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News | Nov. 16, 2016

Contracts group leads effort to reduce overage contracts

By Marta Akopyan DCMA Garden City

The Defense Contract Management Agency Garden City Contracts Group spearheaded an office-wide effort to reduce overage contracts and improve contract closeout actions, surpassing its fiscal year 2016 goals for all contract closeout performance measures.

By the end of the fiscal year, the contract management office’s employees had reduced the number of cost-type contracts by 55 percent, reduced the dollar value of cost-type contracts by 47 percent, reduced firm-fixed-price overage contracts by 51 percent, and closed 100 percent of new cost-type contracts within 180 days.

Closing overage contracts has become a priority for the Department of Defense in recent years due to a high volume of contracts not being closed on time, according to the Government Accountability Office. Overage contracts are those that have not been closed in the time frames prescribed by federal regulations. Closing a contract includes tasks such as verifying that goods and services were provided and making final payment to the contractor.

The GAO released a report in 2012 highlighting the importance of contract closeout procedures. According to the report, closing contracts within required time frames can limit the government’s exposure to certain financial risks. One reason why some contracts are not being closed is the large backlog of incurred cost audits that must first be completed by the Defense Contract Audit Agency to ensure the costs contractors have incurred are permissible under government regulations, the report indicated.

Navy Capt. Michael Murphy, DCMA’s Eastern Region commander, tasked the contract management offices to develop closeout strategies to reduce the number of overage contracts. DCMA Garden City established FY16 goals to reduce the number of overage cost-type contracts by 20 percent, reduce the dollar value of overage cost-type contracts also by 20 percent, reduce overage fixed-price contracts by 50 percent, and close 90 percent of all cost-type contracts within 180 days after settlement of indirect rates.

Eileen Kelly, DCMA Garden City Contracts director, said the closeout strategy included training personnel on closeout and reporting procedures, analyzing performance data from DCMA Operations to track, and monitor overage contracts and collaborating with other groups throughout the office. Employees also received on-site Mechanization of Contract Administration Services training provided by the Functional Information Resource Management Center.   

MOCAS is an electronic contract management and payment system that tracks the status of contracts via Contract Administration Report section number codes. For example, active contracts are designated as Section 1 while physically complete contracts are categorized as Section 2. Physically complete contracts are those where supplies or services have been accepted, but the final payment has not yet been made to the contractor.

“The biggest challenge was to ensure we were proactive in our approach to monitoring physically complete contracts as they moved to Section 2 so actions were completed in an expedited manner,” said Kelly. “Our goal was to ensure contracts closed in accordance with the (Federal Acquisition Regulation) mandated time frames.”

Kelly held weekly meetings with team leaders as well as monthly meetings with DCMA Garden City Director Neil Mintz and Deputy Director John Westerhaus, to discuss the overage status. Kelly encouraged team leaders to work with their administrative contracting officers and contract administrators to close simple contracts such as firm-fixed-price contracts with zero unliquidated obligations as soon as possible and to stay on top of contracts that were more challenging to close.

“Reduction of overage closeouts is a significant effort for the CMO and a top priority. It’s so important that I check the status first thing in the morning and discuss progress with the Contracts director daily,” said Mintz. “Our focus on resolving issues to close the 10 oldest is also a key part of our strategy.”

Mintz credits multiple groups across the office for the success against the contract closeout metrics.

“Quality assurance and manufacturing efforts to accept product and identify physically complete contracts are necessary to move the contracts to MOCAS Section 2 to begin the timeline for closure,” he said. “The effectiveness of the efforts in QA and manufacturing can help to make it possible and sometimes easier for a timely closeout by our Contracts group.”

He also highlighted the support from property administrators, stating “their efforts to focus on timely property clearance have also enabled CMO success.” 

The work is not over as more contracts fall into the overage category every month, said Mintz, but DCMA Garden City is determined to stay ahead of the game by closing contracts before they become overage.

“Our people are very engaged and delivering outstanding results,” he said.

To read the GAO report on reducing contracts, go to DOD’s Efforts to Reduce Its Contract Closeout Backlog.