Closeout Liabilities

The Closeout Liabilities program, as presented in the Army's FY 2026 Procurement of Ammunition budget (Line Item 9615EA8500), is designed to address financial obligations that arise from the conclusion or termination of contracts at Army ammunition plants. The primary objective of this line item is to ensure that the Army can meet its legal and contractual responsibilities for costs that may not have been anticipated during the initial contract period. This includes covering contract termination costs and operational losses or claims that may arise when a contract is ended before its planned completion.

Funding for Closeout Liabilities is allocated to pay for contingent liabilities such as unfunded pension liabilities, severance pay, and other claims that are approved by the Army Contract Review Board (ACRB). The ACRB reviews and approves the settlement of these claims, ensuring that all actions comply with Army policy and federal regulations. The program provides a financial mechanism to resolve these obligations promptly, maintaining the Army's credibility and contractual integrity with its industrial partners.

The requested funding for FY 2026 is intended to cover any unanticipated costs that may arise from contract terminations at ammunition production facilities. The justification for this funding is rooted in the need to address liabilities that, while not part of the original contract scope, are nonetheless the responsibility of the government due to legal or regulatory requirements.

This program does not fund procurement of new ammunition or equipment, nor does it support research and development activities. Its focus is on the financial closeout process, ensuring that all outstanding obligations to contractors and plant workers are satisfied. This may include costs associated with employee severance, settlement of claims for operational losses, or payment of unfunded pension liabilities that become due upon contract termination.

This line item is categorized under the Miscellaneous sub-activity of the Army's Ammunition Procurement appropriation, reflecting its unique role in the budget. Unlike other procurement lines that are tied to specific quantities of munitions or equipment, the Closeout Liabilities line is variable and contingent upon the occurrence of contract terminations and the approval of claims by the ACRB. The funding is managed as a contingency reserve to address these unpredictable but necessary costs.

By maintaining this dedicated funding line, the Army ensures that it can fulfill its obligations to contractors and employees without disrupting ongoing procurement or operational activities. This approach supports the Army's broader goals of maintaining strong relationships with industry partners and upholding its commitments under federal acquisition regulations. The program also helps to mitigate legal and financial risks associated with contract closeouts, thereby supporting the efficiency and accountability of the Army's procurement processes.