Contract close-out

Contract close-out is the final phase of a procurement: the buyer formally confirms that everything the contract required has been delivered, accepted and paid, that no claims or changes remain unresolved, and that the procurement file is administratively closed. For suppliers it is the process that converts finished work into a fully paid, discharged contract.

The federal close-out checklist

Public Services and Procurement Canada's Buyer's Portal (the successor guidance to the archived Supply Manual, published 2026-01-30) defines when a contract is "fully completed." All of the following must be true:

• the required deliverables have been received as specified in the contract;
• the client has accepted the deliverables and the invoice has been paid according to the contract price and basis of payment;
• there are no unresolved work deficiencies, changes, payments, or claims requiring formal release action.

On top of that, PSPC requires administrative closure of the file: reporting, returning government-furnished equipment, disposing of surplus material and assets, and documenting and archiving the procurement file in line with records-management procedures.

Why close-out matters financially

Two contract-management areas converge at close-out. First, money: final payment only moves once deliverables are accepted and nothing is outstanding — which is why open change orders, disputed invoice items or deficiency lists show up as close-out blockers. Second, security: financial security the supplier posted for performance (letters of credit, bonds) is released as part of contract administration once the contract's obligations are satisfied. In construction, the equivalents run through substantial performance, holdback release and the final certificate under provincial construction legislation — separate triggers that gate the last dollars on the job.

What it means for suppliers

Treat close-out as a deliverable in its own right. Keep acceptance records for every deliverable, submit final invoices that match the contract's basis of payment, clear deficiency lists promptly, and formally close out any claims or change requests rather than leaving them "parked." A contract that ends without a clean close-out can leave money in the buyer's hands, security unreleased, and an ambiguous performance record — which matters when that buyer evaluates your past performance on the next solicitation. Note that close-out is a normal, successful end state: it is entirely different from termination, where the contract ends early because of breach, convenience or default.

Common questions

When should close-out activities start?

The verification runs through the contract's life, but the formal close-out phase starts as the last deliverables near completion. Buyers begin by confirming each deliverable meets its acceptance criteria, then chase the financial pieces — final invoice, release of security, disposition of equipment. Suppliers who wait until the end to assemble acceptance evidence often cause the delay themselves, so document acceptance continuously as work progresses.

What stops a contract from closing out?

Almost always one of the unresolved items in PSPC's third condition: outstanding deficiencies, unapproved changes, unpaid invoices or unresolved claims. A $0 claim left open can hold up release of contract security as effectively as a large one, because the buyer needs formal release action before the file can close. Suppliers should reconcile the contract file with the buyer early — a short close-out meeting or reconciliation letter prevents months of follow-up.

Related definitions

Acceptance criteria · Acceptance testing · Performance security · Substantial performance