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    Can excess canceled funds in a given FFP contract be deoblgated unilaterally? Also, after deobligating these excess funds, can the contract be closed?


    Answer

    The following response is based solely on the question and background information provided. As we do not have all of the facts particular to your contract, program, and situation, we highly recommend you consult your Contracting Officer and Legal Office for guidance.
     
    Guidance regarding the closeout of contract files is found at FAR 4.804.  Specifically, the procedures found at FAR 4.804-5(a)(15) require that, when complete, "administrative closeout procedures MUST ensure that contract funds review is completed and excess funds deobligated" (capitalization intended).  "Must" is defined in FAR 2.101 as "shall", and "shall" is defined in FAR 2.101 as "the imperative".  Unless your office has specific guidance relating to this, you are bound to this requirement.  Currently, your FAR supplement, the HHSAR, does not provide any further implementing or supplemental guidance. 
     
    In a FFP environment, the price on the face of the contract and the amount obligated are typically the same (when all funds have been obligated).  I say that to say this: If deobligation of funding needs to occur, the price of the contract most likely needs to be modified as well, which would require a bilateral modification and a contractor signature. 
     
    The Government's failure to timely closeout the contracts you mention will require significant effort now on your part.  While the effort necessary may overshadow some of the amounts deobligated, we are still responsible for ensuring compliance with the terms of the contract and safeguarding the interests of the United States (FAR 1.602-2). 
     
    Some agencies, such as DISA, have created a clause included in their solicitations/contracts that help in situations where retrieving contractors' signature for closeout purposes may prove difficult.  See DARS 52.204-9001.
     

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