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    What modification authority would be appropriate to use on the SF30? I plan to use 52.211-12 Liquidated damages for the LDs portion of the modification. What would I use as authority for the portion of the deobligation that is not LDs since the construction work was completed and accepted by the government.


    Answer

    Questions very similar to this one have been discussed seeveral times in the AAP program. You may want to search topic areas such as 'unilateral deobligations' and/or 'deobligating funds' within AAP to find other answers that may also assist you. Below is an AAP discussion from 2012 that addresses your issue:

    "The issue being raised relates to the modification of contracts for the purpose of removing funds from a contract as part of the closeout effort; a process commonly referred to as "de-obligation".  The purpose for this de-obligation will not be examined but rather the focus will be on the method and authority by which to effect the de-obligation.
       
    Part 43
    of the FAR is titled "Contract Modifications". The description set forth at FAR 43.103 provides the application for both bilateral and unilateral modifications to the contract.  Pertinent to the primary issue, FAR 43.103 (a) (2) states that a bilateral modification is used to "reflect other agreements of the parties modifying the terms of the contract.  The removal of funds from the contract is clearly an act of modifying the terms of the contract and would, therefore, be a situation where the bilateral modification would be employed.
     
     
    Since there is not a clause within FAR or DFARS that addresses the use of the bilateral modification, unlike the unilateral authority and parameters set forth in the Changes clause,  the agreement between the Parties will be embodied in the modification document, such as the SF30,  and signed by both Parties.  This bilateral  form of modification is preferred as the release of claims language will be contained within the modification, thereby precluding the Contractor from reopening the issue, and both the Contractor and Government will have ascertained a mutually agreeable amount that can be de-obligated. 
     
    It should be noted a proper and unliquidated obligation should not be de-obligated unless there is some valid reason for doing so.  The potential to violate the Anti-deficiency Act is an inherent risk when removing funds from the contract.
     
     
    The foregoing explanation is the best case scenario under optimum conditions.  But, what about that situation where using a bilateral modification is not feasible? There are situations, among many others,
    where the Contractor has merged and cannot find their files,  they are no longer in business, the final invoice has yet to be submitted, or the Contractor chooses not to respond to repeated requests for information?
     
     
    Given these problematic situations that often arise on a contract that is performance complete and thus being closed, resort can be made to FAR 43.103(1). This provision indicates that unilateral modifications can be used to "make administrative changes".  As defined at FAR 43.101, "administrative change" means a unilateral contract change that does not affect the "substantive rights of the parties". 
     
     
    It can be asserted that unilaterally removing funds from the performance complete contract does not impinge upon  the right of the  Contractor to prosecute a claim against the U.S. Government should it later be determined that the Contractor is owed more money than what is on the contract.  In other words, it could be postulated that the substantive right of the Contractor has not been affected by the use of the administrative change.
     
     
    The use of the unilateral administrative change is a practical tool to facilitate closeout of contracts when the situation merits such use. The file should be amply documented as to the reasons why the administrative change modification was employed.  It also starts the clock on the time when a Contractor may file a claim should they choose to exercise that right.
     
     
    DCMA does advocate administratively closing contracts unilaterally when the aforementioned problems arise during the closeout phase of the contract. For further information on the approach used by DCMA, please reference the Contract Closeout Guidebook."


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