[Federal Register: September 19, 2005 (Volume 70, Number 180)]
[Proposed Rules]
[Page 54878-54889]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr19se05-17]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1, 2, 17, 31, 32, 35, 42, 45, 49, 51, 52, and 53
[FAR Case 2004-025]
RIN: 9000-AK30
Federal Acquisition Regulation; Government Property
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Proposed rule.
-----------------------------------------------------------------------
SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) are proposing to amend the
Federal Acquisition Regulation (FAR) to simplify procedures, clarify
language, and eliminate obsolete requirements related to the management
and disposition of Government property in the possession of
contractors. Various FAR parts are amended to implement a policy that
fosters efficiency, flexibility, innovation, and creativity, while
continuing to protect the Government's interest in the public's
property. The proposed rule specifically impacts contracting officers,
property administrators, and contractors responsible for the management
of Government property.
DATES: Interested parties should submit written comments to the FAR
Secretariat on or before November 18, 2005 to be considered in the
formulation of a final rule.
ADDRESSES: Submit comments identified by FAR case 2004-025 by any of
the following methods:
Federal eRulemaking Portal: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.regulations.gov.
Follow the instructions for submitting comments.
Agency Web Site: http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.acqnet.gov/far/ProposedRules/proposed.htm.
Click on the FAR case number to submit comments. E-mail: farcase.2004-025@gsa.gov. Include FAR case 2004-
4-
025 in the subject line of the message.
Fax: 202-501-4067.
Mail: General Services Administration, Regulatory
Secretariat (VIR), 1800 F Street, NW, Room 4035, ATTN: Laurieann
Duarte, Washington, DC 20405.
Instructions: Please submit comments only and cite FAR case 2004-
025 in all correspondence related to this case. All comments received
will be posted without change to http://frwebgate.access.gpo.gov/cgi-bin/leaving.cgi?from=leavingFR.html&log=linklog&to=http://www.acqnet.gov/far/ProposedRules/proposed.htm
, including any personal and/or business
confidential information provided.
FOR FURTHER INFORMATION CONTACT The FAR Secretariat at (202) 501-4755
for information pertaining to status or publication schedules. For
clarification of content, contact Ms. Jeritta Parnell, Procurement
Analyst, at (202) 501-4082. Please cite FAR case 2004-025.
SUPPLEMENTARY INFORMATION:
A. Background
In the late 1990s, the Department of Defense (DoD) initiated a
complete rewrite of FAR Part 45 and associated clauses. Beyond
attempting to address long-standing property management
[[Page 54879]]
issues, the effort reflected the general consensus that adoption of
more typically commercial business practices would not only attract
more commercial firms to the marketplace but also result in significant
savings of acquisition dollars. For many reasons, only one portion of
that rewrite - Subpart 45.6 with its associated clauses and forms, was
published as a final rule. Therefore, another rewrite of Part 45 and
its associated clauses is being proposed.
The proposed language, by encouraging efficiency, flexibility,
innovation, and creativity, complements the use of current processes
and technologies such as Enterprise Resource Planning, relational
databases, unique item identification, radio frequency tags, bar-
coding, and the general trend toward commercialization of components
and equipment.
The concepts of the proposed rewrite have been discussed and
presented to a wide audience. Briefings were presented at public
meetings, defense industry representative meetings, industry and trade
associations, and to the military departments, GSA Property Management
Executive Council and other interested parties.
The new language reflects a life-cycle, performance-based approach
to property management and permits the adoption of more typically
commercial business practices.
The proposed rule requires contracting officers, property
administrators and other personnel involved in awarding or
administering contracts with Government property to be aware of
industry-leading practices and standards for managing Government
property. Other associated impacts include--
(a) Stricter policy for contracting officers to follow when
determining whether or not to provide property to contractors.
(b) Possible contracting officer revocation of the Government's
assumption of risk when the property administrator determines that the
contractor's property management practices are inadequate and/or
present an undue risk to the Government.
(c) An outcome-based framework for the management of property in
possession of contractors.
(d) Identification by contractors of the standard or practice
proposed for managing Government property.
Many of the policy language changes are administrative in nature
(i.e., deleting obsolete terms, eliminating duplicate language,
clarifying and relocating definitions to clauses, etc.). Other policy
changes include revising or adding new definitions as a result of
previous changes and/or lessons learned. FAR Subparts 45.1, General;
45.2, Competitive Advantage; 45.3, Providing Government Property to
Contractors; 45.4, Contractor Use and Rental of Government Property;
and 45.5, Management of Government Property in the Possession of
Contractors, have been revised and reorganized in such a manner that it
was necessary to delete language in these sections in their entirety
and replace them with revised language and titles. FAR Subpart 45.6
remains unchanged, except for the revision of the term ``Government
property'' found in FAR 45.600 to read ``contractor inventory'' and the
movement of the definitions to the new FAR 45.101 and the revised
clause at 52.245-1(a).
Definitions for ``Special Test Equipment'' and ``Special Tooling''
are revised and moved from Part 45 to Part 2 and a new definition
``Voluntary Consensus Standards'' is added in Part 2. The definition
for ``Plant Clearance Officer'' in Part 2 is also revised.
Definitions for ``Acquisition cost,'' ``Real property,'' and
``Government property'' located in the clause at 52.245-9, Use and
Charges, are revised and included in the new FAR 45.101.
The proposed rule includes the following new definitions in FAR
45.101 and the clause at 52.245-1:
``Contractor Inventory''
``Contractor's Managerial Personnel''
``Equipment''
``Property''
``Provide''
``Unique Federal Property''.
The proposed rule, if adopted, would eliminate the following
definitions:
Agency Peculiar Property
Accessory Item
Auxiliary Item
Custodial Records
Facilities
Facilities Contracts
Government Furnished Material
Government Production and Research Property
Individual Item Record
Plant equipment
Nonprofit Organization
Salvage
Stock Record
Summary Record
Utility Distribution System
Work-in-Process.
The FAR clauses at 52.245-1, Property Records; 52.245-2, Government
Property (Fixed Price Contracts); 52.245-5, Government Property (Cost-
Reimbursement, Time and Material, or Labor Hour Contracts); and 52.245-
19, Government Property Furnished ``As Is'', were combined to form one
new clause--52.245-1, Government Property. A new property clause at
52.245-2, Government Property (Installation Operations for Services),
was added specifically to address contracts designed for military base-
operating and installation-level contracts, particularly those awarded
under the Office of Management and Budget Circular A-76 process. The
Councils seek specific comment on the new clause at FAR 52.245-1 as to:
(1) whether the proposed wording of paragraphs (f) and (g) are clear in
their intent; and (2) whether the intent of paragraphs (f) and (g)
could be achieved in some other manner.
The following clauses were deleted in their entirety because they
were either obsolete or conflicted with the use of consensus standards
and/or industry-leading standards and practices for property
management:
52.245-3
52.245-4
52.245-5
52.245-6
52.245-7
52.245-8
52.245-10
52.245-11
52.245-12
52.245-13
52.245-14
52.245-15
52.245-16
52.245-17
52.245-18.
The rule deletes the current FAR text on facilities contracts and
the associated clauses because the Councils believe they are outmoded
and no longer necessary. The Councils found that facilities contracts,
contracts established solely to account for property with subsequent
contracts authorized to use that property, are rarely used. The
Councils also found that facilities clauses are being used in service
contracts for the operation of Government-Owned Contractor-Operated
Facilities (GOCOs). In the case of GOCOs, it is believed that agencies'
property management needs can better, and more appropriately, be met
through tailoring the statement of work in these service contracts to
the agency's specific needs and incorporating the new property clause
at FAR 52.245-1. Should the facilities contract coverage be deleted in
a subsequent final rule, any required administrative conforming
revisions (e.g., elimination of cross references to deleted facilities
contract clauses) will be effected in the final rule.
The Councils seek specific comment on instances in which there is a
continued need for coverage or clauses similar to those that are being
deleted.
[[Page 54880]]
The following additional FAR changes are consistent with the intent
of this proposed rule:
Deletion of 42.302(a)(27). This paragraph refers to the
Special Test Equipment clause which is being deleted.
Revision of FAR 51.107 to delete references to facilities
contracts.
Revision of FAR 52.245-17, Special Tooling, was originally
proposed under FAR Case 2002-015, Use and Rental and Special Tooling.
Public comments recommended deletion of this clause rather than
revision. Therefore, this case solicits comments on the deletion of the
clause at 52.245-17, Special Tooling.
The cost principle at FAR 31.205-19 is revised to reflect the
changes made in the proposed clause at FAR 52.245-1, to indicate that,
unless the Government has determined that the contractor's property
management practices are inadequate and/or present an undue risk to the
Government, the cost of insurance is allowable when the contractor is
liable and the insurance does not cover loss, damage, destruction, or
theft which results from willful misconduct or lack of good faith on
the part of the contractor's managerial personnel.
This is not a significant regulatory action and, therefore, was not
subject to review under Section 6(b) of Executive Order 12866,
Regulatory Planning and Review, dated September 30, 1993. This rule is
not a major rule under 5 U.S.C. 804.
B. Regulatory Flexibility Act
The changes may have a significant economic impact on a substantial
number of small entities within the meaning of the Regulatory
Flexibility Act, 5 U.S.C. 601, et seq., because the rule affects the
method of managing Government property and is intended to give agencies
and contractors more flexibility in applying industry-leading practices
and standards. As such, it is expected that the rule will have a
positive effect on small business.
An Initial Regulatory Flexibility Analysis (IRFA) has been
prepared. The analysis is summarized as follows:
The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) are proposing revising
the FAR to update FAR Parts 45 and 52. The revisions will attempt to
address long-standing property management issues and will reflect a
general consensus that adoption of more typically commercial
business practices would not only attract more commercial firms to
the marketplace but also result in significant savings of
acquisition dollars. Moreover, much of the current FAR language
related to property management is well over fifty years old, and
contains inconsistent, often conflicting guidance that is at odds
with modern materials management technology such as Enterprise
Resource Planning, relational databases, unique item identification,
radio frequency tags, bar-coding, and the general trend toward
commercialization of components and equipment.
Title II of the Federal Property and Administrative Services Act
of 1949, Public Law 81-152, as amended, requires, in part that
executive agencies account for Government property, determine when
such property is excess, and dispose of excess Government property
promptly. The proposed rule amends the FAR to revise the policies
for the management of Government-owned property used and acquired by
private industry in the performance of Government contracts.
It is estimated that approximately 5000 contractors have Federal
property in their possession. DoD has 2,242 contractors.
Approximately 62 percent of DoD's contractors are small businesses.
Given that property in the possession of contractors is
overwhelmingly DoD property, it is estimated the DoD ratio of small
business to total businesses having such property is a reasonable
approximation for all Government contractors. Therefore, it is
estimated that approximately 3,100 small businesses have Government
property in their possession.
This proposed rule substantially decreases the impact of the
current FAR provisions by simplifying procedures, reducing
recordkeeping and eliminating requirements related to the management
of Government property in the possession of contractors. The rule
continues the philosophy of ordinarily requiring contractors to
furnish all property necessary to perform Government contracts, but
also introduces more modern and innovative concepts.
The rule is structured around a number of principles or
objectives which, it is believed, will have an overall positive
impact on contractors regardless of size. The rule balances
regulation with principle-based standards that allow for minimal
regulatory requirement and greater flexibility and efficiency to
achieve best value for the Government. The rule introduces
commercial standards and industry best practices into the property
management process to the maximum extent possible. This facilitates
moving from a prescribed regulatory process to a performance-based
outcome environment. The use of sound business practices should
reduce both the Government's and the contractor's ongoing
administrative costs of dealing with Government property.
Contractors will initiate and maintain the processes, systems,
records, and methodologies necessary for effective control of the
Government's property.
While it may be that small businesses are more dependent on
Government--furnished property than large businesses, the underlying
philosophy has not changed (i.e., contractors are ordinarily
required to furnish all property necessary to perform the Government
contracts).
The Federal Property Management Regulation and the Federal
Management Regulation published by the General Services
Administration provide property management guidance to Government
personnel. Some of the material overlaps or is duplicated by the FAR
property management provisions. The duplication or overlap stems
from the need to have contract administration issues addressed in
the FAR and broadly disseminated to Government and contractor
personnel.
The FAR Secretariat has submitted a copy of the IRFA to the Chief
Counsel for Advocacy of the Small Business Administration. A copy of
the IRFA may be obtained from the FAR Secretariat. The Councils will
consider comments from small entities concerning the affected FAR parts
1, 2, 17, 31, 32, 35, 42, 45, 49, 51, 52, and 53, in accordance with 5
U.S.C. 610. Comments must be submitted separately and should cite 5
U.S.C 601, et seq. (FAR case 2004-025), in correspondence.
C. Paperwork Reduction Act
The Paperwork Reduction Act (Pub. L. 104-13) applies because the
proposed rule contains information collection requirements.
Accordingly, the FAR Secretariat submitted a request for a revised
information collection requirement concerning Government Property to
the Office of Management and Budget under 44 U.S.C. 3501, et seq.
The present FAR requirements currently approved by the Office of
Management and Budget (OMB) are being revised under OMB Control Number
9000-0075.
The information collection includes the following requirements
relating to FAR Part 45 and 52.245:
1. FAR 45.606-1 requires a contractor to submit inventory
schedules.
2. FAR 45.606-3(a) requires a contractor to correct and resubmit
inventory schedules as necessary.
3. FAR 52.245-1(f)(1)(ii) requires contractors to receive, record,
identify and manage Government property.
4. FAR 52.245-1(f)(1)(iii) requires contractors to create and
maintain records of all Government property accountable to the
contract.
5. FAR 52.245-1(f)(1)(iv) requires contractors to periodically
perform, record, and report physical inventories during contract
performance.
6. FAR 52.245-1(f)(1)(vi) requires contractors to have a process to
create and provide reports.
7. FAR 52.245-1(f)(1)(viii) requires contractors to promptly
disclose and report Government Property in their possession that is
excess to contract performance.
8. FAR 52.245-1(f)(1)(ix) requires contractors to disclose and
report to the Property Administrator the need for
[[Page 54881]]
replacement and/or capital rehabilitation.
9. FAR 52.245-1(f)(1)(x) requires contractors to perform and report
to the Property Administrator contract property closeout.
10. FAR 52.245-1(f)(2) requires contractors to establish and
maintain source data, particularly in the areas of recognition of
acquisitions and dispositions of material and equipment.
11. FAR 52.245-1(j)(4) requires contractors to submit inventory
disposal schedules to the Plant Clearance Officer.
12. FAR 52.245-9(f) requires a contractor to submit a facilities
use statement to the contracting officer within 90 days after the close
of each rental period.
The information will be used to control and account for Government-
owned property in the possession of contractors.
Annual Reporting Burden:
Public reporting burden for this collection of information is
estimated to average .4598 hours per response, including the time for
reviewing instructions, searching existing data sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
The annual reporting burden is estimated as follows:
Respondents: 15,100.
Responses per respondent: 896.71.
Total annual responses: 13,540,450.
Preparation hours per response: .46.
Total response burden hours: 6,226.350.
D. Request for Comments Regarding Paperwork Burden
Submit comments, including suggestions for reducing this burden,
not later than November 18, 2005 to: FAR Desk Officer, OMB, Room 10102,
NEOB, Washington, DC 20503, and a copy to the General Services
Administration, FAR Secretariat (VIR), 1800 F Street, NW, Room 4035,
Washington, DC 20405.
Public comments are particularly invited on: whether this
collection of information is necessary for the proper performance of
functions of the FAR, and will have practical utility; whether our
estimate of the public burden of this collection of information is
accurate, and based on valid assumptions and methodology; ways to
enhance the quality, utility, and clarity of the information to be
collected; and ways in which we can minimize the burden of the
collection of information on those who are to respond, through the use
of appropriate technological collection techniques or other forms of
information technology.
Requester may obtain a copy of the justification from the General
Services Administration, FAR Secretariat (VIR), Room 4035, Washington,
DC 20405, telephone (202) 501-4755. Please cite OMB Control Number
9000-0075, Government Property, in all correspondence.
List of Subjects in 48 CFR Parts 1, 2, 17, 31, 32, 35, 42, 45, 49,
51, 52, and 53
Government procurement.
Dated: September 7, 2005.
Julia B. Wise,
Director, Contract Policy Division.
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 1, 2,
17, 31, 32, 35, 42, 45, 49, 51, 52, and 53, as set forth below:
1. The authority citation for 48 CFR parts 1, 2, 17, 31, 32, 35,
42, 45, 49, 51, 52, and 53, is revised to read as follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42
U.S.C. 2473(c).
PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM
1.106 [Amended]
2. Amend section 1.106 in the table following the introductory
paragraph by removing FAR segments ``52.245-3'', ``52.245-5'',
``52.245-7'', ``52.245-8'', ``52.245-10'', ``52.245-11'', ``52.245-
16'', ``52.245-17'', and ``52.245-18'' and the corresponding OMB
Control Number ``9000-0075''.
PART 2--DEFINITIONS OF WORDS AND TERMS
3. Amend section 2.101 in paragraph (b) by revising the definition
``Plant clearance officer'', and by adding, in alphabetical order, the
definitions ``Special test equipment'', ``Special tooling'', and
``Voluntary Consensus Standards'' to read as follows:
2.101 Definitions.
* * * * *
(b) * * *
Plant clearance officer means an authorized representative of the
contracting officer assigned the responsibility of screening,
redistributing, and disposing of Contractor Inventory from a
Contractor's plant or work site. The term ``Contractor's plant''
includes, but is not limited to, Government-owned Contractor-operated
plants and Federal installations as may be required under the scope of
the contract.
* * * * *
Special test equipment means either single or multipurpose
integrated test units engineered, designed, fabricated, or modified to
accomplish special purpose testing in performing a contract. It
consists of items or assemblies of equipment including standard or
general purpose items or components that are interconnected and
interdependent so as to become a new functional entity for special
testing purposes. Special test equipment does not include material,
special tooling, real property (except foundations and similar
improvements necessary for installing special test equipment), and
equipment items used for general testing purposes or property that with
relatively minor expense can be made suitable for general purpose use.
Special tooling means jigs, dies, fixtures, molds, patterns, taps,
gauges, all components of these items, and replacement of these items,
which are of such a specialized nature that without substantial
modification or alteration their use is limited to the development or
production of particular supplies or parts thereof or to the
performance of particular services. Special tooling does not include
material, special test equipment, unique federal property, real
property (except foundations and similar improvements necessary for
installing special tooling), equipment, machine tools, or similar
capital items.
* * * * *
Voluntary Consensus Standards means common and repeated use of
rules, conditions, guidelines or characteristics for products, or
related processes and production methods and related management
systems. Voluntary Consensus Standards are developed or adopted by
domestic and international voluntary consensus standard making bodies.
* * * * *
PART 17--SPECIAL CONTRACTING METHODS
4. Amend section 17.603 by revising paragraph (a)(5) to read as
follows:
17.603 Limitations.
(a) * * *
(5) Functions that can more properly be accomplished in accordance
with Subpart 45.3, Authorizing the Use and/or Rental of Government
Property.
* * * * *
PART 31--CONTRACT COST PRINICPLES AND PROCEDURES
5. Amend section 31.205-19 by revising paragraph (e)(2)(iv) to read
as follows:
31.205-19 Insurance and indemnification.
* * * * *
(e) * * *
(2) * * *
[[Page 54882]]
(iv) Unless the Government has determined that the contractor's
property management practices are inadequate and/or present an undue
risk to the Government, costs of insurance for the risk of loss,
damage, destruction, or theft of Government property are allowable to
the extent that the contractor is liable for such loss, damage,
destruction, or theft, and such insurance does not cover loss, damage,
destruction, or theft which results from willful misconduct or lack of
good faith on the part of any of the contractor's managerial personnel
(as described in the FAR clause at 52.245-1(h)(1)(ii)).
* * * * *
31.205-40 [Amended]
6. Amend section 31.205-40 in paragraph (a) by removing ``45.101''
and adding ``2.101(b)'' in its place.
PART 32--CONTRACT FINANCING
7. Amend section 32.503-15 by revising paragraph (b)(1) to read as
follows:
32.503-15 Application of Government title terms.
* * * * *
(b) * * *
(1) The clause at 52.245-1, Government Property.
* * * * *
PART 35--RESEARCH AND DEVELOPMENT CONTRACTING
35.014 [Removed and Reserved]
8. Remove and reserve section 35.014.
PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES
42.302 [Amended]
9. Amend section 42.302 by removing and reserving paragraph
(a)(27).
PART 45--GOVERNMENT PROPERTY
10. Amend section 45.000 by revising the second sentence to read as
follows:
45.000 Scope of part.
* * * It does not apply to property under any statutory leasing
authority, (except as to non-Government use of plant equipment under
45.301(f)); to property to which the Government has acquired a lien or
title solely because of partial, advance, progress, or performance-
based payments; or to disposal of real property.
11. Revise Subparts 45.1 through 45.5 to read as follows:
Subpart 45.1--General
Sec.
45.101 Definitions.
45.102 Policy.
45.103 General.
45.104 Responsibility and liability for Government property.
45.105 Analysis of contractors' property management system.
45.106 Transferring accountability.
45.107 Contract clauses.
Subpart 45.2--Solicitation and Evaluation Procedures
45.201 General.
Subpart 45.3--Authorizing the Use and/or Rental of Government Property
45.301 Use and rental.
45.302 Contracts with foreign Governments or international
organizations.
45.303 Use of Government property on independent research and
development programs.
Subpart 45.4--Title to Government Property
45.401 Title to Government property.
Subpart 45.5--Support Government Property Administration
45.501 Support Government property administration.
Subpart 45.1--General
45.101 Definitions.
As used in this part--
Acquisition cost means--
(1) For contractor acquired property, the full cost determined in
accordance with the system established by the Contractor in conformance
with consistently applied sound accounting principles.
(2) For Government furnished property, the amount identified in the
contract, or in the absence of such identification, the fair market
value attributed to the item by the contractor.
Common item means material that is common to the applicable
Government contract and the contractor's other work.
Contractor acquired property means property acquired, fabricated,
or otherwise provided by the contractor for performing a contract and
to which the Government has title.
Contractor inventory means--
(1) Any property acquired by and in the possession of a contractor
or subcontractor under a contract for which title is vested in the
Government and which exceeds the amounts needed to complete full
performance under the entire contract;
(2) Any property that the Government is obligated or has the option
to take over under any type of contract, e.g., as a result either of
any changes in the specifications or plans thereunder or of the
termination of the contract (or subcontract thereunder), before
completion of the work, for the convenience or at the option of the
Government; and
(3) Government-furnished property that exceeds the amounts needed
to complete full performance under the entire contract.
Contractor's managerial personnel means the contractor's directors,
officers, managers, superintendents, or equivalent representatives who
have supervision or direction of all or substantially all of the
contractor's business; all or substantially all of the contractor's
operation at any one plant or separate location; or a separate and
complete major industrial operation.
Demilitarization means rendering a product designated for
demilitarization unusable for, and not restorable to, the purpose for
which it was designed or is customarily used.
Discrepancies incident to shipment means all deficiencies incident
to shipment of Government property to or from a contractor's facility
whereby differences exist between the property purported to have been
shipped and property actually received.
Equipment means a tangible article of personal property that is
complete in-and-of itself, durable, nonexpendable, and needed for the
performance of a contract. Equipment generally has an expected service
life of one year or more, and does not ordinarily lose its identity or
become a component part of another article when put into use.
Government-furnished property means property in the possession of,
or directly acquired by, the Government and subsequently furnished to
the contractor for performance of a contract.
Government property means all property owned or leased by the
Government. Government property includes both Government-furnished and
contractor-acquired property.
Material means property that may be consumed or expended during the
performance of a contract, component parts of a higher assembly, or
items that lose their individual identity through incorporation into an
end-item. Material does not include equipment, special tooling, special
test equipment, or unique federal property.
Nonseverable means property that cannot be removed after erection
or installation without substantial loss of value or damage to the
installed property or to the premises where installed.
Precious metals means silver, gold, platinum, palladium, iridium,
osmium, rhodium, and ruthenium.
Property means all tangible property, both real and personal.
Property Administrator means an authorized representative of the
contracting officer assigned the responsibility of administering the
[[Page 54883]]
contract requirements and obligations relating to Government property
in the possession of a contractor.
Provide means to furnish existing Government property or to allow
the contractor to acquire property on behalf of the Government under
this contract.
Real property means land, land rights, buildings, structures,
utility systems, steam-generation systems, and equipment attached to
and made part of buildings and structures (such as heating systems). As
such, land rights are considered real property. It does not include
foundations and other work necessary for installing special tooling,
special test equipment, or equipment.
Sensitive property means property potentially dangerous to the
public safety or security if stolen, lost, or misplaced, or that shall
be subject to exceptional physical security, protection, control, and
accountability such as classified property, weapons, ammunition,
explosives, controlled substances, radioactive materials, hazardous
materials or wastes, or precious metals.
Surplus property means excess personal property not required by any
Federal agency as determined by the Administrator of the General
Services Administration (GSA).
Unique Federal property means Government-owned personal property
that is peculiar to the mission of an agency, e.g., military or space
property. Unique federal property excludes material, special test
equipment, special tooling, real property and equipment.
45.102 Policy.
(a) Contractors are ordinarily required to furnish all property
necessary to perform Government contracts.
(b) Contracting officers shall provide property to contractors only
when it is clearly demonstrated--
(1) To be in the Government's best interest;
(2) That the overall benefit to the procurement significantly
outweighs the increased cost of administration, including ultimate
property disposal;
(3) That providing the property does not substantially increase the
Government's assumption of risk; and
(4) That Government requirements cannot otherwise be met.
(c) The contractor's inability or unwillingness to supply its own
resources is not sufficient reason for the furnishing or acquisition of
property.
45.103 General.
(a) Agencies shall--
(1) Allow and encourage contractors to use voluntary consensus
standards (see 11.101(c)) and/or industry-leading practices and
standards to manage Government property in their possession.
(2) Eliminate to the maximum practical extent any competitive
advantage a prospective contractor may have by using Government
property and ensure maximum practical reutilization of Contractor
Inventory for Government purposes (see 45.602).
(3) Require contractors to use Government property already in their
possession to the maximum extent possible in performing Government
contracts.
(4) Charge appropriate rentals when the property is authorized for
use on other than a rent-free basis.
(5) Require contractors to justify retaining Government property
not needed for contract performance and to declare property as excess
when no longer needed for contract performance.
(b) Agencies will not generally require contractors to establish
property management systems that are separate from a contractor's
established procedures, practices, and systems used to account for and
manage contractor-owned property.
45.104 Responsibility and liability for Government property.
(a) Generally, contractors are not held liable for loss, damage,
destruction, or theft of Government property under the following types
of contracts:
(1) Cost reimbursement contracts.
(2) Time and material contracts.
(3) Labor hour contracts.
(4) Negotiated fixed price contracts for which the price is not
based upon an exception at 15.403-1.
(b) However, the contracting officer may revoke the Government's
assumption of risk when the property administrator determines that the
contractor's property management practices are inadequate and/or
present an undue risk to the Government. A prime contractor that
provides Government property to a subcontractor shall not be relieved
of any responsibility to the Government that the prime contractor may
have under the terms of the prime contract.
45.105 Analysis of contractors' property management system.
(a) The agency responsible for contract administration shall
conduct an analysis of the contractor's property management policies,
procedures, practices, and systems. This analysis shall be accomplished
as frequently as conditions warrant, in accordance with agency
procedures.
(b) The property administrator shall notify the contractor in
writing when the contractor's property management system does not
comply with contractual requirements, (i.e., is inadequate, not
acceptable and/or presents an undue risk to the Government), and shall
request prompt correction of deficiencies and shall provide a schedule
for their completion. If the contractor does not correct the
deficiencies in accordance with the schedule, the contracting officer
shall notify the contractor, in writing, that failure to take the
required corrective action(s) may result in--
(1) Contract price adjustment;
(2) Withdrawal of the Government's assumption of risk for loss,
damage, destruction, or theft; and/or
(3) Other such action as determined by the contracting officer.
(c) If the contractor fails to take the required corrective
action(s) in response to the notification provided by the contracting
officer in accordance with paragraph (b) of this section, the
contracting officer shall notify the contractor in writing of any
Government decision to apply the remedies described in paragraphs
(b)(1) through (b)(3) of this section.
45.106 Transferring accountability.
Government property shall be transferred from one contract to
another only when firm requirements exist under the gaining contract
(see 45.102). Such transfers shall be documented by modifications to
both gaining and losing contracts. Once transferred, all property shall
be considered Government-furnished property to the gaining contract.
45.107 Contract clauses.
(a)(1) Except as provided in paragraph (d) of this section, the
contracting officer shall insert the clause at 52.245-1, Government
Property, in--
(i) All cost reimbursement, time-and-material, and labor hour type
solicitations and contracts; and
(ii) Fixed-price solicitations and contracts when the Government
will provide Government property.
(2) The contracting officer shall use the clause with its Alternate
I in contracts other than those identified in 45.104(a).
(3) The contracting officer shall use the clause with its Alternate
II when a contract for the conduct of basic or applied research at
nonprofit institutions of higher education or at nonprofit
organizations whose primary purpose is the conduct of scientific
research (see 35.014) is contemplated.
(b) The contracting officer shall insert the clause at 52.245-2,
Government Property (Installation Operations for
[[Page 54884]]
Services), in service contracts to be performed on a Government
installation when Government-furnished property will be provided for
initial provisioning only and the Government is not responsible for
repair or replacement.
(c) The contracting officer shall insert the clause at 52.245-9,
Use and Charges, in solicitations and contracts when rental of
Government property is contemplated.
(d) When the acquisition cost of the item to be repaired does not
exceed the simplified acquisition threshold, purchase orders for
property repair need not include a Government property clause.
Subpart 45.2--Solicitation and Evaluation Procedures
45.201 General.
(a) The contracting officer shall insert a listing of the
Government property to be offered in all solicitations where
Government-furnished property is anticipated (see 45.102). The listing
shall include at a minimum--
(1) The name, commercial part number and description, manufacturer,
bulk identifier, model number, and National Stock Number (if needed for
additional item identification tracking and/or disposition);
(2) Quantity/unit of measure;
(3) Unit acquisition cost; and
(4) Unique-item identifier or equivalent (if available and
necessary for individual item tracking).
(b) When Government property is offered for use in a competitive
acquisition, solicitations will ordinarily require that the contractor
assume all costs related to making the property available for use, such
as payment of all transportation, installation or rehabilitation costs.
(c) The solicitation shall describe the evaluation procedures to be
followed, including rental charges or equivalents and other costs or
savings to be evaluated, and shall require all offerors to submit the
following information with their offers:
(1) A list or description of all Government property that the
offeror or its subcontractors propose to use on a rent-free basis. The
list shall identify the accountable contract under which the property
is held and the authorization for its use (from the contracting officer
having cognizance of the property).
(2) The dates during which the property will be available for use
(including the first, last, and all intervening months) and, for any
property that will be used concurrently in performing two or more
contracts, the amounts of the respective uses in sufficient detail to
support prorating the rent.
(3) The amount of rent that would otherwise be charged in
accordance with the clause at 52.245-9, Use and Charges.
(4) The voluntary consensus standard or industry leading practices
and standards to be used in the management of Government property, or
existing property management plans, methods, practices, or procedures
for accounting for property.
(d) The contracting officer shall consider any potentially unfair
competitive advantage that may result from the contractor possessing
Government property. At a minimum, this shall be done by--
(1) Adjusting the offers by applying, for evaluation purposes only,
a rental equivalent evaluation factor; or
(2) By charging the offeror rent for using the property when
adjusting the offer is not practical.
(e) The contracting officer shall ensure the offeror's property
management plans, methods, practices, or procedures for accounting for
property are consistent with the requirements of the solicitation.
Subpart 45.3--Authorizing the Use and/or Rental of Government
Property
45.301 Use and rental.
This subpart prescribes policies and procedures for contractor use
and rental of Government Property.
(a) Government property shall normally be provided on a rent-free
basis in performance of the contract under which it is accountable or
otherwise authorized.
(b) Rental charges, to the extent authorized do not apply to the
following:
(1) Government property that is located in Government-owned,
contractor-operated plants operated on a cost-plus-fee basis.
(2) Government property that is left in place or installed on
contractor-owned property for mobilization or future Government
production purposes; however, rental charges shall apply to that
portion of property or its capacity used for non-government commercial
purposes or otherwise authorized for use.
(c) The contracting officer cognizant of the Government property
may authorize the rent-free use of property in the possession of
nonprofit organizations when used for research, development, or
educational work and--
(1) The use of the property is in the national interest;
(2) The property will not be used for the direct benefit of a
profit-making organization; and
(3) The Government receives some direct benefit, such as rights to
use the results of the work without charge, from its use.
(d) In exchange for consideration as determined by the cognizant
contracting officer(s), the contractor may use Government property
under fixed-price contracts other than the contract to which it is
accountable. When, after contract award, a contractor requests the use
of Government property, the contracting officer shall obtain a fair
rental or other adequate consideration if use is authorized.
(e) The cognizant contracting officer(s) may authorize the use of
Government property on a rent-free basis on a cost-type Government
contract other than the contract to which it is accountable.
(f) In exchange for consideration as determined by the cognizant
contracting officer, the contractor may use Government property for
commercial use. Prior approval of the Head of the Contracting Activity
is required where non-Government use is expected to exceed 25 percent
of the total use of Government and commercial work performed.
45.302 Contracts with foreign Governments or international
organizations.
Requests by, or for the benefit of, foreign governments or
international organizations to use Government property shall be
processed in accordance with agency procedures.
45.303 Use of Government property on independent research and
development programs.
The contracting officer may authorize a contractor to use the
property on an independent research and development (IR&D) program,
if--
(a) Such use will not conflict with the primary use of the property
or enable the contractor to retain property that could otherwise be
released;
(b) The contractor agrees not to include as a charge against any
Government contract the rental value of the property used on its IR&D
program; and
(c) A rental charge for the portion of the contractor's IR&D
program cost allocated to commercial work is deducted from any agreed-
upon Government share of the contractor's IR&D costs.
[[Page 54885]]
Subpart 45.4--Title to Government Property
45.401 Title to Government property.
(a) The Government retains title to all Government-furnished
property until properly disposed of, as authorized by law or
regulation. Property that is leased by the Government and subsequently
furnished to the contractor for use shall be considered Government-
furnished property under the clause at 52.245-1, Government Property.
(b) Under fixed price type contracts, the contractor retains title
to all property acquired by the contractor for use on the contract,
except for property identified as a deliverable end item. If a
deliverable item is to be retained by the contractor for use after
inspection and acceptance by the Government, it shall be made
accountable to the contract through a contract modification listing the
item as Government-furnished property.
(c) Under cost-type and time-and-material contracts, the Government
acquires title to all property to which the contractor is entitled to
reimbursement as a direct item of cost, provided the property acquired
is reasonable, allocable, and allowable (see Part 31). If the
contractor is covered by Cost Accounting Standards, its disclosure
statement may affect the charging, and consequently, the title vesting
provisions.
Subpart 45.5--Support Government Property Administration
45.501 Support Government property administration.
(a) To ensure subcontractor compliance with Government property
administration requirements, the property administrator assigned to the
prime contract may request support property administration from another
contract administration office, provided the contractor has agreed to
allow such property administration.
(b) In instances where the prime contractor does not agree to allow
the support property administrator to provide support property
administration, the prime property administrator shall immediately
refer the matter to the contracting officer.
(c) In instances where the prime contractor does not concur with
the findings of the support Property Administrator, the prime property
administrator shall immediately refer the matter to the contracting
officer.
(d) The prime property administrator shall accept the findings of
the delegated support property administrator and advise the prime
contractor of any deficiencies within the subcontractor's property
management system.
45.600 [Amended]
12. Amend section 45.600 by removing ``Government property'' and
``or progress'' and adding ``contractor inventory'' and ``, progress,
or performance-based'' in their places, respectively.
45.601 [Removed and Reserved]
13. Remove and reserve section 45.601.
PART 49--TERMINIATION OF CONTRACTS
14. Amend section 49.108-3 by revising paragraph (b)(1) to read as
follows:
49.108-3 Settlement procedure.
* * * * *
(b) * * *
(1) All subcontractor termination inventory be disposed of and
accounted for in accordance with the procedures contained in paragraph
(j) of the clause at 52.245-1, Government Property; and
* * * * *
PART 51--USE OF GOVERNMENT SOURCES BY CONTRACTORS
51.106 [Amended]
15. Amend section 51.106 by removing from paragraph (b) ``52.245-
2'' and adding ``52.245-1'' in its place, and removing ``, or 52.245-5,
Alternate I''.
51.107 [Amended]
16. Amend section 51.107 by removing the last sentence.
51.200 [Amended]
17. Amend section 51.200 by removing ``45.304'' and adding
``45.102'' in its place.
PART 52--SOLICIATION PROVISIONS AND CONTRACT CLAUSES
18. Revise sections 52.245-1 and 52.245-2 to read as follows:
52.245-1 Government Property.
As prescribed in 45.107(a), insert the following clause:
GOVERNMENT PROPERTY (DATE)
(a) Definitions. As used in this clause--
Acquisition cost means--
(1) For Contractor acquired property, the full cost determined
in accordance with the system established by the Contractor in
conformance with consistently applied sound accounting principles.
(2) For Government furnished property, the amount identified in
the contract, or in the absence of such identification, the fair
market value attributed to the item by the Contractor.
Common item means material that is common to the applicable
Government contract and the contractor's other work.
Contractor-acquired property means property acquired,
fabricated, or otherwise provided by the Contractor for performing a
contract, and to which the Government has title.
Contractor's managerial personnel means the Contractor's
directors, officers, managers, superintendents, or equivalent
representatives who have supervision or direction of all or
substantially all of the Contractor's business; all or substantially
all of the Contractor's operation at any one plant or separate
location.
Contractor inventory means--
(1) Any property acquired by and in the possession of a
Contractor or subcontractor under a contract for which title is
vested in the Government and which exceeds the amounts needed to
complete full performance under the entire contract;
(2) Any property that the Government is obligated or has the
option to take over under any type of contract, e.g., as a result
either of any changes in the specifications or plans thereunder or
of the termination of the contract (or subcontract thereunder),
before completion of the work, for the convenience or at the option
of the Government; and
(3) Government-furnished property that exceeds the amounts
needed to complete full performance under the entire contract.
Demilitarization means rendering a product designated for
demilitarization unusable for and not restorable to, the purpose for
which it was designed or is customarily used.
Discrepancies incident to shipment means all deficiencies
incident to shipment of Government property to or from a
Contractor's facility whereby differences exist between the property
purported to have been shipped and property actually received.
Equipment means a tangible article of personal property that is
complete in-and-of itself, durable, nonexpendable, and needed for
the performance of a contract. Equipment generally has an expected
service life of one year or more, and does not ordinarily lose its
identity or become a component part of another article when put into
use.
Government-furnished property means property in the possession
of, or directly acquired by, the Government and subsequently
furnished to the Contractor for performance of a contract.
Government property means all property owned or leased by the
Government. Government property includes both Government-furnished
and contractor-acquired property.
Material means property that may be consumed or expended during
the performance of a contract, component parts of a higher assembly,
or items that lose their individual identity through incorporation
into an end-item. Material does not include equipment, special
tooling, special test equipment, or unique Federal property.
Nonseverable means property that cannot be removed after
erection or installation without substantial loss of value or damage
[[Page 54886]]
to the installed property or to the premises where installed.
Precious metals means silver, gold, platinum, palladium,
iridium, osmium, rhodium, and ruthenium.
Property means all tangible property, both real and personal.
Property Administrator means an authorized representative of the
Contracting Officer assigned the responsibility of administering the
contract requirements and obligations relating to Government
property in the possession of a Contractor.
Provide means to furnish existing Government property or to
allow the Contractor to acquire property on behalf of the Government
under this contract.
Real property means land, land rights, buildings, structures,
utility systems, steam-generation systems, and equipment attached to
and made part of buildings and structures (such as heating systems).
As such, land rights are considered real property. It does not
include foundations and other work necessary for installing special
tooling, special test equipment, or equipment.
Sensitive property means property potentially dangerous to the
public safety or security if stolen, lost, or misplaced, or that
shall be subject to exceptional physical security, protection,
control, and accountability such as classified property, weapons,
ammunition, explosives, controlled substances, radioactive
materials, hazardous materials or wastes, or precious metals.
Surplus property means excess personal property not required by
any Federal agency as determined by the Administrator of the General
Services Administration (GSA).
Unique Federal Property means Government-owned personal property
that is peculiar to the mission of an agency, e.g., military or
space property. Unique Federal property excludes material, special
test equipment, special tooling, real property and equipment.
(b) Property management. (1) The Contractor shall have a system
to manage (control, use, preserve, protect, repair and maintain)
Government property in its possession. The system shall be adequate
to satisfy the requirements of this clause. In doing so, the
Contractor shall initiate and maintain the processes, systems,
records, and methodologies necessary for effective control of
Government property, consistent with voluntary consensus standards
and/or industry-leading practices and standards for Government
property management.
(2) The Contractor's responsibility extends from the initial
acquisition and receipt of property, through stewardship, custody,
and use until formally relieved of responsibility by authorized
means, including delivery, consumption, expending, disposition, or
via a completed investigation, evaluation, and final determination
for lost, damaged, or destroyed property. This requirement applies
to all Government property under the Contractor's accountability,
stewardship, possession or control, including its vendors or
subcontractors (see paragraph (f)(1)(v) of this clause).
(3) The Contractor shall include the requirements of this clause
in all subcontracts under which Government property is acquired or
furnished for subcontract performance.
(c) Use of Government property. The Contractor shall use
Government property, either furnished or acquired under this
contract, only for performing this contract, unless otherwise
provided for in this contract or approved by the Contracting
Officer. The Contractor shall not modify, cannibalize, or make
alterations to Government property unless this contract specifically
identifies the modifications, alterations or improvements as work to
be performed.
(d) Government-furnished property. (1) The Government shall
deliver to the Contractor the Government-furnished property
described in this contract. The Government shall furnish related
data and information needed for the intended use of the property.
(2) The Government shall retain title to all Government-
furnished property; title shall not be affected by incorporation
into, or attachment to, any property not owned by the Government.
Government-furnished property shall not lose its identity as
Government property by its attachment to real property.
(3) The delivery and/or performance dates specified in this
contract are based upon the expectation that the Government-
furnished property will be suitable for contract performance and
will be delivered to the Contractor by the dates stated in the
contract.
(i) If the property is not delivered to the Contractor by the
dates stated in the contract, the Contracting Officer shall, upon
the Contractor's timely written request, consider an equitable
adjustment to the contract.
(ii) In the event property is received by the Contractor in a
condition not suitable for its intended use, the Contracting Officer
shall, upon the Contractor's timely written request, advise the
Contractor on a course of action to remedy the problem. Such action
may include repairing, replacing, modifying, returning, or otherwise
disposing of the property at the Government's expense. Upon
completion of the required action(s) the Contracting Officer shall
consider an equitable adjustment to the contract (see also paragraph
(f)(1)(ii)(A) of this clause).
(iii) The Government may, at its option, furnish property in an
``as is'' condition. In such cases, the Government makes no warranty
with respect to the serviceability and/or suitability of the
property for contract performance. Any repairs, replacement, and/or
refurbishment shall be at the Contractor's expense.
(4)(i) The Contracting Officer may by written notice, at any
time--
(A) Increase or decrease the amount of Government-furnished
property under this contract;
(B) Substitute other Government-furnished property for the
property previously furnished, to be furnished, or to be acquired by
the Contractor for the Government under this contract; or
(C) Withdraw authority to use property.
(ii) Upon completion of any action(s) under paragraph (d)(4)(i)
of this clause, and the Contractor's timely written request, the
Contracting Officer shall consider an equitable adjustment to the
contract.
(e) Title to Contractor-acquired property. Title to all property
purchased by the Contractor, for which the Contractor is entitled to
be reimbursed as a direct item of cost, under this contract, shall
pass to and vest in the Government upon--
(1) A vendor's or supplier's initial delivery of such property
to the Contractor;
(2) Issuance of the property for use in contract performance,
including the installation of parts through normal maintenance;
(3) Commencement of processing of the property for use in
contract performance; or
(4) Reimbursement by the Government for the cost of the
property, whichever occurs first.
(f) Contractor plans and systems. (1) Contractors shall develop
property management plans and systems, at the contract, program,
site or entity level to enable the following outcomes:
(i) Acquisition of property. The Contractor shall document that
all property was acquired consistent with its engineering,
production planning, material control operations, and/or cost
accounting disclosure statement.
(ii) Receipt of Government property. The Contractor shall
receive Government property (document the receipt), record (the
information necessary to meet the record requirements of paragraphs
(f)(1)(iii)(A)(1), (2), (3), (4) and (5) of this clause), identify
(as Government-owned), and manage any discrepancies incident to
shipment.
(A) Government-furnished property. The Contractor shall furnish
a written statement to the Property Administrator containing all
relevant facts, such as cause or condition and a recommended
course(s) of action, if overages, shortages, or damages and/or other
discrepancies are discovered upon receipt of Government-furnished
property.
(B) Contractor-acquired property. The Contractor shall take all
actions necessary to adjust for overages, shortages, damage and/or
other discrepancies discovered upon receipt, in shipment of
Contractor-acquired property from a vendor or supplier, so as to
ensure the proper allocability and allowability of associated costs.
(iii) Records of Government property. The Contractor shall
create and maintain records of all Government property accountable
to the contract, including Government-furnished and Contractor-
acquired property.
(A) Property records shall enable a complete, current, auditable
record of all transactions and shall, unless otherwise approved by
the Property Administrator, contain the following data:
(1) The name, commercial part number and description,
manufacturer, bulk identifier, model number, and National Stock
Number (if needed for additional item identification tracking and/or
disposition).
(2) Quantity received (or fabricated), issued, and balance-on-
hand.
(3) Unit acquisition cost.
(4) Unique-item identifier or equivalent (if available and
necessary for individual item tracking).
(5) Unit of measure.
(6) Accountable contract number or equivalent code designation.
(7) Location.
(8) Disposition.
[[Page 54887]]
(9) Posting reference and date of transaction.
(10) Date placed in service.
(B) When approved by the Property Administrator, the Contractor
may maintain, in lieu of formal property records, a file of
appropriately cross-referenced documents evidencing receipt, issue,
and use of material that is issued for immediate consumption.
(iv) Physical inventory. The Contractor shall periodically
perform, record, and report physical inventories during contract
performance. A final physical inventory shall be performed upon
contract completion or termination. The Property Administrator may
waive this final inventory requirement, depending on the
circumstances, e.g., overall reliability of the Contractor's system
or the property is to be transferred to a follow-on contract.
(v) Subcontractor control. (A) The Contractor shall award
subcontracts that clearly identify assets to be provided and shall
ensure appropriate flow down of contract requirements, including any
cost savings achieved as a result of its prime contract relationship
with the Government.
(B) The Contractor shall assure its subcontracts are properly
administered and reviews are periodically performed to determine the
adequacy of the subcontractor's property management system.
(vi) Reports. The Contractor shall have a process to create and
provide reports including: reports of discrepancies; loss, damage
and destruction; physical inventory results; audits and self-
assessments; corrective actions; and other reports as directed by
the Contracting Officer.
(A) Loss, damage, destruction, and theft. Unless otherwise
directed by the Property Administrator, the Contractor shall
investigate and promptly furnish to the Property Administrator, a
written narrative of all incidents of loss, damage, destruction, or
theft, as soon as the facts become known or when requested by the
Government. Such reports shall, at a minimum, contain the following
information:
(1) Date of incident (if known).
(2) The name, commercial description, manufacturer, model
number, and National Stock Number (if applicable).
(3) Quantity.
(4) Unique Item Identifier (if available).
(5) Accountable Contract number.
(6) A statement indicating current or future need.
(7) Acquisition cost, or if applicable, estimated scrap
proceeds, estimated repair or replacement costs.
(8) All known interests in commingled property of which the
Government property is a part.
(9) Cause and corrective action taken or to be taken to prevent
recurrence.
(10) A statement that the Government will receive any
reimbursement covering the loss, damage, destruction, or theft, in
the event the Contractor was or will be reimbursed or compensated.
(11) Copies of all supporting documentation.
(B) The Contractor shall take all reasonable actions necessary
to protect the Government property from further loss, damage,
destruction, or theft. The Contractor shall separate the damaged and
undamaged Government property, place all the affected Government
property in the best possible order, and take such other action as
the Property Administrator directs.
(C) The Contractor shall do nothing to prejudice the
Government's rights to recover against third parties for any loss,
damage, destruction, or theft of Government property.
(D) Upon the request of the Contracting Officer, the Contractor
shall, at the Government's expense, furnish to the Government all
reasonable assistance and cooperation, including the prosecution of
suit and the execution of instruments of assignment in favor of the
Government in obtaining recovery.
(vii) Relief of stewardship responsibility. Unless the contract
provides otherwise, the Contractor shall be relieved of stewardship
responsibility for Government property when such property is--
(A) Consumed or expended, reasonably and properly, or otherwise
accounted for, in the performance of the contract as determined by
the Property Administrator, including reasonable inventory
adjustments;
(B) Delivered or shipped from the Contractor's plant, under
Government instructions, except when shipment is to a subcontractor
or other location of the Contractor; or
(C) Disposed of in accordance with paragraphs (j) and (k) of
this clause.
(viii) Utilizing Government property. The Contractor shall
utilize, consume, and store Government property only as authorized
under this contract. The Contractor shall promptly disclose and
report Government property in its possession that is excess to
contract performance.
(ix) Maintenance. The Contractor shall properly maintain
Government property. The Contractor's maintenance program shall
enable the identification, disclosure, and performance of normal
preventative maintenance and repair. The Contractor shall disclose
and report to the Property Administrator the need for replacement
and/or capital rehabilitation.
(x) Property closeout. The Contractor shall promptly perform and
report to the Property Administrator contract property closeout, to
include reporting, investigating and securing closure of all loss,
damage, destruction, or theft cases; physically inventorying all
property upon termination or completion of this contract; and
disposing of items at the time they are determined to be excess to
contractual needs.
(2) The Contractor shall establish and maintain Government
accounting source data, as may be required by this contract,
particularly in the areas of recognition of acquisitions and
dispositions of material and equipment.
(3) The Contractor shall establish and maintain procedures
necessary to assess its property management system effectiveness,
and shall perform periodic internal reviews and audits. The findings
and/or results of such reviews and audits shall be made available to
the Property Administrator.
(g) Systems analysis. (1) The Government shall have access to
the Contractor's premises, at reasonable times, for the purposes of
reviewing, inspecting and evaluating the Contractor's property
management systems, procedures, records, and supporting
documentation.
(2) Records of Government property shall be readily available to
authorized Government personnel and shall be safeguarded from
tampering or destruction.
(3) Should it be determined by the Government that the
Contractor's property management practices are inadequate or not
acceptable for the effective management and/or control of Government
property under this contract; and/or present an undue risk to the
Government, the Contractor shall immediately take all necessary
corrective actions as directed by the Property Administrator.
(h) Contractor Liability for Government Property. (1) Unless
otherwise provided for in the contract, the Contractor shall not be
liable for loss, damage, destruction, or theft to the Government
property furnished or acquired under this contract, except when any
one of the following applies:
(i) The risk is covered by insurance or the Contractor is
otherwise reimbursed (to the extent of such insurance or
reimbursement).
(ii) The loss, damage, destruction, or theft is the result of
willful misconduct or lack of good faith on the part of the
Contractor's managerial personnel. Contractor's managerial
personnel, in this clause, means the Contractor's directors,
officers, managers, superintendents, or equivalent representatives
who have supervision or direction of all or substantially all of the
Contractor's business; all or substantially all of the Contractor's
operation at any one plant or separate location; or a separate and
complete major industrial operation.
(iii) The Contracting Officer has, in writing, withdrawn the
Government's assumption of risk for loss, damage, destruction, or
theft, due to a determination under paragraph (g) of this clause
that the Contractor's property management practices are inadequate,
and/or present an undue risk to the Government, and the Contractor
failed to take timely corrective action. If the Contractor can
establish by clear and convincing evidence that the loss, damage,
destruction, or theft of Government property occurred while the
Contractor had adequate property management practices or the loss,
damage, destruction, or theft of Government property did not result
from the Contractor's failure to maintain adequate property
management practices, the Contractor shall not be held liable.
(2) The allowability of insurance costs shall be determined in
accordance with 31.205-19 of the Federal Acquisition Regulation.
(i) Equitable adjustment. Equitable adjustments under this
clause shall be made in accordance with the procedures of the
Changes clause. The right to an equitable adjustment shall be the
Contractor's exclusive remedy and the Government shall not be liable
to suit for breach of contract for the following--
(1) Any delay in delivery of Government-furnished property.
[[Page 54888]]
(2) Delivery of Government-furnished property in a condition not
suitable for its intended use.
(3) An increase, decrease, or substitution of Government-
furnished property.
(4) Failure to repair or replace Government property for which
the Government is responsible.
(j) Contractor inventory disposal. Except as otherwise provided
for in this contract, the Contractor shall not dispose of Contractor
inventory until authorized to do so by the Plant Clearance Officer.
(1) Scrap to which the Government has obtained title under
paragraph (e) of this clause.--(i) Contractor with an approved scrap
procedure. (A) The Contractor may dispose of scrap resulting from
production or testing under this contract without Government
approval. However, if the scrap requires demilitarization or is
sensitive property, the Contractor shall submit the scrap on an
inventory disposal schedule.
(B) For scrap from other than production or testing the
Contractor may prepare scrap lists in lieu of inventory disposal
schedules (provided such lists are consistent with the approved
scrap procedures), except that inventory disposal schedules shall be
submitted for scrap aircraft or aircraft parts and scrap that--
(1) Requires demilitarization;
(2) Is a classified item;
(3) Is generated from classified items;
(4) Contains hazardous materials or hazardous wastes;
(5) Contains precious metals; or
(6) Is dangerous to the public health, safety, or welfare.
(ii) Contractor without an approved scrap procedure. The
Contractor shall submit an inventory disposal schedule for all
scrap.
(2) Predisposal requirements. Once the Contractor determines
that Contractor-acquired property is no longer needed for contract
performance, the Contractor in the following order of priority--
(i) May purchase the property at the acquisition cost;
(ii) Shall make reasonable efforts to return unused property to
the appropriate supplier at fair market value (less, if applicable,
a reasonable restocking fee that is consistent with the supplier's
customary practices); and
(iii) Shall list, on Standard Form 1428, Inventory Disposal
Schedule, property that was not purchased under paragraph (j)(2)(i)
of this clause, could not be returned to a supplier, or could not be
used in the performance of other Government contracts.
(3) Inventory disposal schedules. (i) The Contractor shall use
Standard Form 1428, Inventory Disposal Schedule, to identify--
(A) Government-furnished Property that is no longer required for
performance of this contract, provided the terms of another
Government contract do not require the Government to furnish that
property for performance of this contract;
(B) Contractor acquired property, to which the Government has
obtained title under paragraph (e) of this clause, which is no
longer required for performance of that contract; and
(C) Termination inventory.
(ii) The Contractor may annotate inventory disposal schedules to
identify property the Contractor wishes to purchase from the
Government.
(iii) Unless the Plant Clearance Officer has agreed otherwise,
or the contract requires electronic submission of inventory disposal
schedules, the Contractor shall prepare separate inventory disposal
schedules for--
(A) Special test equipment with commercial components;
(B) Special test equipment without commercial components;
(C) Printing equipment;
(D) Information technology (e.g., computers, computer
components, peripheral equipment, and related equipment);
(E) Precious metals;
(F) Nonnuclear hazardous materials or hazardous wastes; or
(G) Nuclear materials or nuclear wastes.
(iv) The Contractor shall describe the property in sufficient
detail to permit an understanding of its intended use. Property with
the same description, condition code, and reporting location may be
grouped in a single line item.
(4) Submission requirements. The Contractor shall submit
inventory disposal schedules to the Plant Clearance Officer no later
than--
(i) 30 days following the Contractor's determination that a
Government property item is no longer required for performance of
this contract;
(ii) 60 days, or such longer period as may be approved by the
Plant Clearance Officer, following completion of contract deliveries
or performance; or
(iii) 120 days, or such longer period as may be approved by the
Termination Contracting Officer following contract termination in
whole or in part.
(5) Corrections. The Plant Clearance Officer may--
(i) Reject a schedule for cause (e.g., contains errors,
determined to be inaccurate); and
(ii) Require the Contractor to correct an inventory disposal
schedule.
(6) Postsubmission adjustments. The Contractor shall notify the
Plant Clearance Officer at least 10 working days in advance of its
intent to remove an item from an approved inventory disposal
schedule. Upon approval of the Plant Clearance Officer, or upon
expiration of the notice period, the Contractor may make the
necessary adjustments to the inventory schedule.
(7) Storage. (i) The Contractor shall store the property
identified on an inventory disposal schedule pending receipt of
disposal instructions. The Government's failure to furnish disposal
instructions within 120 days following acceptance of an inventory
disposal schedule may entitle the Contractor to an equitable
adjustment for costs incurred to store such property on or after the
121st day.
(ii) The Contractor shall obtain the Plant Clearance Officer's
approval to remove Government property from the premises where the
property is currently located prior to receipt of final disposition
instructions. If approval is granted, any costs incurred by the
Contractor to transport or store the property shall not increase the
price or fee of any Government contract. The storage facility shall
be appropriate for assuring the property's physical safety and
suitability for use. Approval does not relieve the Contractor of any
liability for such property under this contract.
(8) Disposition instructions. (i) If the Government does not
furnish disposition instructions to the Contractor within 45 days
following acceptance of a scrap list, the Contractor may dispose of
the listed scrap in accordance with the Contractor's approved scrap
procedures.
(ii) The Contractor shall prepare for shipment, deliver f.o.b.
origin, or dispose of Contractor inventory as directed by the Plant
Clearance Officer. If not returned to the Government, the Contractor
shall remove and destroy any markings identifying the property as
U.S. Government-owned property prior to its disposal.
(iii) The Contracting Officer may require the Contractor to
demilitarize the property prior to shipment or disposal. In such
cases, the Contractor may be entitled to an equitable adjustment
under paragraph (i) of this clause.
(9) Disposal proceeds. The Contractor shall credit the net
proceeds from the disposal of Contractor inventory to the price or
cost of work or as the Contracting Officer directs.
(10) Subcontractor inventory disposal schedules. The Contractor
shall require its Subcontractors to submit inventory disposal
schedules to the Contractor in accordance with the requirements of
paragraph (j)(4) of this clause.
(k) Abandonment of Government property. (1) The Government shall
not abandon sensitive Government property or termination inventory
without the Contractor's written consent.
(2) The Government, upon notice to the Contractor, may abandon
any nonsensitive Government property in place, at which time all
obligations of the Government regarding such property shall cease.
(3) The Government has no obligation to restore or rehabilitate
the Contractor's premises under any circumstances; however, if
Government--furnished property is withdrawn or is unsuitable for the
intended use, or if other Government property is substituted, then
the equitable adjustment under paragraph (i) of this clause may
properly include restoration or rehabilitation costs.
(l) Communication. All communications under this clause shall be
in writing.
(m) Overseas Contracts. If this contract is to be performed
outside of the United States and its outlying areas, the words
``Government'' and ``Government-furnished'' (wherever they appear in
this clause) shall be construed as ``United States Government'' and
``United States Government-furnished,'' respectively.
(End of clause)
Alternate I (Date). As prescribed in 45.107(a)(2), substitute
the following for paragraph (h)(1) of the basic clause:
(h)(1) The Contractor assumes the risk of, and shall be
responsible for, any loss, damage, destruction, or theft of
Government property upon its delivery to the Contractor as
Government-furnished property. However, the Contractor is not
responsible for reasonable wear and tear to Government
[[Page 54889]]
property or for Government property properly consumed in performing
this contract.
Alternate II (Date). As prescribed in 45.107(a)(3), substitute
the following for paragraph (e) of the basic clause:
(e) Title to property (and other tangible personal property)
purchased with funds available for research and having an
acquisition cost of less than $5,000 shall vest in the Contractor
upon acquisition or as soon thereafter as feasible; provided that
the Contractor obtained the Contracting Officer's approval before
each acquisition. Title to property purchased with funds available
for research and having an acquisition cost of $5,000 or more shall
vest as set forth in this contract. If title to property vests in
the Contractor under this paragraph, the Contractor agrees that no
charge will be made to the Government for any depreciation,
amortization, or use under any existing or future Government
contract or subcontract thereunder. The Contractor shall furnish the
Contracting Officer a list of all property to which title is vested
in the Contractor under this paragraph within 10 days following the
end of the calendar quarter during which it was received. Vesting
title under this paragraph is subject to civil rights legislation,
42 U.S.C. 2000d. Before title is vested and by signing this
contract, the Contractor accepts and agrees that--
``No person in the United States or its outlying areas shall, on
the ground of race, color, or national origin, be excluded from
participation in, be denied the benefits of, or be otherwise
subjected to discrimination under this contemplated financial
assistance (title to property).''
52.245-2 Government Property (Installation Operations for Services).
As prescribed in 45.107(b), insert the following clause:
Government Property (Installation Operations for Services) (Date)
(a) This Government Property is furnished to the Contractor in
an ``as-is, where is'' condition. The Government makes no warranty
regarding the suitability for use of the Government property
specified in this contract. The Contractor shall be afforded the
opportunity to inspect the Government property as specified in the
solicitation.
(b) The Government bears no responsibility for repair or
replacement of any lost, damaged or destroyed Government property.
If any or all of the Government property is lost, damaged or
destroyed or becomes no longer usable, the Contractor shall be
responsible for replacement of the property at Contractor expense.
The Contractor shall have title to all replacement property and
shall continue to be responsible for contract performance.
(c) Unless the Contracting Officer determines otherwise, the
Government abandons all rights and title to unserviceable (i.e.,
scrap) property resulting from contract performance. Upon
notification to the Contracting Officer, the Contractor shall remove
such property from the Government premises and dispose of it at
Contractor expense.
(d) Except as provided in this clause, Government property
furnished under this contract shall be governed by the Government
Property clause of this contract.
(End of clause)
52.245-3 through 52.245-8 [Removed and Reserved]
19. Remove and reserve sections 52.245-3 through52.245-8.
20. Amend section 52.245-9 by--
a. Removing from the introductory paragraph ``45.106(h)'' and
adding ``45.107(c)'' in its place;
b. Revising the date of the clause; and
c. Revising in paragraph (a) the definitions ``Acquisition cost'',
``Government property'', and ``Real property''.
The revised text reads as follows:
52.245-9 Use and Charges.
* * * * *
USE AND CHARGES (DATE)
(a) * * *
Acquisition cost means--
(1) For Contractor acquired property, the full cost determined
in accordance with the system established by the Contractor in
conformance with consistently applied sound accounting principles.
(2) For Government-furnished property, the amount identified in
the contract, or in the absence of such identification, the fair
market value attributed to the item by the Contractor.
Government property means all property owned or leased by the
Government. Government property includes both Government-furnished
and Contractor-acquired property.
Real property means land, land rights, buildings, structures,
utility systems, steam-generation systems, and equipment attached to
and made part of buildings and structures (such as heating systems).
As such, land rights are considered real property. It does not
include foundations and other work necessary for installing special
tooling, special test equipment, or equipment.
* * * * *
52.245-10 through 52.245-19 [Removed and Reserved]
21. Remove and reserve sections 52.245-10 through 52.245-19.
PART 53--FORMS
53.245 [Amended]
22. Amend section 52.245 in paragraph (e) by removing ``52.245-
2(i), 52.245-5(i)'' and adding ``52.245-1'' in its place.
[FR Doc. 05-18516 Filed 9-16-05; 8:45 am]
BILLING CODE 6820-EP-S