Free «Procurement Close Out» Essay

Introduction

Project closeout is the final significant phase of a project's or a procurement's life span. Contract and procurement closeout is the administrative procedure done at the end of an agreement between a business and a supplier as well as archiving of documents involving the contract (Arkansas, 2009). The close out phase is done after all defined project goals and objectives have been accomplished and the client has accepted the product of the project. Therefore, the process of closing a project is a task that occurs regularly with every contract. The closeout process occurs once the supplier has completed contract performance successfully and has been compensated accordingly. It also occurs when the contract has been terminated for inconvenience or default. The main purpose of procurement and contact closeout is to make sure that all contractual requirements have been complied with by the supplier and that the needs of the client have been fully met (UPS, 201). Many organizations and government agencies demand that all procurement details and documents to be closed out once they have finished full processing.

Fully Performed Contract

A contract is regarded to be fully performed and well completed when the following takes place:

Supplier has fully completed all the required deliveries, while the targeted client has subsequently accepted the products after he has prudently received and inspected the product.

The IT Company should have installed all the voice devices as well as data installations required by the organization and stated in the contract (Arkansas, 2009).

The contract performance has officially been assessed and evaluated with the appropriate effectiveness with the final payment having been settled. Installation of all the required voice and data devices by the telecommunication company procured will be a contractual performance if the contracting firm accepts their service.

A mutual close out decision has been made where the parties agree not to renew the contract or not to perform options specified in the contract (Field, 2010). If the organization agrees with the IT Company not to continue with installation, then the contract will have been deemed to be terminated and closing out procedure is to bee commenced.

Contract Closeout Activities

Scope verification: This takes place during the end of tasks and phases related to the project to make sure that all requirements for that phase, task or project have been fully accomplished. It shows that prudent business decision was applied during the entire purchase project (Arkansas,).

Financial review: is done to determine the payment of all the invoices and whether the real costs matched the projected budget. All the invoices and payments are described in detail to ensure all payments are done.

Product delivery and acceptance: This involves delivery and acknowledging the receipt of the services in conformity to the specified contract requirements. This step should conform to items in the deliver and receive contact clause requirements.

Client sign-off: This takes place after the acceptance of the products by the client. These are the products defined in the contract and the client must sign them off after the delivery. This acts as the acknowledgement of receipt of products and allows for the process of closeout of the contract to commence (Arkansas, 2009).

Inventory management: Involves proper handling of the products accepted since they don’t require any input from the supplier and are now under the responsibility of the client's item manager.

Personnel reassignment: Upon termination of contract, the client should ensure that his purchase and procurement team members dealing with the client organization are deployed to future projects or assigned other current projects.

Closing and archiving of files: All the reports and plans related to the projects and any other related documentation including the contract files should be closed out and archived at the end of the project. The contract file usually contains adequate documentation that can permit an outsider to peruse and understand the firm's business decisions as well as the procurement process. After contract closeout procedures are completed, firm must officially show that the client sign-off is done and include all related concerns and data into the contract file.

Activities Before Closing out Files

In the government procedures, before closing out any procurement document, the contractor firm first should abide with the terms and conditions set in the contract. These terms will include, for example, performing administrative actions like submitting and clarifying patents and royalties of the voice and data devices and programs. The government or any prudent firm's document closeout will only take place when a document is actually complete which implies that:

All required data and voice installations have been delivered, installed, inspected and accepted by the firm.

All IT services have been installed and accepted by the firm.

All options and provisions have been observed.

The contractor IT firm has received a complete contract termination notice from the contracting client.

The contract period between the IT firm and the client has expired.

After all administrative procedures have been fully completed, final payments done and all disputes settled a closeout can take place. It is also notable that once the closeout process has been started, it cannot be stopped or reversed.

Close out Contract Files Procedures

The administration office of the contract is responsible for starting the contracts administrative close out once the office receives a proof of its actual completion. Actually, the contract administration office has to review the funds status of the contract and inform the contracting office in case of excess funds to allow the office to deobligate (Virginia, 2011). The administrative closeout activities should ensure that:

(1) Disposition of contractual classified documents and material is completed;

(2) Final copyright and patent report is cleared. In case a final patent report is needed, the officer in charge of contracting may continue with the closeout according to the following procedures or set by the two parties;

(i) The final patent and copyright reports should be done and cleared 60 days after the receipt;

(ii) In case this report is not received, the officer in charge of contracting shall inform the contractor of his obligations and the firm's rights under the patent rights clause applicable;

Upon failure to respond to this notice, the contracting officer can continue with the contract closeout, but after consultation with the responsible authority regarding the contractor's response failure.

(3) After its presentation, the final royalty report is cleared.

(4) There is no outstanding concern or value awaiting change proposal.

(5) Technical clearance report is presented and received.

(6) Ownership clearance is also received.

(7) All interim expenditures or disallowed costs are paid out.

(8) A comprehensive price revision is fully completed.

(9) Subcontracts, if any, are fully settled by the major contractor.

(10) Indirect costs and rates for previous years are fully settled.

(11) Termination docket and role is completed.

(12) Contract audit is done and completed.

(13) Contractor's final statement is completed.

The final contractor's invoice is presented and contract funds review is done where any excess funds are deobligated. When the actions stated above are verified, the contracting officer must ensure that a contract completion statement is prepared. This statement will compose of contract administration office details, contracting office details, contract number, last modification number, last order number, contractor details, excess funds amount, if any, and payment voucher number details if final payment is made. It should also contain the invoice number, contracting officer’s details and a statement declaring that all contract administration requirements are fully and satisfactorily completed.

After the statement is completed, the officer in charge of contracting will ensure that the signed original in the contract file is placed in the corresponding contract administration file at the contracting office.

Close Out Details

The contract closeout procedure begins at contract receipt and evaluation and continues over the span of the contract. The contracting firm's input data should accurately record the contract so as to make sure there is proper management, pay settlement and closeout process.  When all the requirements have been met as per the contract and the contract is fully complete, it needs to be moved to the close out unit 2.  The simplest contracts to close are the fixed price contracts with single accounting referencing and with no special provisions.  Cost differentiated contracts with several clauses and special payment provisions usually take longer and are more complex.

Final Close Out

After the contract is actually complete and moved to the second unit, the contracting office will present a contract completion statement to the contracting office. The contract completion statement will commonly be presented to the buying office to provide notice of actual completion. However, it should not be finished if the contract is in under appeal, or litigation, pending termination. After the contracts are moved to final close out unit, they should be periodically evaluated to review their status.

Problems in a Contract Close Out

There are several closeout problems that gradually increase in difficulty in the course time. Failure to locate supporting documents and dependence on hard copies of documents are the two regularly experienced problems.  Additionally, if financing challenges occur before the contract closure, suitable financial adjustments are limited and accounting payment errors are experienced.  It can also be difficult to identify and locate the contracting officer responsible for reorganizations and contract closures directed by the Base Realignment and Closures Commission.  Additionally, if a company is bought by another firm, then the holding company takes over contractual responsibilities of the target. This adoption of prior agreements that were not signed by the gaining company contributes to the difficulty faced while closing the old contracts. 

Reducing the Close out Problems

Contact close out problems may be reduced or eliminated by ensuring that the special provisions, contract funding, line items and payment instructions including changes that result from modifications are correctly entered and monitored. Maintaining a clear supporting documentation for delivery and pay settlement transactions will also simplify the close out process. Proper monitoring of payments to ensure accuracy and exact compliance with instructions and special payment will help simplify the process. The contracting officer should also aggressively manage the final cost process to make sure that contractors present their proposals and payment proposals within the agreed timeframes.

Close out Payment Instructions

The contracting firm must review contract payment procedures and provisions to determine compliance with the latter. All contracts with several funded contract items and line aspects must provide proper, adequate and clear payment provisions. These payment instructions should be revised if more provisions are added to the contract.

Special payment provisions are usually placed in the procurement section of the contract when needed.  The procurement department team is responsible for including these instructions to the IT firm notifications. Verifying payment accuracy and any report differences immediately will simplify the procurement process. It is prudent enough to provide contracting office with budgeted cost estimates for the expected cost in conformity with cost clauses of the contracts. The final voucher is prepared not later than 4 months once the settlement of overhead rates is done

Audit of the Close out Process

To audit a close out process, the main activity is to research and analyze the procedure used by the agency to close out contracts. An examination is done on whether the close out process adequately complies with the specified standards and regulations. The auditor identifies the number of physically completed contracts that surpass the time limitations set by the procurement or contract to finish the contract closeout procedure. The examination is to determine and assess whether the reasons for surpassing the set limitations are justified for the audited contract. An examination on the amounts not closed and lacks sufficient reasons and causes for the lateness in carrying out the procedure as necessary is also done. The auditing also assesses the procedures applied to close out the contracts based on the selected basis for review. This helps to determine whether the contract completion declaration documents are cleared and comply with the contract clauses. Finally, the audit should also assess the process to determine whether special issue areas, like patents and inventions, were in compliance.

Conclusion

After all contracting and procurement actions and contract close out procedures, it is prudent to review and assess not only the contract project, but also the closeout experience. The contract close out typically has obligations that should be deobligated which results to potential monetary benefits and implications that any officer can take advantage of. All open contracts should be evaluated to determine the unneeded outstanding contractual and financial obligations so as to minimize contract related problems.