Federal Contract Closeout Guide: Complete Process for Government Contractors
Master the federal contract closeout process. Learn required documentation, timelines, final invoicing procedures, property disposition, and best practices for closing government contracts efficiently.
Quick Answer
Contract closeout is the administrative process of verifying all contractual obligations have been met, settling final costs, and officially completing a government contract. The FAR requires closeout within specific timeframes: 6 months for firm-fixed-price contracts and 36 months for cost-reimbursement contracts. Proper closeout protects your CPARS ratings and ensures timely final payment.
What is Contract Closeout?
Contract closeout is the final phase of contract administration, occurring after all deliverables have been accepted and the period of performance has ended. It involves verifying that both the government and contractor have fulfilled all obligations, settling final costs, and officially completing the contract file.
The closeout process is governed by FAR Part 4.804, which establishes requirements for administrative closeout, and FAR Part 42.7 for cost-type contracts. Proper closeout is essential for receiving final payment, maintaining good past performance records, and avoiding disputes.
Key Closeout Objectives
- Verify Performance: Confirm all deliverables were accepted and services completed
- Settle Finances: Process final invoices and resolve any outstanding costs
- Dispose Property: Return, transfer, or dispose of government property
- Complete Documentation: Finalize all required records and certifications
- Release Obligations: De-obligate unused contract funds
Closeout Timeline Requirements
FAR 4.804-1 establishes specific timeframes for contract closeout based on contract type.
Standard Timeframes
- Firm-Fixed-Price (no property)6 months
- Firm-Fixed-Price (with property)20 months
- All other contracts36 months
- Contracts requiring audit36 months
Timeline Starts When
- • Final acceptance of all deliverables
- • Period of performance expires
- • Final invoice is submitted
- • All modifications are executed
- • Property is disposed
- • Subcontracts are settled
Timeline Warning
These are government targets, not contractor deadlines. However, delays in submitting your final invoice or required documentation can hold up closeout indefinitely—and delay your final payment.
Required Documentation
Proper documentation is critical for efficient closeout. Missing or incomplete documents are the primary cause of closeout delays.
Contractor Closeout Checklist
Financial Documents
- ☐ Final invoice (marked "FINAL")
- ☐ Release of claims
- ☐ Final indirect cost rates (if applicable)
- ☐ Subcontractor cost settlements
- ☐ Patent/royalty certifications
Performance Documents
- ☐ Final progress/status report
- ☐ All deliverable acceptance records
- ☐ Warranty documentation
- ☐ Technical data/software delivery
- ☐ Security clearance terminations
Property Documents
- ☐ Government property inventory
- ☐ Property disposition instructions
- ☐ Property transfer receipts
- ☐ Lost/damaged property report
Compliance Documents
- ☐ Small business subcontracting report
- ☐ Final VETS-4212 report
- ☐ EEO compliance certification
- ☐ Environmental compliance docs
Contractor's Release of Claims
The release of claims is a critical document where you certify that all costs have been submitted and you release the government from further liability. Types include:
- Full Release: No exceptions—you waive all future claims
- Release with Exceptions: Lists specific pending claims or disputes
- Interim Release: Used when costs are still being finalized
Financial Closeout Steps
Final Invoice Preparation
Mark invoice as "FINAL," include all unbilled costs, and ensure it matches contract ceiling
Indirect Rate Settlement
For cost-type contracts, finalize indirect rates with DCAA or cognizant auditor
Subcontractor Settlement
Close out all subcontracts and obtain releases before final contract settlement
Fee Determination
For CPAF/CPIF contracts, calculate final fee based on performance and cost outcomes
Final Payment
Receive final payment after all documentation is accepted and release is signed
Retained Funds
Government may withhold 5-10% pending closeout. This is released upon completion of all requirements.
De-obligation
Unused contract funds are de-obligated and returned to the agency's budget upon closeout.
Property & Equipment Disposition
All government-furnished property (GFP) and contractor-acquired property (CAP) must be accounted for and properly disposed before closeout.
Disposition Options
- Return to Government: Ship to designated location at government expense
- Transfer: Move to another government contract
- Abandonment: Government waives title (contractor keeps)
- Sale: Contractor sells and credits proceeds
- Donation: Transfer to eligible recipient
Property Closeout Steps
- 1. Complete physical inventory
- 2. Reconcile with property records
- 3. Report discrepancies (lost/damaged)
- 4. Request disposition instructions
- 5. Execute disposition
- 6. Obtain property closeout certificate
Property Liability
Contractors are financially liable for lost, damaged, or destroyed government property unless they can demonstrate it wasn't due to negligence. Report issues immediately and document the circumstances.
Quick Closeout Procedures
FAR 42.708 allows for expedited "quick closeout" of cost-reimbursement contracts under certain conditions, avoiding lengthy DCAA audits.
Quick Closeout Eligibility
- Unsettled indirect costs ≤ $2 million
- Cumulative unsettled costs ≤ $2 million
- Agreement on final indirect rates
- No significant audit findings pending
- Good contractor past performance
- CO determines audit not warranted
Benefits of Quick Closeout
- • Faster final payment
- • Reduced administrative burden
- • Avoids lengthy audit process
- • Earlier release of retentions
Request Process
- • Submit written request to ACO
- • Provide final cost proposal
- • Propose indirect rate settlement
- • Await ACO determination
Common Closeout Issues
Delayed Final Invoices
Contractors often delay submitting final invoices while reconciling costs. Solution: Submit interim final invoice and adjust later if needed.
Unresolved Subcontracts
Prime contract cannot close until all subcontracts are settled. Solution: Start subcontract closeout before prime contract ends.
Missing Property Documentation
Incomplete property records prevent closeout. Solution: Maintain ongoing property tracking throughout contract performance.
Pending Indirect Rate Audits
DCAA audit backlogs can delay closeout for years. Solution: Request quick closeout or negotiate provisional rate settlement.
Outstanding Claims
Unresolved claims or disputes prevent closeout. Solution: Negotiate settlement or submit release with specific exceptions.
Frequently Asked Questions
How long does contract closeout typically take?
Firm-fixed-price contracts should close within 6 months if all documentation is complete. Cost-type contracts often take 2-3 years due to indirect rate audits. Quick closeout can reduce this to 6-12 months.
What happens if I discover additional costs after submitting my final invoice?
You can submit a revised final invoice before closeout is complete. Once you sign the release of claims without exceptions, you generally cannot recover additional costs. Always include known exceptions in your release.
Can I keep government property after contract completion?
Only if the government issues disposition instructions authorizing abandonment or sale. Never assume you can keep property without written authorization—this could constitute theft of government property.
What if the contracting officer is unresponsive during closeout?
Submit all required documentation in writing, follow up systematically, and escalate to the contracting officer's supervisor if necessary. Document all communication attempts—delayed closeout affects both parties.
How does closeout affect my CPARS rating?
Final CPARS evaluations are typically completed at or near contract completion, before administrative closeout. However, problems during closeout (missing documents, property issues) can negatively impact your final evaluation.
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