On April 30, 2019, DOD published a final rule, effective immediately, amending the DFARS (Defense Federal Acquisition Regulations) to implement Section 836 of the 2017 NDAA. Section 836, as further amended by Section 824 of 2018 NDSS, authorizes the Secretary of Defense to closeout certain contracts or groups of contracts via modification of the contacts without completion of a reconciliation audit or another type of corrective action.  Sections 836 and 824 apply to contracts that are at least 17 years old prior to the current fiscal year that have not further supplies or service due and have a determination that the contracts records are no longer reconcilable because-

  • “The contract or related payment records have been destroyed or lost,” or
  • “Although contracts records are available, the time or effort required to establish the exact amount owed to the Us Government or amount owed to the contractor is disproportionate to the amount at issue.”

Closeout of these contracts will be completed through a negotiated settlement with the contractor and any remaining contract balances will be offset with balances within the contract or on other contracts, regardless of the year or type of appropriation obligated to fund each contract or contract line item, and regardless of whether the appropriation has closed.

Contracting officers will complete the closeout by issuing a modification to be signed by both the contractor and the government.  If a group of contracts are being closed, the contracting officer needs only to issue a modification requiring the contactor’s signature with at least one of the contracts in the group to reflect the negotiated settlement for the group of contracts.  After which the remaining contracts in the group may be modified without obtaining the contractors signature. (84 Fed. Reg 18,153 (April 30, 2019)).

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Reference: Contract Management, pg. 76/ June 2019

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