FAR 4.804-4—Physically completed contracts.
Plain-English Summary
FAR 4.804-4 defines when a contract is considered "physically completed" for contract closeout purposes. It covers two main subject areas: the standard rule for supplies and services contracts, including required deliveries, Government inspection and acceptance, completion and acceptance of services, and expiration of any option periods; and a special rule for rental, use, and storage agreements, which are physically completed either when the Government issues a notice of complete contract termination or when the contract period expires. The purpose of the section is to establish a clear milestone for determining when a contract has reached the point where closeout actions can proceed, such as final administrative review, property disposition, and file closure. In practice, this rule matters because physical completion is one of the key triggers for contract closeout timelines and helps contracting offices decide when a contract is ready to move from performance administration to final settlement and archival processing. It also prevents premature closeout by requiring both performance completion and Government acceptance, where applicable, before a contract is treated as physically complete.
Key Rules
Supplies must be delivered and accepted
For supply contracts, physical completion occurs only after the contractor has completed all required deliveries and the Government has inspected and accepted the supplies. Delivery alone is not enough; Government acceptance is part of the completion standard.
Services must be performed and accepted
For service contracts, the contractor must finish all required services and the Government must accept them. This ensures the contract is not treated as complete until performance is fully delivered and formally accepted.
Options must expire
If the contract includes option provisions, the contract is not physically completed until all option periods have expired. This prevents closeout while the Government still has a contractual right to extend performance.
Termination notice can complete the contract
A contract is physically completed when the Government gives the contractor a notice of complete contract termination. This applies as an alternative completion event even if normal performance did not run to full delivery or service completion.
Rental and storage agreements have a special rule
Rental, use, and storage agreements are physically completed when the Government issues a notice of complete contract termination or when the contract period expires. These agreements do not use the same delivery-and-acceptance test as ordinary supply or service contracts.
Responsibilities
Contracting Officer
Determine when the contract meets the physical completion standard, including confirming delivery, inspection, acceptance, service completion, option expiration, or termination notice as applicable. Use that determination to support contract closeout actions and ensure the file is not closed prematurely.
Government Inspecting/Accepting Activity
Inspect supplies and formally accept supplies or services when required. Their acceptance is a necessary condition for physical completion in standard supply and service contracts.
Contractor
Complete all required deliveries or services and comply with any termination notice. For rental, use, and storage agreements, the contractor must recognize that completion may occur upon termination notice or expiration of the contract period.
Agency Contract Administration Staff
Track performance status, option periods, and termination actions so the contracting office can identify the physical completion date accurately. Support closeout processing once the contract meets the regulatory standard.
Practical Implications
Physical completion is a closeout trigger, so getting the date wrong can delay final file closure, property disposition, and other administrative actions.
Acceptance matters: a contract is not physically completed just because the contractor says work is done; the Government must inspect and accept where the rule requires it.
Option periods can keep a contract open longer than expected, so contracting staff should verify whether any options remain before treating the contract as complete.
Termination notices can accelerate completion, but only if the notice is a complete contract termination; partial or ongoing termination actions may not satisfy this rule.
Rental, use, and storage agreements should be tracked separately from ordinary supply and service contracts because their completion standard is different and depends on expiration or complete termination.
Official Regulatory Text
(a) Except as provided in paragraph (b) of this section, a contract is considered to be physically completed when- (1) (i) The contractor has completed the required deliveries and the Government has inspected and accepted the supplies; (ii) The contractor has performed all services and the Government has accepted these services; and (iii) All option provisions, if any, have expired; or (2) The Government has given the contractor a notice of complete contract termination. (b) Rental, use, and storage agreements are considered to be physically completed when- (1) The Government has given the contractor a notice of complete contract termination; or (2) The contract period has expired.