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Temporarty Transfer of CAGP to Another Prime Contractor


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We have a DoD CPFF contract which requires, in small part, that we develop and deliver a "widget". We have built the widget but the government would like us to send the widget to another prime contractor on its contract for temporary integration into its system for testing. Upon completion of the test, the widget would be returned to us for completion of the widget development and for later delivery to the Gov't. (As is, the widget is not complete for delivery to the Government but can be used for testing purposes.)

What is a contractual mechanism for the temporary transfer of Contractor Acquired Government Property from one prime contract to another prime contract (different prime contractors)?

The other contractor is arguing it can only accept the widget if its prime contract is modified to add the widget as GFE to its contract. Otherwise, it will not accept any risk of loss, damage, or destruction while the widget is being tested in its system. Since the widget is not complete for delivery and acceptance to the Government, and since it will be used by us to perform in other areas of our contract's scope, we cannot deliver the widget to the Gov't. The customer's Govt Property Administrator's suggestion is for us to enter into a Govt Property "Rent Free Use Agreement" where we would accept the risk for any damage, loss, or destruction of the widget while in the other prime contractor's possession. This seems unreasonable to us since the test is being requested at the urging of the Gov't.

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A simple contract modification can be written to specify that the Government will take possession of the unfinished widget for up to _____ days and then will return it to the contractor for finishing and final delivery.

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Technically, until delivery and government acceptance of the widget, does it not belong to you, rather than the government? If this is a change to your contract's requirement's can you not negotiate who is responsible and who will cover costs for damage or loss To your widget while fulfilling the new requirement?

seems like the other contract is being changed too?

Edit: I like JI's idea.

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Guest Vern Edwards

ji20774 has described the only sensible way to do what the government wants. If the government won't sign a mod, you should refuse to send the widget to the other contractor.

But I don't think I would say that the mod will be simple. You need to stipulate (1) who bears responsibility for risk of damage or loss during transit and use, (2) when it will be returned to you, (3) in what condition it is to be returned, and (4) the effect of the transaction on contract estimated cost and fee and on delivery schedule.

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We have a DoD CPFF contract which requires, in small part, that we develop and deliver a "widget". We have built the widget but the government would like us to send the widget to another prime contractor on its contract for temporary integration into its system for testing.

You say the government customer "would like" your company to ship the incomplete widget to another contractor "for testing". Was that testing called out in the contract SOW? Is the shipment mandatory, or the subject of a request?

What happens if the widget fails testing?

All this in addition to Vern's excellent points. If you don't have the answers to these questions -- and have those answers documented and agreed-to by the three parties -- then I'm suggesting its a BAD IDEA. You have little or no upside and lots of downside.

Hope this helps.

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The "test" would be performed on the other prime contractor's contract.

Transfer of the equipment to the other contractor on a "temporary basis" would not materially affect our schedule or contract costs, unless it is returned in less than similar condition as it was initially delivered to the other contractor.

Assumption of risk is a significant issue. Both parties have DCMA-approved GP systems and as I understand it, provided we are not grossly negligent or commit an intentional act damaging or destroying the widget, the government would assume the risk, which makes sense since it is requesting the test. However, I think that making that clear in any contract mod is a good idea.

At this point, this is a customer "request". We have requested the "temporary transfer" mod; and we assume a similar mod would have to be initiated with the other prime contractor to receive the widget as GFE on a temporary basis. The mod request we submitted specified the time frame that the widget would be transferred for testing with the other contractor.

Regarding "ownership" of the widget, since it was developed under a CPFF contract, and since we have billed and been paid for its development, I would say that the Government "owns" the equipment (CAGP), so any transfer of it would have to be approved by the KO in some written form.

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If I can offer another bit of advice -- don't wait for the Government to write the "temporary transfer" modification -- you can write it yourself as a help to your contracting officer. That way, you have the first stab at addressing Vern's stipulations.

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Regarding "ownership" of the widget, since it was developed under a CPFF contract, and since we have billed and been paid for its development, I would say that the Government "owns" the equipment (CAGP), so any transfer of it would have to be approved by the KO in some written form.

Does the contract contain FAR clause 52.245-1 Government Property? If so, the question of title would be answered in the clause. Also, a contract modification is required for both contracts if it is CAGP and the Government maintains title - see FAR 45.106 Transferring accountability.

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