Contract Closeout Update

Ms. Anita Bales, DCAAMr. Timothy Callahan, DCMA

Ms. Rebecca Beck, DFAS

Overview

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Contract Life Cycle

Industry

Common Barriers

Glide Paths

Agency Material Weakness

Contract Closeout

Financial Impacts

Closeout Initiatives

Appropriation Life Cycle

Tri-Agency Working Group

Department-Wide Initiatives

Contract Lifecycle: Procure to Pay Overview

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Contract Lifecycle: Pre-Award

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Buying Command

Document Relevant Information in

CBAR

Analyze/Audit submission

and Negotiation

ACO

DCAA

Requirement

Solicitation

Source Selection

Award

Funding

Forward Pricing Proposals and Rates

DFAS

Set up LOA & Financial Record

Provides acquisition insight on business intelligence

Pre-Award Accounting

Contract Lifecycle: During Performance

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Buying CommandACO

DCAA

Annual Audit of Incurred Cost

DFAS

Pay Vouchers

Process Contract

ModificationsAdjust Funding & Monitoring

Process Vouchers/ Perform Payment ReviewsMaintain Gov.

Financial Record

Monitor FundingAccept Deliveries

Monitor Funding

Accounting/Billing System Audit –

Process Withholds

Billing Rates

Contract Lifecycle: Closeout

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Audit of Incurred Cost

Pay Final Voucher

Process Contract Modifications

Reconcile Quantity –before accepting final

voucher

Reconcile and Close Accounting

File

Accept Final Delivery

Preliminary ULO Review,

reconcile payment

differences

Reconcile and Close Out ContractResolve remaining funds

Confirm all Audits are Complete and

documentation is submitted

Consider Quick Close Out Process

Support Quick Close Out Procedures

Provide Final CACWS or Evaluation of Final Voucher

Sign & Process Final Voucher

Buying Command ACO

DCAA

DFAS

Industry

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• Subcontract management

• CACW

• Yearend rate adjustments

• Final inventory

• Final voucher

• Timely and adequate incurred cost submissions

• Closing Statement

Industry’s Role

Common Barriers and Recommendations

Barriers to Closeout

• Contractor Submission Delays

• Delayed Negotiation of Overhead Rates

• Final OH Rates

• Direct Cost Audits

• Complex Contracts

• Cancelled Funds

• Reconciliations Issues

Recommendations to Mitigate

• Submission of Cumulative Allowable Cost Worksheet (CACWS)

• Timely Submission of Final Voucher

• Monitor Cancelled Funds

• Standard, Clear and Simplified Payment Instructions

• Limit Contract Financing Rates

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DCAA Incurred Cost Years Completed

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DFAS Aged Reconciliation Inventory

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Agency Material Weakness

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FY16: Updated material weakness criteria to address KTS in DCMA’s control

- 20% reduction of overage cost contracts

- 20% reduction of obligated value of overage cost contracts

- Defined burn down plan for firm fixed price contracts

Nov 15: MOCAS automated closeout threshold

increased to $500K

Jul 16: Established FY 17 closeout goals

- Cost: 43,075 / $144.9B

- FFP overage: 869

2nd QTR 17: Working towards

obligated value; Fixed Price met

FY 18: Baseline/Goal will be

recalculated to account for new

audits issued

Agency Material Weakness

Contract Closeout

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• Contract closeout importance to audit readiness• Affects Dormant funds• Reduces contingent liability

• Other benefits• Reduces liability to use current year funds • Frees expired funds for use elsewhere• Reduces actions to address canceling funds

Contract Closeout

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• What we’re working on…..• Predictable battle rhythm• Predictive capability for when audits and

rates will be completed • Resolution of systems issues that “reopen”

closed contracts• Prioritization of funds reconciliation actions • DoD IT solution that has shared visibility and

common status reporting for key players• Improving final voucher timeliness

Financial Impacts

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Army

$1.4B

Air Force

$1B

Navy

$760M

Marine Corps

$77M

Defense Agencies

$53M

MOCAS Cancelled

Unliquidated ObligationsFY17 Contract Pay (YTD)

• 371,229 Active Contracts

• 19,398 Active Contractors

• 356,423 Invoices Processed

• $2.177 Trillion Obligations

• $77.9 Billion Disbursed

Appropriation Life Cycle

Appropriation Types

Available Expired Cancellation Date

O & M = 1 Year + 5 Years = September 30th of the 6th year

R & D = 2 Year + 5 Years = September 30th of the 7th year

PROC = 3 Year + 5 Years = September 30th of the 8th year

MILCON = 5 Year + 5 Years = September 30th of the 10th year

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Current/Available Expired Cancelled

Available for Obligationand Payment

Must ObtainNew Funding

Available for Payment

Appropriation Life Cycle

Tri-Agency Working Group

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Targeting FY17 & FY18

cancelling funds

Tri-Agency Working Group

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Goal: Strategically align priorities across all three Agencies for contract closeout actions

Aligns DCMA’s closeout strategy and DCAA’s audit plan with the service’s financial records maintained by DFAS

Focus: Targeting FY17 and FY18 cancelling ULO balances in MOCAS

Priority being being given to contractors (DCAA) and contracts (DCMA/DFAS) with the highest cancelling ULO $ balances

Results: Reduced FY17 and FY18 cancelling ULO balance by $820M

1,709 DCAA contractor audits were matched to MOCAS FY17 cancelling ULO balances

• Represents 12,964 contracts for $4.1B in FY17 cancelling ULO

• DCAA: 1,233 audits are complete or not required; 476 being worked

• DCMA: Prioritizing administrative closeout actions across impacted CMO's for closed audits

• DFAS: Issued FY17 year-end cancelling year invoice instructions to assist with receiving and processing cancelling year transactions prior to the funds cancelling

Future: Follow the same process for future years cancelling ULO balances

Department-Wide Initiatives

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• Contracts Prior to FY2000

• No Further Deliverables

• Unreconcilable

Legislative Relief

• Data Lake Project• Posting Contract

Closeout Notices• Increase Simplified

Acquisition Threshold• Simplified Payment

Instructions

DPAP Initiatives

Open Discussion

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Mr. Anita Bales, DCAA

Mr. Timothy Callahan, DCMA

Ms. Rebecca Beck, DFAS