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Contract Close-Out

Frequently Asked Questions

Q. Is there a time limit that a contractor has to submit an invoice for work performed? We have a 5-year contract for professional services and recently received an invoice for work that was performed two years ago.

A. There is no Federally-mandated time limit if the contract has not been closed out (i.e., final payment made, contractor's release submitted). However, a well constructed contract would place time limits on the contractor’s ability to submit invoices. This situation is a good argument for early close-out of contracts. If the contractor incurred an overrun on the contract and did not notify the agency beforehand of an impending overrun and did not obtain the agency's approval to incur the costs, then it is highly questionable as to whether you have to pay the overrun. The overrun could be to due to final audit of overhead rates, late subcontractor billings, etc., but the contractor has a positive duty to control its costs and be aware of where it stands at all times relative to contract funding. (Reviewed: May 2010)

Q. What are the procedures/time frame for closing out contracts?

A. Contract close out is a part of contract administration and therefore has the same purpose: to “...ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” Like contract administration, the extent of the effort involved in contract close out varies widely with contract type and the type of product or service procured. Therefore, there is no single procedure that can be used for the full range of contract types and products procured. Essentially it is a review and documentation of the fulfillment of all contract requirements.

This task is quite simple with respect to a firm-fixed-price, off-the-shelf supply contract where the file contains documentation that the end product has been received, inspected and accepted and that full payment has been made. The process is more complex when large cost reimbursement contracts (e.g. research and development) containing progress payments, partial deliveries and many change orders are involved. Audit of the contractor’s overhead rates also lengthens the process. However, the end objective is the same; to determine if the contractor fulfilled all requirements of the contract and if the contracting agency fulfilled its obligations. The Best Practices Procurement Manual contains a good listing of the major elements of the contract close out process in Chapter 10.

There is no required time frame for contract close out. It is a matter of good office management. To prevent the buildup of many files in the procurement or program office, a regular timetable should be established to review and close out the files on all completed contracts (e.g. every six or twelve months).

There is one time requirement set by FTA; however, it should not affect the close out process. The FTA Master Agreement, at Sec. 8.c., requires the following: “the Recipient agrees to maintain intact and readily accessible all data, documents, reports, records, subagreements, leases, third party contracts, and supporting materials related to the Project as the Federal Government may require.” When a contract is closed out it should be filed with reference to the Federal project funding to ensure that these records are maintained for the required three years after project close out. (Revised: May 2010)

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