42.708 Quick-closeout procedure
Source: FAR 42.708 on acquisition.gov
The quick-closeout procedure allows contracts with low unsettled costs to be closed quickly by negotiating final costs, streamlining the closeout process and reducing administrative delays.
Overview
FAR 42.708 establishes the quick-closeout procedure, allowing contracting officers to negotiate and settle direct and indirect costs for a contract, task order, or delivery order before final indirect cost rates are determined. This process is intended for contracts that are physically complete and have relatively insignificant unsettled costs (not exceeding $1,000,000 or 10% of the contract value, whichever is less). The contracting officer must conduct a risk assessment considering the contractor's systems, auditor concerns, and other relevant factors. If a reasonable estimate of allocable costs can be agreed upon, the contract can be closed out quickly. Once settled, the indirect cost rates used are final for that contract and do not set a precedent for other contracts, nor are adjustments made for over- or under-recoveries on other contracts.
Key Rules
- Eligibility for Quick-Closeout
- Applies to physically complete contracts with unsettled costs below $1,000,000 or 10% of contract value.
- Risk Assessment Requirement
- Contracting officer must assess risk, including contractor systems and auditor input, before proceeding.
- Finality of Settlement
- Settled indirect cost rates are final for the closed contract and do not affect other contracts.
- No Precedent Set
- Rates used in quick-closeout do not bind future rate negotiations.
Responsibilities
- Contracting Officers: Must determine eligibility, conduct risk assessments, negotiate settlements, and ensure compliance with thresholds and documentation.
- Contractors: Must provide necessary cost data, participate in negotiations, and agree to reasonable estimates.
- Agencies: Oversee proper application of the procedure and ensure audit and documentation requirements are met.
Practical Implications
- Enables faster contract closeout, reducing administrative burden and freeing up resources.
- Helps avoid lengthy delays due to unresolved indirect cost rates.
- Contractors and agencies must ensure all criteria are met to avoid compliance issues or disputes.
(a) The contracting officer responsible for contract closeout shall negotiate the settlement of direct and indirect costs for a specific contract, task order, or delivery order to be closed, in advance of the determination of final direct costs and indirect rates set forth in 42.705, if-
(1) The contract, task order, or delivery order is physically complete;
(2) The amount of unsettled direct costs and indirect costs to be allocated to the contract, task order, or delivery order is relatively insignificant. Cost amounts will be considered relatively insignificant when the total unsettled direct costs and indirect costs to be allocated to any one contract, task order, or delivery order does not exceed the lesser of-
(i) $1,000,000; or
(ii) 10 percent of the total contract, task order, or delivery order amount;
(3) The contracting officer performs a risk assessment and determines that the use of the quick-closeout procedure is appropriate. The risk assessment shall include-
(i) Consideration of the contractor’s accounting, estimating, and purchasing systems;
(ii) Other concerns of the cognizant contract auditors; and
(iii) Any other pertinent information, such as, documented history of Federal Government approved indirect cost rate agreements, changes to contractor’s rate structure, volatility of rate fluctuations during affected periods, mergers or acquisitions, special contract provisions limiting contractor’s recovery of otherwise allowable indirect costs under cost reimbursement or time-and-materials contracts; and
(4) Agreement can be reached on a reasonable estimate of allocable dollars.
(b) Determinations of final indirect costs under the quick-closeout procedure provided for by the Allowable Cost and Payment clause at 52.216-7 shall be final for the contract it covers and no adjustment shall be made to other contracts for over- or under-recoveries of costs allocated or allocable to the contract covered by the agreement.
(c) Indirect cost rates used in the quick closeout of a contract shall not be considered a binding precedent when establishing the final indirect cost rates for other contracts.