Contract Closeout . . . Getting it Done Efficiently

Breakout Session # D02 Lynne A. Hood Sr. Director, Procurement & Subcontracts Mindy Schreyer-Hughes Government Liaison Lead Concurrent Technologies Corporation March 18, 2016 9:00 a.m. to 10:15 a.m.

2 #NCMAsmtf

Objectives • Equip you to efficiently and effectively close

subcontracts;

• Provide “Lessons Learned” from both the Prime and Subcontractor perspectives.

3 #NCMAsmtf

Introductions

Mindy Schreyer-Hughes Government Liaison Lead

• Over 13 years of experience in Government Compliance field.

• Worked prime/subcontract closeouts throughout entire career at CTC.

Lynne Hood Sr. Director, Procurement & Subcontracts • Over 20 years of experience in

Procurement & Subcontract award & management, proposal development, and small business utilization.

• Successfully closed out over 1,000 subcontracts in the last 3 years.

4 #NCMAsmtf

Agenda

• When is a Contract Considered Closed • Contract Type & Closeout • The Process • Allowable Cost & Payment, 52.216-7 • Subcontract Management & Closeout

5 #NCMAsmtf

When is a Subcontract Considered Closed? • All of the following must occur for final closeout of a prime

contract or subcontract: Final delivery of the product or service Final amount owed to the contractor/subcontractor is

determined All claims have been resolved

6 #NCMAsmtf

Subcontract Type and Closeout Contract Type Closeout Requirements FAR 4.804-1

FFP Receipt, acceptance and payment Should be closed within 6 months after physical evidence of completion

T&M (no provisional indirect burden on non-labor)

Verification of rates and hours Should be closed within 20 months after physical evidence of completion

Cost Settlement of indirect cost rates in accordance with FAR 52.216-7, Allowable Cost & Payment

Should be closed within 36 months after physical evidence of completion.

7 #NCMAsmtf

When does the process start? • Pre-Award • Award • Administration • End of the Period of Performance

8 #NCMAsmtf

Pre-Award Contract Type

Closeout Considerations Verification

Cost Do not award a cost type subcontract to an organization that does not have a Government approved accounting system.

• Section K Certs & Reps • Copy of Government

Approval Letter

T&M Only award a T&M type subcontract if you have verified their timekeeping practices.

• Same as above • If no Government approval,

utilize an “Accounting Survey”

FFP Well defined deliverables. • Defined inspection and acceptance

9 #NCMAsmtf

Award Contract Type Considerations

Cost • Flowdown FAR 52.216-7, Allowable Cost & Payment • Fee Retainage

T&M • Flowdown FAR 52.216-7, Allowable Cost & Payment • If no Government approval of accounting system,

require timesheets be submitted with invoices

FFP • Defined inspection and acceptance

10 #NCMAsmtf

Award (Contd.)

• If you are awarding a flexibly priced subcontract, flowdown allowable cost & payment in Section I.

• Have Section H subcontract terms to ensure the subcontractor submits an incurred cost proposal.

11 #NCMAsmtf

FAR 52.216-7, Allowable Cost & Payment

• Applies only to cost and T&M subcontracts. • Addresses two key areas:

1. Interim reimbursement of costs 2. Determination of final indirect rates and

billing rates

12 #NCMAsmtf

Indirect Rate Process

Indirect Rate Proposal

• Negotiated “Provisional Rates”

• Billing rates

Incurred Cost Submission

• 6-months after FYE end • Determines “Claimed

Rates” • Adjusting Invoices

Final Audited (Negotiated) Rates

• 60 days to submit adjusting invoices; or

• 120 days for final invoice for all years in a multi-year award

13 #NCMAsmtf

Incurred Cost Submission • Schedule I – Schedule of Cumulative Direct & Indirect

costs claimed and billed by contract and subcontract • Schedule K – Summary of each T&M and labor hour

contract information, including labor categories, labor rates, hours, & amounts; direct materials, ODCs; and Indirect expense applied at claimed rates

14 #NCMAsmtf

Indirect Rate Process

Provisional/Billing Rate

• FY end 12/30/14 • FY14 – 100%

Incurred Cost Submission

• Submitted by 6/30/15 • FY14 Claimed – 110% • Adjusting invoice

Final Audited (Negotiated) Rates

• FY14 – Final 105% • 60 days to submit

adjusted invoice • 120 days if final year of a

multi-year award.

15 #NCMAsmtf

SUMMARY – 52.216-7 • Review and understand the clause. • Flow the clause down to your subcontractors. • Ensure compliance with the clause with good

subcontract administration.

16 #NCMAsmtf

Subcontract Administration • Know your subcontractor’s fiscal year end • Remind your subcontractor of their incurred

cost submission requirement • Receive proof of submission • Ensure you receive an adjusting invoice

17 #NCMAsmtf

Subcontract Administration (Contd.)

• At the subcontractor’s fiscal year end, send a reminder of their incurred cost submission and adjusting invoice requirement.

18 #NCMAsmtf

Subcontract Administration (Contd.)

• If after six months, you have not received proof of submission and an adjusting invoice, send another reminder.

• Notify ACO they have not adhered to 52.216-7.

This is CTC’s second and final request for verification of your submission. If CTC does not receive verification by March 30, 2016, we will notify our Defense Contract Management Agency (DCMA) Administrative Contracting Officer (ACO) that proof of submission has not been provided. Consequently, CTC’s ACO will request proof of submission from ABC Company’s cognizant ACO or Defense Contract Audit Agency (DCAA)).

19 #NCMAsmtf

Subcontract Administration (Contd.)

• If your transaction is T&M and your subcontractor does not have an ACO, request a Schedule K.

20 #NCMAsmtf

Subcontract Administration (Contd.) Schedule K

ADDRESS

CONTRACTLABOR

CATEGORY(NOTE 1)

RATE HOURS AMOUNT(2)

Labor Category $0.00Labor Category $0.00Labor Category $0.00Labor Category $0.00Labor Total - $0.00Material Costs (Note 3) -$ Travel (Note 3) -$ G&A @ XX% (Note 4) -$ TOTAL - $0.00TASK CEILING

Explanatory Notes:(1) Represents effort performed by the company. Any Subcontract effort should be identified separately.(2) Represents rates specified in the contract, which may be higher or lower than actual rates incurred.(3) Represents actual costs recorded in the cost records.(4) G&A applied at the claimed rate to Material and Travel Costs only.

Signature:

Name of Certifying Official:

Title:

Date of Execution:

This is to certify that I have reviewed this proposal to establish final indirect cost rates and to the best of my knowledge and belief:1. All costs included in this proposal (identify proposal and date) to establish final indirect cost rates for (identify period covered by rate) are allowable in accordance with the cost principles of the Federal Acquisition Regulation (FAR) and its supplements applicable to the contracts to which the final indirect cost rates will apply; and2. This proposal does not include any costs which are expressly unallowable under applicable cost principles of the FAR or its supplements.

NAME

SUBCONTRACT # XXXXXXXXXPRIME CONTRACT # XXXXXXXXXXX

SUMMARY OF HOURS AND AMOUNTS ON TIME AND MATERIAL/LABOR HOUR CONTRACTSFISCAL YEAR ENDED 20XX

CITY, STATE ZIP

Sample Schedule K

21 #NCMAsmtf

Utilize/Develop Tracking Tools • Automate as much of the administrative tasks

as possible. • Use tools your company has in-house. • Utilize standard email templates for requests

and follow-ups.

22 #NCMAsmtf

Subcontract Information Management System (SIMS)

23 #NCMAsmtf

Subcontract Information Management System (SIMS) (Contd.)

Initial Reminder for 12/30 FY End 2nd Reminder if not received From: simsLS@ctc.com [mailto:simsLS@ctc.com] Sent: Thursday, January 2, 2016 8:57 AM To: Hess, Christian Subject: Do not reply: simsLS Incurred Cost Submission for Subcontract Number 123450047

Christian:

This is a reminder to send an Incurred Cost Letter for Subcontract Number 123450047.

Subcontract Number 123450047 Vendor ABC CORP

Letter Due Date 1/30/2016

Please update simsLS once the Incurred Cost Letter has been sent to ensure proper tracking of administrative requirements.

Thank You.

From: simsLS@ctc.com [mailto:simsLS@ctc.com] Sent: July 1, 2016 7:52 AM To: Hess, Christian Subject: Do not reply: simsLS Incurred Cost Submission *Second Reminder* for Subcontract Number 123450047

Christian:

This is a second reminder that under the terms of Subcontract Number 123450047, documentation substantiating that in an Incurred Cost Proposal has been submitted to the Government by ABC CORP is past due. Please notify the Subcontract that CTC intends to notify our ACO if the documentation is not received within the next two weeks.

Subcontract Number 123450047 Vendor ABC CORP

Incurred Cost Proposal Due Date 6/30/2016

Please update simsLS once the documentation has been received from ABC CORP to ensure proper tracking of administrative requirements.

Thank you.

24 #NCMAsmtf

Subcontract Information Management System (SIMS) (Contd.)

25 #NCMAsmtf

End of Period of Performance • Initiate the process early. • If cost type or T&M with provisional indirect rates, verify

status of final audits with subcontractor. • Utilize tracking tools. • Have closeout checklists for each subcontract type

(CR/CPFF, T&M and FP).

26 #NCMAsmtf

Initiate the Process Early • Generate monthly report that lists all subcontracts with a

POP end date as of the last day of the previous month. • Send out closeouts forms (Program Manager Acceptance

Report, Release of Claims, Property, etc.) • Have Contracts Department provide a report listing prime

contracts with a POP end date as of the last day of the previous month.

27 #NCMAsmtf

Verify Status of Subcontractor Audits

• Determine if the subcontractor has final cost audits for the POP of the subcontract.

• In most cases, the answer will be no! • “Audit Expediting”

P.O. # VENDOR FY END TYPE POP POC STATUS ACTION

12345678

ABC Company

31-Jan CPFF 5/27/2010 TO 3/31/2011

11 & 12 John Smith John.Smith@abc.com

12/30/2015 - Per John Smith ABC has final rates for FY09 and FY10

Follow-up June 2016.

87654321

CPFF 11/20/2011 TO 3/30/2012

12 & 13

28 #NCMAsmtf

Utilize Tracking Tools – “Closeout Matrix” • Have a means of checking the status of closeouts.

Fiscal Year

P.O. Number Project Number Vendor Type Closeout Buyer Status Notes

FY09 65780001 1234 ABC Company T&M Brown, Charles Closed 7/17/2013 - Closeout complete; 7/11/2013 - Received all closeout forms; forwarded to Finance for approval; 4/12/2013 - Requested status update; 3/15/2013 - Requested status update; 2/12/2013 - Completed and forwarded Form 266 for approval; 1/16/2013 - Received signed Form 252 from PMt; 1/14/2013 - Requested closeout documents and Schedule K's; 1/11/2013 - Requested Form 252 from PMt

FY09 89705030 5678 Smith, Inc. CR Jones, Mark Closed 9/24/15 MASH Approved FY09 09574730 9876 Small Business LLC FFP Smith, Joe Closed FY09 86858030 5431 Big Company, Inc. CPFF Anderson, Sally In Process 8/17/2015 spoke with Mr. Big concerning closeout of

low dollar ($16K) CPFF subcontract. Mr. Big provided that I should send the information to Ms. Small to assign a closeout administrator. Ms. Small ooo email thru Aug 21. 8/12/2015 - Per Ms. Small FY08 rates are final. Proceed with closeout. 6/5/2015 - Per Shaun Cummings expect 2008 letter in July.

FY09 86747368 6543 New Inc. T&M Smith, Joe 10/16/12 – Old, Inc. acquired by New, Inc. Emailed Alex Jones requesting a POC at New Inc. to assist with closing out Old, Inc. subcontracts. Awaiting his response. 05/28/2012 Requested invoice support, revised release and DD882. 12/17/2012 Requested Status Update 11/19/2012 requested timesheets and travel expense reports per Alt Audit Program. Response requested NLT 12/07/2012.

29 #NCMAsmtf

Work Closely with ACO • Discuss high risk vs. low risk subcontracts and

subcontractors. • Government audit vs. copies of Schedule I or K

from Incurred Cost Submission • Dollar thresholds • A good relationship with the ACO goes a long

way in getting things done!

30 #NCMAsmtf

Utilize Checklists • Have a checklist for each type of subcontract.

Cost T&M Fixed Price

31 #NCMAsmtf

Summary • Closeout considerations begin at award. • Understand 52.216-7 and how it impacts

closeout. • Conduct good subcontract administration. • Initiate closeout early. • Monitor status of closeouts. • Work closely with your ACO.

32 #NCMAsmtf