Is there away to adminstratively close this contract with this much of a NULO? If not suggestions on a path to follow?
1. The FAR references quoted below in pertinent part are applicable to this response.
FAR 1.401 -- Definition
“Deviation” means any one or combination of the following:
(a) The issuance or use of a policy, procedure, solicitation provision, contract clause, method, or practice of conducting acquisition actions of any kind
at any stage of the acquisition process that is inconsistent with the FAR.
FAR 1.403 -- Individual Deviations
Individual deviations affect only one contract action … may be authorized by agency head. The Contracting Officer must document the justification and agency approval in the contract file.
DFARS 201.403 -- Individual deviations
(1) Individual deviations, except those described in 201.402(1) and paragraph (2) of this section, must be approved in accordance with the department/agency plan prescribed by 201.304(4).
FAR 4.804-5 -- Procedures for Closing Out Contract Files
(a) The contract administration office is responsible for initiating (automated or manual) administrative closeout of the contract after receiving evidence of its physical completion. At the outset of this process, the contract administration office must review the contract funds status and notify the contracting office of any excess funds the contract administration office might deobligate. When complete, the administrative closeout procedures must ensure that
(1) Disposition of classified material is completed;
(2) Final patent report is cleared. If a patent report is required, the contracting officer may proceed with contract closeout in accordance with the following procedures, or as otherwise prescribed by agency procedures: (i) Final patent reports should be cleared within 60 days of receipt. (ii) If the final patent report is not received, the contracting officer shall notify the contractor of the contractor’s obligations and the Government’s rights under the applicable patent rights clause, in accordance with 27.303. If the contractor fails to respond to this notification, the contracting officer may proceed with contract closeout upon consultation with the agency legal counsel responsible for patent matters regarding the contractor’s failure to respond.
(3) Final royalty report is cleared;
(4) There is no outstanding value engineering change proposal;
(5) Plant clearance report is received;
(6) Property clearance is received;
(7) All interim or disallowed costs are settled;
(8) Price revision is completed;
(9) Subcontracts are settled by the prime contractor;
(10) Prior year indirect cost rates are settled;
(11) Termination docket is completed;
(12) Contract audit is completed;
(13) Contractor’s closing statement is completed;
(14) Contractor’s final invoice has been submitted; and
(15) Contract funds review is completed and excess funds deobligated.
2. The references quoted below in pertinent part from the DoD Financial Management Regulation 7000.14-R are also applicable to this response.
Volume 3 – BUDGET EXECUTION - AVAILABILITY AND USE OF BUDGETARY RESOURCES
Chapter 11 – Cash, Unmatched Disbursements, Negative Unliquidated Obligations, and In-Transit Disbursements
110201. Canceled Appropriation. An appropriation that has been canceled in accordance with the provisions of Public Law 101-510. This term also applies to appropriations that otherwise would have been canceled, but have not been closed by the Treasury Department because the appropriation has a negative balance.
110212. Negative Unliquidated Obligation (NULO). A disbursement transaction that has been matched to the cited detail obligation, but the total disbursement(s) exceeds the amount of that obligation.
1103 Disbursement Posting Policy
110301. … [T]ransaction research and corrections are to begin as soon as it is apparent that a disbursement transaction has resulted in a NULO … .
B. Obligations, obligation adjustments, or reductions in unobligated balances must be recorded
for all NULOs that are not resolved … .
1104 Treatment of Overaged Negative Unliquidated Obligations and Unmatched Disbursements
110402. Canceled Accounts and Accounts Scheduled to Cancel at the End of the Current Fiscal Year
K. Perpetual balances of unobligated amounts, and unliquidated amounts, shall be maintained for each canceled appropriation. Should the unobligated balance in a canceled appropriation be negative, or should the unexpended balance be negative, then a potential violation of the Antideficiency Act would have occurred, and must be reported and investigated.
1108 Requests to Discontinue Unsuccessful Research Efforts for Overaged Negative Unliquidated Obligations and Unmatched Disbursements
. Notwithstanding the obligation of funds after 180 days, as required by paragraph 110301.B. and section 1104., above, UMDs and NULOs must continue to be researched and corrected unless written approval to discontinue research efforts is obtained from the Military Department Assistant Secretary for Financial Management and Comptroller, the Comptroller of a Defense Agency or DoD Field Activity in accordance with the provisions of subsection 110802 below. This responsibility may not be redelegated.
3. The references quoted below in pertinent part from the DCMA Contract Closeout Guidebook (September 2011) are also applicable to this response.
a. Negotiated Settlement
(pp. 47 – 48)
Negotiated Settlement is the process of reaching a settlement among all parties to close a contract (including all Government parties
responsible for final closing actions). … The negotiated settlement process is applicable to those contracts that are determined to be complete, shipped and accepted, and the contract is determined to be unreconcilable
b. What to do when Negative ULOs (NULOs) exists:
· The ACO should contact the PCO and obtain agreement on the best path for closing this contract.
· The ACO should conduct a meeting or conference with the responsible/affected Government parties to include the PCO, fund manager(s), DFAS accounting station personnel, DFAS or disbursing office personnel … and any other party that will … assume responsibility for closing the official accounting records for the PCO.
· The ACO will distribute a copy of the [final closeout] modification to all parties.
· The ACO should document the contract file to include: the efforts made by the ACO team to obtain the necessary closeout data [and] the situations and/or factors affecting the ACO team's inability to obtain and/or complete the required steps of this procedure
c. Sample Letter
Buying Activity Notification of Contractor No Longer in Business
d. Sample Memo to File
Contractor No Longer in Business
e. Sample Modifications
Contractor No Longer in Business - No Adjustment in Previous Payments - Block 14a
Paragraph 5 modified as follows:
“As a result of this modification, the contract obligation is hereby increased
by $_____ from $_______ to $________.”
4. Given the limited information provided in this inquiry, and based on our research of the relevant regulations as summarized above, we do not believe that the CAO can simply close out the contract under these circumstances without first addressing several important issues. Therefore, we would suggest that the CAO take the following actions to enable the administrative closeout of this contract. These suggested actions are not necessarily sequential and could be performed concurrently up to the point where a final unilateral modification officially closing out the contract can be issued.
5. First, for a contract to be considered as administratively complete, the cognizant Contracting Officer must
determine that all closeout actions listed in FAR 4.804-5( a)(1) through (a)(15)
that are applicable to this acquisition have been accomplished. (For example, if the contract was not formally terminated for convenience or default, then the action listed at FAR 4.804-5(a)(11)
would not apply). If any of the mandatory actions listed under FAR 4.804-5(a)
that would normally apply can no longer be completed under the circunstances, then we believe that an individual FAR Deviation must be processed by the CAO and approved in accordance with agency procedures pursuant to FAR 1.403
and DFARS 201.403
in order to waive any such mandatory contract closeout requirements for this acquisition.
6. As set forth in Volume 3, Chapter 11 of DoD 7000.14-R, there are many administrative requirements that must be accomplished regarding the final disposition of an NULO. While these requirements are too numerous to list in this response, a few of the more notable requirements which we found that are described above are: (a) transaction research and corrections must be accomplished, (b) obligation of additional funds in the amount of this unresolved NULO must have been, or be, recorded, (c) a potential violation of the Antideficiency Act appears to have occurred and therefore must be reported and investigated, and (d) written approval to discontinue research efforts must be obtained from the Military Department Assistant Secretary for Financial Management and Comptroller, the Comptroller of a Defense Agency or DoD Field Activity. Because all of this required activity is directly related to the contract closeout action required by FAR 4.804-5(a)(15)
, we believe that the CAO must also document the contract file to confirm that all of the DoD FMR requirements applicable to the disposition of the NULO have been accomplished before the contract can be administratively closed-out.
7. Finally, even though the contractor is no longer in business, we believe that the CAO can still utilize selected procedures from DCMA’s “Negotiated Settlement” Process as summarized above in order to facilitate the administrative closeout of this contract, given that the contract appears to be unreconcilable. In particular, we believe that the CAO should conduct meetings as necessary on a continuing basis with the responsible/affected Government parties to include the PCO, fund manager(s), DFAS accounting station personnel, DFAS or disbursing office personnel and any other party that will assume responsibility for closing the official accounting records for the PCO. Such interactions will be particularly important in processing any FAR deviation that may be necessary and for documenting that all of the actions required by the DoD FMR have been accomplished by the appropriate personnel.
8. Among the CAO actions that should be completed, if not done so already, would be to issue the “Buying Activity Notification of Contractor No Longer in Business” letter and complete the “Contractor No Longer in Business” memo for the contract file. Once these and all of the activities described in paragraphs 5, 6 and 7 above have been accomplished, then the CAO can issue and distribute the “Contractor No Longer in Business - No Adjustment in Previous Payments” final contract modification, with the revision suggested in paragraph 3e. above, if this modification will be used to formally obligate additional funds to the contract to cover the NULO. At this point, administrative closeout of the contract may occur.