One of my first tasks as a newly-warranted Contracting Officer was to process DD Form 1594 – Contract Completion Statements for old, completed contracts that had not yet been officially closed. This means that the work had been completed, the final invoice had been paid, and the account ledger for the funds expended had been reconciled with the contract amount and the two sheets balanced. But for government filing purposes, the contract is not completed until the contract file has been closed, using the above-mentioned DD-1594. This is the government’s way of stating with finality that there are no additional actions to be taken, and once the DD-1594 is prepared and signed, then the file can be moved to inactive, “closed out” status and held for the requisite number of years before final destruction (which in most cases is six years and 3 months, or thereabouts).
So, my job was to peruse the paper file, check for dates and signatures of all receiving reports and payment disbursements, and make sure the amounts balanced. In most cases, any remaining funds had been removed from the contract by use of a de-obligation modification, but occasionally I would find a recently completed contract that still had leftover funds obligated but the funds had not yet expired, and I would have to prepare the modification. This gets especially important near the end of the fiscal year when those funds can still be used by the agency. Once the fiscal year expires, the funds go with it. Of course, most government contracts are now written and signed using an automated contract writing system, so there is an electronic file as well as a hard copy paper file. Thus, the electronic file must be closed out ‘in the system,’ and a hard copy DD-1594 printed to insert into the paper file before it is moved to the storage area with the other inactive files. The contracting office must maintain the files for several years to respond to any audit, Congressional inquiry, or contractor’s grievance.
Another important piece of paperwork in the file is a release of claims, which is not always obtained or included in the file. This is the contractor’s signed acknowledgement that they have received the full compensation set forth in the contract and subsequent modifications, and that they will not pursue restitution against the government in the future, hence they are ‘releasing their claim’ against any future compensation. Really good, effective contracting offices build these releases of claims into their processes, but the sheer volume of work, and the relatively small scale of many of the contract actions make it nearly impossible to get 100% completion for this subtle but important task.
One important benefit of the government’s fastidious approach to contract closeout is the indirect help it provides the contractors themselves. Many small businesses do not possess the staffing, resources, or experience to diligently track the contract administration, invoicing and payments. Many times, the contractors are excellent service providers, but the administrative burden exceeds their capabilities. So, the government’s thorough contract administration, including exacting closeout procedures, provides a comprehensive record of actions, expenses, and payments to ensure the contractor completes all the required work, but also gets fully compensated for the services provided. As a contracting officer, I frequently discovered errors in the contractor’s billing, invoicing and accounting procedures that would have cost them money if not for the government’s insistence on accurate record-keeping. And the contract closeout is the final step in ensuring that process.
One final point: as you can see, it’s a thankless, arduous job to go through boxes of dusty files to close out contracts that have been virtually completed for years, but whose files have not been officially closed out. I’m grateful for the experience – it has given me many insights into the full spectrum of contract management, and one of the finer points is that it is better to “clean as you go,” meaning close out contracts as they are completed, rather than pitching them into a box and waiting for relatively slow periods to complete the close-out process. In my first contracting office in Germany, we had a backlog of nearly 2,000 old files that needed to be closeout. In my last contracting office at Fort Campbell, KY, we had nearly the same amount. While it’s a good experience for young COs to work through dozens of closeouts (I personally did more than 200), it’s more efficient to simply complete the closeout at the end of the contract performance period.