, or other supporting documentation that all goods and services have been received before the contract can be moved to Section 2.
4.2. LINE ITEM SCHEDULE AND SHIPMENT RECORD (LISSR). The LISSR shows the quantity of items ordered and the quantity shipped and accepted. For example, one widget was ordered by the contract and one widget was shipped and accepted by the Government. If the contract authorizes a Quantity Variance (QV), then follow the procedures in 4.2.a. to balance the line items.
a. Quantity Variation (QV). A contract can authorize a quantity variance in items shipped pursuant to FAR 52.211-16, Variation in Quantity. When this clause is incorporated in a contract, an R9 26 Remark is present in MOCAS. The receiving reports that ships the final (under-shipped) quantity of the Contract Line Item Number (CLIN) with the variation must have a “Z” in the Advice code on the receiving report (see Figure 01, Receiving Report Example). If
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S ECTION 4: DATA INTEGRITY ACTIONS FOR M OVEMENT TO S ECTION 2 19
Figure 1. Receiving Report Example
b. Shipped Contract Data Requirements List (CDRL). This section only applies to Exhibit Line Item Numbers (ELINs). When a CDRL is put on contract from a DD Form 1423 (A001, B001, etc.,) the Block 10, “Frequency” reads “AS REQ” or “EACH SHIPMENT” and the contractor has over shipped the quantity on one of these CDRLs, the LISSR must be balanced by the Trusted Agent (TA) to correct the ON ORDER QTY to match the quantity shipped. Consider: If the quantity for an ELIN is 1 AS REQUIRED, or 1 with EACH SHIPMENT, the contractor may ship product on 5 shipments or on 1 shipment. If contractor ships once, the quantity of (1) would be correct. However, if contractor ships 5 times and the requirement is to send data with EACH shipment, the quantity on order in MOCAS must be 5. Under no circumstances will the TA change the receiving report; the change must be made in MOCAS to the CLIN and Schedule data.
c. Notice of Completion. Data items on CDRL or the DD Form 1423 that do not require a Receiving Report are consolidated into a single ‘dummy’ service line item in MOCAS. A DCMA Notice of Completion (NOC) must be utilized to signify completion of this item. Anyone can initiate the NOC, as long as they have the backup information.
4.3. FINAL “Z” RECEIVING REPORT DD FORM 250 In accordance with paragraph 4.1., a final shipment document (Z-DD 250 Receiving Report) must be received and entered into MOCAS upon completion of the contract/order. If the final receiving report does not have a Final Z, if source acceptance, the DCMA QAR must reject this shipment for the contractor to correct and resubmit. If the QAR signs the receiving report and realizes that the shipment number should contain a “Z”, the QAR (or appropriate functional specialist) can make the shipment available for correction in WAWF. The vendor must add the "Z" to shipment number and change Final Shipment indicator to "Y" and resubmit; the QAR resigns corrected shipper.
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The ACO can input notes in the ACO notebook stating it is a final DD250 or request the contractor to process a corrected DD250 with a “Z”. All missing shipment issues must be corrected and resolved, and annotated in the ACO Notebook (Field in MOCAS). When the shipment numbers are not sequential, the Technical Specialist (IS/PT) must research to determine why a shipment is missing and either process the missing shipment or annotate the ACO Notebook with appropriate remarks.
4.4. ALL MODIFICATIONS PROCESSED. All modifications must be received and processed correctly in MOCAS prior to a contract/order moving to Section 2. If a contract is in Section 2 and a contract modification is required, manually move the contract back to Section 1 and process the modification prior to moving the contract back to Section 2. All missing modifications must be addressed in the ACO Notebook with remarks.
4.5. DESTINATION ACCEPTANCE. Destination acceptance documents are often delayed or not received by the payment office or CMO. Because it is their responsibility, DFAS will obtain destination acceptance. The Technical Specialist (IS/PT/ACO/CA) must request the PCO or designated POC sign the final DD 250 Receiving Report in WAWF. Until the Technical Specialist (IS/PT/ACO/CA) receives confirmation from DFAS that DFAS has received Destination Acceptance, the Technical Specialist will ensure the contract remains in Section 1. After the Technical Specialist receives such confirmation, the Technical Specialist must then balance the LISSR before they move the contract to Section 2.
4.6. FFP CONTRACTS AWAITING FINAL ACCEPTANCE. Receiving reports with a Ship To in the Continental United States (CONUS) must be entered and processed electronically in WAWF. Except for Receiving Reports shipping to Outside Continental United States (OCONUS), Destination Acceptance must be obtained in WAWF. When OCONUS final acceptance documents are not received by the payment office, DFAS is responsible to obtain the document.
