Contract Closeout - Best Practices

Roy DeLauder, CPPM, CF Virginia Gaston, CPPM

General Dynamics Advanced Information Systems, Inc.

AGENDA• Contract Closeouts 101• What does it mean to close out property?• Why is closing out property important?

– External drivers;– Internal drivers;

• What are the benefits to your company for closing out contracts?• What “tools” do we need to close out property?

• 2012 Best Practices Award• Breakout Session

• Create a checklist to take back to work with you!• Work in progress - changes in the process.• Wrap up;

• Share Checklists• Q&A.

Why Do We Do Contract Closeouts?• FAR 4.804-5 requires the Contracting Officer to collect

evidence of the following to close out a contract:• Classified information has been disposed of.• Contractor provided a FINAL Invoice (including final

rates).• All deliverables under the contract have been met.• Subcontracts are settled by the prime contractor.• “Property clearance has been received.” (FAR

4.804-5(a)(6)• Patent report is submitted (if applicable).

Why Do We Do Contract Closeouts?

CA$H

Final Payment!

Requirements for Property?• Upon completion of a contract, all property accountable to

the contract must be accounted for and disposed of.• Transfer;• Shipment;• Disposal by Instruction (“Agent on their Behalf”)

• Includes all property, equipment and material. All work locations (including subcontractors).

• The requirement is to have a zero balance of property.• Certification requirement.

• Closing out property is driven by internal and external processes and customers.

Additional Drivers for Property• Final Deliverables/Acceptance.

• What are your customer’s expectations?• Customer’s expect us to perform contract

closeouts efficiently to protect their interests and free up current year program priorities.

• What do you have to supply your customer?• What does your contract state? Your

procedures?

What other benefits for completing property closeout?

• Reduces Cost / Saves money!–Storage costs.–Labor costs.

• Mitigates risk of property loss, theft, and damage.

• Audit risks.

What “tools” are useful in closing out property?

• What has been successful for General Dynamics Advanced Information Systems PMO?

• Developing / Maintaining Metrics.• Contract / Subcontract Databases.• One Repository• Historical Files.• Closeout notices.• Closeout Checklist.

NPMA BEST PRACTICES AWARDBest Practices Award for Corporation/GovernmentContractor: General Dynamics Advanced Information Systems Property Management Organization represented by Roy Delauder, CPPM, CF (NOVA Chapter)Roy and team members developed tools and procedures for the contract property close-out process that standardized documentation and provided quick responses for close-outs which helped to track status, provided a repository for speedy acknowledgements, and advanced the close-out of contracts so that final billings could be performed in a timely manner.

Organization Background Information

• General Dynamics Advanced Information Systems subsidiary of GD.– General Dynamics Advanced Information Systems put together via

acquisitions.– Legacy companies had own Property Control Systems and Accounting

Systems.

• Customer Property individuals from the legacy companies:– Had little or no direction from management as to how to make this work.– Developed vision: To be one seamless team that is recognized by General

Dynamics Advanced Information Systems as a key strategic partner, and by the defense industry as a leader in the field of Property Management.

• General Dynamics Advanced Information Systems Property Management organization has developed tools and processes that standardize:– The documentation.– The contract property close out process.– Ability to respond quickly in closing out property on a contract.

Situational Analysis• New Company losing money due to

contract close outs.• Property team had no standard way of

doing closeouts.• No way to verify that a specific contract

was closed other than to interview the responsible Property Specialist.– But what if they had left the company?– Finding property on contracts that had been

closed…

Solutions Evaluated and Best Practices Deployed

• Developed a database:– Active;– In Closeout;– Closed;

• Developed a checklist.

Adoption, Challenges and Lessons Learned

• Training on the importance of contract close out.

• Team of Property Specialists with backgrounds in different property environments:– Office;– R&D;– Laboratory;– Warehouse;– Manufacturing;– Deployed Services.

Realized Benefits• Database is a repository of close out

documentation open to all in Property team.– We know which contracts have been closed and

which have not.– Tracks close out status.

• Checklist has been very helpful in ferreting out problems.– Revised a couple of times.

• Between 2009 and March 2012 – General Dynamics Advanced Information Systems PMO closed 2,997 contracts for Property.

• Drives a company wide standardized approach.

• Provides simple step by step instructions.

• Historical record of completed steps taken. (Closeout can take a while.)

• Documentation for audits.

Why is a closeout checklist important?

What to include?

• Contract Data.• FAR and Statement of Work Requirements.• Point of Contacts.• Property Record collection points /

Databases.• Tasks to be performed.• Task assignments.• Check-off fields for task completion.

The Checklist

• For the next 15 minutes we are going to break into small groups. We have assigned a leader for each group, a scribe, and would like everyone to participate.

• How will your checklist look?• What information will you

need?• Where will you need to look for

property?

Break out session

Our Checklist• Originally had two checklists:– Short Form. • Contracts that had no property, no

materials, no purchases, no subs.• 6 steps to close.

– Long Form• Contracts that had property, materials,

purchases, or subs.• 18 steps to close.

Problems forced a Change• Subcontracts held up property closeout, as

they were the last items to be worked or were not closed prior to final property closeout

• Found property remaining on closed contracts.

• Multiple locations for various programs.• MRP access limited to specific individuals.• Materials still remained against charge

numbers for FFP contracts.• Checklists not being initiated until the end.

Consolidation of the Checklists

• Merged the checklists into one.– 8 steps if there was never any property,

materials, purchases, or subs.– 17 steps for property, materials or subs.– Final review, submission & filing by Property

Contracts Database Administrator.

• Checklist is initiated by the Contracts Database Administrator & sent to the Property Specialist to begin closeout.

• Rearranged the steps to put subcontracts at the start of the process.

Consolidation of the Checklists

• Requires email confirmation from the PM that no property or materials ever existed as the final step for the “short version”.

• Requires dates & initials for each step to ensure proper completion.

The Steps1) Contract Database Administrator

verifies that the contract can be closed.

2) Contract Database Administrator updates PMO Contract Database.

3) Contract Database Administrator contacts Subcontract Specialist. - Are there any Subcontractors? Yes or No.

The Steps4) Contract Database Administrator Notifies Property Specialist of Closeout. 5) Run or request a purchase order report, check DD1149 and Return To Vendor logs to determine if there are any open orders or expected return shipments. 6) For manufacturing locations that use work/shop orders, review the MRP/ERP system or contact manufacturing operations to determine if there are any open work orders.

The Steps7) Check for/obtain property listings of residual material/equipment from all existing inventory and property databases.8) Contact PMO Subcontracts Specialist for existing subcontracts with Property. Are there Subcontractors with Property?- If the answers to steps 5-8 are NO – “short form” now ends here with written PM confirmation.

The Steps9) Notify UID Coordinator of closeout.10) Conduct walkthrough of all known shops/labs for residual material or excess property.11) Perform Physical Inventory of residual property that is on record.12) Perform screening of residual property.

The Steps13) Request contract modifications to transfer residual property.14) Submit residual property listings / inventory schedules to Customer.15) Execute disposition instructions as directed by DCMA / Customer.16) Verify the closure of all Property Lost cases.

The Steps17) Verify that ALL Records in ALL Systems have been Updated.*******************************Closeout documentation along with contract closeout checklist is now sent to the Contracts Database Administrator for the final steps.

The Steps18) Submit contract closeout documentation to internal and external customers.19) Contract Database Administrator updates Contract Database.20) Contract Database Administrator ensures all closeout documentation is completed and placed in storage as required.

Group Readouts

1) How many steps did you have?2) Were there any additional tasks

that you have that is unique to your customers or your company?

3) Do you currently have a checklist? Do you think it is a tool that will be helpful to you during the process?

Wrap Up

• There is no “perfect property closeout”. • The closeout of the property is only as good as

the property specialist performing it and the tools they are using!

• We hope this class got you thinking about your property closeout process and that perhaps you can use the checklist you created today, when you return home from the NES.

Questions? Please Contact:• Roy DeLauder, CPPM, CF

ManagerProperty Management OrganizationRoy.Delauder@gd-ais.com

• Virginia Gaston, CPPMAdvanced Specialist 3 - Property Property Management Organization

Virginia.Gaston@gd-ais.com