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July 23, 2015

The Department Does Not Fully Ensure Compliance With Contract Closeout Requirements

Self-Initiated
Project ID: 
ZA2015071
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Contract closeout is an important contract administration procedure that involves verifying that goods and services were provided as intended, validating final costs and payments, and freeing excess funds for possible use elsewhere. Timely and effective closeout ultimately protects the Government’s interests and helps agencies efficiently manage residual contract funds.

The Department does not fully ensure its Operating Administrations comply with Federal and departmental closeout requirements. Specifically, the Operating Administrations we reviewed—the Federal Aviation Administration (FAA), Federal Highway Administration (FHWA), National Highway Traffic Safety Administration (NHTSA), and the Office of the Secretary (OST)—did not fully comply with closeout requirements and frequently did not close out contracts timely. In total, 42 of the 58 closed contracts in our sample were not closed out within Federal Acquisition Regulation and Acquisition Management System timeframes. Our in-depth review of selected NHTSA and OST contracts files found also a lack of evidence that four key contract closeout steps were completed. Finally, because contract files were not always properly maintained, FAA, FHWA, NHTSA, and OST were unable to locate the files for 21 percent of the 120 total contracts in our audit samples.

The Department concurred with all five of our recommendations to help improve DOT’s compliance with contract closeout requirements.

Recommendations

Open

Closed

Closed on 09.28.2018
No. 1 to OST

Implement an oversight process for monitoring compliance with Federal and departmental closeout requirements.

Closed on 09.28.2018
No. 2 to OST

Issue additional departmental guidance on the contract closeout process. At a minimum, this guidance should include requirements for: file retention and storage, contract closeout file documentation, initial funds reviews, closeout of individual task and delivery orders, timely submission of adequate evidence of physical completion, and safeguards to prevent the destruction of contract files before closeout is completed.

Closed on 03.08.2019
No. 3 to OST

Require Operating Administrations' acquisition offices to update or finalize all internal contract closeout policies, including references to key Federal and departmental requirements.

Closed on 08.28.2017
No. 4 to FAA

Implement an oversight process for monitoring compliance with AMS closeout requirements.

Closed on 04.14.2017
No. 5 to FAA

Issue additional AMS guidance on the contract closeout process. At a minimum, this guidance should include requirements for: file retention and storage, contract closeout file documentation, initial funds reviews, timely submission of adequate evidence of physical completion, and safeguards to prevent the destruction of contract files before closeout is completed.