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  • Question

    The Prime vendor say they are awaiting their sub-contractor to settle rates to closeout open purchase orders. Once the prime rates are settled can we proceed with contract closeout?


    Answer

    Before a contract can be closed, all applicable items on the Contract Closeout Check List must satisfactorily accomplished.  You have completed one of the applicable items in settlement of final rates. But, the functional specialist must also ensure that the prime contractor has settled subcontractor costs before closing a contract/order.  The prime contractor is responsible for closing subcontractors and generally closes subcontracts using procedures similar to the Government.

    The government can encourage the prime contractor to use quick closeout if the amount of unsettled direct and indirect costs is insignificant and
    FAR 42.708 -- Quick-Closeout Procedure considers cost to relatively insignificant costs when the total unsettled direct costs and indirect costs to be allocated to any one contract does not exceed the lesser of $1,000,000 or 10 percent of the total contract.  If the costs do not meet this definition of insignificant, the prime contractor should not use quick closeout.

    In most cases, DCMA would not want to close a contract with open subcontracts but DCMA Instruction 135, Contract Closeout states DCMA may proceed with contract closeout when the subcontract costs (direct or indirect) are considered to be immaterial.  If DCAA has reviewed the subcontract amounts and only an insignificant amount the subcontractor costs have not been reviewed, DCMA may close the prime contract.


    Bottom line, the prime contractor cannot submit a final voucher until they settle costs with their subcontractor.


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