DCMA Manual 2501-07
Contract Closeout
__________________________________________________________________
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.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
2
• 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.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
3
SUMMARY OF CHANGES
Substantive changes have been made to this Manual. The purpose of the substantive changes are
to provide more clear and detailed information. The following identifies the most notable
changes:
• Section 4.1 is revised to clarify data integrity actions required for fixed price and flexibly
priced contracts
• Section 4.2 is revised to delete DFARS 252.246-7000, Material Inspection and Receiving
Report (MIRR) Clause
• Section 4.5 is revised to clarify procedures required for destination acceptance
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
TABLE OF CONTENTS 4
TABLE OF CONTENTS
SECTION 1: GENERAL ISSUANCE INFORMATION ................................................................8
1.1. Applicability. ...........................................................................................................................8
1.2. Policy. ......................................................................................................................................8
SECTION 2: RESPONSIBILITIES ..................................................................................................9
2.1. Contract Management Office (CMO) Commander/Director/Contracts Director/Supervisor. 9
2.2. Contingency Contracting Administration Services (CCAS). ..................................................9
2.3. Administrative Contracting Officer (ACO). ............................................................................9
2.4. Aco Or Contract Administrator (CA). .....................................................................................9
2.5. Termination Contracting Officer (TCO). ...............................................................................10
SECTION 3: INTRODUCTION TO CONTRACT CLOSEOUT.................................................11
3.1. Introduction. ...........................................................................................................................11
3.2. Closeout Time Standards. ......................................................................................................11
3.3. Overage Contract Coding. .....................................................................................................12
3.4. What Can An ACO/CA Do To Simplify Closeout. ...............................................................15
3.5. File Retention And Maintenance. ..........................................................................................16
3.6. Mocas Section Designations. .................................................................................................16
SECTION 4: DATA INTEGRITY ACTIONS FOR MOVEMENT TO SECTION 2 .................17
4.1. Introduction To Contract Closeout Data Integrity. ................................................................17
4.2. Line Item Schedule And Shipment Record (LISSR). ............................................................17
4.3. Final “Z” Receiving Report DD Form 250 (DD 250) ...........................................................19
4.4. All Modifications Processed. .................................................................................................20
4.5. Destination Acceptance. ........................................................................................................20
4.6. FFP Contracts Awaiting Final Acceptance. ...........................................................................20
SECTION 5: CONTRACT CANCELLATIONS ...........................................................................21
5.1. Cancelling Purchase Orders. ..................................................................................................21
5.2. MOCAS Paid Contracts. ........................................................................................................22
SECTION 6: TERMINATIONS AND LITIGATION ...................................................................23
6.1. Terminations. .........................................................................................................................23
6.2. Termination Settlement. .........................................................................................................23
6.3. No-Cost Termination. ............................................................................................................24
6.4. Coding Section 3 Dormant Contracts/Orders. .......................................................................24
6.5. Litigation Resolved. ...............................................................................................................24
SECTION 7: COMMON CLOSEOUT ACTIONS ........................................................................25
7.1. Common Closeout Actions. ...................................................................................................25
7.2. Property Clearance. ................................................................................................................25
7.3. Royalties. ...............................................................................................................................25
7.4. Final Patent Report. ...............................................................................................................26
7.5. Value Engineering Change Proposal (VECP). ......................................................................27
7.6. Disposition Of Classified Materials. ......................................................................................27
SECTION 8: FINANCIAL ACTIONS ............................................................................................29
8.1. Customary Financial Actions. ................................................................................................29
8.2. Funds Reconciliation. ............................................................................................................29
8.3. Withholds. ..............................................................................................................................29
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TABLE OF CONTENTS 5
8.4. Excess Funds. .........................................................................................................................29
8.5. Negative Unliquidated Obligation. ........................................................................................30
8.6. Unliquidated Work In Process (WIP) Balances. ....................................................................30
8.7. Final Payment. .......................................................................................................................30
8.8. Remaining Funds…………………………………………………………………………....31
8.9. Coding for Warranty. .............................................................................................................31
8.10. Dormant Funds.....................................................................................................................32
8.11. Replacement of Cancelled Funds. ........................................................................................32
8.12. Additional Funds. .................................................................................................................33
8.13. Q-Final. ................................................................................................................................33
SECTION 9: OTHER DISBURSING OFFICE (ODO) CLOSEOUT REQUIREMENTS ........34
9.1. Defense Logistics Agency (DLA) ODO. ...............................................................................34
9.2. Non-DLA-ODO. ....................................................................................................................34
SECTION 10: FIXED PRICE CLOSEOUT REQUIREMENTS .................................................35
10.1. Automatic Closeout. ............................................................................................................35
10.2. Final Invoice. .......................................................................................................................35
10.3. Fixed Price Incentive (FPI). .................................................................................................35
10.4. Fixed Price Redetermination................................................................................................36
10.5. Fixed Price Incentive Firm...................................................................................................36
10.6. Unilateral Price Determination. ...........................................................................................36
SECTION 11: TIME AND MATERIAL/LABOR HOUR CLOSEOUT REQUIREMENTS ....37
11.1. Time & Material (T&M) Contracts. ....................................................................................37
11.2. Rates, Other Direct Costs and Travel. .................................................................................37
SECTION 12: COST TYPE CLOSEOUT REQUIREMENTS .....................................................38
12.1. Introduction. .........................................................................................................................38
12.2. Cost Type Closeout Actions. ...............................................................................................38
SECTION 13: QUICK CLOSEOUT AND EARLY CLOSEOUT ................................................43
13.1. Quick Closeout (QCO). .......................................................................................................43
13.2. Early Closeout. .....................................................................................................................44
SECTION 14: CLOSEOUT OF BASIC ORDERING AGREEMENT (BOA)/INDEFINITE
DELIVERY CONTRACT (IDC) ......................................................................................................47
14.1. Closing a BOA. ....................................................................................................................47
14.2. Closing an IDC. ...................................................................................................................47
SECTION 15: CLOSING PART B AND PART C CONTRACTS AND NON-PROCUREMENT
INSTRUMENTS ................................................................................................................................49
15.1. Part B Contracts. ..................................................................................................................49
15.2. Part C - Support Contracts. ..................................................................................................49
15.3. Part C - Payment Only Contracts. ........................................................................................49
15.4. Closing Non-Procurement Instruments (NPI). ....................................................................49
SECTION 16: DFAS RECONCILIATIONS AND MOCAS SECTION 4 ...................................50
16.1. Request For Funds Reconciliations. ....................................................................................50
16.2. DFAS Reconciliation. ..........................................................................................................50
16.3. Movement of Contracts to Mocas Section 4. .......................................................................51
16.4. Opening A Closed Contract. ................................................................................................52
16.5. Unreconciled Contracts. .......................................................................................................53
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TABLE OF CONTENTS 6
16.6. Reopened Contracts. ............................................................................................................53
SECTION 17: MOVEMENT TO SECTION 5 - FINAL CLOSEOUT ACTIONS ......................55
17.1. Final Pay NLA/PK9. ............................................................................................................55
17.2. Manual Closeout. .................................................................................................................55
17.3. Contract Closeout Application. ............................................................................................55
17.4. Contract Closeout Records. .................................................................................................55
17.5. Closed-Contract Database (CCDB). ....................................................................................55
SECTION 18: ADMINISTRATIVE UNILATERAL CLOSEOUT .............................................56
18.1. Introduction. .........................................................................................................................56
18.2. ACO Actions. .......................................................................................................................57
SECTION 19: SOLUTIONS FOR PROBLEM CLOSURES ........................................................58
19.1. Background. .........................................................................................................................58
19.2. Contractor is Bankrupt. ........................................................................................................58
19.3 Contractor is No Longer in Business………………………………………………….......60
19.4. Contractor has Failed to Submit Indirect Cost Proposal. .....................................................61
19.5. Contractor has Failed to Submit Final Invoice or Voucher. ................................................62
GLOSSARY........................................................................................................................................64
G.1. Definitions. ............................................................................................................................64
G.2. Acronyms. .............................................................................................................................66
REFERENCES ...................................................................................................................................69
TABLES
Table 1. Standard Closeout Timeframes .............................................................................................11
Table 2. R2 Overage Delay Reason Codes .........................................................................................13
Table 3. MOCAS Section Numbers and Titles ...................................................................................16
Table 4. Steps to Process Contract Cancellations ...............................................................................21
Table 5. R3 Dormant Reason Codes ...................................................................................................32
Table 6. Criteria for DLA Auto Closeout ...........................................................................................34
Table 7. Criteria for Non-DLA ODO Closeout ..................................................................................34
Table 8. Automatic Closing Requirements .........................................................................................35
Table 9. Final Voucher Review Criteria .............................................................................................40
Table 10. Risk Assessment for Final Vouchers ..................................................................................40
Table 11. Final Voucher Review ........................................................................................................40
Table 12. NPI Closeout Documentation .............................................................................................49
Table 13. Obtaining Status ..................................................................................................................51
Table 14. Movement to Section 4 .......................................................................................................51
Table 15. Request for MOCAS Action ...............................................................................................52
Table 16. Explanations for the R5 Remarks for Reopened Contracts ................................................53
Table 17. Examples of Conditions for Reopens .................................................................................54
Table 18. List of Contract Closeout Documents .................................................................................55
Table 19. Unilateral Closeout Procedures ..........................................................................................56
Table 20. Steps for Accelerated FV Preparation ................................................................................57
Table 21. Examples of Circumstances and Possible Solutions ...........................................................58
Table 22. Procedures when a Contractor is No Longer in Business ...................................................60
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TABLE OF CONTENTS 7
FIGURES
Figure 1. Receiving Report Example ..................................................................................................19
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SECTION 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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Change 1, December 19, 2019
SECTION 2: RESPONSIBILITIES 9
SECTION 2: RESPONSIBILITIES
2.1. CONTRACT MANAGEMENT OFFICE (CMO) COMMANDER/DIRECTOR/
CONTRACTS DIRECTOR/SUPERVISOR. The CMO commander/director/contracts
director/supervisor must ensure the ACO and Contract Administrators follow FAR, Defense
Federal Acquisition Regulation Supplement (DFARS), and contractual requirements when
closing contracts.
2.2. CONTINGENCY CONTRACTING ADMINISTRATION SERVICES (CCAS).
Responsibilities of the head of the contracting activity for contingency contract closeout are
addressed in DFARS 204.804 and any applicable PGI procedures.
2.3. ADMINISTRATIVE CONTRACTING OFFICER (ACO). The ACO will:
a. Lead the contract closeout process, including coordinating with DCMA personnel,
Defense Finance and Accounting Service (DFAS) (or other appropriate payment offices), buying
activity personnel, Defense Contract Audit Agency (DCAA) (or other audit agencies), the
contractor, and as necessary, DCMA’s Office of the General Counsel, Defense Criminal
Investigative Service (DCIS), Inspector General (IG), and the Department of Justice (DOJ).
b. Review and determine if the contract is physically complete (FAR 4.804-4(a)).
c. Notify the buying activity when all contract/order administration office closeout actions
are complete (DFARS Procedures Guidance Information (PGI) 204.804-2(1)(iv)).
d. Notify the buying activity when a contract/order cannot be closed within the FAR
mandated time standard (DFARS PGI 204.804-2(2)). This notification must include the reason
for the delay and the new estimated closing date (ECD).
e. When applicable, use Quick Closeout (QCO) in accordance with (IAW) FAR 42.708.
However, the ACO must first negotiate the settlement of indirect costs for a specific
contract/order or group of contracts/orders in advance of the determination of final indirect cost
rates. The ACO must coordinate QCO efforts IAW DCMA Final Indirect Cost Rates, QCO
Rates procedures.
f. Verify completion of all closeout actions and sign the DD Form 1597 or MCC 1.5 eTool,
and place a signed copy in the Official Contract File.
g. When applicable, request evaluation of the annual submission of the contractor's
overhead cost proposals.
h. When applicable, request an audit report of findings or low-risk rate agreement letter, or
other DCAA product (i.e. disengagement memo, decrement memo, unilateral recommendation
memo).
2.4. ACO OR CONTRACT ADMINISTRATOR (CA). The ACO or CA will:
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Change 1, December 19, 2019
SECTION 2: RESPONSIBILITIES 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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Change 1, December 19, 2019
SECTION 3: INTRODUCTION TO CONTRACT CLOSEOUT 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
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 3: INTRODUCTION TO CONTRACT CLOSEOUT 12
settlement of indirect cost rates and must be closed not later than 36 months after the physical
completion date. Purchase orders identified in the 9th position of the contract number per FAR
4.1603 and DFARS 204.1603 will close 3 months after the final shipment has been processed.
All other contract types including Labor Hour (LH), must be closed no later than 20 months after
the physical completion date. Fixed Price Unilateral Contracts will go overage 3 months after
final acceptance date.
b. Contracts/orders using simplified acquisition procedures must be considered closed when
the Contracting Officer (CO) receives evidence of receipt of deliverable and final payment. A
completed closeout checklist is not required for closeout unless Paragraph 3.2.b(1) Part A
applies.
(1) Part A. MOCAS Part A contracts at the simplified acquisition threshold (SAT) or
higher or below the simplified acquisition threshold with special provision codes other than
Special Provision Code T or W will need a completed closeout checklist via Contract Closeout
Application or a completed DD Form 1597.
(2) Part B. MOCAS Part B contracts are closed by the Defense Finance and Accounting
Service (DFAS) to include contracts/orders (firm-fixed price contracts/orders that are $500,000
or less in value with no special provisions or requirements except for Special Provision Code T
or W) when final payment has been made.
3.3. OVERAGE CONTRACT CODING. Contracts are considered overage when they remain
open beyond the FAR standard timeframes. The ACO and/or CA are required to assign an R2
overage delay reason code and input an ECD for MOCAS Part A, Section 2 contracts within 45
calendar days after the contract going overage IAW DFARS PGI 204.804-2(2). However, to be
proactive, it is recommended the ACO and/or CA assign the R2 overage delay reason code 45
calendar days prior to the contract going overage, if the contract will not close prior to the
overage date. Once the R2 Reason Code and ECD have been properly assigned, a PKX,
Notification of Delay in Closing, is transmitted to the Procurement Contracting Officer (PCO)
informing them that closeout will be delayed. The ACO or CA must input only one code at a
time. The contract must be coded with the overage code for the action that is currently being
worked. When that issue is resolved, update the code to the new issue prohibiting closeout. For
a complete listing of the R2 overage delay reason and Office of Primary Responsibility (OPR)
codes see Table 2, R2 Overage Delay Reason Codes. When assigning an R2 overage delay
reason code of F, H, M, P, V, or W, the ACO/CA is required to assign an OPR code in the R9
Remark. The OPR numeric codes are used to designate who has the primary responsibility to
complete the R2 coded closeout action. The ACO or CA are encouraged to place additional
closeout comments in the ACO Notebook.
Table 2. R2 Overage Delay Reason Codes
R2 MOCAS/MILSCAP
Clarifications OPR
Codes Description
Awaiting submission Contractor has not submitted a final bill for
Contractor
A of final payment. For cost contracts, final indirect rates
(72)
voucher/invoice have been established.
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Change 1, December 19, 2019
SECTION 3: INTRODUCTION TO CONTRACT CLOSEOUT 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 or equivalent. The Form has been forwarded to Services (71)
required
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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Change 1, December 19, 2019
SECTION 3: INTRODUCTION TO CONTRACT CLOSEOUT 14
Table 2. R2 Overage Delay Reason Codes
R2
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
3.
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 R9
55 once all property actions are closed.
Services (71)
Contractor
(72)
DCMA (73)
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Change 1, December 19, 2019
SECTION 3: INTRODUCTION TO CONTRACT CLOSEOUT 15
Table 2. R2 Overage Delay Reason Codes
R2
Codes
MOCAS/MILSCAP
Description
Clarifications OPR
W
Contract modification
pending
Contract modification awaiting Contractor
signature, PCO issuance of modification or ACO
modification actions.
Services (71)
Contractor
(72)
DCMA (73)
X
Contractor Release of
Assignment
DO NOT USE - This is associated with FAR
52.232-23, and is used when the Contractor has
assigned its rights to be paid to a Financial
Institution. This is NOT to be confused with the
Contractor Assignment of Refunds, Rebates,
Credits and other amounts, which is required to
be submitted with the final voucher.
N/A
Y
Awaiting notice of
final payment
Proper final invoice/voucher forwarded to DFAS
for payment, awaiting payment.
DFAS (75)
Z
Disposition of
classified material
pending
Awaiting disposition instructions on classified
materials from the Buying Activity. The ACO is
responsible for notifying DIS that the contract is
complete and classified material must be
dispositioned.
Services (71)
1
Canceled Funds
DO NOT USE: Use Reason Code “Y" when
final invoice/voucher has been forwarded to
DFAS.
N/A
2
Appropriations in Red
DO NOT USE
N/A
3
Prevalidation Action
Pending
Voucher/invoice at DFAS pending prevalidation
process before payment.
DFAS (75)
6
Fee Withheld
Fee withheld awaiting resolution of issue before
final payment can be made.
DCMA (73)
7
Awaiting Removal
from Excess Funds
The ACO has deobligation authority.
DCMA (73)
3.4. WHAT CAN AN ACO/CA DO TO SIMPLIFY CLOSEOUT. Many closeout problems
increase in difficulty over time. Taking detection to prevention actions will make the closeout
process easier:
a. Complete a thorough contract receipt and review of all contract actions delegated to
DCMA for administration to ensure MOCAS database integrity. See DCMA-MAN 2501-01,
“Contract Receipt and Review,” and DCMA-MAN 2501-05, “MOCAS Data Integrity
Screening.”
b. Ensure contract moves from MOCAS Section 1 to MOCAS Section 2 upon physical
completion.
c. Make sure the contract funding, line items, special provisions, and payment instructions as
well as changes resulting from modifications are correctly entered into MOCAS.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 3: INTRODUCTION TO CONTRACT CLOSEOUT 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)
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 4: DATA INTEGRITY ACTIONS FOR MOVEMENT TO SECTION 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
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 4: DATA INTEGRITY ACTIONS FOR MOVEMENT TO SECTION 2 18
the “Z” is omitted, and it is the final shipment for the contract, the receiving report must be
returned to the contractor for correction. Once the corrected receiving report is received with the
“Z” in the Ship Advice Code, the presence of the R9 26 Remark will allow the under shipment to
process correctly and allow the contract to move to Section 2 with no further action. If the
quantity shipped is over or under the variation in quantity, it needs to be negotiated between the
PCO or ACO (if permitted) and the contractor. A modification must be issued to balance the
LISSR.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 4: DATA INTEGRITY ACTIONS FOR MOVEMENT TO SECTION 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.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 4: DATA INTEGRITY ACTIONS FOR MOVEMENT TO SECTION 2 20
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.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 5: CONTRACT CANCELLATIONS 21
SECTION 5: CONTRACT CANCELLATIONS
5.1. CANCELLING PURCHASE ORDERS. IAW FAR 13.302-4, Termination or
Cancellation of Purchase Orders, unilateral small purchase orders may be cancelled at no cost to
the Government via modification. See Table 04, Steps to Process Contract Cancellations.
Table 4. Steps to Process Contract Cancellations
All contracts that are cancelled will be closed using Steps 1-6. However, the person who
issued the cancellation will drive the steps needed AFTER Step 6.
Step 1. Check MOCAS to make sure no shipments or payments have been processed. If
shipments or payments are in processed status, the mod must be returned to the
originator and must not be distributed or processed.
IF ALL MODIFICATIONS ARE PROCESSED PROCEED.
Step 2. Reduce the total contract amount to zero.
Step 3. Reduce each ACRN amount to zero (after the next MOCAS cycle is run, the ACRNs
will delete).
Step 4. Annotate the R5 or R6 Remarks with: "Cancelled per mod XXXXX.”
Step 5. After the 2 MOCAS cycles have run and each ACRN has been deleted, move the
contract to Section 2. Note: If the contract is moved to Section 2 before the 2 cycles
run, MOCAS will automatically return the contract to Section 1. Process the
(Generate) "G" NLA to close the contract if it is a Part B or is a DCMAI payment only
contract. Process "G" and (Final) "F" NLA to close the contract if it is a Part A. After
the contract closes, the ACO/CA will still receive UYCJ03, NLA, the next day;
however, report can be disregarded.
Step 6. Do not delete the line items. This is unnecessary because they will be purged
automatically 14 calendar days after the contract moves to Section 5.
ACO Issued Modification
If the contract is MOCAS paid, the modification should process successfully and update
MOCAS via EDI. After 2 cycles, a TA should do the Section move and NLA
processing. In the event the mod does not process successfully, a direct input person
(PT) needs to process the modification on line following the 6 steps listed in Table 04.
If the contract is an ODO, the modification will not successfully process (because
MOCAS thinks the ACRN reduction will put the contract in a credit position). A Direct
Input person (PT) needs to process the modification on line following the 6 steps listed
in Table 04.
PCO Issued Modification on an ODO contract:
A direct input person (PT) needs to process the modification on-line following the 6
steps listed in Table 04.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 5: CONTRACT CANCELLATIONS 22
Table 4. Steps to Process Contract Cancellations
Step 7. If ODO, the mod will not successfully process (because MOCAS thinks the ACRN
reduction will put the contract in a credit position). A direct input person (PT) needs to
process the modification on line, following the steps listed in Table 04. For a PCO-
issued mod on an ODO order, a direct input person (PT) needs to process the
modification on line following the steps in Table 04.
a. Once the cancellation modification is processed by DFAS, ACO/CA will enter the R5
Remark “Contract Cancelled per MOD P0000*.”, prepare and submit a DCMA Form 1797 to the
TA requesting manual movement of the contract/order to MOCAS Section 2 and proceed with
normal closeout procedures. If the cancellation modification is not processed or on the MOCAS
backlog, the ACO/CA will enter an ACO Notebook Remark “contract/order cancelled per MOD
P0000*, and send an e-mail to the DFAS Mod Input Mailbox to have the mod processed.
b. If a Firm Fixed Priced cancellation modification was processed and the movement to
Section 2 was not accomplished in 2 nightly cycles of MOCAS, the TA will not be able to move
the contract to Section 2 after the Accounting Classification Reference Number (ACRN) data has
dropped from the system. Any attempt to move the contract will result in an error message
“financial data required.” To override this error message, input an R9 54 Remark into MOCAS,
and enter an ACO Notebook Remark identifying the need to input the R9 54 Remark. This will
permit the contract/order to move to Section 2 and facilitate the closeout process.
5.2. MOCAS PAID CONTRACTS. DFAS will process PCO issued cancellation
modifications for MOCAS-paid contracts and orders. Direct Input Person (PT) processes
cancelling modifications issued by an ACO (MOCAS paid or ODO), or by a PCO on an ODO
contract/order.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 6: TERMINATIONS AND LITIGATION 23
SECTION 6: TERMINATIONS AND LITIGATION
6.1. TERMINATIONS. A contract/order may be terminated for convenience, cause, or default.
IAW FAR 4.804-1(c), a contract/order must not be closed if the contract/order is in litigation,
under appeal or pending a termination action. All open actions and liabilities must be resolved
prior to closeout.
a. The Government may at any time during contract performance fully or partially terminate
contracts for default or for convenience.
b. The Government may terminate a contract/order for default when the contractor has
materially breached the contract by failing to perform IAW contract requirements. Under
termination for default, the contractor is liable for any additional costs to the Government to
obtain terminated line items.
c. Complete instructions for terminations can be found in the DCMA-MAN 2501-06,
“Terminations.”
6.2. TERMINATION SETTLEMENT. The DCMA TCO settles contracts/orders terminated
for convenience and the buying activity settles contracts/orders terminated for default.
a. When a contract/order is terminated for convenience, it is the responsibility of the CMO to
send a copy of the termination modification to the Terminations Group's Inbox
dcma.lee.hq.mbx.Terminations-Inbox-@mail.mil Upon receipt of the termination modification,
the TCO will establish a termination docket.
(1) Partial Termination Settled. If a contract is partially terminated, and the terminated
line items are settled, the contract must remain in Section 1 until the non-terminated line items
are shipped and accepted. Once the contract is physically complete, it will automatically move
to Section 2 and close through normal procedures.
(2) Partial Termination Not Settled. If a contract is partially terminated, and the
terminated line items are not settled, but the remaining line items are complete, the contract must
remain in Section 3 until the terminated line items are settled. Once the partial terminated line
items are settled, the contract must be moved to Section 2 and closed through normal procedures.
b. Fully terminated contracts/orders must be moved to Section 3 (via DCMA Form 1797 to
the TA). Contracts/orders moved to Section 3 must have a valid dormant reason code. The
contract/order will remain in MOCAS Section 3 until all open actions and liabilities are resolved
by the TCO. Upon execution of a settlement agreement, the TCO will issue a modification and
close the termination docket. Upon receipt of the settlement modification the contract must be
moved into Section 1, and the ACO will ensure the modification is processed correctly to ensure
timely closeout.
c. When a contract/order is terminated for default, the CMO will ensure proper processing of
the modification, and the contract/order will remain in MOCAS Section 1. The buying activity
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 6: TERMINATIONS AND LITIGATION 24
maintains the termination docket for contracts/orders terminated for default. The Functional
Specialist (ACO/CA) will send DCMA Form 1797 to the TA for movement to Section 2. Once
contract is in Section 2, it must stay there until the PCO assesses the re-procurement charges (if
any). Once settled, the ACO must proceed with normal closeout procedures.
d. For all terminated ODO contracts/orders, the Functional Specialist (ACO/CA/PT) will
ensure proper processing of the termination modification. If not processed correctly, forward the
modification to the DCMA Direct Input Person (PT). The TA will move contract from Section 1
to Section 2 and then take action to close the contract in the same cycle by issuing a G and F
NLA.
6.3. NO-COST TERMINATION. Upon receipt of a no-cost termination settlement
modification from PCO for a contract/order administered in MOCAS, DFAS is responsible for
processing the PCO modification and moving the contract/order to MOCAS Section 5. The
ACO must ensure that DFAS takes action to close the contract/order, which completes this
action.
6.4. CODING SECTION 3 DORMANT CONTRACTS/ORDERS. The ACO must not close
a contract/order if it is in litigation, under appeal, or pending termination settlement. These
contracts must be assigned the appropriate dormancy code and moved to MOCAS Section 3.
Once contracts are moved to Section 3, they must be reviewed periodically to update their status.
For example, a contract was originally moved to Section 3 awaiting review by the Armed
Services Board of Contract Appeals. When the appeal was denied, the contractor filed for
bankruptcy. Accordingly, the R3 (Dormant Reason Code) must be updated from BCA to
BKRPT. In addition, if the closeout date is expected to exceed the overage date, the contract
must be moved into Section 2 via DCMA Form 1797 by the TA, an estimated closeout date
entered into MOCAS and the contract returned to Section 3 via DCMA Form 1797 by the TA.
The estimated closeout date should be revised as necessary. Coordination with assigned legal
counsel is recommended to ensure current and accurate MOCAS Section 3 coding.
6.5. LITIGATION RESOLVED. The contractor, under the Disputes Clause, may appeal a
decision of the contracting officer directly to the Armed Services Board of Contract Appeals
(ASBCA), or the United States Court of Federal Claims. The prime contractor may sue or be
sued by a subcontractor for damages related to the contract in question. The ACO/CA must
ensure that the contract is moved from Section 3 once litigation is resolved. The ACO and PCO
must work together to ensure that any litigation and resulting cost impact is resolved under the
contract before the contract is closed. Coordination with assigned legal counsel is required to
ensure current and accurate information regarding litigation status.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 7: COMMON CLOSEOUT ACTIONS 25
SECTION 7: COMMON CLOSEOUT ACTIONS
7.1. COMMON CLOSEOUT ACTIONS. All of the actions in this section can be taken on all
types of contracts, if applicable. If the appropriate FAR Clause is on the contract then the
respective action is required. All actions can happen simultaneously, once contract is physically
complete ACO/CA will start closeout procedures.
7.2. PROPERTY CLEARANCE. When a contract/order contains FAR clause 52.245-1,
Government Property, Government Property is or could be assigned to the contract. This is also
indicated by the Special Provision Code (SPC) “E” in MOCAS.
a. All Government contract property accountable to a contract must be properly
dispositioned in order for contract closeout to occur. Contracts with SPC “E” in MOCAS cannot
be closed unless the R9 55 Remark is entered into MOCAS by the Property Administrator (PA).
The R9 55 Remark, once entered into MOCAS, signifies all property actions are closed.
(1) The ACO must wait for the R9 55 Remark to be entered into MOCAS, by the
Property Administrator (PA), before the contract can be closed. This could happen prior to
physical completion or prior to the ACO beginning the closeout process.
(2) If the contract is in MOCAS Section 2 and a R9 55 Remark has not yet been entered
in MOCAS, the ACO should first check with the PA to ensure all property actions are closed. If
so, request PA to update the Defense Property Accountability System (DPAS) to reflect the
correct information. If not, ACO will provide written notification to the contractor notifying
them that the contract is physically complete, and all property, Government furnished and
contractor acquired, assigned to the contract needs to be transferred per contract modification or
dispositioned through the PLCO in a timely manner (See Resource page).
b. A Basic Ordering Agreement (BOA) is identified by a “G” in the 9th position of the
contract number. Each delivery order issued under the BOA is an individual contract and any
Government Property will be accountable to individual delivery orders. If the property clause is
in the Basic Ordering Agreement (BOA), the requirement flows to all delivery orders. Each
delivery order must have the property cleared and be closed individually.
c. An Indefinite Delivery Contract (IDC) is a contract, identified by a “D” in the 9th position
of the contract number, and individual orders issued under the IDC are not considered to be
individual contracts and are not to be segregated from the IDC. If the property clause is in an
IDC, it does not flow to the delivery/task order level. As such, when closing property for an
IDC, it must be cleared at the IDC level, not at the delivery/task order level.
d. If it is discovered the contract has property but there were no property clauses and Special
Provision Code E, then a modification must be issued by ACO to incorporate the appropriate
property clauses. The contractor must then disposition the property IAW FAR 52.245-1 and the
PA must ensure disposal of all Government property and resolution of all property issues.
7.3. ROYALTIES. Before final payment can be made, the ACO must receive a statement
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 7: COMMON CLOSEOUT ACTIONS 26
provided by the contractor of royalties paid or required to be paid in connection with performing
the contract/order and subcontracts/orders thereunder together with the reasons.
a. When the contract contains FAR 52.227-9, Refunds of Royalties, and royalties are
included in the contract/order price and are determined and documented by the ACO to be
properly chargeable to the Government and allocable to the contract/order, then the contractor
will be compensated and this action is complete. For IDCs and BOAs, the clause does not
automatically flow to the task order or order level. The clause has to be incorporated into each
order, if applicable.
b. Upon movement of the contract to Section 2, the Functional Specialist (ACO/CA) must
provide written notification and receive acknowledgement from the contractor requesting that
royalties be paid.
(1) If royalties are included in the contract/order price and were not in fact paid by the
contractor, or are determined by the ACO not to be properly chargeable to the Government and
allocable to the contract/order, then the contract/order price must be reduced. Repayment or
credits to the Government must be made as the ACO directs, completing this action. Royalty
payment must be paid prior to final payment.
(2) If a royalty payment is required and the contractor is nonresponsive, the ACO can
recoup the amount of the royalty due via demand letter, prior to final payment. If, at any time
within 3 years after final payment under this contract, the contractor for any reason is relieved in
whole or in part from the payment of the royalties included in the final contract price as adjusted
pursuant to FAR 52.227-9(d), the contractor must promptly notify the Contracting Officer of that
fact and must reimburse the Government in a corresponding amount.
7.4. FINAL PATENT REPORT. If the patent clause is in an IDC, the clause does not flow to
the delivery/task order level. As such, when closing patent for an IDC, it must be cleared at the
IDC level, not at the delivery/task order level.
a. If the patent clause is in the BOA, the clause automatically flows to the delivery/task order
level. As such, the patent must be cleared at the delivery/task order level. If the contract
contains a patent rights clause, FAR 52.227-11, or 13, (Patent Rights – Ownership by the
Government), a final patent report must be submitted by the contractor, on a DD Form 882,
“Report of Inventions and Subcontracts,” within 3 months after physical completion of the
contract. It must list all patent claims made under the contract or certify that there were no
inventions and list all subcontracts which include a patents rights clause or certify that no
subcontracts were issued with this requirement.
b. Upon movement of the contract to Section 2, the ACO or CA must provide written
notification to and receive acknowledgement from the contractor requesting they submit a DD
Form 882. If DFARS 252.227-7039, Patents--Reporting of Subject Inventions, or DFARS
252.227-7038 Patent Rights - Ownership by the Contractor (Large Business) is also in the
contract, a final report is required within 90 calendar days after completion of the contracted
work. The representative designated by the PCO or buying activity will provide the clearance.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 7: COMMON CLOSEOUT ACTIONS 27
c. A negative DD Form 882 is used when there are no reportable inventions claimed by the
contractor or Subcontractor in association with the contract. If a negative DD Form 882 is
received Block 5a and/or 6a must have “NONE” annotated in the block. If the final patent report
is negative, the ACO must forward a letter, along with the DD Form 882 to the PCO and
immediately deem the patent cleared. The letter must state, "The final patent report, DD Form
882, is submitted per contract requirements. Due to a negative report, the ACO has deemed the
patent cleared." The letter must be signed by the ACO (digital signatures are acceptable).
d. When the contractor has disclosed an invention or patent in association with the contract,
they have 90 calendar days to submit the final DD Form 882, which lists all inventions under the
contract, including subcontractors (if applicable) and their reports. If the contractor discovers a
new invention after submittal of the initial DD Form 882, they must submit to the government
within 60 calendar days of discovery. The contractor can accomplish this by letter or DD Form
882. If there is an invention, the contractor should indicate whether they anticipate filing a
Patent on the DD 882. (Please verify if these blocks are marked.) If the contractor is undecided
at this time, ACO/CA should follow-up with them on a periodic basis (even though they
officially have 2 years to decide). Periodic follow-up is important as the contractor may have
forgotten about a disclosed invention or just decided not to file and have not notified us. Once
the contractor indicates they intend to file, they have 1 year to do so. Once the contractor files
with the U.S. Patents Office and receives their patent filing number, they need to complete a
Confirmatory Instrument (or license). Some buying commands will accept partially completed
(contingent) Confirmatory Instruments (i.e. contractors will file later or contractor has filed and
not received filing number). Check with the Patent Counsel or Service Representative at the
buying activity to see if they will give a patent clearance based on this contingent Confirmatory
Instrument. If the contractor indicates that they are not going to file, they must notify the ACO
in writing, and the ACO must forward the notification document to the Patent Counsel
requesting final Patent Clearance. Once patent clearance is received, ACO/CA will annotate the
R5 Remark and Contract Closeout Check List with Patent Clearance received, and the date.
e. It is important to note that the Government has a 3 year look-back period after final
payment on the contract to examine the books and records of the contractor for the purpose of
asserting title and/or determine ownership rights to patentable subject inventions if the final
patent report is found unacceptable. The contractor has a regulatory duty to retain its books and
records for 3 years after final payment on the contract. As such, if in the unlikely event an
unreported invention is discovered after closure, the contract can be reopened and the invention
issues addressed.
7.5. VALUE ENGINEERING CHANGE PROPOSAL (VECP). When the contract includes
FAR 52.248-1, Value Engineering, the ACO verifies no outstanding VECPs requiring payment
or disposition exist before closing the contract. For contracts that include a contractor’s release
of claims with total amount paid, the release of claims serves as the documentation for the
required verification.
7.6. DISPOSITION OF CLASSIFIED MATERIALS. When the contract/order is classified
or contains requirements for handling classified material (DD Form 254), “DoD Contract
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 7: COMMON CLOSEOUT ACTIONS 28
Security Classification Specification,” the ACO will ensure classified material is dispositioned
IAW Government security regulations and accounted for by the contractor. The prime contractor
must clear all subcontracting DD Forms 254. The ACO will ensure the prime contractor clears
all DD Forms 254 from Subcontractors performing under the prime contract/order.
a. When the FAR Clause 52.204-2 is in the contract, and the Security Classification Code in
MOCAS (SCC-CD) is coded C, all classified documents must be dispositioned IAW
Government security regulations as stated in contract terms and conditions. This is
accomplished when the final DD Form 254 is completed by the contractor, indicating disposition
and sent to the PCO, or the contractor provides written certification that all data was properly
processed.
b. If there is a DD Form 254, the ACO must notify the Defense Security Service (DSS)
when the contract/order is complete and the classified material must be disposed of properly.
The cognizant DSS/Industrial Security Office address may be found on the contract/order DD
Form 254. The ACO does not need to receive confirmation or certification of completed actions
from the security office in order to proceed with closeout. When a contract/order with classified
material is closed and a final contract completion statement has been issued, all classified
material approved for retention by the contractor are under the cognizance of the PCO and the
Industrial Security Office.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 8: FINANCIAL ACTIONS 29
SECTION 8: FINANCIAL ACTIONS
8.1. CUSTOMARY FINANCIAL ACTIONS. The financial actions in this section may
pertain to all contract types. Contract type and clauses drive specific financial actions on each
contract. During the closeout process, one or more of these financial actions are routinely
performed.
8.2. FUNDS RECONCILIATION. After contracts are physically complete and ready to be
closed, there may be instances where unliquidated obligated funds remain on the contract. In
these instances a review must be accomplished to determine if the funds are “excess” or
“remaining” to the contract requirements. Upon completion of the review, the circumstances
cause the funds imbalance will dictate whether funds must be deobligated via modification
because they were “excess” or Q-Finaled (See Section 8.13) because they are remaining funds.
In order to determine the type of funds, the ACO must consider the type of contract/order,
clauses within the contract/order, and the reason for the unliquidated funds (e.g., if indirect rates
have not been settled for a cost-reimbursement type contract, the ACO must retain enough
funding to make payment on the FV). Generally, fixed-price contracts/orders have a ULO
balance of $0.00 when the contract/order becomes physically complete. However, there are
instances where the contract/order allows for variances in quantity shipped, the contractor has
rounded on the invoice, or performance on a specific CLIN was not necessary (e.g., fixed funds
provided for maintenance or service on computer hardware). An initial review will be conducted
to determine if funds are excess or remaining on contract/order within 60 calendar days of the
physical completion of a flexibly priced contract over the SAT, an ACO or CA compares the
contract's ULO balance in MOCAS to contract document. The ACO or CA documents this
action in a memorandum for record or on the contract closeout checklist. Documentation must
be signed/dated by the ACO or CA. It is recommended that the ACO retains a ULO that equates
to the adjustments needed for final overhead indirect rates when determining the initial excess
funds deobligation amount (see section 8.4).
8.3. WITHHOLDS. When the ACO withholds payments as a result of a final determination to
disapprove a contractor’s business system, the ACO must request the CMO’s TA to input
MOCAS Special Provision Code “U.” The MOCAS Special Provision Code must only be input
for those contracts where a payment withhold has been implemented. The withhold amount
must be input into the Contract Business Analysis Repository (CBAR) e-Tool.
8.4. EXCESS FUNDS. Excess funds are funds relating to a specific line item or deliverable in
excess of the amount needed for payment of that item (such as a line item not performed on a
contract). An initial review will be conducted to determine if funds are excess or remaining on
contract/order within 60 calendar days of the physical completion of a flexibly priced contract
over SAT, an ACO or CA compares the contract's ULO balance in MOCAS to contract
document. The ACO/CA must notify the PCO within 30 calendar days of identifying excess
funds during initial excess funds determination. Funds should be deobligated by contract/order
modification. A contract modification must be issued to deobligate excess funds on flexibly
priced contracts, with PCO notification.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 8: FINANCIAL ACTIONS 30
a. A follow-up Excess Funds determination should be conducted on flexibly priced
contracts, after the ACO/CA confirms the contractor’s incurred cost proposal is determined
adequate by the DCAA/Non-DCAA Auditor. When determining which funds are excess, the
ACO/CA will consider the amounts claimed for the contract/order in the proposal as well as any
fee withholds if applicable. If the proposal does not identify cost claimed on an individual
contract/order basis, the ACO/CA will validate the cost claimed for the contract/order with the
contractor. This review and documentation is required to be performed on all contracts/orders
within 60 calendar days after the final incurred cost proposal was deemed adequate, when the
ULO is greater than or equal to (>/=) 25 percent of the obligated amount and is greater than
$250,000.00 (thousand) or the ULO is greater than or equal to (>/=) $5,000,000 (million), and
must be documented on an Excess Funds Determination form (see Resource Page) and retained
in the contract file.
b. FAR 4.804-5 states that once a CMO receives evidence of physical completion, they will
review the contract funds status and notify the PCO of any excess funds available for
deobligation at the outset of the closeout process. It is recommended that this notification be
done by e-mail. When excess or negative unliquidated funds exist, a funds review must be
performed at the ACRN level to determine the cause.
c. If it is determined excess funds remain because of contractually acceptable unperformed
work or undelivered product, the ACO must issue a modification to deobligate the excess funds
and quantity. The CMO is no longer required to obtain PCO authorization prior to deobligating
excess funds, however, the ACO must notify the PCO before the action is taken. Below are
examples only.
(1) Deliverable CLIN. Contract required Ten (10) widgets. Eight (8) widgets have
been delivered and two (2) widgets will not be delivered. Because the contract required ten (10)
widgets and the contractor is not going to deliver (perform as required by contract), the funds
associated with the two (2) widgets are “excess funds” and must be deobligated via modification.
(2) Non-Deliverable CLIN. Contract called for five (5) trips. Three (3) trips were
accomplished and two (2) were not accomplished because two (2) trips were not performed as
required by the contract. The monies associated with these two (2) trips are considered “excess
funds” and must be deobligated via a modification.
8.5. NEGATIVE UNLIQUIDATED OBLIGATION. If there is a negative unliquidated
obligation (NULO) at the contract or ACRN level, a request for reconciliation (DCMA Form
1797) with support documentation must be sent to DFAS explaining the discrepancy. Refer to
Section 17 of this Manual for additional information.
8.6. UNLIQUIDATED WORK IN PROCESS (WIP) BALANCES. The Work in Process
Unliquidated Obligation (WIP ULO) balance must equal $0.00. Unliquidated progress payment
balances must be cleared prior to closeout. In order to clear the WIP ULO, conduct research
with the contractor and DFAS to determine status of balance.
8.7. FINAL PAYMENT. Final shipment and acceptance of the product/service on firm-fixed-
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 8: FINANCIAL ACTIONS 31
price contracts entitles the contractor to receive final payment. In some cases, obligated funds
are no longer required because of quantity variance. Excess funds may exist on maintenance and
repair contracts where the repairs cost less than originally estimated. Flexibly priced contracts
require settlement of final overhead rates and incentives. Because Divisional/ACO settlement of
final overhead rates with DoD contractors can be a lengthy process, it is important to conduct
and initial review contracts to identify and remove excess funds at the time of physical
completion. Working with the contractor, the ACO must estimate the total Government
monetary liability under the contract. It is important to avoid deobligating funds that may be
required for final payment. The ACO must retain a ULO that equates to the final overhead pay
adjustments (calculation of costs for proposed final overhead rates), which the ACO will review
for excess funds during a follow-up excess funds review.
8.8. REMAINING FUNDS. Remaining funds are those funds left on a contract/order due to
quantity variances or price rounding and where all contract/order performance as required by the
contract/order has been completed and paid in full. The functional specialist (ACO/CA) must
annotate the ACO notebook with a remark stating, “$XX.XX (amount of remaining funds) funds
are remaining funds and should be Q-Finaled.”
a. Deliverable CLIN. Contract required ten (10) widgets, ten (10) widgets were delivered.
The contractor billed less than the price contained in the contract and does not plan to bill at the
contract price. The money leftover is “remaining funds” and is systematically removed via the
“Q-Final” process in MOCAS. ACO must annotate the ACO Notebook in MOCAS with the
amount of the remaining funds and process the F NLA in MOCAS or Contract Closeout
Application. This allows the mechanical removal of funds in MOCAS, alerts the PCO not to
reopen the contract, and generates the PK9/EDI 567 transaction (notifies PCO that the contract is
administratively closed) and identifies “remaining funds.” PCO is responsible for notifying the
funding station.
b. Non-Deliverable CLIN. Contract is for travel. The number of trips is not specified and
performance is complete and accepted. The money leftover is “remaining funds” and ACO must
follow the “Q-Final” process to close the contract.
8.9. CODING FOR WARRANTY. A number of warranty clauses or terms and conditions
may appear in DCMA-administered contracts. Some of the warranty clauses can extend well
beyond the physical completion of the contract. As long as there is not a CLIN or money
attached for extended warranty, the contract must not be held open just for warranty. The
contractor must have a process on how to handle a warranty item, and if necessary, the contract
can always be reopened through the Closed-Contract Database (CCDB). Just because a contract
is closed in MOCAS does not relieve the contractor of their contractual responsibility to perform
under the warranty clause. When a contract contains provisions for extended testing periods
after shipment and before final notice of acceptance where final payment is withheld from
contractor, the contract must be moved to MOCAS Section 3 and coded “GUA”. When a
contract is moved to Section 3, the R2 indicator drops the information that had resided in the R2
overage delay reason code and transfers the information to the R6 and resides there while the
contract is in Section 3. Accordingly, an NLA alert for the ACO will be generated 21 calendar
days before the effective overage date, or ECD, as it appears in the R6.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 8: FINANCIAL ACTIONS 32
8.10. DORMANT FUNDS. Funds where no obligations, adjustments, contract modifications,
disbursements, or withdrawals have occurred within 120 calendar days after the period of
performance has expired. Additionally, commitments and obligations are defined as dormant in
the case of contracts that are physically complete for 12 months or more, and for which the
period of performance has expired. If funds are under review by DCMA or DCAA for closeout,
they are not considered DORMANT. As such, if you have completed an excess funds
determination, there is no need to issue a Dormant Funds Notification.
a. If an excess funds determination has not been made and it is not under review by DCMA
or DCAA, the ACO must issue a Dormant Funds Notification form within 30 calendar days after
physical completion, identifying to the PCO that the contract is complete and no further financial
transactions will occur (See Resource Page).
b. Dormant funds that have been classified as “cancelled” will be identified by the ACO by
November 15th of each year using the Dormant Funds Notification form. The ACO will send
the Dormant Funds Notification to the PCO that no further actions will be taken by the ACO to
clear cancelled funds. See Table 05, R3 Dormant Reason Codes.
Table 5. R3 Dormant Reason Codes
CODE
EXPLANATION
BCA
Armed Services Board of Contract Appeals (ASBCA) Case
TERM-C
Termination for Convenience
PL
Public Law-Claim Pending (e.g., PL 85-804)
BKRPT
Bankruptcy
CIL
Contractor in Litigation
CLL
Under Investigation
Contract containing provisions for extended testing periods after
GUA
shipment and before final notice of acceptance from an estimation where
final payment is withheld from Contractor
LLD
Labor Law Determination
VE
Contingent Value Engineering Payment
DEBT
Deferred DEBT - Request for Debt DEFERRAL
the Finance Officer
has been approved by
NOTES:
R3 Reason Code DEBT must be used in Conjunction with R9 - 64, Deferred Debt
TERM-D (Termination for Default) is not a valid Section 3 code. Any contract
moved to Section 3 must have a R3 Dormant Reason Code, no blanks
8.11. REPLACEMENT OF CANCELLED FUNDS. Replacement funds are those needed to
cover cancelled appropriations.
a. If funding is still on the contract but has since cancelled, the ACO will give pre-
notification to the PCO before submitting the FV to DFAS for payment. The voucher will be
held by DFAS for insufficient funds and coded “DMACT” (DFAS Merged Account) in the
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 8: FINANCIAL ACTIONS 33
invoicing screen of MOCAS. After verification, DFAS will request replacement funding from
the funding activity to recertify the cancelled funds.
b. ACOs must monitor final vouchers that require replacement funds to ensure the invoice is
coded as “DMACT” and included on the current DMACT list posted to the DCMA AQC 360
page (See Resource Page). Partial payments can occur against the FV which may result in
premature closeout. DFAS will send a letter to the funding station requesting funds. If the
funding station is unable to provide replacement funds, DFAS will send a letter to the contractor
requesting they waive the request for additional funds and submit a zero-dollar FV. The
ACO/CA will not deobligate funds for contracts on the DMACT list. The PCO is responsible for
issuing mods to deobligate all cancelling funds.
8.12. ADDITIONAL FUNDS. When additional funds are needed on a contract, the ACO is
responsible for notifying the PCO of the amount of additional funds required to complete the
contract. These funds will then be obligated onto the contract by the PCO or Funding Activity.
The ACO must not submit final vouchers to DFAS until additional funds have been obligated to
the contract via PCO issued modification.
8.13. Q-FINAL. This is a process in which DFAS systematically removes funds via the “Q-
Final” process in MOCAS. ACO must annotate the ACO Notebook in MOCAS (See Resource
Page) with the amount of the remaining funds and process the Final NLA in MOCAS or the
Contract Closeout Application. This allows the mechanical removal of funds in MOCAS, alerts
the PCO not to reopen the contract, and generates the PK9 transaction (notifies PCO that the
contract is administratively closed) and identifies “remaining funds.” PCO is responsible for
notifying the funding station. Funds that are Q-Finaled are sent back to the buying activity.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 9: OTHER DISBURSING OFFICE (ODO) CLOSEOUT REQUIREMENTS 34
SECTION 9: OTHER DISBURSING OFFICE (ODO) CLOSEOUT
REQUIREMENTS
9.1. DEFENSE LOGISTICS AGENCY (DLA) ODO. DCMA provides contract
administration services for contracts/orders that are not paid through MOCAS. These
contracts/orders are typically referred to as ODOs and closeout varies slightly from traditional
primary administration. DLA ODOs close automatically 30 calendar days after they are moved
to Section 2 if they are in MOCAS Part A, coded correctly and have no special requirements
(e.g., Property). DLA ODOs require only the quantity shipped = quantity accepted and a Z
shipment. DCMA ACOs are not able to perform the funds review at the time of physical
completion as required by FAR. DLA has retained the responsibility for closeout of the function
required by FAR 4.804-5(a)(14)-Contractor's final invoice has been submitted, FAR 4.804-
5(a)(15)-Contract funds review is completed and excess funds deobligated, FAR 4.804-5(b)(9)-
Invoice number and date, if the final approved invoice has been forwarded to a disbursing office
of another agency or activity and the status of the payment is unknown, and DFARS PGI
204.804-2(1)(iv)- Upon final payment—(A) Process a DD Form 1594, “Contract Completion
Statement,” or the electronic equivalent verifying that all contract administration office actions
are completed; and (B) Send the original DD Form 1594 or the electronic equivalent to the
contracting office for filing in the contract file and send a copy to Electronic Document Access
(EDA) and financial systems using the ANSI X12 567. See Table 06, Criteria for DLA Auto
Closeout. All other closeout actions must be performed IAW the contract type.
Table 6. Criteria for DLA Auto Closeout
Department Code Contract Level Pay Office R9 Remark Payment Office
S 9 70 SL4701
Note: DODAACs used by DLA Payment Office include: S33189, S33186, S33181, S33150, &
S12137.
9.2. NON-DLA ODO. DCMA does not have an agreement with other buying activities
regarding our administration of ODO contracts/orders. For NON-DLA (regular) ODO
contracts/orders, verification must be made with the payment office that final payment has been
made and that the ULO balance equals zero. See Table 07, Criteria for Non-DLA ODO
Closeout. NON-DLA ODOs must be closed using the Contract Closeout Application.
Table 7. Criteria for Non-DLA ODO Closeout
• R9 Remark code = 54.
• All ACO/PCO modifications and Receiving Reports are entered into MOCAS.
• The Line Item Schedule Shipment Record is balanced.
• All contractual actions are complete.
• Contract payment office has verified that final payment has been made and that the ULO
balance equals zero.
Note: The sources for payment information are as follows: My Invoice, Other Disbursing Payment
Office listed on contract or the PCO.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 10: FIXED PRICE CLOSEOUT REQUIREMENTS 35
SECTION 10: FIXED PRICE CLOSEOUT REQUIREMENTS
10.1. AUTOMATIC CLOSEOUT. IAW DFARS PGI 204.804-3(1), a firm-fixed-price
contract under $500,000 may be a candidate for automated contract closeout. For contracts over
the SAT, a DD Form 1597, Contract Closeout Check List or the DD Form 1594 is required to be
completed and uploaded into the official contract file when automatic contract closeout is used.
As permitted by FAR 4.804-5(a), automated contract closeout allows the MOCAS system to
initiate and execute the closeout action. The contract qualifies for the automated closeout if the
contract has requirements listed in Table 08, Automatic Closing Requirements:
Table 8. Automatic Closing Requirements
1. Is Firm Fixed Priced
2. Does not exceed a total contract value of $500,000 (inclusive of exercised options)
AND
3. Does not contain any of the following provisions requiring administrative action at
closeout:
FAR 52.211-11 Liquidated Damages—Supplies, Services, or Research and
Development
FAR 52.216-7 Allowable Cost and Payment
FAR 52.227-9 Refund of Royalties
FAR 52.227-11 Patent Rights—Ownership by the Contractor
FAR 52.227-13 Patent Rights—Ownership by the Government
FAR 52.232-16 Progress Payments
FAR 52.232-29 Terms for Financing of Purchases of Commercial Items
FAR 52.232-30 Installment Payments for Commercial Items
FAR 52.232-32 Performance-Based Payments
FAR 52.245-1 Government Property
FAR 52.248-1 Value Engineering
Note: If DFAS encounters a problem closing the contract, the ACO/CA may need to assist
or investigate why contract will not close. Otherwise, DFAS is responsible for closing the
contract within the 6 month time standard and ensuring the contract moves to Section 5 and
then to Section 8. When the contract enters Section 8, no further action is required by the
ACO/CA or DFAS.
10.2. FINAL INVOICE. Each contract prior to closeout must have a final invoice indicated by
a "Z" in the eighth position of the invoice number; otherwise, the contract will reopen. If a "Z" is
missing on a final invoice, the ACO/CA must annotate the ACO Notebook.
10.3. FIXED PRICE INCENTIVE (FPI). Prior to closing a FPI contract, the ACO must
ensure the incentive was negotiated and paid. Contracts/orders containing incentive clauses may
be subject to submission and negotiation of cost elements that will be used in the formula for the
incentive arrangement. For an incentive contract, the ACO must ensure all overhead rates
applicable to the contract/order are negotiated and the contractor is required to submit its re-
pricing settlement proposal. The ACO must issue a modification, IAW the contract/order clause,
to complete this action.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 10: FIXED PRICE CLOSEOUT REQUIREMENTS 36
10.4. FIXED PRICE REDETERMINATION. Upon receipt of a redetermination proposal
submitted by the contractor IAW the contract redetermination clause at FAR 52.216-6, the ACO
must negotiate to redetermine fair and reasonable prices, document the negotiation with a Price
Negotiation Memorandum and issue a bi-lateral contract modification prior to closing a contract.
10.5. FIXED PRICE INCENTIVE FIRM. The final price of the contract is determined once
the contract modification is executed. The total amount paid or to be paid on all invoices or
vouchers must be adjusted to reflect the total final price, and any resulting additional payments,
refunds or credits must be made promptly.
10.6. UNILATERAL PRICE DETERMINATION. If the ACO and contractor are unable to
reach a bilateral agreement redetermining the price under any clause requiring price
redetermination, the ACO is required to issue a unilateral final decision setting the redetermined
price. In such a case, the subject contract should not be closed out pending a potential Contract
Disputes Act appeal to the ASBCA or Court of Federal Claims. ACO should consult assigned
legal counsel in such situations for guidance.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 11: TIME AND MATERIAL/LABOR HOUR CLOSEOUT REQUIREMENTS 37
SECTION 11: TIME AND MATERIAL/LABOR HOUR CLOSEOUT
REQUIREMENTS
11.1. TIME & MATERIAL (T&M) CONTRACTS. T&M contracts contain FAR Clause
52.232-7, Payments under Time-and-Materials and Labor-Hour Contracts, and offer unique
challenges for closeout. Note the rate structure of the contract. Labor rates are expressly agreed
to at the time of award and must be reflected in a schedule within the contract. In the case of an
IDC, labor rates should be expressed in the contract itself rather than in individual task orders or
delivery orders. The schedule must include Labor rates and personnel qualifications.
11.2. RATES, OTHER DIRECT COSTS AND TRAVEL.
a. Rates. LH rates for a T&M contract are negotiated prior to award and a labor rate sheet is
included in the contract, or in the case of an IDC, is attached at the contract level, and applicable
to all orders.
b. ODC & Travel CLINs. Other Direct Costs (ODC) and Travel are associated with indirect
rates. Indirect final cost rates, when applicable, must be settled prior to closeout. The contractor
is not eligible to submit a FV until all the applicable indirect costs and overhead rates are
negotiated or established. If the costs are immaterial, there is no need to wait for final indirect
cost rates. Immateriality is based on regular business acumen and determined by the ACO, and
should be documented by an MFR. See DCMA-MAN 2201-03, “Final Indirect Cost Rates,” for
specific rate instructions.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 12: COST TYPE CLOSEOUT REQUIREMENTS 38
SECTION 12: COST TYPE CLOSEOUT REQUIREMENTS
12.1. INTRODUCTION. Closing cost type contracts is similar to closing all other types of
contracts with the exception of the settlement of rates, the submission of the FV, and all closing
documents. Cost Contracts (includes types: Cost Plus Fixed Fee (CPFF), Cost Plus Award Fee
(CPAF), Cost Sharing, and Cost Plus Incentive Fee (CPIF)). All cost type contracts are closed
using the same steps/methods and information:
12.2. COST TYPE CLOSEOUT ACTIONS. Actions 12.2.a. through 12.2.j., are specific to
closing Cost Type contracts.
a. Subcontracts. Prime contractors use procedures similar to those of the Government. The
ACO ensure that all of the prime's subcontracts are paid and closed before the prime contract can
be eligible for contract closeout.
b. Final Rates. The DACO/ACO must determine whether or not all overhead rates that
apply to a contract/order are negotiated. The contractor is not eligible to submit a FV until all
the applicable indirect costs and overhead rates are negotiated or established. If final rates have
been established unilaterally by the DACO or ACO, the contractor may appeal the final decision
of the ACO under the Contract Disputes Act. In such cases, FVs will not be submitted until the
appeal is resolved by settlement or litigation and ACOs should contact assigned legal counsel for
guidance.
c. Credit Voucher. Credit vouchers can be submitted electronically through WAWF,
however, they cannot be credited through WAWF. DCMA utilizes the Automated Cash
Collection System (ACCS) for payment of monies owed by the contractor. ACCS provides the
ability for contractors to submit refunds/payments to DFAS electronically. When
contracts/orders are ready to close and contractors are required to submit a refund/payment to the
Government, they are encouraged to use ACCS to process a credit interim voucher. When using
the ACCS, the contractor must state the Contract Number, the payment amount, CLIN and the
ACRN to ensure proper and prompt posting by DFAS. After the refund/payment posts to the
contract, then the contractor must submit a zero-final voucher to the ACO for review/approval.
d. Final Voucher. Once final annual indirect cost rates are settled for all years of the period
of performance of a physically complete contract, the contractor must submit a FV reflecting the
settled amounts and rates within 120 calendar days, unless an extension has been approved in
writing by the ACO, prior to the 120 calendar day expiration date. The request for the extension
must come from the contractor and be in writing. To determine whether a period longer than 120
calendar days is appropriate, the ACO must consider whether there are extenuating
circumstances as listed in FAR 42.705 (b) (1) through (5), Final Indirect Cost Rates.
(1) If the contractor fails to submit a FV within the specified time period, the ACO may:
(a) Issue a Level II Corrective Action Request for non-compliance to a contract
requirement.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 12: COST TYPE CLOSEOUT REQUIREMENTS 39
(b) Determine the amounts due to the contractor under the contract.
(c) Record this determination in a unilateral modification to the contract.
(2) If a contractor consistently misses the 120 calendar day deadline for submitting a FV,
the ACO must coordinate with the DACO/CACO (if applicable) to address systemic issues.
(3) FAR 42.705, Final Indirect Cost Rates, explicitly states the right of the ACO 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 FAR. The contracting officer
determination must be issued as a final decision IAW FAR 33.211, Contracting Officer’s
Decision.
(4) Contractors are required to update their "Schedule of cumulative direct and indirect
costs claimed and billed by contract and subcontract" (Schedule I ) with their annual indirect
cost rate proposal for audit by DCAA or third party auditors and update it within 60 calendar
days after rate settlement. The contractor's ability to track cumulative allowable cost by contract
is essential for an adequate billing system and necessary to ensure that cumulative amounts billed
do not exceed total estimated contract cost ceilings.
(5) A Cumulative Allowable Cost Worksheet (CACWS) summarizes total cumulative
allowable costs for all open flexibly priced contracts. (See Cumulative Allowable Cost
Worksheet). The CACWS is designed to expedite contract closeout by eliminating the need for
DCAA to evaluate the FV and prepare a separate contract evaluation closing statement. This
saves time and resources for both the contractor and Government. The ACO can ensure that the
total payment amount stated in the CACWS equals the total amount requested for each contract
as stated in the FV payment support documentation. However, if the ACO cannot determine the
cumulative allowable costs by contract using the CACWS, ACO should request DCAA to
evaluate the FV.
e. Review Final Voucher. The contractor’s FV must be submitted electronically in WAWF
along with all closing documents as attachments. WAWF has a limitation on size of
attachments. The contractor may need to send attachments exceeding the WAWF limitation by
alternate means. These files should be uploaded into the agency’s official record keeping system
by the ACO or CA.
(1) ACOs may review final vouchers instead of requesting a DCAA review if the ACO
determines that the contract is low risk. The ACO will conduct a risk assessment of the contract,
and review the FV for those contracts determined to be low risk with Contract Price/Cost
Analyst assistance. DCMA will continue to request DCAA review the FV for those contracts
that are determined to be higher risk, See Table 9, Final Voucher Review Criteria:
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 12: COST TYPE CLOSEOUT REQUIREMENTS 40
Table 9. Final Voucher Review Criteria
Following are items that must be considered when reviewing a Final Voucher (FV):
• If a Cumulative Allowable Cost Worksheet (CACWS) has been prepared, and
approved by DCAA, an evaluation of the FV is not needed by DCAA, the CA/ACO
can review the voucher to confirm that the amounts on the FV match the CACWS.
• There will be times when DCAA cannot timely review the voucher. However, if funds
are at risk of cancelling, DCAA will schedule and conduct the review. If DCAA is
unavailable to conduct review, DCMA Pricing can perform the review if available.
(2) When conducting a risk assessment, the ACO must take into consideration low risk
criteria as identified in Tables 10 and 11:
Table 10. Risk Assessment for Final Vouchers
• No subcontract costs on the contract or subcontractor costs have been settled
• Consider the dollar value of the contract. Higher dollar contracts may result in higher
risk.
• Consider business systems to be either adequate or inadequacies do not impact the FV.
Business systems that impact a FV are: Accounting, and Purchasing.
• No identified unsettled disallowances, outstanding legal actions, open insurance
claims, defective pricing issues, ASBCA cases, or other unresolved items affecting the
contract.
Table 11. Final Voucher Review
Overhead rates must be established for all years covered by the contract period of
performance. Overhead rates can either be negotiated, determined using QCO rates, or the
contracting officer can accept the Contractor’s proposed rates after receipt of a DCAA
adequacy review. DCMA Price/Cost Analyst are recommended to perform the Steps for FV
Review:
Step 1. Verify accuracy of arithmetic – Coordinate with the Contractor to reconcile
differences
Step 2. Review Contract file and identify
a. Funding by CLIN
b. Cost restrictions, e.g., limits on travel or overtime costs
c. Level of Effort (LOE)
Step 3. Verify period of performance on the FV agrees with the period of performance per
contract and latest modification. If dates do not agree, coordinate with the Contractor to
reconcile differences.
Step 4. When applicable, the ACO may request Contractor Cost Ledgers by CLIN for the
contract.
Step 5. Verify that amounts incurred by CLIN on the Contractor Cost Ledgers agree with
amounts by CLIN on the FV. If amounts do not agree, coordinate with the Contractor to
reconcile differences.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 12: COST TYPE CLOSEOUT REQUIREMENTS 41
Table 11. Final Voucher Review
Step 6. Verify amounts per CLIN on the FV do not exceed contractual funding limits.
Coordinate with the Contractor to reconcile differences if funding amounts have been
exceeded.
Step 7. Review Cost Ledgers and FV Support Schedules and verify that cost restrictions have
not been exceeded, (e.g., limits on travel or overtime). Coordinate with the Contractor to
reconcile differences if contractual amounts were exceeded.
Step 8. Obtain from Contractor the top-level Labor Distribution Report and verify that LOE
was met. If not met, verify that the fee on the FV was adjusted. If fee was not adjusted,
coordinate with the Contractor to reconcile differences.
Step 9. Verify accuracy of rates used by Contractor to calculate costs in the FV.
a. Obtain cost reports from Contractor that identify rates used to compute costs.
b. Verify that costs in total on Rate Reports agree with total costs on the FV.
c. Verify rates used to compute costs in the FV agree with final negotiated QCO rates.
Step 10. Verify that the fee on the FV agrees with contractual terms.
Step 11. Verify the subcontract costs (if applicable) have been settled, and the ACO to the
subcontractor take no exception to the costs. In some instances, the qualified audit opinion
(due to another pending assist audit report) may relate to subcontract costs that are a type of
ODCs. Subcontract costs typically have no impact relative to settling a prime Contractor’s
final indirect rates. However, the assist audit (covering subcontract costs) will likely be
needed to settle specific contract costs with the prime Contractor.
f. Final Voucher Approval. Once the FV is reviewed and deemed acceptable, the ACO must
approve the payment in WAWF. Personnel involved in the final payment process must be aware
of the significant differences in the appointment qualifications and responsibilities for a
certifying officer and a contracting officer. The buying activity Certifying Officers and DFAS
Disbursing Officers depend on ACOs to support the contract payment process. They have
potential for significant financial liability for erroneous payments made based on improper
certifications. PCO/ACOs are the only individuals authorized to bind the Government and direct
the contractor. They play a critical role to ensure the Government’s interests are protected
during contract performance and serve as the principal point of contact for industry and buying
commands on matters pertaining to contract interpretation, execution and compliance.
Considering these differences, it is important that ACOs exercise care when approving
final/completion vouchers.
g. Interim or Disallowed Costs. The ACO must ensure that all interim or disallowed costs
are settled under the contract/order prior to closeout.
h. Contractor's Completion Statement. IAW FAR 52.216-7(h)(2)(i)-(ii), the FV must
include the release of claims and other required documents. The release of claims is a signed,
dated statement from the contractor. The release of claims should match FV cumulative amount
allowed to be billed including fee.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 12: COST TYPE CLOSEOUT REQUIREMENTS 42
i. Results of DCMA or DCAA Final Voucher Review. If there are questioned costs, the
ACO must settle and document all questioned costs (including Subcontractor costs) in a
Memorandum for Record prior to approving the FV.
j. Closeout of Cost Contracts. Once all actions are complete and the FV is processed and
paid by DFAS, the contract is ready to be closed.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 13: QUICK CLOSEOUT AND EARLY CLOSEOUT 43
SECTION 13: QUICK CLOSEOUT AND EARLY CLOSEOUT
13.1. QUICK CLOSEOUT (QCO). The QCO process offers an alternative to holding
contracts open until final indirect cost rates are settled. When it becomes apparent that there will
be a delay in the settlement of final indirect rates, it is recommended that the ACO utilize QCO
to the maximum extent possible. Unlike early closeout procedures, the determinations of final
indirect costs under QCO procedures are final for the covered contracts and no adjustments are
made to other contracts for over or under recoveries of costs allocated or allocable to the
contracts covered by the advance agreement. Additionally, indirect cost rates used in the QCO
of a contract are not considered a binding precedent when establishing the final indirect cost
rates for other contracts.
a. In the first quarter of a Fiscal Year, ACOs with or without a corporate ACO/DACO
network must identify a list of contracts/orders for potential QCO and needing QCO Rates. The
listing of the potential QCO contracts/orders must be provided to the contractor, with the goal to
obtain contractor agreement on the use of QCO procedures for the listed contracts. Frequently,
current billing rates are used as the QCO rates. Because these rates are established by the
contractor and reviewed by DCAA and the ACO, they are considered credible and can be used to
invoice and close the contract at a relatively immaterial cost.
b. Pursuant to FAR 42.708, Quick-Closeout procedures to include the QCO Class Deviation
or Low Value/Low Risk QCO initiative (See Resource Page) may be used if:
(1) Physical Completion. The contract/order is physically complete.
(2) Costs. The amount of unsettled direct and indirect cost to be allocated to the
contract, task order, or delivery order are relatively insignificant. Direct and indirect cost
amounts are insignificant when:
(a) The total unsettled direct and indirect cost to be allocated to any one contract,
task or delivery order does not exceed $2 million. NOTE: DCMA ACOs are further authorized
to deviate from FAR 42.708(a)(2) and negotiate the settlement direct and indirect costs for a
specific contract, task order, or delivery order to be closed in advance of the determination of
final direct costs and direct rates set forth in FAR 42.705 regardless of the dollar value or percent
of unsettled direct or indirect costs allocable to the contract, see class deviation 2019-O0009
dated May 03, 2019.
(b) Unless otherwise provided in agency procedures, the cumulative unsettled direct
and indirect cost to be allocated to one or more contracts in a single fiscal year do not exceed 10
percent of the estimated total unsettled direct and indirect costs allocable to cost type contracts
for that fiscal year. The contracting officer may waive the 10 percent restriction based upon risk
assessment that considers contractor’s accounting, estimating and purchasing systems, other
concerns of the cognizant contract auditors, and any other pertinent information. An agreement
can be reached on a reasonable estimate of allocable dollars.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 13: QUICK CLOSEOUT AND EARLY CLOSEOUT 44
(3) Identifying QCO Candidates. The ACO must maintain close coordination between
DCAA and the contractor in determining QCO candidates. The candidates can be identified in
multiple ways:
(a) ACO. The ACO usually is the primary person who can identify candidates for
QCO. The ACO must consider the volume of contracts awaiting settlement of indirect rates and
monies will be affected by cancelling funds. QCO is an excellent way to close contracts and
preclude millions of dollars from cancelling. Another area that ACOs may consider is T&M
type contracts. These contracts are ideal for QCO because the only redeterminable amount is
usually the general and administrative (G&A) costs associated with the ODCs in the contract.
(b) DCAA. Sometimes the auditor will contact the ACO and recommend particular
contracts for QCO. Oftentimes the auditor is approached by a contractor regarding QCO. When
these recommendations are received, the ACO must review the contracts and any other contracts
for that particular fiscal year and determine if QCO procedures are practicable.
(c) PCO. A PCO will sometimes contact an ACO concerning closeout status of a
particular contract and will often inquire about QCO possibilities.
(d) Contractor. The contractor will occasionally request QCO procedures for a given
contract or group of contracts.
c. Contracting Officers who are external to DCMA using QCO procedures to close contracts
may reach out to DCMA ACOs/DACOs for information. ACOs/DACOs shall provide support
to external contracting officers who are using QCO procedures on contracts that are not
delegated to DCMA to administer. Support can be provided in a number of ways such as
providing recommended rate information; status of contractor business systems; or information
on CAS non-compliances. ACOs/DACOs can also direct external contracting officers to CBAR
etool for additional information.
13.2. EARLY CLOSEOUT. Early Closeout procedures are used to close delivery orders under
an IDC prior to indirect rates settlement in order to avoid cancelling funds and overage contracts.
The practice is acceptable because the task orders are not considered to be individual contracts.
QCO procedures at FAR 42.708 may be used in conjunction with Early Closeout. In order to use
QCO procedures, the task order or delivery order must be physically complete, and the amount
of unsettled direct costs and indirect costs to be allocated to the contract, task order or delivery
order is relatively insignificant. Relatively insignificant is considered when the total unsettled
direct and indirect costs to be allocable to any one contract, task order or delivery order does not
exceed the lesser of $1 Million or 10 percent of total contract, task order or delivery or the ACO
performs a risk assessment and determines that the use of the QCO procedure is appropriate.
a. Candidates for Early Closeout. Candidates for early closeout procedures are those IDC
contracts that contain FAR Clause 52.232-7, Payments under Time-and-Materials and Labor-
Hour Contracts. The clause provides the Government the right to withhold 5 percent of
payments otherwise due, up to a maximum of $50,000. Withholds are directly linked to the
contractor release which discharges the Government from all liabilities, obligations and claims.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 13: QUICK CLOSEOUT AND EARLY CLOSEOUT 45
In addition, withholds are applied against the estimated amount of the entire instrument - not
against individual task orders.
(1) ACOs must consider the adequacy of contractor accounting and billing systems.
Adequate systems indicate that minimal adjustments would be required for the FV. If a
contractor has inadequacies in their accounting and billing system, the nature of the inadequacy
must be considered.
(2) Orders that do not contain ODC or a Travel CLIN are eligible candidates for Early
Closeout.
b. Early Closeout Procedures. While it is recommended that early closeout procedures be
established at the onset of the contract, the procedure may be implemented during contract
performance, or after physical completion of task orders. By establishing early closeout
procedures at the onset of the contract, the ACO will be able to monitor the process IAW FAR
Clause 52.232-7, Payments under Time-and-Materials and Labor-Hour Contracts.
c. Early Closeout for Cost-Plus-Fixed-Fee Type Task Orders Issued Under an IDC. The use
of early closeout for cost-plus-fixed-fee type orders issued under an IDC contract is considered
to be an acceptable practice because the task orders are not considered as individual contracts. In
addition, the clauses governing the closeout process do not prohibit the use of this procedure.
(1) When implementing early closeout for Cost Plus contracts, the ACO should follow
the procedures in Early Closeout and Establishing Early Closeout - After Performance.
(a) FAR Clause 52-216-8 Fixed Fee, states that ". . . the Contracting Officer may
withhold further payment of fee until a reserve is set aside . . ." and "This reserve shall not
exceed 15 percent of the total fixed fee or $100,000, whichever is less."
(b) PCO/ACO must withhold fee, (a sufficient number of orders should be held open
to maintain the 15 percent or $100,000 withhold). This will satisfy the requirements of the FAR
clause. The PCO/ACO shall release 75 percent of all fee withholds under this contract after
receipt of an adequate certified final indirect cost rate proposal covering the year of physical
completion of this contract, provided the contractor has satisfied all other contract terms and
conditions including the submission of the final patent and royalty report and is not delinquent in
submitting final vouchers on prior year’s settlement. The PCO/ACO may release up to 90
percent of the fee withholds under this contract based on the contractor’s past performance
related to the submission and settlement of final indirect cost rate proposals.
(2) When an ACO determines that fee withholds are necessary, the ACO should advise
the contractor as to the specific reasons why fee withholds are necessary, and should describe the
curative measures that the contractor can take to eliminate the need for fee withholds. If the
ACO determines that it is necessary to withhold fee to protect the Government's interests, written
direction should be issued to the contractor by modification of the contract. This paragraph
provides suggested wording for the modification: “This modification is issued to incorporate fee
withholding IAW FAR Clause 52.216-8 (-9 or -10, as appropriate). In order to protect the
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 13: QUICK CLOSEOUT AND EARLY CLOSEOUT 46
Government's interest, [contractor] is hereby directed to begin withholding fee from billings
under this contract until a reserve is set aside in the amount of $______ (amount of reserve shall
not exceed 15 percent of the total fixed fee or $100,000, whichever is less). Fee shall be released
IAW FAR Clause 52.216-8 (-9 or -10, as appropriate).”
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 14: CLOSEOUT OF BASIC ORDERING AGREEMENT (BOA)/INDEFINITE DELIVERY
CONTRACT (IDC) 47
SECTION 14: CLOSEOUT OF BASIC ORDERING AGREEMENT
(BOA)/INDEFINITE DELIVERY CONTRACT (IDC)
14.1. CLOSING A BOA. A BOA is an agreement and not a contract, and is identified by a “G”
in the 9th position of the contract number. The delivery orders issued under a BOA are
considered the “contract.”
a. If the property clause is in a BOA, it flows down to each delivery/task order level. As
such, when closing property for a BOA, property must be cleared at delivery/task order level.
b. The Final Delivery Date (FDD) of a BOA should remain the same as the expiration date
of the basic contract until the basic contract expiration date has expired or all orders are
physically complete and moved to Section 2, 3, or 4, whichever occurs latest. If the basic
expiration date is expired and all orders are in Section 2, 3, or 4, then the FDD should be revised
to reflect the latest estimated closing date to close all orders, unless the PCO specifies a different
FDD.
c. After the ordering period has expired, the BOA must stay in Section 1 until all delivery
orders are closed.
d. Upon expiration of the ordering period and closeout of all orders, the ACO must complete
a DCMA Form 1797 with documentation showing no open orders and a screenshot of the
expired period of performance, and forward to the TA(PT) to move the BOA from MOCAS
Section 1 to Section 2. The ACO must then process closeout via the Contract Closeout
Application or via MOCAS, applying a “G” and “F” NLA in the same cycle. This will result in
the transmission of the PK9/EDI 567 to the PCO. Special Programs Directorate must forward a
copy of the signed DD Form 1593 to the PCO when the contract is closed.
14.2. CLOSING AN IDC. An IDC is a contract, identified by a “D” in the 9th position of the
contract number. Individual orders issued under the IDC are not considered to be individual
contracts and are not to be segregated from the IDC. Each order under an IDC must be closed
individually.
a. If the property clause is in an IDC, it does not flow to the delivery/task order level. As
such, when closing property for an IDC, it must be cleared at the IDC level, not at the
delivery/task order level.
b. Initially for IDCs, the FDD entered in MOCAS must be the expiration date of the basic
contract. When orders are issued under the IDC, the actual FDD of the IDC must be updated to
reflect the latest delivery date applicable to any of the orders issued in MOCAS Section 1. An
R5/R6 remark must state the FDD date of the IDC. The FDD can change (see 14.1.b.) and must
be deleted and updated with the new date. After the FDD has expired, the IDC must remain in
MOCAS Section 1 until all orders are closed. When all orders are in MOCAS Section 2, ACO
must update the IDC to reflect the latest Estimated Closing Date to close all orders. After the
last order under the IDC is closed, the ACO must request, on a DCMA Form 1797, the IDC be
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 14: CLOSEOUT OF BASIC ORDERING AGREEMENT (BOA)/INDEFINITE DELIVERY
CONTRACT (IDC) 48
moved from MOCAS Section 1 to Section 2. The ACO will complete the checklist and close the
IDC.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 15: CLOSING PART B AND PART C CONTRACTS AND NON-PROCUREMENT
INSTRUMENTS 49
SECTION 15: CLOSING PART B AND PART C CONTRACTS AND NON-
PROCUREMENT INSTRUMENTS
15.1. PART B CONTRACTS. When a final payment is made for contracts in MOCAS Part B
the contract “automatically” moves to Section 5 and then to Section 8. When the contract enters
Section 8, no further action is required. In the rare instance the contract does not move to
Section 5 automatically, ACO/CA will contact DFAS via a DCMA Form 1797 to request the
contract be moved to Section 5.
15.2. PART C - SUPPORT CONTRACTS. On support contracts, the functional specialist
(ACO/CA) from the delegated CMO tracks performance and completion of all designated
activities within MOCAS. CMO personnel are responsible for inputting all support contracts in
MOCAS. When support contracts administered in MOCAS (assignment code S or T) are ready
to be closed, the functional specialist (ACO/CA) must move the contract/order from Section 1 to
Section 5 through the MOCAS YCU2 screen and then select summary edit. Manual closeout of
support contracts is required.
15.3. PART C - PAYMENT ONLY CONTRACTS. Payment Only contracts (Assignment
Code “G”) are the responsibility of DFAS for input, changes, and closeout. Other than ensuring
the ACO code reads "PAY", CMOs must not make changes to, or attempt to close these
contracts since there is no DCMA involvement.
15.4. CLOSING NON-PROCUREMENT INSTRUMENTS (NPI). Grants, agreements, and
other transactions (OT) See DCMA-MAN 2501-08, “Grants Agreements and Other
Transactions,” are referred to collectively as NPIs. When closing an NPI, special attention must
be made to property issues, payment issues, and patent/royalty/march-in right issues. Although
NPIs are not covered by the FAR/DFARS, the DCMA Contract Closeout process is generally the
same as for contracts/orders. ACOs must ensure all necessary closeout actions are accomplished
within 36 months of expiration of the agreement. See Table 12, NPI Closeout Documentation
for Grants, Agreements and Other Transactions criteria.
Table 12. NPI Closeout Documentation
Unique file documentation requirements may exist for OTs and similar agreements. The file should include:
• An invention disclosure spreadsheet, or similar information.
• A property list spreadsheet, or similar information.
• Evidence of Government program manager certification that all milestones have been satisfactorily
completed and that all deliverable items/reports have been accepted.
• Evidence of Administrative Grant Officer review of expenditures/cost share contributions and
verification of these amounts as appropriate.
• Evidence the recipient sent copies of required reports/documents to the Defense Technical
Information Center, when required by the agreement.
• A closeout checklist or closeout worksheet or similar information.
• A closeout memorandum or DD Form 1594 that addresses all pertinent closeout actions.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 16: DFAS RECONCILIATIONS AND MOCAS SECTION 4 50
SECTION 16: DFAS RECONCILIATIONS AND MOCAS SECTION 4
16.1. REQUEST FOR FUNDS RECONCILIATIONS. Within 60 calendar days of a flexibly
priced contract moving to Section 2, the ACO must perform and document that a reconciliation
was completed. The purpose of the reconciliation is to identify excess and/or remaining funds.
Normally, at the completion of the contract, the total of funds obligated must match the total
payments made to the contractor, inclusive of the final payment. Cost underruns, mistakes in
payments, unearned incentives, withheld fees, etc., result in unliquidated obligations at the
completion of the contract. When remaining funds balances or unliquidated obligations exist
that cannot be explained, reconciliation is required to compare hard copy documents with the
MOCAS database.
16.2. DFAS RECONCILIATION. Section 16 covers how to ensure a contract gets into the
reconciliation “pipeline" at DFAS. DFAS requires proper completion and submission of DCMA
Form 1797, Request for MOCAS Action/Information and an Obligation Recap. When all
administrative closeout actions are completed, DFAS will assign contracts to MOCAS Section 4
upon receipt of a properly completed DCMA Form 1797, Request for MOCAS
Action/Information. The 1797 form is used both for requests for adjustment and for requests for
"full-scope" disbursement reconciliation.
a. DCMA Form 1797 requests for adjustment contain a description of the problem and an
explanation of the corrections that are needed in the MOCAS records. Requests for adjustment
cover readily identifiable errors and corresponding corrections.
b. DCMA Form 1797 requests for full-scope disbursement reconciliation differ from
requests for adjustment in that the corrections needed cannot be identified by the ACO.
c. DCMA requests for disbursement reconciliation are accompanied by a spreadsheet
showing contract obligations. This includes the identification of all funding obligated and
deobligated on the basic contract by all subsequent modifications. The audit is required to be
performed to the CLIN and ACRN levels.
d. The ACO must sign the DCMA Form 1797 (digital signature acceptable). Signature on
the DCMA Form 1797 is the certification that the obligation information is accurate.
e. DFAS Columbus is responsible for contract disbursement records and for any
adjustments/corrections to the disbursement records. When submitting a DCMA Form 1797
requesting reconciliation, ACO/CA must include an Obligation Recap. ACO/CA must not send
an audit of the disbursement records.
f. Submission of Contract Obligation Data. The recommended format for submitting
contract obligation data in support of a request for disbursement reconciliation is an Excel
spreadsheet.
g. Use of e-mail for Submitting Requests for Adjustment and Disbursement Reconciliation.
Requests for adjustment and disbursement reconciliation may be submitted to DFAS via e-mail.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 16: DFAS RECONCILIATIONS AND MOCAS SECTION 4 51
Functional Specialists (ACO/CA) must refer to the MOCAS DCMA 360 site under DFAS
Information for the most up to date e-mail address and Order of Escalation information along
with other valuable DFAS related information. See Table 13, Obtaining Status on reconciliation.
Table 13. Obtaining Status
To obtain status:
• After 90 calendar days: Functional Specialist (ACO/CA) must send request to DFAS
Reconciliation Status mailbox. Refer to the MOCAS DCMA 360 site under DFAS
Information for the most up to date e-mail address and Order of Escalation information.
• When submitting via e-mail, include in the subject line "1797 -- MOCAS Database MOC_."
• Add the appropriate indicator to "MOC_" so that DFAS can identify the DFAS payment
division responsible for the reconciliation action -- either "H" for the North Payment Division,
"G" for South, or "L" for West.
h. MOCAS Delay Reason Code P. One of the MOCAS Section 2 delay reason codes is "P"
-- reconciliation with the paying office and contractor being accomplished. Entry of code "P"
into MOCAS does not by itself trigger DFAS action: If adjustment or disbursement
reconciliation is required on "P" coded contracts, the DCMA Form 1797 process must be used.
i. DFAS CAR Reconciliation Report. When DFAS receives a DCMA Form 1797 (along
with an Obligation Recap) requesting contract reconciliations, the contract is registered in the
CAR Recon Report (Open Audit Log). When DFAS completes the reconciliation, the contract
number is posted to the Closed Audit listing. These reports can be found on the DFAS MOCAS
360 site (under DFAS Information/Open Audit Listing link). Listings are updated
weekly/monthly.
16.3. MOVEMENT OF CONTRACTS TO MOCAS SECTION 4. MOCAS Part A and B
contracts require DFAS disbursement reconciliation to be assigned to Section 4. Table 14,
Movement to Section 4 contains the criteria to be met before movement to Section 4 occurs.
Table 14. Movement to Section 4
• The contract is physically complete IAW FAR 4.804-4, Physically Completed Contracts.
• All acceptance documents are obtained and processed in MOCAS.
• The MOCAS ACO Notebook must be annotated if the contract was moved to MOCAS Section
2 with an out of balance Line Item Schedule Shipment Record (LISSR). The ACO must
annotate the ACO Notebook Remarks field in MOCAS as follows: (“Due to unbalanced
LISSR, PCO certification of acceptance received “date”).
• All administrative closeout actions identified in FAR 4.804-5, Procedures for Closing out
Contract Files, are completed.
• All invoices/vouchers have been paid.
• Unliquidated amounts do not remain on the MOCAS withhold lines.
• Unliquidated amounts do not remain on the MOCAS Work-in-Process (WIP) finance line
unless the contract is at DFAS for WIP reconciliation.
• Known contract debt or related disputes are resolved.
• Remaining funds are annotated in the MOCAS ACO Notebook.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 16: DFAS RECONCILIATIONS AND MOCAS SECTION 4 52
a. Once all of the conditions are met in Table 14, DFAS will assign contracts to MOCAS
Section 4 upon receipt of a properly completed DCMA Form 1797, Request for MOCAS
Action/Information. The DCMA Form 1797 must include the requirements in Table 15, Request
for MOCAS Action:
Table 15. Request for MOCAS Action
• A request to move the contract to Section 4.
• An annotation that the contract is physically complete and all administrative actions are
complete.
• A request for reconciliation/closeout audit.
• An obligation recap. This includes the identification of all funding
obligated/deobligated by the basic contract and all subsequent modifications. The
audit is required to be performed to the CLIN and ACRN levels.
b. If the recap reveals a corrective modification is needed, the modification must be issued
and submitted to DFAS for processing prior to submission of the DCMA Form 1797.
c. If the DCMA Form 1797 does not meet the conditions for movement to Section 4 as set
forth in Table 15, DFAS will return the DCMA Form 1797 to the originator and the contract will
not move to Section 4. Once the conditions are completed, the DCMA Form 1797 will need to
be resubmitted as described in Table 15.
d. Contracts at DFAS for disbursement reconciliation that meet the criteria in Table 15 can
also move to Section 4 by a request to move via the DCMA Form 1797 process. In this case,
Part II of the DCMA Form 1797 must include a comment that the contract is registered in the
CAR Recon Report (Open Audit Log).
e. A MOCAS R4 remark will be input by DFAS once the contract is moved to Section 4. It
will read “ADMN COMPLT PENDING RECON.”
f. Most contracts will remain in Section 4 until reconciliation and corresponding adjustments
are completed by DFAS and the contract is ready to close. DFAS will close the Part B contracts
by issuing a G and F NLA. DFAS will move Part A contracts to Section 2 for closeout and will
generate a MOCAS R5/R6 remark to read "RECON CMP.” The Part A contracts will receive a
G NLA from the CAR clerk, but will require the ACO to issue the F NLA to close the contract.
g. If DFAS' reconciliation reveals a corrective modification is required, the contract will
move to Section 2 and the ACO will be notified via a Contract Deficiency Report (CDR),
Contract Data Package Recommendation/Deficiency Report. The CDR will list the corrective
action required and will contain the statement “RECON CMP - MOD REQ FOR CLOSEOUT.”
The MOCAS R5/6 remark will also be updated to include the same statement. If any other
actions are required (e.g., refund), a similar R5/R6 remark identifying the required action will be
included. Use of electronic DCMA Form 1797 and retention of the delivery confirmation from
DFAS is encouraged. MOCAS coding must be updated as appropriate.
16.4. OPENING A CLOSED CONTRACT. If a voucher is incorrectly coded as a FV, the
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 16: DFAS RECONCILIATIONS AND MOCAS SECTION 4 53
contract will automatically close (moves to MOCAS Section 5), if the ULO is zero. When the
Contract Closeout accounting technician identifies a contract that has moved to Section 5, 8, or 9
in error, DFAS is responsible for ensuring the contract is reopened.
a. If DCMA needs a contract reopened, the ACO/CA must prepare a DCMA Form 1797
requesting the contract be reopened and forward to the Contract Input Technician assigned at
DFAS. The ACO/CA must refer to the MOCAS DCMA 360 site under DFAS Information for
the most up-to-date e-mail address and Order of Escalation information.
b. Section 9 contracts are reopened by Contract Input. The Contract Closeout accounting
technician at DFAS submits a CAR Multipurpose Form (DFAS-CO Form 1023) to Contract
Input requesting the contract be reopened and placed in MOCAS Section 1.
16.5. UNRECONCILED CONTRACTS. After a contract moves to Section 4, DFAS
Columbus will conduct a Request and Inspection of Documents (RAID). DFAS will try to locate
critical documents required to conduct the audit. They will perform an extensive search for
missing documentation required for the reconciliation. DFAS may send requests to the ACO,
PCO, and Accounting Station asking for assistance in locating the missing documentation.
When sufficient documentation cannot be located to support contract reconciliation, a contract
will be designated as unreconcilable. Further action to close these contracts will be placed on
hold until a mechanism for disposing of the contracts is introduced. The ACO must work with
the Contractor, PCO, and DFAS to come to an agreement, document and close the contract.
16.6. REOPENED CONTRACTS. Each month contracts may reopen due to MOCAS data
discrepancies not resolved prior to closure. The R5 Remark in MOCAS (see Table 16,
Explanations for the R5 Remarks for Reopened Contracts) will show the date the contract was
reopened. In many instances, the ACO will not be notified when these contracts reopen. The
main reasons contracts reopen are unsatisfied line items, unpaid invoices, or unexplained dollars
on the ULO line. See Table 17 for Examples of Conditions for Reopens. To improve
communications, DCMA and DFAS personnel must enter comments in the ACO Notebook by
using the general format: date of remarks dd/mm/yy, remarks, phone number, and e-mail
address.
Table 16. Explanations for the R5 Remarks for Reopened Contracts
Assigned when a contract is manually reopened, within the first 14 calendar
REOPEN OL days after closure, prior to records being purged from MOCAS. Reopens at
this phase are generally a result of reviews during the Q-Final process.
Assi
gned when a contract is manually reopened using copy of contra
REOPEN CCDB stored in the CCDB. This allows a contract to be fully restored to its
closure state. Applies only to contracts closed after December 2000.
Assigned when a contract is systemically reopened during end of mo
REOPEN ULO NOT (EOM) processing. This indicates failure of the Q-Final process due
ZERO missing data on the MOCAS master appropriation table or out-of-bal
financial conditions.
Systemically assigned code resulting from remaining WIP balance at
REOPEN-PP
processing.
ct data
pre-
nth
to
ance
EOM
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
Table 16. Explanations for the R5 Remarks for Reopened Contracts
Varying reopen reasons, generally assigned when a contract, closed prior to
December 2000, must be manually re-established in MOCAS. This remark
Other
is often descriptive in nature (e.g., Reopen to process demand letter, Reopen
per ACO request, etc.)
SECTION 16: DFAS RECONCILIATIONS AND MOCAS SECTION 4 54
Table 17. Examples of Conditions for Reopens
In Audit Contract is on the open audit log
YINV SCREEN NO FINAL “Z” invoice has not been paid
INVOICE
OPEN ACCOUNTS There is an outstanding accounts receivable to be collected
RECEIVABLE
OPEN ACCOUNTS PAYABLE There is an outstanding invoice to be paid
INVOICE ON HAND There is an unpaid invoice in MOCAS waiting to be
paid/processed
UNPAID VOID Contract has a voided invoice that was never reprocessed and paid
UNPAID “E” Contract has an E’d invoice that was never reprocessed and paid
CREDIT /BOC NOT MARKED Credit invoice or Bill of Collection (BOC) coded “K” (collection)
“F” PAID needs to be processed to “F”
OUT OF SEQUENCE BVN Missing voucher number from sequence not paid and not
addressed in ACO Notebook Remark
H-STOP and D-MACT Ensure invoices are clear of these reasons/means accounts payable
pending
NO FINAL DISBURSEMENT A final or type payment code “1” has not been made/input
YCU2 SCREEN ULO NOT ACRN ULO or Provisions ULO not addressed in ACO Notebook
ZERO Remarks
WORK-IN-PROCESS (WIP) Contract has unliquidated financing payments
BALANCE
WITHHOLD BALANCE Contract has an outstanding withhold
NULO/DWIP Contract has an ACRN- or contract-level Negative ULO (NULO)
or debit WIP (DWIP) balance
OPEN LINES Out of balance LISSR - what was ordered/shipped/accepted
quantity doesn’t match
MISSING SHIPMENT Out-of-sequence or missing shipments that are not addressed in
ACO Notebook Remark
MISSING MOD Out of sequence mod numbers or mod on EDA not processed in
MOCAS
NUMERIC ACRN Contract has a numeric ACRN with a balance <>$0
$.01 ACRN Contract has an ACRN with a $.01 balance (may need a “reverse
penny-down adjustment”)
BASIC BOA/IDC Open Orders/Ordering Period
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 18: ADMINISTRATIVE UNILATERAL CLOSEOUT 55
SECTION 17: MOVEMENT TO SECTION 5 - FINAL CLOSEOUT
ACTIONS
17.1. FINAL PAY NLA/PK9. Once all required closeout actions are complete and the
checklist is completed and signed, the ACO must close the contract in MOCAS using the
Contract Closeout Application. The closeout checklist must be signed by the ACO prior to
closing the contract either manually or in the tool. MOCAS will generate a NLA when final
payment is processed for Part A contracts. The ACO/CA will verify the Final Pay NLA was
issued. MOCAS will automatically generate a PK9, Contract Completion Statement, to notify
the Buying Activity the contract is closed. If the PK9 does not transmit, the ACO must complete
a DD Form 1594, to notify the PCO/buying activity that the contract is closed.
17.2. MANUAL CLOSEOUT. DCMA Special Programs and the Contract Closeout Center
will follow the DCMA Contract Closeout process and forward the DD Form 1594 to the
PCO/buying activity.
17.3. CONTRACT CLOSEOUT APPLICATION. Use of the Contract Closeout Application
is mandatory for closing contracts. If the application is down for more than three consecutive
days, the functional specialist (ACO/CA) will close the contract using the manual closeout
procedure by issuing “F” and “G” NLAs.
17.4. CONTRACT CLOSEOUT RECORDS. Original contract documents must be placed
into records management prior to contract closeout. DCMA has a DoD 5015.2-STD compliant
Electronic Document Records Management System (eDRMS) for archiving electronically
managed contracts in IWMS. All contracts indicated as closed in IWMS will automatically be
held for retention and disposed of IAW DCMA Records Management. Contracts indicated as
closed in IWMS after the contract moves to Section 5. Table 18 lists contract closeout
documents that must be uploaded into IWMS prior to ACO signing DD Form 1597 for contract
closeout.
Table 18. List of Contract Closeout Documents
• Any document bearing an original signature
• Correspondence with or without signature requiring action by DCMA
• Contract-related e-mail sent by the CMO
• Contract-related e-mail received by the CMO requiring DCMA action
• Correspondence generated or altered by the CMO
• Bilateral agreements: the page(s) showing all signatures
17.5. CLOSED-CONTRACT DATABASE (CCDB). The CCDB was activated on December
4, 2000, and acts as a repository of MOCAS contracts closed after the date it was established. It
stores contract data on an optical storage device that may be viewed on line for 10 years after the
contract has closed. Instructions for using the CCDB are found in the DCMA MOCAS Users
Guide for Contract Administration, Part 1, Contract Management, Chapter 11.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 18: ADMINISTRATIVE UNILATERAL CLOSEOUT 56
SECTION 18: ADMINISTRATIVE UNILATERAL CLOSEOUT
18.1. INTRODUCTION. The ACO must pursue a unilateral determination of final contract
price when the contractor is non-responsive or has not provided a reasonable explanation for not
submitting a FV. After issuance of the initial request for submission of FV and the expiration of
the 120 calendar day suspense, the ACO performs procedures delineated in Table 19, Unilateral
Closeout Procedures.”
Table 19. Unilateral Closeout Procedures
• Verify that all shipments/performance have been accepted by the Government.
• Notify PCO of intent to perform Unilateral Determinations. PCO concurrence is recommended
prior to issuance of contract modification. However, if after 30 calendar days the PCO has not
responded, the ACO must proceed with the closeout.
• Coordinate with DCAA to determine allowable costs.
• Determine the total previous payments made to the Contractor according to MOCAS.
• Coordinate with assigned legal counsel, and/or other advisors as appropriate.
• Issue a letter to the Contractor, using return receipt, which will serve as a notice of intent to
unilaterally determine the final contract price. The letter must include a suspense date for the
Contractor to respond.
• Calculate the final price based on previous amounts paid to date.
If overpayment has occurred, request a refund from the Contractor. If the Contractor
refuses to provide the refund within 30 calendar days from the date of the request,
forward the debt to DFAS Columbus, via DCMA Form 1797, for collection action.
If it is determined that excess funds remain on the contract, accomplish deobligation
within the unilateral determination modification.
• Issue a modification establishing the final price at the amount previously paid to date and
deobligate any excess funds at the ACRN level.
• Monitor movement of contract through MOCAS to ensure closeout. The ACO must:
• Verify that the modification has been processed in MOCAS.
• Verify that the unliquidated balance equals $0.00 at the ACRN level.
• Verify that the Contractor was paid complete.
• Verify any refund checks received have been posted in MOCAS and excess funds deobligated.
• Forward any delinquent refund request to DFAS Columbus, via DCMA Form 1797, requesting
collection action.
• Document all contacts, telephone conversations and meetings, as evidence of Government
initiated attempts to engage the Contractor in remedying issue, and ensure all documentation is
uploaded to the official file.
• Closing the contract in the tool (or by G&F in MOCAS) will automatically notify the PCO that
all actions are completed (via PK9). This can be used as a deviation from the FV submission,
and may be used instead of Administrative Unilateral closeout.
Note: For contract awarded prior to May 30, 2011, a Cumulative Cost Worksheet submission is not
required. There may be times when a Contractor may be able to prepare the FV but it will take an
unreasonable amount of effort and expenditure of resources to pull the cumulative cost sheets together.
As a result, FV submission will be delayed and often cause the contract to become overage for
closeout.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 18: ADMINISTRATIVE UNILATERAL CLOSEOUT 57
18.2. ACO ACTIONS. The ACO may want to consider an accelerated FV preparation and
review process in order to close the contracts in a timely manner. The procedure is applied on a
fiscal year basis and may include all contracts or a partial list of contracts. Three stakeholders
will need to concur in each case - the ACO, the auditor, and the contractor. There are three steps
required for this process listed in Table 20, Accelerated FV Preparation.
Table 20. Steps for accelerated FV Preparation
Step 1. The ACO and the Contractor must agree on the final contract amount.
Step 2. DCAA, Functional Specialist (ACO/CA), or DCMA Pricing must perform a risk
analysis and cumulative cost sampling for the contracts.
Step 3. The Contractor must agree to submit a non-detailed FV for each contract.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 19: SOLUTIONS FOR PROBLEM CLOSURES 58
SECTION 19: SOLUTIONS FOR PROBLEM CLOSURES
19.1. BACKGROUND. This chapter addresses those "problem closures" that exist in every
Contract Management Office. A "problem closure" is considered to be a contract that has
unusual circumstances barring the use of traditional closeout methods. Traditional closeout
procedures are, for the most part, dictated by the payment clauses contained in affected contracts.
When the circumstances mentioned in Table 21 exist, it is sometimes virtually impossible to
close contracts using traditional methods. In these instances, the ACO must perform a cost risk
analysis and exercise business judgment IAW FAR 1.602-2, Responsibilities, to ensure that the
Government’s interests are protected and administrative actions are reasonable. With the goal of
minimizing loss to the Government, exercising and implementing efficient business practices and
processes, guidelines are offered as a solution to these "problem closures" in Table 21.
Table 21. Examples of Circumstances and Possible Solutions
1. Contractor is Bankrupt
2. Contractor is No Longer in Business
3. Contractor Has Failed to Submit Indirect Cost Data
4. Contractor Has Failed to Submit Final Invoice/Voucher
5. Flexibly Price Contracts Final Vouchers (SF 1035) When Contractor has Lost
Records/Files (See Resource Page)
IMPORTANT! While this Manual offers possible closeout solutions, ACOs are encouraged to
tailor each of the procedures to fit their individual situation.
19.2. CONTRACTOR IS BANKRUPT. The ACO must coordinate with assigned legal
counsel on any closeout action.
a. IAW FAR 42.9, Bankruptcy, when notified of bankruptcy proceedings, agencies must, as
a minimum:
(1) Furnish the notice of bankruptcy to assigned legal counsel and other appropriate
agency offices (e.g., contracting, financial, property) and affected buying activities;
(2) Determine the amount of the Government's potential claim against the contractor
(assess the impact, identify and review any contracts that have not been closed out, include those
physically completed or terminated);
(3) Take actions necessary to protect the Government's financial interests and safeguard
Government property; and
(4) Furnish pertinent contract information to the assigned legal counsel representing the
Government.
b. If a contractor is bankrupt, contact the assigned legal counsel prior to taking any contract
closeout actions. A thorough review of the contract and the status of bankruptcy are required.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 19: SOLUTIONS FOR PROBLEM CLOSURES 59
c. Once a bankruptcy petition is filed, an automatic stay goes into effect. This stay generally
precludes any action to collect from the debtor or that would interfere with the debtor’s property
interests. Contracts can be considered property of the bankrupt estate. Contract closeout actions
could interfere with this property interest and violate the stay. Consequently, contract closeout
actions must generally not be initiated without relief from the stay. Violation of the stay can
subject responsible parties to be in contempt of court. DCMA assigned counsel have been
successful in getting relief from stays by working with bankruptcy trustees.
d. Another reason for immediate coordination with the assigned counsel is any claim against
the contractor must be filed with the court in the form of a Proof of Claim. With the filing of a
bankruptcy petition, the court usually will set a date by which the Proof of Claim must be filed
(the Bar Date). Potential claims against the contractor must be compiled and analyzed to
determine whether a Proof of Claim is in the best interests of the Government and, if so, that
information must be provided to DFAS. DFAS has the responsibility for preparing the Proof of
Claim and providing it to the cognizant U.S. Attorney for filing with the bankruptcy court.
When the Government does not file a timely Proof of Claim (a form filed by DFAS establishing
us as a creditor), the Government's right for recovery may be forfeited. If the ACO missed the
deadline for filing Proof of Claim, send DCMA Form 1797 to DFAS seeking write-off (debt not
collectible).
e. If the ACO sees that a contractor is experiencing financial difficulty, accelerate contract
closeout efforts.
f. If the ACO would like to close contracts after the automatic stay was issued, contact
trustee through the assigned legal counsel for relief from stay.
g. If contracts are fully performed/paid, inform the trustee the Government intends to close
contracts.
h. The ACO may be able to leave just a few contracts open by year or color of money and
close the rest, but consult the assigned legal counsel before taking any action.
i. There are two types of Bankruptcy the ACO might encounter:
(1) Chapter 7 – Liquidation. This type of bankruptcy permits the sale of non-exempt
items by a court-appointed trustee wherein the proceeds of the sale are distributed to the
creditors.
(2) Chapter 11 – Reorganization. This type of bankruptcy permits the corporation to
reorganize debt as long as the majority of the creditors approve the reorganization plan.
j. Recommended actions for Administrative Unilateral Closeout and, if required,
determination of final contract price can be found in Section 19.5 Contractor Has Failed to
Submit Final Invoice/Voucher of this Manual.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 19: SOLUTIONS FOR PROBLEM CLOSURES 60
19.3. CONTRACTOR IS NO LONGER IN BUSINESS. Unfortunately, it is not uncommon
to have open contracts for companies that are no longer conducting business. The Government
must take every reasonable measure to locate the company and/or its principals. The ACO must
follow the procedures listed in Table 22 when a contractor is no longer in business:
Table 22. Procedures when a Contractor is No Longer in Business
• Attempt to contact company/company officials by telephone (using “directory
assistance”, System for Award Management (SAM), or internet search to verify that
the company has not relocated).
• Attempt to locate company in writing, via certified mail, return receipt requested.
• Search records maintained by state Corporations registration (usually Secretary of
State) to determine whether the business entity is still in legal existence. Consult with
Counsel for assistance in searching and interpreting results.
• Contact/inquire about company’s status from other Government officials (PCO,
Quality Assurance Representative (QAR), IS, PA, Small Business Administration,
DCAA).
• Visit or request plant visit by the CMO designee (ACO, IS, QAR).
• Contact the Bankruptcy Court of the state in which the company is located to
determine if company has filed for bankruptcy.
• Document every attempt made to locate the company and its officials in a
Memorandum for Record. If all of the attempts prove unsuccessful, it is recommended
that the ACO begin the Administrative Unilateral Closeout process.
Administrative Unilateral Closeout begins with a thorough review of the official
contract file(s). The eight steps must be ascertained during that review:
• Is the contract physically complete and has Government acceptance of goods/services
been received? If not, file must be documented with all actions taken to obtain
acceptance of goods/services that were received.
• Was the Contractor previously paid any funds?
• What is the status of indirect cost rate settlement (if contract is other than firm-fixed-
price)?
• Have all reasonable measures been taken to locate the company and documented in the
contract file?
• Has the contract been terminated for convenience or default?
• Any other pertinent information relative to the Contractor or performance of the
contract (e.g., unsettled subcontract cost, unliquidated progress payments, litigation,
etc.) must be considered. It is recommended that the ACO check with the assigned
legal counsel to ascertain if any actions are pending.
• After completing your review, ACO must notify the PCO of your intent to perform
Administrative Unilateral Closeout. ACO must obtain PCO concurrence prior to
issuing an Administrative Unilateral Closeout modification.
• Recommended actions for Administrative Unilateral Closeout and, if required,
determination of final contract price can be found in 19.5 Contractor Has Failed to
Submit Final Invoice/Voucher.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 19: SOLUTIONS FOR PROBLEM CLOSURES 61
19.4. CONTRACTOR HAS FAILED TO SUBMIT INDIRECT COST PROPOSAL. IAW
FAR 52.216-7, Allowable Cost and Payment, the contractor is required to submit a final indirect
cost proposal to the Government within the six month period following the expiration of each of
its fiscal years. Regardless of whether rates are ACO or Audit determined, it is the ACO’s
responsibility to secure certified final rate claims, pursuant to FAR Part 42.705, Final Indirect
Cost Rates. The ACO must work with DCAA to obtain overdue proposals. Other recommended
actions for the DACO/ACO:
a. Become proactive as early as practicable and supplement and complement DCAA’s
efforts.
b. Apprise contractors of obligations, repetitively at strategic junctures throughout the
lifetime of a contract, starting early in the cycle.
c. Offer technical guidance to ensure an adequate submission.
d. Remember to stay on top of the situation and document all discussions and meetings,
including telephone conversations in order to support any resulting unilateral decision.
e. Issue a letter to the contractor 90 calendar days before the end of a contractor's fiscal year,
requesting submission of the indirect cost proposal. If the contractor does not submit their
proposal in a timely manner, measures must be taken to protect the Government's financial
interest. The ACO must issue a letter expressing concern over non-receipt of the proposal. The
letter must include a reminder that failure to submit a proposal is considered to be an internal
control deficiency and request a response within 30 calendar days.
f. If a contractor remains non-responsive, the ACO must work with DCAA on possible
actions and consult with assigned legal counsel as unilateral rates and price determinations are
appealable final decisions in IAW DCMA-MAN 2501-09, “Contract Claims and Disputes.”
(1) Recommend DCAA no longer provisionally approve interim vouchers
(2) Presenting the contractor with a letter informing them that continued non-
responsiveness will result in a billing rate decrement.
(3) Contractor’s attention is captured when there is unilateral decrementing of the billing
rates so as to impede cash flow. This action is not to be punitive in nature, but rather a
precautionary step to safeguard the Government’s interests in that it is incumbent upon the ACO
to preclude overpayments. Because of the lack of the required rate claim, such concerns may be
warranted. Accordingly, the decrement factor would equate to the reasonable uncertainties
related to costs paid or to be paid, as a result thereof. Contractor will respond to a billing rate
decrement; however, continued non-receipt of incurred cost data dictates an aggressive approach
by the ACO.
g. Based on these factors, the ACO must proceed with unilateral determination of indirect
cost rates IAW FAR 42.703-2, and/or unilateral determination of final contract price.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 19: SOLUTIONS FOR PROBLEM CLOSURES 62
19.5. CONTRACTOR HAS FAILED TO SUBMIT FINAL INVOICE OR VOUCHER.
Different circumstances and solutions are described in 19.5.a and 19.5b.
a. Firm Fixed Price with a ULO. On occasion, contractors complete performance but fail to
submit a final invoice on firm-fixed price contracts. After making a reasonable number of
requests to the contractor, the subsequent actions must be taken:
(1) Verify that the Government has accepted all shipments/performance.
(2) Send the contractor a letter asking if paid complete or when they will submit a final
invoice. The letter must be signed (digital signatures are acceptable).
(a) If the contractor fails to respond by suspense date in first letter, send a certified
letter, return receipt requested, to the contractor advising them of the intent to administratively
close the contract.
(b) If the contractor responds that an amount is owed, but they will not submit a final
invoice, the contract must be closed via Final Pay NLA with remaining funds noted on the ACO
Notebook. If the contractor fails to respond by the suspense date in the certified letter, the
contract must be closed via Final Pay NLA with remaining funds noted on the ACO Notebook.
(3) As previously stated in Section 8.13 of this Manual, the PCO is responsible for
notifying the funding station. Funds that are Q-Finaled are sent back to the buying activity. The
ACO Notebook will be annotated with a remark, "Date - The $ XX (Amount of Funds) funds are
remaining funds for Q-Final; All Requirements are complete and this contract is ready to close/e-
mail address/ title/ phone number."
b. Cost Reimbursable: Contractor Fails to a Submit Final Voucher. The contractor is
contractually required to submit a FV within 120 calendar days after settlement of final indirect
cost rates. As soon as rates are settled and the contractor has signed an indirect cost rate
agreement, the ACO must request that final vouchers be submitted IAW FAR 52.216-7(d)(5).
(1) In situations where indirect cost rates have been settled and the contractor has failed
to adhere to FAR 52.216-7(d)(5) it is recommended that the ACO research and determine the
reason for non-submission. There may be times when the contractor will tell you they are unable
to submit final vouchers. Those reasons may include:
(2) They are awaiting final Subcontractor costs
(3) There is a lack of accounting staff to prepare FV
(4) There is a lack of sufficient financial records needed to prepare cumulative cost
(CUM) sheets and ultimately the FV. Note that none of these “reasons” are valid reasons, and
ACO/CA must not delay the action. When the contractor fails to submit a FV within 120
calendar days after settlement of final indirect cost rates, and has not provided a reasonable
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
SECTION 19: SOLUTIONS FOR PROBLEM CLOSURES 63
explanation along with an acceptable plan to become current in the submittal of the FV and has
not received an extension from the ACO, the ACO must take action. Remedies available to the
ACO include:
(a) Escalation to Management Councils, CMO Commander, and Region
Commander/Director.
(b) Other non-contractual remedies such as inclusion of comments in Preaward
Surveys.
(c) Suspend interim financing payments.
(d) Disallow or recoup previously paid costs.
(e) Decrement provisional billing rates.
(f) Initiate appropriate systems reviews.
(g) Maintain fee withholds.
(h) Recommend DCAA no longer provisionally approve interim vouchers
(5) After the ACO determines the reason for non-submission of final vouchers, the
alternative is to issue a Unilateral Determination. The ACO may issue a Corrective Action
Request for non-compliance to contract requirements. The ACO may also send a second letter
notifying the contractor that since an extension in writing has not been received, the contractor
has 15 calendar days to submit a FV or the ACO will begin unilateral procedure to close the
contract.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
GLOSSARY - DEFINITIONS 64
GLOSSARY
G.1. DEFINITIONS.
Assigned Legal Counsel. Counsel who are directly assigned by the DCMA Office of General
Counsel to serve as the primary legal advisor to a specific DCMA Contracting Officer.
Closed. All administrative actions, including final payment, are complete and all disputes have
been settled. A contract is considered to be closed on time when closeout is achieved within the
FAR-mandated time standard.
Cost-Reimbursement Contracts. Contract under which allowable and reasonable costs
incurred by a contractor in the performance of a contract are reimbursed IAW the terms of the
contract.
Dormant Contracts. Contracts/orders that are inactive and are awaiting closeout.
Electronic Data Interchange. A technique for electronically transferring and storing formatted
information between computers utilizing established and published formats and codes, as
authorized by the applicable Federal Information Processing Standards.
Fixed-Price Contracts. Contract that provides for a price which is not subject to any adjustment
unless certain provisions are included in the contract. These contracts are negotiated usually
where reasonable definite specifications are available, and costs can be estimated with
reasonable accuracy. A fixed-price contract places minimum administrative burden on the
contracting parties, but subjects the contractor to the maximum risk arising from full
responsibility for all cost escalations.
Flexibly Priced Contracts. All contracts types except for no-cost (k), firm-fixed-price (J),
fixed-price with economic price adjustment (K) and fixed-price-award-fee (M).
Funding Station/Finance Station. Organization inside the Buying Activity/Funding Activity
that DFAS will request funds from.
Non-MOCAS Contracts. Contract administered in a system other than MOCAS.
Overage. The contract was not closed within the FAR-mandated time standard.
Physically Complete. The contractor has completed the required deliveries and the Government
has inspected and accepted the supplies, or the contractor has performed all services and the
Government has accepted these services, and all option provisions, if any, have expired, or the
Government has given the contractor a notice of complete contract termination.
Patents. “Invention” means any invention or discovery that is or may be patentable or otherwise
protectable.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
GLOSSARY - DEFINITIONS 65
Royalties. The term “royalties” as used in this Manual refers to any costs or charges in the
nature of royalties, license fees, and patent or license amortization costs.
Technical Specialist. Industrial Specialists (IS), Industrial Engineers (IE), Procurement
Technicians (PT), and other technical personnel assigned responsibility for Production
Surveillance (DFARS 242.1104) by their assigned CMO. The Industrial Specialist (IS) and
Procurement Technician (PT) performing contract production surveillance ensure MOCAS data
accuracy in the area of delivery performance.
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
GLOSSARY – ACRONYMS 66
G.2. ACRONYMS.
ACCS Automated Cash Collection System
ACO Administrative Contracting Officer
ACRN Accounting Classification Reference Number
ASBCA Armed Services Board of Contract Appeals
BOA Basic Ordering Agreement
BOC Bill of Collection
CA Contract Administrator
CACWS Cumulative Allowable Cost Worksheet
CAR Contract Administration Report
CBAR Contract Business Analysis Repository
CCAS Contingency Contracting Administrative Services
CCDB Closed Contract Database
CDR Contract Deficiency Report
CDRL Contract Data Requirements List
CLIN Contract Line Item Number
CMO Contract Management Office
CO Contracting Officer
DACO Divisional Administrative Contracting Officer
DCAA Defense Contract Audit Agency
DCMA Defense Contract Management Agency
DCMA FORM 1797 Request for MOCAS Action/Information
DCMA-INST DCMA Instruction
DCMA-MAN DCMA Manual
DD FORM 250 Receiving Report
DD FORM 254 DoD Contract Security Classification Specification
DD FORM 882 Report of Inventions and Subcontracts
DD FORM 1423 Contract Data Requirements List (CDRL)
DD FORM 1593 Contract Administration Completion Record
DD FORM 1594 Contract Completion Statement
DD FORM 1597 Contract Closeout Checklist
DFARS Defense Federal Acquisition Regulation Supplement
DFAS Defense Finance and Accounting Service
DLA Defense Logistics Agency
DMACT DFAS Merged Account
DSS Defense Security Service
ECD Estimated Closing Date
EDA Electronic Document Access
EDI Electronic Data Interchange
ELINS Exhibit Line Item Number
EOM End of Month
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
GLOSSARY – ACRONYMS 67
FAR Federal Acquisition Regulations
FDD Final Delivery Date
FFP Firm-Fixed-Price
FPI Fixed Price Incentive
FV Final Voucher
IAW In Accordance With
IDC Indefinite Delivery Contract
IS Industrial Specialist
IWMS Integrated Workload Management System
LH Labor Hour
LISSR Line Item Schedule and Shipment Report
LOE Level of Effort
MCC MOCAS Contract Closeout
MOCAS Mechanization of Contract Administration Services
MOD Modification
NLA Notice of Last Action
NOC Notice of Completion
NPI Non-Procurement Instrument
NULO Negative Unliquidated Obligation
OCONUS Outside Continental United States
ODC Other Direct Costs
ODO Other Disbursing Office
OPR Office of Primary Responsibility
PA Property Administrator
PCO Procurement Contracting Officer
PCO CERT PCO Certification
PLCO Plant Clearance Officer
PT Procurement Technician
QAR Quality Assurance Representative
QCO Quick Closeout
QV Quantity Variance
SAT Simplified Acquisition Threshold
SPC Special Provision Code
TA Trusted Agent
TCO Terminations Contracting Officer
T&M Time and Material
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
GLOSSARY – ACRONYMS 68
ULO Unliquidated Obligation
VECP Value Engineering Change Proposal
WAWF Wide Area Work Flow
WIP Work in Progress
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
REFERENCES 69
REFERENCES
DCMA Manual 2201-03, “Final Indirect Cost Rates,” February 14, 2019
DCMA Manual 2501, “Contract Maintenance,” August 14, 2017
DCMA Manual 2501-01, “Contract Receipt and Review,” March 24, 2019
DCMA Manual 2501-05, “MOCAS Data Integrity Screening,” April 1, 2019
DCMA Manual 2501-06, “Terminations,” October 2, 2018
DCMA Manual 2501-08, “Grants Agreements and Other Transactions,” March 14, 2019
DCMA Manual 2501-09, “Contract Claims and Disputes,” March 26, 2018
DFARS PGI 204.804, “Closeout of Contract Files,” September 30, 2015
DFARS 204.804, “Closeout of Contract Files,” September 30, 2015
DFARS 204.1603, “Procedures,” February 26, 2016
DFARS 242.1104, “Surveillance Requirements,” June 08, 2004
DFARS 252.227-7038, “Patent Rights - Ownership by the Contractor (Large Business),”
June 2012
DFARS 252.227-7039, “Patents-Reporting of Subject Inventions,” April 1990
DoD 5015-2-STD, “Electronic Records Management Software Applications Design Criteria
Standard,” April 25, 2007
DoDD 5105.64, “Defense Contract Management Agency,” January 10, 2013
FAR 1.602-2, “Responsibilities,” June 21, 2013
FAR 4.804, “Closeout of Contract Files,” May 6, 2019
FAR 4.804-5, “Procedures for Closing Out Contract Files,” May 6, 2019
FAR 4.1603, “Procedures,” August 22, 2018
FAR 13.302-4, “Termination or Cancellation of Purchase Orders,” March 22, 2007
FAR 33.211, “Contracting Officer’s Decision,” April 29, 2014
FAR 42.703-2, “Certificate of Indirect Costs.” July 14, 2016
FAR 42.705, “Final Indirect Cost Rates,” February 8, 2002
FAR 42.708, “Quick Closeout Procedure,” May 31, 2011
FAR 42.9, “Bankruptcy,” July 26, 1996
FAR 46.709, “Warranties of Commercial Items,” September 18, 1995
FAR 46.710, “Contract Clauses,” January 10, 2001
FAR 52.204-2, “Security Requirements,” June 20, 1996
FAR 52.211-11 “Liquidated Damages—Supplies, Services, or Research and Development,”
September 2000
FAR 52.211-16, ‘Variation in Quantity,” April 1984
FAR 52.216-2, “Economic Price Adjustment – Standard Supplies,” January 1997
FAR 52.216-6, “Price Redetermination – Retroactive,” October 1997
FAR 52.216-7, “Allowable Cost and Payment,” August 2018
FAR 52.216-8, “Fixed Fee,” June 2011
FAR 52.216-9 “Fixed Fee – Construction,” June 2011
DCMA-MAN 2501-07, January 14, 2019
Change 1, December 19, 2019
REFERENCES 70
FAR 52.216-10 “Incentive Fee,” June 2011
FAR 52.216-16, “Incentive Price Revision – Firm Target,” October 1997
FAR 52.227-9, “Refund of Royalties,” April 1984
FAR 52.227-11, “Patent Rights—Ownership by the Contractor,” May 2014
FAR 52.227-13, “Patent Rights—Ownership by the Government,” December 2007
FAR 52.232-7, “Payments under Time-and-Materials and Labor-Hour Contracts,” August 2012
FAR 52.232-16, “Progress Payments,” April 2012
FAR 52.232-23, “Assignment of Claims,” May 2014
FAR 52.232-29, “Terms for Financing of Purchases of Commercial Items,” February 2002
FAR 52.232-30, “Installment Payments for Commercial Items,” January 2017
FAR 52.232-32, “Performance-Based Payments,” April 2012
FAR 52.245-1, “Government Property,” January 2017
FAR 52.248-1, “Value Engineering,” October 2010
United States Code, Title 50, Chapter 29, Section 1431 (applies to “Extraordinary Contractual
Actions”)
