Chapter 6: Contract Administration
Table of Visuals
- All administrative record-keeping and file management requirements in the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) apply under contingency, humanitarian assistance, and peacekeeping conditions.
- Contract files must be organized and sufficiently annotated to document the actions taken and the supporting rationale for the entire procurement process.
- The use of electronic business tools can automate some aspects of contract administration and are key in ensuring data accuracy and overall transparency.
- Contracting does not end with contract award. Contract administration ensures that customer needs are satisfied and that the contractor has been paid for performance.
- Fast and accurate reporting is critical to satisfactory contract performance. This includes timely identification and documentation of contractor performance.
- Contracting officer’s representatives (CORs) must be appointed and properly trained.
- When the contractor satisfactorily completes the terms of the contract and final payment is made, the contract file should be closed out as soon as possible.
- Redeployment and demobilization place demands on the contingency contracting officer (CCO). The CCO must coordinate with the operational planners and Defense Logistics Agency (DLA) in the associated reduction of equipment, personnel, and services.
A subset of contracting, contract administration includes efforts to ensure that supplies, services, and construction are delivered in accordance with the terms, conditions, and standards expressed in the contract. Contract administration is the oversight function, from contract award to contract closeout, performed by contracting professionals and designated non-contracting personnel. It includes ensuring that both parties (government and contractor) meet the specified terms and conditions of the contract. Contract administration is composed of more than 90 functions, described in FAR part 42 and DFARS part 242, including monitoring contract compliance, administering property, and assuring quality. Contract administration during contingency operations is referred to as contingency contract administration services (CCAS)(1).
This chapter discusses the actions that a CCO should take to administer a contract (including documentation), from contract award to contract closeout, while supporting in contingency environments. Such administration includes monitoring, transferring, terminating, and closing out contracts.
Contract administration documentation involves record keeping and ensuring the documentation is adequate for an audit trail. The importance of accurately documenting all purchases, especially in a contingency environment, cannot be overemphasized. Because normal checks and balances and electronic administration tools might not exist right away in contingency environments, CCOs should put due diligence in maintaining hard-copy contract files with proper documentation to “tell the story” of the respective acquisition. CCOs can be assured that auditors, inspectors general (IGs), and external agencies like the government Accountability Office (GAO) will request paperwork and other sources of contract data during inspections, investigations, or audits during the contingency or soon thereafter.
Problems and high-risk areas. Contingency contracting involves unique challenges. Effective contract administration and a healthy awareness of certain contracting risks can help prevent problems, now and in the future. The establishment of effective administrative procedures, audit capabilities, and maintenance protocols early in a contingency situation can greatly enhance supportability and minimize potential fraud, waste, and abuse problems. Areas of concern include the following:
- Difficulty obtaining detailed documentation from contractors. The problem of incomplete contractor documentation holds true, not only for documents supporting contractor claims, but also for general purchases, because many overseas vendors operate on a cash-and-carry basis and are not in the habit of furnishing paper receipts or using invoicing procedures. (FAR subpart 4.8 and DFARS subpart 204.8 contain guidance on record keeping.)
- Field ordering officer (FOO) operations. The use of FOOs allows maximum flexibility in supporting field operations. However, their use entails a greater risk of fraud, given the delegated authority to non-contracting personnel. Training and strong oversight by the CCO are required. FOOs who deviate from the regulations or misuse their authority must be immediately terminated.
- Blanket purchase agreements (BPAs). Although BPAs are easy to set up and use and can serve well in certain situations, BPAs physically located with the customers and set up for customers to call from their physical location (commonly known as decentralized BPAs) can be risky. Common risks include exceeding periods of performance (POP), breaking price ceilings, and lack of overall contractor accountability.
- Relief in place/transfer of authority (RIP/TOA). When military units replace each other during the RIP/TOA process, the contracting office must coordinate with the incoming and outgoing forces to ensure all operational contracting assignments are turned over to the new unit. Such responsibility transfers include property books and the assignment of CORs and FOOs.
- Advance payments. Advance payments and progress payments are normal procedures in the Continental United States (CONUS), but in a contingency, these procedures can be extremely risky. Vendors might not return to complete the agreed-upon work.
- Redeployment and demobilization. The risks associated with redeployment and demobilization decrease dramatically with the timely involvement of the various commands and personnel associated with contingency contracting Phase IV, “Redeployment.” These include DLA, operational contract support (OCS)/ contingency planners, operational commanders, and the United States Transportation Command (TRANSCOM).
Contract files must be organized and sufficiently annotated to document the actions taken and the supporting rationale for the entire procurement process. This includes use of BPAs, governmentwide commercial purchase cards (GCPCs), and other mechanisms outside standard contracting procedures.
The following questions will help in determining whether the contract file has the requisite information to protect the government’s interests and the CCO:
- Does it contain all of the required and pertinent acquisition information as required by the FAR and DFARS?
- How will it be reviewed and understood if it ends up in court?
- Will the follow-on CCO understand the acquisition history by reviewing the standalone file?
- Will it hold up to the scrutiny of an inspection, including efforts to track funds and transactions through forensic investigation or forensic accounting?
CCOs must do the following to help ensure the contract file tells the acquisition story:
- Furnish essential facts (include a description of the acquisition environment) used as a basis for informed decisions at each step in the process.
- Document the rationale for actions taken, for example, deciding an agreed-upon price was fair and reasonable and restricting competition.
- Furnish a complete audit trail that may be used to support reviews and future investigations, litigation, or congressional inquiries.
File contents. The following are examples of the records normally contained in contract files, if applicable (FAR 4.803):
- Purchase requests (PRs), acquisition planning information, and other pre-solicitation documents
- Justifications and approvals (J&As), determinations and findings (D&Fs), price negotiation memorandums, and supporting documents
- Evidence of availability of funds
- Lists of sources solicited
- Independent government estimates (IGEs)
- Copies of solicitations and all amendments
- Copies of each offer or quotation and related abstract and records of determinations concerning late offers or quotations
- Contractor contingent fee representations and other certifications and representations
- Pre-award survey reports
- Source selection documentation
- Cost and pricing data and certificates of current cost or pricing data
- Packing, packaging, and transportation data
- Cost or price analysis
- Records of negotiation
- Required approvals of award and evidence of legal review
- Notices of award
- Original signed contracts, all contract modifications, and documents supporting modifications
- Notices to unsuccessful bidders or offerors and records of any debriefings
- Post-award conference records
- Orders issued under the contract
- COR appointment letters and training
- Quality assurance records
- Property administration records
- Bills, invoices, vouchers, and supporting documents
- Records of payments or receipts
- Receiving documentation
- Contract completion documents.
The program executive officer (PEO) for simulation, training, and instrumentation was unable to support fair and reasonable price determinations for more than $94 million in acquired supplies and services that supported training efforts for warfighter field operations. This occurred because contracting officials lacked required documentation, such as properly annotated pre-negotiation objective and price negotiation memorandums, essential for accountability and transparency. Also, contracting officials did not require the procuring contracting officer to maintain a complete history of the contract (as a basis for making informed decisions during the acquisition process) and centralized and integrated program and contract files. They did not adhere to federal and Department of Defense (DoD) policies for subcontract-related work in a contingency environment and may not have received fair and reasonable prices. Furthermore, decentralized contract files could indicate questionable contract management and oversight.
The Bottom Line:
CCOs must ensure that contract decisions are supported by documentation, such as the pre-negotiation objective, and that the contract file includes the information needed to explain the history of the acquisition. CCOs must always be able to justify the expenditure of funds as stewards of taxpayer dollars. Even in a combat zone, CCOs must articulate, document, and show a fair and reasonable price was paid for goods and services.
Contract administration. The CCO must understand that the contracting process does not end with the award of a contract, purchase order, or delivery order. The role of contract administration is to complete the cycle, oversee the contract, ensure customer needs are satisfied, and confirm the contractor is fully compensated for services or supplies rendered, per the contract terms and conditions. Recent contingency operations proved that contract administration sometimes takes a back seat to contract execution. Ineffective contract administration can waste the efforts spent planning, describing, and funding customer requirements.
Purchase, pickup, receipt, and delivery. CCO responsibilities for supply purchases are more challenging during deployments than during peacetime. Many of these challenges are associated with the lack of proper receipt of goods and services. The unreliable communications in many contingency environments necessitate travel to the vendor’s location. No policy or procedures mandate the site where merchandise is received. The CCO should expect frequent changes and possibly cumbersome procedures during deployment.
CCO follow-up efforts. Deployed CCOs may not have the benefit of interconnected computer information systems that simplify communication. Therefore, following up with the customer by any means available is a must. Giving the customer as much information as possible along the way will prevent problems later. If the delivery date passes or the customer receives the wrong item, part of an item, or a broken or damaged item, the CCO is accountable, too. Clear delivery instructions to the contractor and proper quality assurance procedures help ensure the right goods and services are received on time. CCOs need to establish solid working relationships with the customer so that any discrepancies or problems can be handled expeditiously. The customer should know to contact the CCO as soon as practical (if possible, while the delivery truck is still there) if discrepancies arise. All correspondence should be maintained in the contract file.
Receipt, inspection, and payment. The customer inspects goods and services. Once the item is delivered or the service performed, the customer must sign a receiving report acknowledging receipt and authorizing payment. The contractor invoice is then submitted to the contracting office, which ensures it is correct. This receiving report must accompany the invoice so that the vendor can be paid in a timely manner. (Government support contractors are not authorized to accept or sign for the government in any situation.) The report is then sent to finance personnel, who issue payment to the vendor. Finance personnel will not pay without a signature acknowledging that the government received the goods or services. All documentation must be placed in the contract file.
Typical problems encountered. Many problems are associated with the proper receipt of goods. For example, there may be no central control point where contractors can deliver goods. Vendors might deliver directly to the user, but the user might fail to notify the contracting activity upon receipt. In addition, someone at the site might accept the delivery, but no one accepts responsibility for receiving the goods when it is time to verify delivery and quantity. Consequently, payments to the vendor are ultimately delayed. Without all the key support members involved in, and coordinating, contract actions, accountability is quickly lost, contractor performance may decrease, and safety may be jeopardized. CCOs should involve multiple functions outside contracting to ensure as much coordination of contracting activities as possible. Work with the acquisition team to refine processes and procedures tailored for the immediate situation. Communicate the process and procedures to senior leadership. These actions significantly improve your ability to track ordered goods and services and ensure all protocols are followed.
Tracking initial vendor deliveries is difficult, but the failure to take the time to organize for receipt of vendor goods results in long-term problems. The CCO has two options for alleviating problems involved in receiving emergency goods:
- Strive for a central base receiving point where all goods can be processed, to account for all goods and support timely payments to vendors.
- Have supply personnel furnish a receiving officer to accompany the CCO on all initial buys, establishing accountability and control from the onset. (This approach has limited application and resolves the problem for government pickup items only. Direct vendor deliveries to the base still require proper receipt.)
Regardless of the system used, coordinate in advance with base supply personnel to ensure accountability for all emergency goods delivered. A reliable accountability system can ensure quick and accurate payments to vendors.
Customer and contractor training. As a business advisor, the CCO can’t just issue an order or contract and assume the customer and contractor understand the delivery, acceptance, and invoicing procedures. The CCO must ensure both parties understand their responsibilities, because receipt of the goods and the payments that follow are of paramount interest to both parties. Correspondence detailing agreements and understandings must be filed with the contract.
Security personnel must establish clear procedures for local installation authorities to facilitate access to the base. In some cases, deliveries and shipments are held at the gate for hours or not made at all because of access problems, which can also pose safety risks in some environments. To work around these problems, installations can establish receiving sections outside the gate, if authorized, and then reload supplies and equipment onto government vehicles to make final delivery. CCOs should be mindful of local security protocols for traveling off the installation and work with security to build proper delivery requirements into the contract. In hostile areas, security personnel can assist CCOs at time of pickup.
Shipment of supplies and equipment to overseas location. Waiting for supplies and equipment ordered from the United States can be very frustrating for CCO customers. To minimize shipping time, contractors can use the mail or similar commercial services (such as DHL or FedEx) if available and authorized. Although the shipping time may be shorter, shipments sent by ordinary mail incur some additional risk because they are not traceable.
Customs. CCOs must be aware of local customs clearance procedures and must contact the proper authorities for expeditious clearance of inbound goods. Advance coordination with proper customs officials is critical, particularly when clearing personal equipment and baggage. Military transportation, whether by ship or aircraft, makes shipments traceable. For military transportation, the reachback buying offices may check with the local traffic management office for assistance in determining the following:
- Port of embarkation, or the geographic point in a routing scheme from which cargo or personnel depart
- Port of debarkation, or the geographic point at which cargo or personnel are discharged.
In addition, the reachback buying office can obtain a transportation control number for the shipment. If contractors use commercial transportation, they must understand that preference is given to U.S.-flag vessels and air carriers.
Full administration is used on construction contracts, including construction schedules and progress reporting. Additional policy and guidance on unspecified minor construction is contained in 10 United States Code (U.S.C.) 2805 and Department of Defense Directive (DoDD) 4270.5, “Military Construction.” The U.S. Army Corps of Engineers (USACE) also has a handbook that helps with construction contracts, 51C/1102 Proficiency Guide for Construction, Architect-Engineer (A-E) & Contingency Contracting, EP 715-1-8, September 2011. CCOs also should lean on the USACE and other construction experts like Naval Facilities Engineering Command (NAVFAC) personnel and Air Force Red Horse engineers as able.
The CCO needs to ensure that all pre-award actions (as described in the rest of this section) are accomplished.
Preconstruction conference. Construction contracts can require a preconstruction conference. This conference gives the government one more opportunity to inform the contractor about obligations, discuss safety and fire precautions, emphasize the personnel who are authorized to obligate the government, and organize everyone for the start of work. The contracting officer chairs the preconstruction conference. (See FAR 36.522 for more information.)
Before work begins on a construction contract with a value that exceeds $25,000, a notice to proceed (NTP) should be issued in compliance with FAR 52.211-10. The contractor uses the period between contract award and NTP to meet bond, insurance, and other administrative requirements. The contracting officer or COR must accept all submittals.
For contracts valued at more than $1 million, Unified Facilities Guide Specification 01 45 00.00 10, “Quality Control,” should be included in the contract to furnish guidelines for the quality management program. The specification also provides for development of a quality control (contractor) and quality assurance (government) program and notes the requirement for daily construction logs to support the quality evaluations.
Liquidated damages. Although liquidated damages (LDs) are most commonly used in construction contracts, CCOs need to be aware that LDs can be used in other types of contracts, except for cost-plus-fixed-fee contracts. Review all information on LDs before deciding whether they can or should be used. Consider LDs carefully before applying them to the contract (see the real-world example). (See FAR 11.501 and DFARS 211.503.)
When a contractor did not finish a contract on time, a contracting officer did not issue letters of concern or inform the contractor that it was in breach of contract. For several months, the contractor was allowed to work without a new schedule, proper direction, or administration efforts from the contracting office. The contractor filed a claim months after the original completion date for $450,000, claiming additional costs. The contracting officer responded with LDs, and the case went to court. The judge ruled that (1) the contracting officer did not protect the government’s rights by not taking action before the completion date, and (2) the LDs appeared to be retaliatory and thus were thrown out.
The Bottom Line:
If LDs are not placed in the contract during the pre-award stage, the CCO should bilaterally add LDs post-award if the CCO decides LDs are in fact needed for the respective contract.
"Government property” is all property owned or leased by the government, including government-furnished property (GFP) and contractor-acquired property to which the government has title. Normally, contractors furnish all equipment and materials necessary to perform government contracts. CCOs provide property to contractors only when it is clearly demonstrated to be in the best interests of the government.
A property administrator is an authorized representative of the CCO who is appointed in accordance with agency procedures and is responsible for administering the contract requirements and obligations relating to government property in the possession of the contractor.
Department of Defense Instruction (DoDI) 5000.64, “Accountability and Management of DoD Equipment and Other Accountable Property,” establishes policy, assigns responsibilities, and provides procedures for DoD-owned equipment and other accountable property. Instructions for contract property management are explained in Defense Contract Management Agency Instruction (DCMA-INST) 124.
FAR part 45 specifies policies and procedures for the provision of government property to contractors; contractor management and use of government property; and reports on, redistribution of, and disposal of contractor inventory. FAR subpart 45.6 establishes policies and procedures for reports on, reuse of, and disposal of contractor inventory that is excess to the contract. FAR 45.603 addresses abandonment or destruction of excess personal property, and FAR 45.604 describes the disposal of surplus property. Chapter 9 of the Defense Material Disposition Manual, 4160.21-M, covers excess personal property in foreign locations. Disposition Services Instruction, 4160.14, Chapter 6 covers sales. The COR may be asked to assist the CCO in administering contractor use of GFP. If available, the property administrator acts on behalf of the CCO to oversee government property in the possession of a contractor.
If a commander is seeking disposal support, use one of the following e-mail addresses:
- Air Force: DLADispositionServicesAirForceHelp@dla.mil
- Army: DLADispositionServicesArmyHelp@dla.mil
- Navy: DLADispositionServicesNavyHelp@dla.mil
- Marines: DLADispositionServicesMarineHelp@dla.mil
- Coast Guard: DLADispositionServicesCoastGuardHelp@dla.mil.
CCOs and other officials can contact the DLA Customer Interaction Center (CIC), accessible around the clock at 877-DLA-call (877-352-2255), or e-mail the CIC at DLAContactCenter@dla.mil regarding customer support inquiries about programs, products, or services; status of requests; or general information.
As a representative of the contracting officer, the COR is responsible for ensuring that the contractor has performed at least the minimum contract requirements. Any perceived deviations from the statement of work (SOW), statement of objectives (SOO), or performance work statement (PWS) should be brought to the attention of the contracting officer. The customer should not attempt to interpret these documents for the contractor and cannot direct changes or accept substitute performance. Many people have improperly cost the government (or themselves) substantial sums of money by making seemingly nonchalant remarks asking the contractor to act outside the scope of the contract. (The following paragraphs contain more information on the COR. See also the Defense Contingency COR Handbook.
Contract monitoring system (past performance). Pursuant to FAR 42.1502, agencies evaluate past performance, using the Contractor Performance Assessment Reporting System (CPARS) and Past Performance Information Retrieval System (PPIRS) tools to measure the quality and timely reporting of past performance information. Architect-engineer and construction contracts or orders are reported into the Architect-Engineer Contract Administration Support System (ACASS) and Construction Contractor Appraisal Support System (CCASS) databases of CPARS respectively. During initial operations in austere environments, contract monitoring systems may be unavailable. CCOs must still evaluate and document past performance and ensure the data are entered into the respective contract monitoring system as soon as practicable.
Contract Officer’s Representative. Contractor surveillance by contracting personnel under contingency conditions can be difficult because of ongoing military operations, lack of qualified personnel, local threat conditions, remote locations, broad customer bases, and time involved for performance and delivery. Therefore, a properly trained cadre of CORs needs to be established to support the CCO and contracting activities. CORs are qualified personnel appointed and trained by the CCO to help with the technical monitoring or administration of a contract. The CCO should include DFARS clause 252.201-7000, “Contracting Officer’s Representative,” in the solicitation and the resulting contract when use of a COR is anticipated. Figure 6-1 summarizes key COR duties, file content, and important forms.
Figure 6-1. COR Key Duties, File Content, and Important Forms
COR characteristics and duties include the following:
- Both commanders and CORs must understand that they do not have the authority to issue directions on, or make changes to, any contract or purchase order. If unauthorized personnel make changes, the CCO must be immediately notified. The CCO then determines whether the work performed falls within the scope of the original contract. If the work does not fall within the contract scope, the CCO takes corrective action through the ratification process.
- CORs must forward any correspondence from the contractor to the CCO. Because the COR is an authorized representative of the CCO, COR records are part of the official post-award contract files and are forwarded to the CCO for retirement (in conjunction with the official contract file) after completion of the contract. Documents that pertain to the contract are clearly identified when forwarded to the CCO.
- The CCO appoints CORs through the Contracting Officer’s Representative Tracking (CORT) Tool—or the Army Virtual Contracting Enterprise (VCE)–COR for operations in Afghanistan—or in writing, including the rank or grade of the COR and the applicable contract number. The requiring activity must first submit a nomination package for a trained COR to the CCO via the CORT Tool. The Defense Procurement and Acquisition Policy website has Contracting Officer Representative Tracking (CORT) Tool Guidance and Instruction.
- The appointment letter defines the scope and limitations of COR responsibilities and specifies the period for which the appointment is effective.
- The CCO normally appoints a COR and an alternate COR. Ideally, both are identified and trained before deployment.
- All service and construction contracts require CORs. Some contracts for highly technical goods also may require a COR. CCOs must ensure that COR personnel have the technical experience and ability to monitor contractor performance.
- The COR appointment must state that the COR authority cannot be redelegated.
- The COR appointment must state that the COR may be personally liable for unauthorized acts.
- The CCO should appoint the COR before contract award, if practical, identifying the COR in the PR.
- CORs must not do any of the following:
- Obligate funds.
- Direct the contractor by words, or actions (failure to act), to take on new work.
- Interfere with contractor performance.
- Supervise contractor employees.
- Authorize the contractor to obtain property or use government property from another contract.
- Modify contract terms and conditions by words, actions, or failure to act.
- Suggest the contractor hire, fire, or manage employees.
- Make statements promising future contract work or awards or threaten to have the contractor removed.
COR training is critical to performance. COR training is available before deployment from the Defense Acquisition University (DAU). DODI 5000.72 “DoD Standard for Contracting Officer’s Representative (COR) Certification” outlines established policies and standards, assigns responsibilities, and provides procedures to certify CORs and outlines uniform guidance for identification, development, certification, and management of CORs within the DoD. To the maximum extent practicable, CORs must receive COR training, including theater-specific training, before deployment so that they are ready upon arrival.
The following additional courses are available and may be relevant depending on the mission of the COR:
- CLC 004, Market Research
- CLC 006, Contract Terminations
- CLC 007, Contract Source Selection
- CLC 011, Contracting for the Rest of Us
- CLC 013, Services Acquisition
- CLC 055, Competition Requirements
- CLC 133, Contract Payment Instructions
- CLM 013, Work-Breakdown Structure
- CLM 024, Contracting Overview
- CLM 031, Improved Statement of Work
- CLM 039, Foundations of government Property.
Additionally, the Defense Contingency COR Handbook contains additional information on the role and responsibilities of the COR.
Contract modifications. In the post-award contract administration phase, the contracting officer can expect changes to contract requirements. FAR subpart 43.1 and FAR clause 52.212‑4 provide definitions, policy, and limitations regarding the modification of contracts. One important aspect of modifying contingency contracts is the impact these changes have on timely performance and cost. Contract terms and contractor performance can be changed in three ways: change orders, administrative changes, and constructive changes. Contracts can be modified either bilaterally or unilaterally. The CCO must understand the difference. (See FAR part 43 for additional information.)
Change orders. “Contract modification” is a generic term defined as any written change in the terms or scope of the contract. Contracts may be modified by using a change order. A clear distinction must be made between the terms “change” and “change order,” and between the terms “in scope” and “out of scope,” as follows:
- A change is any alteration within the scope of the contract. Changes can be made in the specifications, drawings, designs, method of packing or shipment, time or place of delivery, or quantity or type of government-provided materiel.
- A change order is a unilateral order, signed by the contracting officer, that directs the contractor to make a change that the Changes clause authorizes the contracting officer to order without the contractor's consent, within the general scope of the contract. If the change order results in an increase or decrease in the cost of, or the time required for, performance of any part of the work under the contract, the contracting officer shall make an equitable adjustment in the contract price, delivery schedule, or both. See FAR 43.204 and DFARS 243.204 for additional information on change order execution, resulting equitable adjustments, and definitization. CCOs shall follow the procedures at DFARS Procedures, Guidance, and Information (PGI) 243.204 for administration of change orders.
- The question of whether work is in scope or out of scope is critical. Final determination rests with the CCO. Oral agreements, letter contracts, and the rapid pace of acquisition can lead to loosely worded arrangements for contractual actions. However, this does not mean that CCOs can broadly interpret the items in the original scope of the contract. Issuing an out-of-scope modification generally means that (1) the modification must be bilateral, (2) a J&A is required; and (3) approval from an official above the CCO level may be needed in accordance with local approval thresholds.
- CCOs should verify that proper change order authority is used on Standard Form (SF) 30 before issuing a modification.
- CCOs should ensure that supplemental agreements containing an equitable adjustment as the result of a change order also include a statement of release (FAR 43.204(c)(2)).
Administrative change. Administrative changes are unilateral changes that do not affect the substantive rights of the parties. They are used to change things like the paying office or the name of the contracting officer.
Constructive change. A constructive change involves contract work that has actually changed, but the procedures on the changes clause have not been followed. All constructive changes have two essential change and order elements as well as other common characteristics, as follows:
- The change element is determined by examining the actual performance to decide whether it went beyond the minimum standards demanded by the terms of the contract.
- The order element also must be present for the change to be compensable. The government must order the change. That is, the government representative, by words or deeds, must require the contractor to perform work not within the scope of the contract.
- Several common actions often lead to a constructive change: (1) directing a particular method of performance, (2) providing late or defective government-furnished equipment (GFE), (3) requiring higher quality than specified in the contract, and (4) failing to approve time extensions. For example, if a contractor fails to complete performance within the specified contract date and time and the government allows work to continue without approval, the government has executed a constructive change by not placing the contractor on notice for failure to meet a contract deadline.
- Constructive changes must be formalized with a contract modification.
Unilateral and bilateral modifications as a method to incorporate contract changes. For the protection of all parties, unilateral and bilateral contract actions should be priced before execution of the modification. In accordance with FAR clause 52.212-4(c), commercial item contracts require bilateral modifications. However, the magnitude of some changes and the contingency environment can make this difficult as follows:
- Unpriced orders are risky because, during negotiations when performance is proceeding, the contractor has no incentive to minimize costs. If a contract action cannot be priced before it is authorized, the government should agree with the contractor on a ceiling (not-to-exceed) price.
- For changes that result in a relatively small increase or decrease in price, the parties should try to agree to incorporate them into the contract on a no-cost basis.
Bilateral modifications. Supplemental agreements must be in writing and must be signed by both parties, per FAR 43.103(a). Supplemental agreements are appropriate when contractor consent is needed before modifying the contract. All supplemental agreements to contracts for commercial items must be bilateral. Details on such agreements include the following:
- Circumstances that require a supplemental agreement include (1) incorporating substantive contract changes that both parties agreed to accept and (2) negotiating an equitable adjustment resulting from a change order.
- The issue of prepriced or unpriced services must be considered. (The more formal regulatory terms for this concept are definitized or undefinitized services.) The risk of unpriced actions is that the government must be willing to pay for what it wants. (DFARS 217.74 details policy and procedure for definitizing an unpriced action. Chapter 5 contains additional information on undefinitized contract actions.)
Unilateral modifications. Unilateral modifications (those signed by the contracting officer only) are used to make administrative changes, issue change orders or termination notices, make changes authorized by clauses other than the changes clause (such as the option, property, or suspension of work clause), change GFP, or incorporate a value engineering proposal into the contract (see FAR 43.103(b)).
Changes clause. In general, government contracts contain a changes clause that permits the contracting officer to make unilateral changes in designated areas within the general scope of the contract. The particular changes clauses differ slightly, depending on the item purchased (supplies, services, or construction) and the type of contract awarded (fixed price or cost reimbursable), as described in FAR subpart 43.2. However, the following elements are common to all changes clauses:
- A change order must be within the general scope of the contract.
- The change order must be in writing.
- The contracting officer must issue the change order.
- Quantities may not be unilaterally adjusted by use of the changes clause.
- The changes clause does not apply to commercial contracts.
A partial termination for convenience (T4C) can effect a decrease in quantity. If the contract contains the variation in estimated quantity clause, a price adjustment is required for items received in excess of the specified quantity (including the variation allowed) that exceed a value of $250. These items may, however, be returned at the contractor’s expense. (See FAR 11.701.)
Established permanent-station contracting offices rarely if ever transfer contract administration functions to another agency. On the other end of the spectrum, many CCOs will transfer contract functions for redeployment. As one unit packs its bags to return to the home station, another unit arrives to assume the mission.
Delegation of contract administration. CCAS is a process recognized by the DFARS to centrally administer selected contingency contracts through formal contract administration delegation (CAD) procedures. It involves a mixture of acquisition corps and specialties, including administrative contracting officers (ACOs), contract administrators, quality assurance representatives (QARs), and property administrators, along with service-provided CORs and, in some cases, technical inspectors. CCAS procedures normally apply only to large-scale, large-dollar, mission-critical external support—primarily civil augmentation program (CAP) task orders—and theater support contracts.
In the absence of geographic combatant command (GCC)-requested, USD(AT&L)-directed, joint CCAS guidance, or when contracts fall below or outside of the preestablished GCC criteria, service contracting and CAP organizations are responsible for providing their own CCAS capability as appropriate. The actual scope of CCAS measures and supporting organizational structure varies, depending on operational requirements. Doctrinally, joint-directed CCAS is a joint theater support contracting command (JTSCC) function overseen by the senior contracting official (SCO)-CCAS.
When a JTSCC has been stood up, its SCO-CCAS should review proposed CAD arrangements as part of the approval process and decide whether it should assume responsibility for contract administration in theater or whether the procuring contracting officer (PCO) should retain it. In some cases, reachback support may be required. The lead service for contracting (LSC) SCO should take similar actions when they apply.
Once delegated by the contract PCO, the JTSCC SCO CCAS will furnish the ACOs, QARs, and property administrators to administer the contracts or CAP task orders as applicable. If a JTSCC is not formed, the applicable contracting activity will coordinate with the LOGCAP deputy program director to arrange CCAS support. Supported units, under the direction of the requiring activity will be required to provide COR support where LOGCAP support is used.
(See FAR 42.202 for additional information pertaining to delegating functions.)
Basically, two options are available for terminating contracts: T4C and termination for default (T4D) or cause. After deciding which method to use, the CCO should be prepared to negotiate a fair and reasonable settlement. Termination implies a breach of contract, and adequate compensation is appropriate. The CCO must follow local procedures for reporting and reviewing any termination actions.
The notice of termination should be in writing and specify the following:
- Termination of the contract
- Extent of the termination
- Any special instructions
- Steps that the contractor should take to minimize the impact on personnel if the termination, together with all other outstanding terminations, will result in a significant reduction in the contractor workforce.
After receipt of a termination notice, the contractor should take the following actions, per FAR 49.104:
- Stop work immediately.
- Terminate all subcontracts.
- Immediately advise the termination contracting officer of any special circumstances that preclude the stoppage of work.
- Perform any continued portion of work.
- Submit a request for equitable adjustment (REA), if necessary.
- Protect any GFP.
- Notify the termination contracting officer of any legal proceedings arising from terminated subcontracts.
- Settle any outstanding liabilities (subcontracts).
- Submit a settlement proposal.
- Dispose of termination inventory.
Termination for Convenience (T4C). The rapid pace of changing requirements can often result in the government’s no longer needing the supplies or services for which it has contracted. A request for the contractor to stop providing such supplies or services can often be met with confusion from the contractor. Regardless of the reason for not wanting contract performance to continue, the contractor might perceive that the CCO simply is not satisfied with contractor performance. If less than $5,000 remains on the contract, the CCO should not terminate the contract. (See FAR 49.101(c).)
The general procedures for T4C include the following actions (not necessarily in the sequence listed):
- Issue a suspension-of-work order for construction or architecture and engineering, which specifically excludes profit (FAR 42.1302 and FAR clause 52.242-14).
- Issue a stop-work order for the service or supply, which does not exclude profit (FAR 42.1303 and FAR clause 52.242-15) and is usually in effect for 90 days (but if no notice is given after 90 days, contractor work restarts).
- Negotiate a settlement or, if no settlement is reached, unilaterally make a determination and notify the contractor that the changes are under the disputes clause.
When a T4C is requested, the CCO should take the following actions:
- Request or recommend a meeting with contractor.
- For construction, obtain an estimate of the contractor cost incurred from engineering.
- Establish and negotiate a cost settlement.
- Prepare a stop-work or suspension-of-work order, consulting if necessary with the head of contract activity (HCA).
- Prepare SF 30, using the T4C clause (FAR clause 52.249-2).
When the CCO uses a partial contract cancellation or a total contract cancellation, the following should be considered:
- No-cost settlement
- Partial settlement (such as restocking charge)
- Total termination.
Termination for Default (T4D). When the contractor fails to perform as required, the CCO may terminate the existing contract and begin reprocurement under a new one. If the CCO anticipates the need to enter into another contract with a specific vendor in the future (especially in areas with limited sources), defaulting that vendor on an existing contract can hinder future contracts.
The general procedures for T4D include the following actions (not necessarily in the sequence listed):
- Reference the appropriate default clause (FAR clause 52.249-8 for a supply or service or FAR clause 52.249-10 for construction).
- Issue a cure notice and give the contractor a minimum of 10 days to cure (using the format in FAR 49.607). (See “Cure notice” below.)
- After 10 days (or if fewer than 10 days remain in the performance schedule), issue a show-cause notice (using the format in FAR 49.607).
- Ask an engineer to verify the extent of completion of work and to give an estimated value of the completed work.
- Consult with the HCA before issuing the modification.
- Report on the steps taken (FAR 42.1503(f)).
Termination or cancellation of purchase orders. As described in FAR 13.302-4, if a purchase order accepted in writing by the contractor is to be terminated, the contracting officer must process the termination in accordance with FAR clause 52.212-4(l) or 52.212-4(m) for commercial items or FAR clause 52.213-4 for noncommercial items.
If a purchase order not accepted in writing by the contractor is to be cancelled, the contracting officer must notify the contractor in writing that the purchase order has been cancelled and request the contractor’s written acceptance of the cancellation. If the contractor does not accept the cancellation or claims that costs were incurred under the purchase order, the contracting officer should process the action as a termination, as previously detailed.
Termination for cause. The government may terminate for cause after any default by the contractor if the contractor fails to comply with the terms and conditions of the contract or fails to provide the government, on request, with adequate assurance of future performance. Contracts for commercial items purchased under the procedures in FAR part 12 may be terminated for convenience or for cause. In general, the constraints of FAR part 49 (T4C) and FAR subpart 49.4 (T4D) do not apply. (FAR 12.403 details procedures for termination of commercial item contracts.)
Delinquency notice. The formats of the delinquency notices described in FAR 49.607 and discussed in this section may be used to satisfy the requirements of FAR 49.402-3. All notices must be sent with proof of delivery requested. (FAR 42.1303 addresses procedures for stop-work orders.)
Cure notice. If a contract is to be terminated for default before the delivery date, a cure notice, as described in FAR 49.607(a), is required by the default clause. Before using this notice, the CCO must confirm that an amount of time equal to or greater than the period of the cure remains in the contract delivery schedule (or any extension to it). If the time remaining in the contract delivery schedule is not sufficient to permit a realistic cure period of 10 days or more, the cure notice should not be issued.
After the cure notice is issued, the CCO takes the following actions:
- Negotiates changes.
- Prepares a modification to the T4D.
- Documents the negotiations.
- Obtains the contractor’s receipt of cure notice.
Show-cause notice. If the time remaining in the contract delivery schedule is not sufficient to permit a realistic cure period of 10 days or more, a show-cause notice may be used (FAR 49.607(b)). The show-cause notice should be sent immediately after expiration of the delivery period.
Considerations. When deciding whether to use a T4C or T4D or to allow the contract to run to completion, the CCO must use sound business judgment. The CCO must remember that contractors are providing goods and services at a time when the government has been fairly demanding. Vendors may incur costs to perform in accordance with CCO and government wishes and should be properly compensated for doing so. The CCO needs to balance fair and just compensation with legally sufficient adjustments and allowability of costs.
Contract closeout process. When the contractor satisfactorily completes performance of the terms of the contract and the final payment is made, the CCO should close out the contract file as soon as possible as follows:
- Upon receipt of final invoice and a receiving report, issue a unilateral modification to deobligate any excess funds.
- Address release of claims. On a final invoice with a payment amount that is subject to contract settlement actions (release of contractor claims), the settlement occurs on the effective date of the contract settlement. (FAR 43.204(c)(2) provides language for supplemental agreements.)
- Complete Department of Defense (DD) Form 1594, “Contract Completion Statement,” or agency-specified form for all contracts, and complete DD Form 1597, “Contract Closeout Checklist” (or agency-specific form, such as Air Force Form 3035) for contracts that exceed the simplified acquisition threshold (SAT) after receiving proof that work or delivery is complete.
- Place the completed and certified DD Form 1594 in the contract file, write “closed” on the file (preferably in large bold letters), remove the file from the active contracts, and retain the completed contract file as required by the FAR or the relevant agency.
- Use DD Form 1597 as the primary document for initiating a systematic contract closeout. When all necessary and applicable actions are completed, the contracting officer will sign and attach this form to DD Form 1594.
- Identify physically completed contracts that involve government property in the possession of the contractor. In such cases, the contracting officer forwards DD Form 1593, “Contract Administration Completion Record,” to the property administrator to request the actual or estimated dates for completion of property administration. DD Form 1593 should be used to verify that other functional activities have completed their required closeout actions.
- Address remaining funds. The contracting officer reviews the status of funds on physically completed contracts to determine whether they are available for removal before final payment.
- Address all contracts that fall below the SAT. In such cases, the contracting officer must include a statement that all contract actions have been completed in the contract file. The completed form or statement is authority for closing out the contract file.
- Manage closeout of contracts administered by the purchasing office. In such cases, that office is responsible for ensuring that all required purchase actions and contract administration are completed, using as necessary DD Form 1597 and DD Form 1593.
- Complete DD Form 1594. When all required actions are completed, the purchasing office must prepare DD Form 1594 for all contracts that exceed the SAT. The contract completion statement must be added to the official contract file. (DFARS 204.804 requires the use of DD Form 1594.)
Contracting officers should be aware, and ensure respective contractors are aware, of the contractor records retention requirements and retention periods described in FAR 4.7 DoD policy is that contractors make available all records—including books, documents, accounting procedures and practices, and other data, regardless of type and regardless of whether such items are in written form, in the form of computer data, or in any other form—and other supporting evidence to satisfy contract negotiation, administration, and audit requirements of the contracting agencies and the Comptroller General unless an exemption applies.
CCO closeout of FOO and BPA authorized caller accounts. When FOO and BPA authorized callers are ready to redeploy, the CCO must be sure that they return their original appointment orders, all completed forms and documents, updated Procurement Instrument Identification Number (PIIN) logs, and unused forms (especially SF 44s). Throughout the contingency, the CCO should be receiving Joint Uniformed Lessons Learned System and after action report input from ordering officers.
FAR 4.804-5 describes procedures for closing out contract files, including the following main issues:
- Contractor release of claims
- Final invoice that has been submitted and paid
- Completed contract funds review and deobligated excess funds
- Storage, handling, and disposal of contract files.
Abandoned or unclaimed property. One issue that might arise is the disposal of abandoned contractor-owned property in accordance with FAR subpart 45.6. The CCO should consult with the local judge advocate about the disposition of contractor property left behind by the contractor before using or appropriating the asset.
“Redeployment” is defined as the transfer of forces, personnel, equipment, and materiel to home or demobilization stations for reintegration and out-processing. When possible, the CCO should become part of the joint contingency planning staff that is planning the redeployment or demobilization phase of the operation. The CCO must communicate with operational planners, DCMA, and DLA in the drawdown planning.
The contingency contracting process can involve many different supporting systems, tools, and interfaces. The use of electronic business (e-business) tools can automate aspects of the contracting process and can greatly assist in delivering goods and services faster to the user. Electronic tools also help to ensure data accuracy and overall transparency. In the event of accessibility issues, Internet connectivity problems, or other situations that prevent the use of e‑business tools in theater, the CCO should rely on hard-copy forms, tools, and methods to ensure contract support is uninterrupted.
In September 2014, the Defense Procurement and Acquisition Policy (DPAP) office published the Department of Defense Contingency Business Environment Guidebook. This guidebook introduces six e-business tools that give CCOs automation support and information on how to get them up and running in theater. These six tools are as follows:(2)
1. 3in1: The 3in1 Tool automates key processes: field order, receipt, and purchases, previously executed manually using the paper SF44. 3in1 delivers an easy-to-use technology to execute immediate off-the-shelf field purchases of supplies and services where use of the Government Purchase Card is appropriate, but not feasible.
2. AGATRS: The Acquisition Cross-Servicing Agreements (ACSA) Global Automated Tracking and Reporting System (AGATRS) is an automated tool that tracks and provides visibility into worldwide ACSAs. This provides visibility into available ACSAs that may satisfy a requirement through support from the host nation or other nation supporting the contingency.
3. cASM: The Contingency Acquisition Support Model (cASM) is a web-based tool used to plan, generate, staff for approval, and track acquisition-ready requirements packages. This enables users to get requirements on contract more efficiently. cASM’s output produces a complete, approved, and electronically signed requirements package (RP).
4. D&S: Dollars & Sense (D&S) is a tool that is used to support the contract closeout process by receiving, organizing, assigning, and tracking contracts to closeout outside the area of operations.
5. JCCS: The Joint Contingency Contracting System (JCCS), part of the Joint Contingency & Expeditionary Services (JCXS)(3) platform, is a web-based application that has the following capabilities/functions: HN vendor management for centralized registration, solicitation posting, proposal receipt, and past performance tracking. The JCCS application supports contract data capture, contract closeout and historical data reference, and offers simplified and advanced reporting features.
6. TBC: Theater Business Clearance (TBC) tool automates the TBC process by enabling electronic submission of TBC packages, ensuring solicitations and contracts contain appropriate clauses and provisions.
DFARS/PGI 218.272 “Use of electronic business tools” dictates the usage requirements of the six tools listed above. See the CBE Guidebook for specific information on these tools and how to get them operational in theater.
Additionally, CCOs should be familiar with the following eBusiness tools.
- The Federal Procurement Data System – Next Generation (FPDS-NG) allows millions of procurement transactions from across the government to be recorded and reported in real-time. The system contains detailed information on contract actions that exceed $3,000 (FY04 and later). It can identify who bought what, from whom, for how much, when, and where.
- The Wide Area Work Flow (WAWF) eBusiness suite is a paperless, DoD-wide contracting application designed to eliminate paper records from the receipts and acceptance process of the contracting life cycle. The WAWF systems allows government vendors to submit and track invoices and receipt and acceptance documents over the web and enables government personnel to process those invoices in a real-time paperless environment. WAWF is the only application used to capture the unique identification (UID) of tangible items information.
- Procurement Desktop Defense (PD2) provides automated strategic and streamlined contract management support for the procurement professional as part of a complete workflow management solution. PD2 is an integral part of the DoD Standard Procurement System (SPS), which is integrating acquisition, logistics, and financial management in one end-to-end enterprise business system.
- The Contractors Performance Assessment Reporting System (CPARS) is a web-enabled application used to document contractor and grantee performance information required by federal regulations. CPARS supports the FAR requirement to consider past performance information before making a contract award (FAR part 15, part 36, and part 42). FAR part 42 identifies requirements for documenting contractor performance assessments and evaluations for systems, nonsystems, architect-engineer, and construction acquisitions.
- The Electronic Document Access (EDA) system is an online document access system designed to provide acquisition-related information for use by all of DoD. The EDA system offers two concurrent operating sites (in Ogden, UT, and Columbus, OH). If one site is down or unavailable, the alternate site can be used.
- DAU’s Acquisition Requirements Roadmap Tool (ARRT) Suite is a collection of tools that helps users build acquisition documents. It currently includes requirements definition and evaluation factors components.
- Office of Federal Procurement Policy, A Guide to Best Practices for Contract Administration
- 5 U.S.C. Appendix 8L, Special Provisions Concerning Overseas Contingency Operations
- GAO-13-283, GAO High Risk Series: An Update.
2. Usage of these tools may vary by situation, so the CCO should check with the local command for additional guidance. See Chapter 5 for details on contract action reporting, payment information, Joint Contingency & Expeditionary Services (JCXS), and Procurement Desktop Defense (PD2).Back to Top