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  • Question

    How do you close a contract that has a warrenty the exceed the contract performance date?


    Answer

    A contract can be closed out once it is physically complete. 
    FAR 4.804-4 Physically Completed Contracts states,
    “(a) Except as provided in paragraph (b) below, a contract is considered to be physically completed when --
    (1)
    (i) The contractor has completed the required deliveries and the Government has inspected and accepted the supplies;
    (ii) The contractor has performed all services and the Government has accepted these services; and
    (iii) All option provisions, if any, have expired; or
    (2) The Government has given the contractor a notice of complete contract termination.
     
    (b) Rental, use, and storage agreements are considered to be physically completed when --
    (1) The Government has given the contractor a notice of complete contract termination; or
    (2) The contract period has expired.” 
     
    FAR 4.804-1
    “(c) A contract file shall not be closed if --
    (1) The contract is in litigation or under appeal; or
    (2) In the case of a termination, all termination actions have not been completed.”
     
    You’ve stated all items are delivered and final invoice paid has been paid, you did not mention any of the reasons in FAR 4.804-1(c) that would prohibit you from closing out the contract so, it seems the contract is physically complete and can be closed out.
     
    DoD requires the use of close out procedures in PGI 204-804-1, involves the completion of DD Form 1594, Contract Completion Statement and DD Form 1597, Contract Closeout Checklist or locally developed forms.  These forms shall be retained in the official contract files. 
     
    FAR 46.701 examines the use of warranties, you do not mention whether or not this is a commercial item.  If it is a commercial item generally the government accepts the commercial item warranty.  If non-commercial the term and conditions for the warranty will be stated in a clause 52.246-17 through 52.246-19.  You will need to read the warranty clause in the contract carefully to understand the government’s rights and the contractor’s responsibility or liability, repair or replace.  As long as the user follows the terms of use of the item, the contractor should honor the warranty.
     
    In accordance with the Contract Disputes Act official contract files are to be retained for 6 years and 3 months.  Therefore, if the government should have a warranty claim against the contractor the contracting office will be able to retrieve the file for any information needed regarding the terms of the warranty.  The warranty doesn’t extend for more than 6 years therefore there should be no problem closing out the contract file.

     


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