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  • Question

    What would the steps be to get this contract and orders closed, out taking into consideration the requirements for releases and audits for increases in the indirect rates etc. (requirements of the Allowable Cost and Payments clause).


    Answer

    FAR 4.804-1(b) makes it mandatory to use the closeout procedures @ FAR 4.804-5 when closing out contract files @ FAR 4.804-1(a)(2)(3) and (4) which includes contracts requiring settlement of indirect cost rates, i.e., cost reimbursement contracts. The contract administration office (CAO) is responsible for initiating administrative closeout of the contract upon receiving evidence of physical completion (see FAR 4.804-5(a) and FAR 4.804-4). At the beginning of the process, the CAO is required to review contract fund status and notify the contracting officer of any excess funds to be deobligated. Once this is completed, all applicable actions @ FAR 4.804-5 must be completed as well. As a Department of Defense (DoD) organization, DFARS further requires the contracting officer to follow the procedures @ DFARS PGI 204.804 to complete the closeout of DoD contracts.

    When appropriate the Quick Closeout procedures @
    FAR 42.708 should be used to reduce administrative costs and to enable deobligation of funds. The Allowable Cost and Payment clause @ FAR 52.216-7 (d) requires the Government to establish final annual indirect cost rates, to establish the appropriate bases for those rates IAW FAR subpart 42.7, and the contractor to submit an adequate final indirect cost rate proposal to the contracting officer. Because the company is no longer in business and the contractor cannot be located, the requirements of this clause cannot be met through negotiation and mutual agreement of the parties. Final indirect cost rates can be established on the basis of the contracting officer determination procedure @ FAR 42.705-1 or auditor determination procedure @ FAR 42.705-2.

    Since there is no contractor available to carry out the requirements of the regulation, we suggest that the contracting officer issue a unilateral decision on the final indirect cost rates by doing a historical analysis using data from any DCAA audits that may have been conducted on the company in the past three years and calculate the final rates for this contract based on acceptance/approval of any rates from that three year data. Wefurther suggest that a memo for record (MFR) be included in the contract file to document all attempts made to locate the contractor in order to carry out the mandatory requirements of the Allowable Cost and Payment Clause. If the company was a small business then include in the MFR all attempts made to locate contractor through contacts with the agency small business representative.

    Another option to close out the contract and deobligate the funds would be a T4D on any orders that were not completed or best effort attempted prior to contractor going out of business. However since the contractor cannot be located and is not available for the Government to carry out the mandatory requirements of the termination clause, you are advised to discuss with legal how this could be done or even if it may be a viable option. 
    You should consult with your contracting activity legal office for guidance on the Government's right to make this unilateral determination and any legal ramifications that could result from any actions taken to close out this contract since the company is no longer in business and the contractor cannot be located as the regulations, FAR and DFARS, does not address this particular situation.


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