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Damaged Government Property


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We have had abandoned classified Government property on our books for almost 20 years. The equipment is outdated and not been maintained as it is not prototypical of anything in the active inventory. The Government wants to leave it where it is because they cannot reach internal agreement to scrap the equipment and they will not pay us for storage. Requests for disposition have been dissapproved.

Twenty years ago, the equipment had a replacement value of $500K. Having designed the equipment, we can say that today it has no real value beyond scrap; however, replacing the equipment with known obsolesence issues could cost tens of millions for a redesign.

Recently, the equipment was severely damaged by an act of God. If the Government wants to be reimbursed for the damage, how do we value that reimbursement? We believe it's the scrap value of the metal.

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If you have an approved property control system and took reasonable care of the "scrap" government property, why would you expect the government to seek reimbursement?

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If you have an approved property control system and took reasonable care of the "scrap" government property, why would you expect the government to seek reimbursement?

Good question. You said that you have had abandoned classified Government property on your books for almost 20 years. When did the Government "abandon" the property? If they wont pay you to return it, to dispose of it or to store it, what rights do they still have to it?

To answer your question, you could inform the government that you intend to scrap the property and generously offer to send the taxpayers a check for the residual scrap value, after deducting your costs for disposal. If the government doesn't agree to that, you can then also deduct the cost for continued storage after they abandoned the property.

Actually, if the equipment would cost as much as you say to replace, I advise you to contact a good government contracts attorney for advice.

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Seacucus,

Just making sure that the USG officially abandoned the property. Sometimes contractors think property is abandoned because there has been no decision/no interest.

If it is officially abandoned, then the USG has no title. I would do as Joel says.

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I could well be mistaken, but I seriously doubt that the Government would abandon (i.e., relinquish all claims to ownership and control) classified property. Most likely, there has simply been no instruction on what to do with the property.

I echo the recommendation to contact a good contracts attorney for assistance. That will most likely lead to the "best" result (getting the government to take control and possession of the property, getting paid your past storage costs, getting paid for future storage, etc.), though it is questionable as to whether that will be the most cost effective action you can take. Disposing of the property yourself is dicey; it is, after all, classified, and that could lead to some significant problems for you.

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So you've been storing this stuff for 20 years after the contract has been physically completed? Your disposition requests have been rejected? You have been storing this stuff and the government has not been paying you for your storage costs?

Hmm. I wonder what the Red Book has to say about this. I know what my GPA would say, and it wouldn't be pretty.

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Yes, something looks pretty fishy in the whole story here.

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The Government has not abandoned the property per se. They have just refused to deal with the issue including ignoring REA's for storage costs.

Unfortunately, this particular customer performs their own contract admin including Plant Clearance so there are limited options.

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Secaucus, you might want to leverage your DSS rep. to get the classified material off-site. Annually, our rep had us justify any item on our class inventory that wasn't tied to a current contract. In your case, we would likely submit a formal letter by certified mail to the appropriate contracting officer as well as the DCMA GPA, cc'g DSS: stating that, 'per DSS instruction to take action to remove x property from our inventory, after x date, we will disposition by certified destruction the classified item as the government has effectively abandoned the property and not responded to prior correspondence dated xxxx. Any funds received for scrap in excess of costs incurred for destruction, transfer, and storage will be submitted to the US Treasury-General Fund.'

Whether or not the stated disposition actions were compliant or even lawful, the resultant actions of the GPA and/or CO quickly resolved the issue.

BC

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The Government has not abandoned the property per se. They have just refused to deal with the issue including ignoring REA's for storage costs.

Unfortunately, this particular customer performs their own contract admin including Plant Clearance so there are limited options.

secaucus, how long ago did they stop paying for continued storage costs? Did the accident, which has apparently destroyed the article, occur before or after that date?

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secaucus, you really need to consult with an attorney concerning this matter. I'm not a lawyer but remember in a business law class learning a little bit about bailments. I don't know if a contractual responsibility once it is fulfilled, can convert under these circumstances to a constructive bailment for the sole benefit of the bailor (a"gratuitous bailment"?) . A gratuitous bailee is liable for damage to the property only if the damage is caused by the bailee's gross negligence. A lower standard of care is imposed upon the bailee in a gratuitous bailment. Of course, it depends upon the terms of the contract, applicable laws and the actual, specific circumstances. You are also dealing with classified property. Please consult with an attorney and good luck.

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