DoD Expands Opportunities for Quick Closeouts

July 10, 2019

Contractors with flexibly-priced contracts typically endure a lengthy and costly closeout process involving incurred costs submissions, incurred costs audits, and final negotiations with the contracting officer. Oftentimes, this process means that the contractor’s final payment will not be received until years after the contract’s completion. The Federal Acquisition Regulation (FAR) offers an alternative “Quick Closeout” process when the dollars at stake are not significant. FAR Subpart 42.708 allows the contracting officer to close out certain flexibly priced contracts without waiting for an incurred cost audit.

There are several requirements that must be met before a contract is eligible for a quick closeout, the most limiting of which is that the total unsettled direct and indirect cannot exceed the lesser or $1,000,000 or 10% of the total contract. These relatively modest thresholds were established years ago and significantly limit the number of contracts that can utilize the quick closeout option.

On May 3, 2019, the Department of Defense (DoD) issued a class deviation, changing the $1 million threshold to $2 million and eliminating the 10% requirement. Aronson recommends contractors review all their completed DoD contracts awaiting closeout to determine if, based on the new thresholds, they now qualify for a quick closeout.

If you have any questions about quick closeouts or the closeout process in general, contact Tom Marcinko at 301.231.6200.