Department of Health and Human Services 

OFFICE OF 

INSPECTOR GENERAL 

CMS HAS NOT PERFORMED 

REQUIRED CLOSEOUTS OF 

CONTRACTS WORTH 

BILLIONS 

Daniel R. Levinson 

Inspector General 

December 2015 

OEI-03-12-00680 
 

 

 

EXECUTIVE SUMMARY: CMS HAS NOT PERFORMED REQUIRED CLOSEOUTS OF 

CONTRACTS WORTH BILLIONS 

OEI-03-12-00680 

WHY WE DID THIS STUDY 

The Centers for Medicare & Medicaid (CMS) relies extensively on contractors to carry out its basic mission and 

spends billions of dollars each year in contracts for a variety of goods and services. A contract is closed once 

the contractor has completed contract requirements and the Government has completed all required 

administrative actions. Because improper payments may be identified and recovered during the closeout 

process, it is imperative that contracts are closed within Federal Acquisition Regulation (FAR) timeframes. The 

closeout process, generally, is the last chance for improper contract payments to be detected and recovered, and 

delayed closeout poses a financial risk to agency funds. 

A report by the Government Accountability Office (GAO) in 2009 found a large backlog of unclosed contracts 

at CMS. OIG designed this study to review the state of unclosed contracts as of February 2014, to gauge 

CMS’s progress, and to support continuing improvements in contract management. Recommendations will 

help CMS improve its contract management and better protect Federal funds. 

HOW WE DID THIS STUDY 

This study focused on CMS’s FAR contracts that were active as of February 2014, and its FAR contracts 

pending closeout as of February 2014. We analyzed contract data to determine (1) the number of active 

contracts and the amounts obligated to those contracts and (2) the number and total cost of contracts pending 

and overdue for closeout. We also interviewed CMS staff and reviewed policies and procedures related to 

contract closeout. 

WHAT WE FOUND 

CMS obligated $15 billion to 1,229 contracts that were active as of February 2014. These contracts were held 

by 500 separate contractors, with 7 contractors having obligated amounts over $500 million. As of February 

2014, CMS contractors completed work for 6,126 contracts that CMS had not closed out as required under the 

FAR. These contracts totaled $25 billion. CMS continues to have thousands of contracts overdue for closeout, 

with 15 percent of contracts that completed before fiscal year (FY) 2011 at least 10 years overdue. 

Furthermore, the closeout status of a number of contracts could not be determined because of inconsistent and 

conflicting data. Because the closeout process is usually the last chance for improper payments to be detected 

and recovered, delays in the closeout process pose a financial risk to CMS. While CMS has not consistently 

met FAR timeframes for closing out contracts, it has been improving the timeliness of contract closeouts over 

the past several years. CMS reported a number of barriers, including resource constraints, which CMS believes 

prevent the timely closeout of contracts. Finally, key pieces of information, such as project description and 

contract payments, that CMS could use to manage and oversee contracts are not easily accessible through its 

contract management system. 

WHAT WE RECOMMEND 

We recommended that CMS (1) implement additional strategies to meet required FAR timeframes for closeout, 

(2) determine the status of contracts for which closeout status could not be determined, (3) improve reports from 

CMS’s contract management system to allow for easier access to contract data that would assist in closeout and 

funds management, and (4) improve coordination and collaboration across departmental staff with contract 

closeout responsibilities. CMS concurred with all four recommendations. 
TABLE OF CONTENTS 

Objectives ................................................................................................................1 

Background..............................................................................................................1 

Methodology............................................................................................................3 

Findings....................................................................................................................5 

CMS obligated $15 billion to 1,229 contracts that were active as of February 

2014 ..............................................................................................................5 

As of February 2014, CMS had not closed out completed contracts 

totaling $25 billion as required by regulation ..............................................5 

The large backlog of unclosed contracts poses a significant financial risk 

to CMS ........................................................................................................6 

While CMS has taken steps to improve its closeout and contract 

management processes, barriers remain that hinder timely closeout ...........7 

Conclusion and Recommendations ..........................................................................9 

Agency Comments and Office of Inspector General Response .................11
 

Appendix A: Agency Comments ..........................................................................12 

Acknowledgments..................................................................................................14 
 

 

 

 

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OBJECTIVES 

1.	 To determine the number of contracts active as of February 2014 that are 

administered under the Federal Acquisition Regulation (FAR) by the Centers for 

Medicare & Medicaid Services (CMS) and the amounts CMS had obligated for these 

contracts; 

2.	 To determine the number and total cost of FAR contracts that CMS has not closed 

out as required under FAR; and 

3.	 To identify CMS’s barriers to closing FAR contracts. 

BACKGROUND 

CMS relies extensively on contracts to carry out its basic mission. In fiscal year (FY) 

2014, CMS spent $7 billion on contracts 

needed to administer its programs. 

FAR Closeout Requirements 

The FAR governs how Federal agencies 

can contract for goods and services. The 

FAR requires agencies to begin the 

closeout process once a contract is 

physically completed. A contract is 

physically completed when a contractor 

finishes providing the goods or services 

under the contract (hereafter referred to as 

completed).1 

DEFINITION OF SELECT CONTRACT TERMS

USED IN REPORT

OBLIGATED AMOUNT a definite commitment that

creates a legal liability of the Government for the

payment of goods and services ordered or received.

An obligation is incurred, for example, when a contract

is signed or an order is placed for goods and/or

services.

CONTRACT COST the total cost of the contract at

closeout, or at completion date if pending closeout.

CONTRACT TYPES

FIXED‐PRICE is a type of contract that provides

maximum incentive for the contractor to control costs

and perform effectively, and the contractor assumes the

risk for cost overruns. Firm fixed price is one type of

fixed price contract. The FAR requires these contracts to

be closed within 6 months of completion.

COST‐REIMBURSEMENT is a type of contract that provides

for payment of allowable costs to the extent prescribed

in the contract, and the Federal Government assumes

the risk for cost overruns. The FAR requires these

contracts to be closed within 36 months of completion.

The timeframes specified in the FAR 

for completing closeouts vary 

depending on the type of contract. 

Firm-fixed-price contracts must be 

closed within 6 months after the date 

on which the contracting officer 

receives evidence of completion.2 

Contracts requiring settlement of 

indirect cost rates, for example, 

certain cost-reimbursement 

contracts, should be closed within 

36 months of the date on which the 

contracting officer receives evidence 

1 FAR 4.804-4(a) and 5(a). 

2 FAR 4.804-1(a)(2). This applies to firm-fixed-price contracts other than those using simplified 

acquisition procedures. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 1 
 

 

 

 

 

 

of completion.3 All other types of contracts should be closed within 20 months of the 

date on which the contracting officer receives evidence of completion.4 

Contract Closeout Process 

The closeout process is an important step in the management of contracts, as it generally 

is the last chance for the Government to detect and recover improper contract payments. 

Therefore, delays in the closeout process pose a significant risk to Government funds. 

The procedures for closing out cost-reimbursement contracts include settling all costs 

and finalizing indirect cost rates, where applicable. They also can include completing a 

contract audit, if necessary. As part of this process, CMS contractors must submit their 

indirect cost proposals to the cognizant agency responsible for establishing indirect cost 

rates, which is usually the National Institutes of Health (NIH) for for-profit entities and 

the Program Support Center (PSC) for not-for-profit entities.5 Once the indirect cost 

rates have been finalized, CMS contracting officers and specialists can perform the 

necessary actions to administratively close the contract. 

Contract Management at CMS 

CMS’s Office of Acquisition and Grants Management (OAGM) plans, organizes, 

coordinates, and manages the activities required to maintain an agencywide acquisition 

program. OAGM uses a CMS intranet-based Windows software tool called the 

Comprehensive Acquisition Management System (CAMS), which automates the full 

Federal procurement life-cycle from advanced procurement planning through acquisition 

closeout. CAMS includes contract management capabilities to support FAR contracts, 

and tracks and reports on CMS procurement activity. 

Within OAGM, the Division of Financial Services (DFS) is responsible for ensuring that 

all required contract closeouts are executed. DFS tracks all contracts to be closed and 

issues notifications and reminders to OAGM contracting staff when a contract should be 

ready to be closed. 

Vulnerabilities Identified Within CMS’s Contracting Environment 

In 2007, the Government Accountability Office (GAO) found that CMS’s operating 

environment created vulnerabilities in the contracting process and increased the risk of 

waste and improper payments.6 Specifically, GAO found that CMS did not adequately 

fulfill critical contractor oversight and that it frequently used cost-reimbursement 

contracts, which increased risks to CMS. GAO also found that CMS did not perform its 

contract closeout procedures in accordance with FAR timeframes; moreover, it had a 

backlog of about 1,300 contracts at the time of the study, putting CMS at increased risk 

3 FAR 4.804-1(a)(3). 

4

 FAR 4.804-1(a)(4). 

5

 The cognizant agency is the Federal agency that is responsible for establishing final indirect cost rates on
 

behalf of all Federal agencies. For for-profit contractors, this is normally the Federal agency with the 

largest dollar amount of negotiated contracts.
 6 GAO, Centers for Medicare and Medicaid Services: Internal Control Deficiencies Resulted in Millions 

of Dollars of Questionable Contract Payments, GAO-08-54, November 2007.
 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 2 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 3 

 

 

of improper payments or waste. GAO made nine recommendations to CMS to improve 

internal control and accountability in the contracting process and related payments to 

contractors. 

A 2009 GAO report indicated that CMS had not substantially addressed seven of the 

nine recommendations made in the 2007 report to improve internal control over 

contracting and payments to contractors.7 In addition, CMS continued to have a backlog 

of contracts that were overdue for closeout. 

To address GAO’s recommendation to reduce the backlog of contracts awaiting 

closeout, OAGM created a contract closeout policy that established unique internal 

OAGM procedures for the closeout of contract files. In addition, a special team was 

created within DFS in July 2011 to focus on reducing the large number of contracts that 

were completed before FY 2011, but were overdue for closeout (hereafter referred to as 

the backlog). 

METHODOLOGY 

Scope 

This study focused on CMS’s FAR contracts that were active as of February 2014 and its 

contracts pending closeout as of February 2014. 

Data Collection and Analysis 

Active contracts. From CMS, we requested and analyzed data for all FAR contracts that 

were active, i.e., not completed, as of February 2014. 

Contract closeouts. We also requested and analyzed data regarding contracts that were 

completed after September 30, 2010. For FYs 2011 through 2013, we asked CMS to 

identify the contracts that were (1) closed as of the end of each FY, (2) pending but not 

overdue for closeout as of the end of each FY, and (3) pending and overdue for closeout 

based on FAR regulations as of the end of each FY. 

In addition, we requested and analyzed information for the contracts in the backlog 

(completed before FY 2011) that were not closed as of February 2014. 

Document review. We collected and reviewed CMS policies and procedures related to 

contract management and contract closeouts. 

Structured interview and survey questions. We conducted a structured interview with 

CMS staff in OAGM to determine their procedures for closing out contracts. We also 

asked CMS to provide information about the reasons why contracts are not completed 

on time and the chief barriers to closing out contracts in a timely manner. 

In the interview with CMS staff, it was reported that NIH’s procedures impacted CMS’s 

closeout process. Therefore, we also requested information from NIH’s Division of 

Financial Advisory Services, Office of Acquisition Management and Policy, to 

7

 GAO, Centers for Medicare and Medicaid Services: Deficiencies in Contract Management Internal
 

Control Are Pervasive, GAO-10-60, October 2009. 
 

 

determine their role in the contract closeout process. Our questions focused on NIH’s 

procedures for establishing contractors’ final indirect cost rates. 

Limitations 

FAR 4.804-1(c) states that contracts shall not be closed if they are in litigation, under 

appeal, or have been terminated and all termination actions have not been completed. 

CMS staff reported that they do not track whether contracts fall into any of these 

categories. Therefore, we had no method to establish whether any of the contracts that 

we determined were overdue would be exempt from the standard closeout procedures 

and timeframes. However, CMS staff stated that exempted contracts are rare 

occurrences. 

OIG did not review individual contract file documents to verify the data provided by 

CMS. 

Standards 

This study was conducted in accordance with the Quality Standards for Inspection and 

Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 4 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 5 

 

 

 

 

 

FINDINGS 

CMS obligated $15 billion to 1,229 contracts that were active as 

of February 2014 

CMS obligated $15 billion to a total of 1,229 active contracts as of February 2014.8 

Most of these contracts are not firm-fixed-price contracts. The 1,229 active contracts are 

held by a total of 500 separate contractors. The number of contracts per contractor range 

from 1 to 32, and obligated amounts ranged from under $1,000 to $947 million. As 

shown in Table 1, 7 contractors had obligated amounts over $500 million. 

Table 1: CMS Contractors With Over $500 Million in Total Obligations on Active Contracts as of 

February 2014 

Contractor Name Number of Contracts Total Obligated 

General Dynamics Information Technology, Inc. 12 $946,513,287 

Lockheed Martin Services, Inc. 7 $934,136,928 

GHI Medicare 2 $710,477,163 

HP Enterprise Services, LLC 12 $663,411,748 

CGI Federal, Inc. 13 $565,428,728 

Buccaneer Computer Systems 14 $509,277,243 

Safeguard Services, LLC 11 $507,518,007 

Source: OIG analysis of FAR contract data provided by CMS from CAMS for active contracts, 2014. 

As of February 2014, CMS had not performed required closeouts 

for contracts totaling $25 billion as required by regulation 

As of February 2014, CMS had 6,126 contracts that were overdue for closeout, i.e., they 

were completed, but not closed out as required by the FAR. As shown in Table 2, these 

6,126 contracts totaled $25 billion. The majority of overdue contracts (5,420) were 

completed before FY 2011, i.e., in the backlog. These backlog contracts totaled 

$24 billion and were overdue an average of 2,512 days—almost 7 years. 

In addition to the large backlog of contracts that completed before FY 2011 and remain 

overdue, 706 contracts that completed between FY 2011 and FY 2013 remain overdue. 

These 706 contracts totaled an additional $1.5 billion. On average, these contracts were 

412 days past their closeout due dates as of February 2014, with 49 percent overdue 

more than 1 year. 

8

 This amount was aggregated from the obligated amount reported in CAMS for contracts that were 

active as of February 2014. 
 

 

 

Table 2: Closeout Status of CMS Contracts Reviewed 

Closeout Status Number of 

Contracts1 

Percent of 

Contracts Total Contract Cost 

Overdue 6,126 86 $25,448,848,937 

Completed before FY 2011 

Completed between FYs 2011 and 2013 

5,420 

706 

88 

12 

$23,928,485,437 

$1,520,363,500 

Closed2 402 6 $49,104,963 

Closed within FAR timeframe 

Not closed within FAR timeframe 

13 

389 

3 

97 

$19,567,099 

$29,537,864 

Pending closeout but not overdue2 635 9 $10,519,020,794 

Total 7,163 1003 $36,016,974,694 

Source: OIG analysis of FAR contract data provided by CMS, 2014. 

1 This includes CMS contracts that (1) were completed but not closed out as of February 2014 or (2) were completed 

in FYs 2011 through 2013 and closed as of February 2014.

2

 Only includes contracts that completed between FYs 2011 and 2013. 

3

 The percentages do not sum to 100 percent because of rounding.
 

The large backlog of unclosed contracts poses a significant 

financial risk to CMS 

Having a large number of contracts that are awaiting closeout after the deadlines 

required by the FAR poses a financial risk to CMS. Generally, the appropriations used 

to fund a contract cannot be used to make payments to contractors more than 5 years 

after the end of the fiscal year in which they were appropriated.9 After 5 years, CMS 

cannot use the original appropriated funds to make payments owed to the contractor at 

closeout because the appropriation account is closed. Instead, CMS must use available 

current year funds to pay any obligations that were incurred during the contract 

performance period.10 Similarly, any money owed to CMS by contractors may not be 

payable directly to CMS. Contractor repayments can be credited back to the agency if 

the appropriation account has not been closed.11 However, once the appropriation 

account has been closed, any repayments must be returned to the U.S. Department of 

Treasury. 

Of the 5,420 contracts that completed before FY 2011 and were overdue for closeout as 

of February 2014, 69 percent were overdue 5 or more years—with the most delayed 

closeout due in 1995. These contracts totaled $5 billion. If at closeout CMS determines 

that any of this $5 billion was misspent or not allowable, it would not be able to directly 

recover these dollars. 

9

 This does not apply to no-year appropriations, which are available for obligation indefinitely. 10 CMS is limited to using 1 percent of current year funds to satisfy valid, prior obligations. 31 U.S.C. § 

1553(b)(2).
 11 If the period of availability for obligation of those funds has passed, the repayment may only be used to 

adjust existing obligations, not to make new ones. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 6 
 

We could not determine the extent of CMS’s financial risk because CMS could not 

provide us with information regarding the amount of money owed to or from contractors 

for the most recently closed out contracts. In fact, CMS could provide information 

regarding closeout payments due to or from the contractor for only 49 contracts that had 

been in the backlog but were closed out as of February 2014. At closeout, CMS 

determined that contractors owed the Government $10,069,407 for these 49 contracts. 

While CMS has taken steps to improve its closeout and contract 

management processes, barriers remain that hinder timely

closeout 

In addition to developing a team to focus solely on closing out contracts in the backlog, 

CMS has taken other steps to improve the contract closeout process and contract 

management.12 CMS has developed and implemented policies and procedures for 

managing and closing out contracts, which includes implementing performance metrics 

to improve the timeliness of closeouts. CMS also developed a four-year strategic plan 

that outlines its goals and objectives to constantly monitor and improve the effectiveness 

of contract management internal controls. However, despite these improvements, there 

continue to be some significant barriers in completing contract closeouts. 

CMS has made improvements in meeting the FAR timeframes in recent 

years, but FAR timeframes continue to be missed 

The percentage of closed contracts that met FAR timeframes increased slightly between 

FYs 2011 and 2013. Of the FY 2013 contracts that CMS closed, 9 percent were closed 

within the FAR timeframes, whereas, of the FYs 2011 and 2012 contracts that closed, 

only 4 percent and 0 percent (respectively) closed within the FAR timeframes. 

However, of all the 402 contracts that completed between FYs 2011 and 2013 and were 

closed by February 2014, only 3 percent were closed within FAR timeframes. This 

means that 97 percent of contracts that were closed did not meet the FAR requirements 

for timely closeout. 

Sixty-five percent of contracts have not been closed out because the 

indirect cost rates have not been finalized 

Out of the 6,761 contracts that are pending or overdue for closeout, 65 percent require 

settlement of indirect cost rates before they can be officially closed out. These contracts 

totaled over $34 billion. According to CMS staff, one of the major barriers to timely 

closeout is the challenge of finalizing indirect cost rates. 

A number of factors have contributed to delays in finalizing indirect cost rates. Both 

CMS staff and NIH staff reported that some contractors fail to timely and adequately 

submit their indirect cost proposals to their cognizant agency (NIH or PSC), which 

causes delays in the finalization of indirect cost rates. Furthermore, while CMS has 

developed a system to track contractors’ outstanding cost proposals, NIH and PSC do 

not have access to this system. CMS staff stated that the lack of a tracking system at 

12 This team is comprised of one DFS staff member and five contractor personnel. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 7 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 8 

 

 

 

NIH and PSC, as well as NIH’s lack of access to CMS’s tracking system, prohibit 

effective collaboration, especially between NIH and CMS, and contributes to significant 

delays in finalizing indirect cost rates.13 

CMS and NIH staffs reported that the lack of resources and staff hinder 

timely closeouts 

Both CMS and NIH staffs reported that the lack of adequate resources and insufficient 

staff levels continue to be a major challenge for completing contract closeouts in a 

timely manner. CMS staff reported that CMS was understaffed for the task of closing 

out billions of dollars in contracts. NIH staff reported that a lack of resources, the loss 

of several senior staff, and a large backlog of indirect cost proposals from many years 

are the primary barriers to timely completion of the review of indirect cost rates. 

CMS’s contract management system contains conflicting data and cannot 

readily provide key pieces of information 

We found instances in which CAMS data were inconsistent and conflicting. Using the 

data provided by CMS from CAMS, we could not determine the closeout status for 

675 contracts. This was because of inconsistent data identified in CAMS. The data 

showed the following: (1) the contract was closed, but the closeout date was missing or 

(2) the contract was pending, but a closeout date was given. These contracts totaled 

$2.7 billion. 

In addition, CMS was unable to provide the product service code, project description, 

total dollars withheld, and issuing office for the contracts that completed between 

FYs 2011 and 2013. According to CMS staff, obtaining these data from CAMS would 

require a significant edit to the existing data reports, a task for which CMS has 

inadequate resources. Additionally, the total disbursements (payment amounts) made to 

contractors are not available in CAMS. While CMS has plans to incorporate these data 

into CAMS in the future, CMS staff cannot determine how much money was paid to 

contractors without manually reviewing contract files and contacting CMS’s Office of 

Financial Management, which is responsible for the disbursements. Furthermore, the 

total amount owed by or to the Government or contractor as determined during closeout 

is not available in CAMS. According to CMS staff, these data also must be captured 

manually if a modification was necessary to reconcile amounts owed either by the 

contractor or by the Government at the time of closeout. Therefore, key pieces of 

information that CMS could use to manage and oversee contracts are not easily 

accessible through the existing contract management system. 

13 This issue has not been as significant with regard to not-for-profit contracts under PSC’s authority 

because CMS works with PSC to determine billing and final rates. 
 

CONCLUSION AND RECOMMENDATIONS 

In their strategic plan, CMS outlines goals to fulfill its mission “as an effective steward 

of public funds.” Part of being an effective steward of public funds involves protecting 

contract funds from risk by providing effective and rigorous oversight of the contracting 

environment. With tens of billions in contract dollars, CMS has a responsibility to 

ensure that contracts are being appropriately and effectively managed. 

The closeout process is an important step in the management of contracts, as it generally 

is the last opportunity for improper contract payments to be detected and recovered. 

Timely closeouts are imperative for protecting contract funds and reducing CMS’s 

financial risk. In cases where original appropriations cannot be used to make payments, 

CMS would need to use current year funds to pay any money owed to contractors at 

closeout. Therefore, closing contracts within FAR timeframes ensures that (1) CMS’s 

current year funds are not being used to pay past year obligations, (2) CMS is able to 

recover any contract funds owed, and (3) Government funds are used according to the 

contract requirements. 

While improvements have been made in meeting the FAR timeframes when closing 

contracts in recent years, CMS continues to have a large percentage of contracts that are 

overdue for closeout, including a large backlog of contracts completed before 

FY 2011. The contracts overdue for closeout totaled $25 billion. 

Though CMS has made significant strides in improving the contracting environment in 

recent years, it continues to face barriers that prevent timely contract closeouts, which 

poses a significant risk to public funds. 

Therefore, we recommend that CMS: 

Implement additional strategies to meet required FAR timeframes for 

closeout 

Contracts should be closed out within FAR timeframes. While CMS has made 

improvements between FYs 2011 and 2013 in reducing the average number of days to 

close contracts, CMS should review their policies and procedures to ensure that all 

necessary steps are being taken to ensure closeouts are meeting FAR timeframes. CMS 

also could reevaluate how it is prioritizing closeouts to determine if efficiency could be 

increased. For example, CMS could determine if the most effective closeout strategy is 

to prioritize contracts that do not require finalization of indirect cost rates and/or those 

approaching the 5-year expiration of their appropriated funds. 

Determine the status of contracts for which closeout status could not be 

determined 

CMS was unable to provide the closeout status of 675 contracts. CMS needs to 

determine the closeout status of these contracts and update this information in CAMS. 

Because these contracts are worth nearly $3 billion, it is important that CMS knows 

whether these contracts have been properly closed out and to have this information 

readily accessible in CAMS. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 9 
 

Add additional data to its contract management system, and improve 

reports to allow for easier access to contract data that would assist in 

contract closeout and funds management 

CMS should add to CAMS the ability to enter data regarding the total amount owed by 

or to the Government or contractor at the end of contract closeout. CAMS should 

contain information regarding payments made by the Government to the contractors. 

CMS also should create a standard data report that would enable CAMS users to 

generate basic contract information, such as product service code, project description, 

total dollars withheld, and issuing office. Having these data in CAMS, along with an 

improved CAMS report, would enable CMS to readily access more complete 

information regarding the contract as part of its contract oversight. 

Improve coordination and collaboration with NIH 

CMS should consider finalizing a Memorandum of Understanding with NIH to clearly 

define each agency’s roles and responsibilities in the closeout process, especially with 

regard to cost-reimbursement contracts. This would enable increased collaboration 

between CMS and NIH, and enable CMS to better track the incurred cost audits that 

need to be completed. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 10 
 

AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL RESPONSE 

CMS concurred with all four of the report recommendations. In its comments, CMS 

described several initiatives it has implemented to facilitate the improved management 

of its contracts; initiatives focus on clear lines of authority, prioritization of requirements 

and deliverables, and metric-driven quality reviews. 

CMS reported progress related to our recommendations, including: 

	 closing 2,077 contracts with an obligated value of $1.3 billion and de-obligating 

$29.95 million since February 2014; 

	 upgrading its contract management system and improving its contract tracking 

system and reporting capabilities; 

	 working to integrate its contract management system with the CMS Health Care 

Integrated Ledger Accounting System to track expenditures; 

	 working to implement the Department of Treasury’s Invoice Processing Platform to 

automate the invoicing process; and 

	 working to determine more effective and efficient opportunities for closing out 

contracts. 

We look forward to receiving updates from CMS on its progress toward these 

recommendations through the initiatives it described. We did not make any changes to 

the report based on CMS’s comments. The full text of CMS’s comments is provided in 

Appendix A. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 11 
APPENDIX A 

Agency Comments 

DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 

SEP3 D2015 	 200 Independence Avenue SW 

Washington, DC 20201 

To: 	 Daniel R. Levinson 

Inspector General 

Office ofthe Inspector General 

From: 	 Andrew M. Slavitt 

Acting Administrator 

Centers for Medicare & Medicaid Services 

Subject: 	 Billions in Contract Dollars Have Not Been Closed by CMS as Required (OEI03-12-00680) 

The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 

comment on the Office of the Inspector General's (OIO) draft report. CMS is committed to 

providing effective management and oversight of contracts, thereby acting as a good steward of 

tax payer dollars. 

CMS spends over 7 billion a year in contracts and to facilitate the improved management of 

these contracts we have implemented several initiatives which focus on clear lines of authority, 

prioritization ofrequirements and deliverables, and metric-driven quality reviews. These include 

implementing a strong management structure, which focuses priorities and provides clear 

direction. In addition, CMS has issued formal guidance that lays out the roles and responsibilities 

for each member ofthe acquisition workforce community, and has established a standardized 

Contracting Officer's Representative (COR) Appointment Memorandum on each contract that 

will provide CORs, and their managers, with better guidance about their respective acquisition 

team roles and responsibilities. 

CMS takes its responsibility to protect taxpayer doUars seriously and had already prioritized 

dosing out contracts prior to the OIG's draft report. We have been accelerating the close out of 

overdue contracts but at the same time making sure we are spending sufficient time conducting 

close out audits so we can appropriately track recovery of any additional funds. This additional 

time, while delaying the closing of contracts, is time well spent Since February 1, 2014, the date 

this OW draft teport data was based upon, OAGM closed 2,077 contracts with an obligated 

value of$1.3 bilHon and also de-obligated $29.95 million. In October 2014, CMS implemented 

a goal ofclosing out approximately 20 percent or 2,250 of overdue contracts per year. To assist 

in close-outs, CMS put in place a cross-divisional task force that meets on a regular basis with 

executive oversight to ensure accountability, the speed of progress and share best practices. 

Additionally, CMS has begun implementing the Depru1ment of Treasury's reconunended Invoice 

Processing Platform (IPP) to automate the invoicing process. The IPP is a secure, Web-based 

centralized service that more efficiently manages government invoicing from contract award 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEl-03-12-00680) 12 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 13 
 

ACKNOWLEDGMENTS 

This report was prepared under the direction of Linda Ragone, Regional Inspector 

General for Evaluation and Inspections, in the Philadelphia regional office. 

Maria Schepise Johnson served as the team leader for this study. Other Office of 

Evaluation and Inspections staff from the Philadelphia regional office who conducted 

the study include Robert A. Vito and Russell Tisinger. Central office staff who provided 

support include Althea Hosein, Scott Manley, and Lucia Fort. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680) 14 
Office of Inspector General

http://oig.hhs.gov 

The mission of the Office of Inspector General (OIG), as mandated by Public Law 95452, as 

amended, is to protect the integrity of the Department of Health and Human Services 

(HHS) programs, as well as the health and welfare of individuals served by those programs. 

This statutory mission is carried out through a nationwide network of audits, investigations, 

and inspections conducted by the following operating components: 

Office of Audit Services 

The Office of Audit Services (OAS) provides auditing services for HHS, either by conducting 

audits with its own audit resources or by overseeing audit work done by others. Audits 

examine the performance of HHS programs and/or its grantees and contractors in carrying 

out their respective responsibilities and are intended to provide independent assessments of 

HHS programs and operations. These assessments help reduce waste, abuse, and 

mismanagement and promote economy and efficiency throughout HHS. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

HHS, Congress, and the public with timely, useful, and reliable information on significant 

issues. These evaluations focus on preventing fraud, waste, or abuse and promoting 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

The Office of Investigations (OI) conducts criminal, civil, and administrative investigations 

of fraud and misconduct related to HHS programs, operations, and individuals. With 

investigators working in all 50 States and the District of Columbia, OI utilizes its resources 

by actively coordinating with the Department of Justice and other Federal, State, and local 

law enforcement authorities. The investigative efforts of OI often lead to criminal 

convictions, administrative sanctions, and/or civil monetary penalties. 

Office of Counsel to the Inspector General 

The Office of Counsel to the Inspector General (OCIG) provides general legal services to 

OIG, rendering advice and opinions on HHS programs and operations and providing all 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities.