[Federal Register: July 2, 2010 (Volume 75, Number 127)]
[Rules and Regulations]
[Page 38675-38683]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr02jy10-18]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 2, 4, 15, 31, 32, 42, 45, and 52
[FAC 2005-43; FAR Case 2008-011; Item I; Docket 2009-0029; Sequence 1]
RIN 9000-AL41
Federal Acquisition Regulation; FAR Case 2008-011, Government
Property
AGENCIES: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: The Civilian Agency Acquisition Council and the Defense
Acquisition Regulations Council (Councils) have agreed on a final rule
amending the Federal Acquisition Regulation (FAR) to revise FAR part
45, Government Property, and its associated clauses.
DATES: Effective Date: August 2, 2010.
FOR FURTHER INFORMATION CONTACT: Ms.nbsp; Jeritta Parnell, Procurement
Analyst, at (202) 501-4082, for clarification of content. For
information pertaining to status or publication schedules, contact the
Regulatory Secretariat at (202) 501-4755. Please cite FAC 2005-43, FAR
Case 2008-011.
SUPPLEMENTARY INFORMATION:
A. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 74 FR 39262, August, 6, 2009. This rule clarifies and
corrects the previous FAR rule for part 45, Government Property,
published under FAC 2005-17, FAR Case 2004-025, May 15, 2007 (72 FR
27364).
Sixteen respondents submitted 106 comments. The comments received
were grouped under 31 general topics. A discussion of the comments and
the changes to the rule as a result of these comments are provided
below:
1. Access
There is no revision to the proposed rule based on this category of
comment. One respondent recommended revising FAR 52.245-1(g)(4) to
provide Government access to contractor site locations at reasonable
times. The Councils did not agree. Similar language is already
contained in the proposed rule at FAR 52.245-1(g)(1). The proposed FAR
language at 52.245-1(g)(1) provides for Government access to all
contractor site locations, prime and subcontractor (with prime
contractor consent). This language was merely consolidated. The
language consolidated and relocated subsections 52.245-1(g)(1) and
52.245-1(g)(4) into one subsection.
2. Closeout
There is no revision to the proposed rule based on this comment
category. One respondent suggested adding a new paragraph after FAR
52.245-1(f)(x) entitled Disposition of contractor inventory. The
Councils noted the issue raised by the commenter. The recommendations
are outside the scope of this particular case.
3. Commingling
There is no revision to the proposed rule based on this comment
category. Two respondents suggested that commingling Government and
contractor material should not occur. One respondent questioned whether
equipment can be commingled by being located with similar equipment.
Another respondent recommended revising FAR 52.245-1(f)(1)(viii)(B) to
address commingling while in storage or in stockrooms. The Councils do
not agree. The practice of commingling only applies to material.
Equipment, special tooling, and special test equipment can be co-
located, but by their nature are not commingled. The Councils see no
need to limit the applicability of commingling to a particular
location(s).
4. Contractor Records
There is no revision to the proposed rule based on this comment
category. Two respondents submitted three comments on contractor
records. Two comments requested clarification on retention periods in
FAR 4.705-3(h). In addition, one commenter requested clarification of
the term ``property records'' in FAR 4.705-3(h). Another respondent
recommended removal of language ``consisting of equipment usage and
status reports'' from FAR 4.705-3(c). The Councils disagree. The
beginning of the retention period is defined in FAR 4.704(a). The
definition of property records is in the proposed rule at FAR 45.101.
The recommendation for removal of language from FAR 4.705-3(c) is
outside the scope of this particular case and will be considered in the
formulation of a new case.
5. Corrective Action
There is a revision to the proposed rule at FAR 52.245-1(g)(3)
based on this comment category.
Two respondents recommended revising the action required for
corrective action. One respondent recommended additional language to
distinguish between the lines of authority and responsibility as
follows: `` * * * the contractor shall immediately take all necessary
corrective actions and shall prepare a corrective action plan at the
request of the Property Administrator.'' The Councils partially agree.
The language at FAR 52.245-1(g)(3) is revised to add ``* * * the
contractor shall prepare a corrective action plan when requested by the
Property Administrator and take all necessary corrective actions as
specified by the schedule within the corrective action plan.'' The
second respondent suggested that there needs to be a better audit
protocol and due process in property management practices. The Councils
noted the issues raised by this respondent and the respondent's
recommended revisions to FAR 52.245-1(g)(3). These revisions are
outside the
[[Page 38676]]
scope of this case and will be considered in the formulation of a new
FAR case.
6. Definitions
There are revisions to the proposed rule based on this comment
category. Twenty-two comments were received from five respondents
regarding definitions. One respondent recommended changing the
definition of ``cannibalize'' to read as ``Cannibalization means the
unauthorized permanent removal of parts from Equipment, Special Tooling
or Special Test Equipment in order to install them on other Government
equipment.'' The Councils disagree. The current definition is meant to
convey only the act of cannibalization itself, notwithstanding whether
or not the act is authorized, or whether the removal of parts is
temporary or permanent.
One respondent recommended that FAR part 45.101 include a Web site
for 41 CFR 102-71.20, thus providing easier access to the term ``Real
Property.'' The Councils disagree. The Code of Federal Regulations is
already easily accessible through most on-line search engines.
Moreover, in general, the Councils wish to avoid adding unnecessary
hyperlinks to the FAR due to their potentially transient nature.
One respondent recommended that the last sentence of the definition
of ``Equipment'' be expanded to include special test equipment and
special tooling in the exclusions. The Councils agree.
One respondent recommended revision of the definition to read:
``Cannibalize means to remove worthwhile parts from property for
probable use or installation on other property.'' The Councils
disagree. The Councils revised the definition to limit cannibalization
of parts to Government property. The use of cannibalization is governed
by its application (i.e., by the terms and conditions of the contract).
One respondent recommended revision of the definition of Government
Furnished Property in both FAR 45.101 and 52.245-1. The Councils
partially agree. The Councils revised the language to include
``Government-furnished property also includes contractor-acquired
property if the contractor-acquired property is a deliverable under a
cost contract when accepted by the Government for continued use under
the contract''.
One respondent recommended a new definition of ``Property Loss.''
The Councils noted the issue raised by the commenter. The
recommendation is outside the scope for the proposed rule. The Councils
will consider adding this new definition as part of a future proposed
rule.
One respondent recommended adding a definition of ``Prime Property
Administrator.'' The Councils noted the issue raised by the commenter.
The recommendation is outside the scope for the proposed rule. The
Councils will consider adding this proposal as part of a future
proposed rule.
One respondent agreed with the proposed rule in regard to the
definitions of ``Equipment,'' ``Material,'' ``Plant equipment,''
``Government property,'' ``Real property,'' ``Plant equipment,'' and
``Property records.'' The same respondent also agreed with the proposed
changes to the definition of ``Plant clearance officer'' in FAR 2.101.
7. Disposal Schedules
There is a revision to the proposed rule based on this comment
category. One respondent submitted five comments on disposal schedules.
In one comment, the respondent requested amending the language at FAR
52.245-1(j)(1)(i)(B) to eliminate submission of inventory schedules for
property that requires demilitarization; is classified, hazardous or
dangerous; and for precious metals. The respondent recommended the use
of a list in accord with the contractor's plans or by approval of the
property administrator or contracting officer. The Councils noted the
issue raised by the commenter. The recommendation is outside of the
scope of this case. The proposed revision will be considered in the
formulation of a new case.
The respondent, in two comments, agreed with the proposed language
in FAR 52.245-1(j)(1)(i)(C) and 52.245-1(j)(3)(iv).
The respondent recommended deletion of paragraph FAR 52.245-
1(j)(3)(iv)(A). The Councils agree. The respondent recommended deletion
of paragraph FAR 52.215-1(j)(3)(iv)(F). The Councils do not agree. The
language is retained and moved to paragraph (A). This language allows
the flexibility to determine whether there may be further use of the
property.
8. Evaluation
There is no revision to the proposed rule based on this category of
comment. One respondent recommended revising FAR 45.202(a) to read:
``(a) The contracting officer shall consider any potentially unfair
competitive advantage that may result from the prospective contractor
possessing Government property. This shall be done by adjusting the
offers by applying, for evaluation purposes only, a rental equivalent
evaluation factor.'' The Councils noted the issue raised by the
commenter. The recommendation is outside the scope for the proposed
rule. The Councils will consider adding this proposal as part of a
future proposed rule.
9. Fair Value
There is no revision to the proposed rule based on this category of
comment. One respondent recommended replacement of the term
``acquisition cost'' in FAR 45.602-3(b) and in 52.245-1(d)(2)(i)(B)
with the term ``fair market value''. The Councils note the issue raised
by the commenter. The recommendation is outside of the scope of this
case. The proposed revision will be considered in the formulation of a
new case.
10. Guidance
There is no revision to the proposed rule based on this comment
category. One respondent recommended revising 42.302(a)(30)(iii) to add
the following language ``and guidance at FAR 45.103(a)(4) with the
maximum use of Government property already in the contractor's
possession.'' The Councils disagree. The intent of this paragraph is to
address the use of the clause at FAR 52.245-9, Use and Charges. The use
of Government property already in the possession of the contractor to
its maximum extent is adequately addressed at FAR 45.103(a)(4) and is
not appropriately referenced in this paragraph.
11. Item Unique
There is a revision to the proposed rule based on this comment
category. The proposed rule language in FAR 45.201, 52.245-
1(f)(1)(iii)(A)(4) and 52.245-1(f)(1)(vi)(B)(4) was deleted and the
current FAR language is retained.
Three respondents with five comments recommend changing the
proposed rule to use the term ``unique item identifier (UII)'' in place
of ``item unique.'' One comment recommended a general overall change to
UII, two comments recommended revising 52.245-1(f)(1)(iii)(A)(4) to use
the term ``unique item identifier (UII)'' in place of ``item unique,''
one comment suggested that the term ``item unique identifier'' is a DoD
term and that ``asset identifier'' is a more widely recognized term,
and one comment suggested changing ``Item unique'' identifier to
``Unique item'' identifier as prescribed in Defense Acquisition
Regulation Supplement (DFARS) 252.211-7007. The Councils agree with the
proposal to retain the current FAR language of ``unique item''
identifier. The Councils did not agree with the term ``asset
identifier.'' The
[[Page 38677]]
Councils believe that unique item identifier is used across industry
and is reflected in industry practices and standards.
12. Liability
There is no revision to the proposed rule based on this comment
category. One respondent, with two comments, recommended revising the
language associated with relief of stewardship responsibility to add
the term liability (see FAR 52.245-1(f)). One comment recommended
adding new language to read: ``(vii) Relief of Liability. The
Contractor shall have a process to enable the prompt disclosure and
reporting of all instances of loss, theft, damage, and destruction of
Government property, including Government property in the possession of
contractors.'' The second comment recommended moving 52.245-1(f)(vi)(A)
and (B) to the new paragraph (vii). The Councils noted the issues
raised by the commenter. The recommendations are outside of the scope
of this case. These recommendations will be considered in the
formulation of a new case.
13. Location
There is no revision to the proposed rule based on this comment
category. One respondent recommended revising FAR 45.501 and the
amended FAR 45.502 to read as follows: ``45.501 Prime contractor
alternate locations. (a) The property administrator assigned to the
prime contract may request support property administration from another
contract administration office, for purposes of evaluating prime
contractor management of property located at the prime contractor's
alternate locations. (b) Prime contractor consent is not required for
support delegations involving prime contractor alternate locations. FAR
section 45.502 Subcontractor locations. (c) The prime property
administrator shall accept the findings of the delegated support
property administrator and advise the prime contractor of the results
of property management reviews, including deficiencies found with the
subcontractor's property management system.'' The Councils did not
agree. The Government is not required to seek prime contractor consent
to conduct property reviews at alternate locations of the prime
contractor.
14. Lost Property
There is no revision to the proposed rule based on this comment
category. Twenty-one comments were received from two respondents
regarding lost property.
(a) One respondent provided two comments requesting consistency in
the use of language throughout the FAR regarding loss (loss, theft,
destruction, or damage).
(b) One respondent provided eighteen comments recommending that
``loss, theft, destruction, or damage'' be replaced with ``lost'' only.
(c) One respondent recommended that ``loss, theft, destruction, or
damage'' be replaced with ``lost'' only and that ``all'' be removed at
52.245-1(f)(1)(x) from ``inventorying all property.''
The Councils recommend no change to the proposed rule. The Councils
noted the recommendations for a new definition of ``loss.'' As a
result, the Councils recommend including the definition of ``loss'' in
a separate case. The Councils do not agree with the deletion of ``all''
at 52.245-1(f)(1)(x). The clause at FAR 52.245-1(b)(1) already allows
``the contractor to initiate and maintain the processes, systems,
procedures, records, and methodologies necessary for the effective
control of Government property consistent with voluntary consensus
standards and industry leading practices and standards.'' This
requirement extends to the physical inventory required at FAR 52.245-
1(f)(1)(x).
15. Management Plan
There is a revision to the proposed rule based on this comment
category. One respondent recommended revising FAR 52.245-1(g)(1) to
allow for multiple contractor property plans. The Councils agree. The
language at FAR 52.245-1(g)(1) is revised to allow for multiple plans
by revising ``plan'' to ``plan(s).''
16. Management System
There is a revision to the proposed rule based on this comment
category.
Two respondents submitted four comments on this category. One
respondent suggested that FAR 45.201(c)(4) be replaced with the
following: ``A description of their Property Management System and the
voluntary consensus standards or industry leading practices and
standards to be used in the management of Government Property.''
Another comment recommended revising FAR 45.105(b) to change ``provide
a schedule for their completion'' to ``request prompt correction of
deficiencies and a schedule for their completion.'' Another comment
recommended revising FAR 52.245-1(f)(1)(iii)(B) to delete the language
``when approved by the Property Administrator.'' Another comment
recommended revising FAR 45.105(b) to amend the proposed rule to
provide more effective property management. The Councils disagree with
the change to FAR 45.201(c)(4). This recommendation is outside the
scope of this case. The Councils partially agree with the
recommendation of one respondent to change FAR 45.105(b) and partially
concur with another respondent to provide a schedule of completion;
therefore, the language in FAR 45.105(b) is revised. The Councils
disagree with the recommended request to delete the language ``when
approved by the Property Administrator.'' The Councils believe it is in
the best interest of the Government for such approvals by the
Government to be made on a contract by contract basis.
17. Markings
There is a revision to the proposed rule based on this comment
category. One respondent recommended deleting ``Government-affixed'' at
FAR 52.245-1(j)(8)(ii). The Councils agree.
18. New Coverage
There is no revision to the proposed rule based on this category of
comment. Three respondents submitted four comments for this category of
comments. One respondent recommended new coverage in FAR 45.103 to
cover the contract award process when considering competitive
advantage. The Councils disagree. The scope of the effort on the
contract or type of contract (e.g., A&E, construction) should not be
the consideration for inclusion of the clauses at FAR 52.245-1 and
52.245-9. The sole consideration for use of these clauses is whether
Government property is to be provided.
One respondent suggested making all references to ``property''
consistent by changing the term to ``Government property.'' The
Councils disagree. The Councils believe that all references to property
in FAR part 45 inherently mean Government property (see FAR 45.000
Scope of part), and no further clarification is needed.
One respondent submitted two comments proposing new coverage. The
first comment recommended new coverage in FAR 45.103 to cover the
contract award process when considering competitive advantage. The
second comment requested a rewrite of FAR 45.603. The Council noted the
issues raised by the commenter. The recommendations are outside of the
scope of this case. The proposed revisions will be considered in the
formulation of a new case.
19. Policy
There is no revision to the proposed rule based on this category of
comment.
[[Page 38678]]
Two respondents submitted four comments for this comment category.
One respondent agrees with the revision.
Two respondents proposed coverage outside of the scope of this
case. The Councils noted the comments. The proposed revisions are
outside of the scope of this case. The proposed revisions will be
considered in the formulation of a new case.
One respondent recommended adding a new paragraph (e) in FAR 45.102
to read: ``Intangible property, e.g., intellectual property, software,
etc., are not subject to this requirements of this FAR part or the
Government property clauses found at 52.245.'' The Councils disagree.
The issue of whether Intellectual property is covered under FAR
contract property regulations is addressed in the scope of part in FAR
45.000 and in the definitions in FAR 45.101.
20. Profit and Fee
There is a revision to the proposed rule based on this comment
category. The proposed language in FAR 15.404-4(a)(3) is relocated to
FAR 15.404-4(c)(3) and revised. Nine comments were received from eight
respondents regarding profit and fee.
One respondent suggests removal of the proposed language in 15.404-
4(a)(3) and inclusion of new language in 15.404-4(c)(3) that
``instructs contracting officers to exclude the costs of contractor-
acquired property from pre-negotiation cost objectives when calculating
the Government's pre-negotiation profit or fee objective, unless the
contractor acquired property is a deliverable under the contract.'' The
Councils partially agree with this recommendation and the language is
revised accordingly.
One respondent requests clarification of the language added in
15.404-4. The Councils agree with this recommendation.
One respondent suggests that requirement of the language added to
15.404-4(a)(3) will be burdensome and require auditing to ensure zero
profit; instead of this method, the respondent suggests that the
contracting officer take the value of the contractor acquired property
in consideration when negotiating profits. The Councils partially agree
with this suggestion. The Councils disagree with the assertion that the
requirement is burdensome. The language has been modified to clarify
its use and limit its applicability to equipment as defined in FAR
45.101.
One respondent suggests changing the weighted guidelines to address
the value of contractor acquired property. The Councils disagree with
this suggestion; however, the revised language provides direction to
the contracting officer as to how equipment should be treated within
the current guidelines.
Four respondents suggest removal of the language added in 15.404-
4(a)(3). The Councils disagree with these suggestions.
One respondent believes there is no basis to eliminate profit on
any allowable element of the contract cost, especially property that is
required in the performance of a Government contract but not
incorporated into the end item deliverable or listed as a deliverable.
The Councils disagree with this suggestion. The language is revised to
assure that it applies only to equipment as defined in FAR 45.101.
The language has been revised and moved to 15.404-4(c)(3). The
revision does not change, expand or constrict existing contracting
policy. Rather, the purpose of the revised language is to clarify
policy, and ensure its awareness within the acquisition community.
Prior to the publication of FAR Case 2004-025, June 2007, FAR
45.302-2(c) and FAR 45.302-3(c) contained language intended to prevent
contractors from acquiring facilities and treating the facilities in
the same manner as a contract line item deliverable with associated
profit or fee. FAR Case 2004-025 deleted this language. The
requirements of this language were added to the proposed rule in FAR
15.404-4 because the policy still applies.
While the application of this policy tended to be obfuscated by the
term ``facilities,'' the underlying principle was clear--that when the
contractor buys equipment or acquires real property on a ``pass
through'' basis, i.e., when not part of a deliverable, it is the
Government--not the contractor--who assumes the risk. Moreover, it is
generally held that upon contract award, contractors are required to
furnish all property necessary to perform Government contracts (FAR
Part 45.102) as well as all the necessary resources needed for contract
performance (FAR 9.104-1(f), General standards).
Accordingly, it is not appropriate for the Government to include
the cost of contractor acquired property (equipment) when calculating
the Government's pre-negotiation profit or fee objective. Including
such costs would unduly compensate the contractor for obtaining
equipment it should already have; and for risks it did not incur. This
is a long held view; however, up until the publication of the proposed
rule FAR Case 2008-011, it had not been adequately addressed in the
FAR.
This policy does not exclude the otherwise allowable cost of
depreciation under FAR 31.205-11.
21. Rental
There is no revision to the proposed rule based on this category of
comment. One respondent submitted two comments recommending amending
FAR 45.301 and 45.303. One comment recommended amending FAR 45.301 by
inserting a comma after the word ``authorized'' in paragraph (b) and
making two sentences out of paragraph (b) so that it reads as follows:
``(b) Rental charges, to the extent authorized, do not apply to
Government property that is left in place or installed on contractor-
owned property for mobilization or future Government production
purposes; (c) Rental charges shall apply to property to be used for
non-government commercial purposes.'' The second comment recommended
amending FAR 45.303 to read ``The contracting officer may authorize a
contractor to use the property on an independent research and
development (IR&D) program rent free, 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 claim rental value against any
Government contract for the property; and
(c) Estimated rental proceeds are immaterial or rental cost to the
contractor would subsequently, in a substantial way, be charged back to
the Government as part of indirect cost.''
The Councils note the issue raised by the commenter. The
recommendations are outside of the scope of this case. The proposed
revisions will be considered in the formulation of a new case.
22. Responsibility vs. Liability
There is no revision to the proposed rule based on this category of
comment. One respondent recommended moving the coverage in FAR 52.245-
1(f)(vii) to FAR 45.104 or moving this paragraph to FAR 52.245-1(h)(1)
and being repeated in 45.104, or replace the word ``responsibility''
with ``liability.'' The Councils note the issue raised by the
commenter. The recommendations are outside of the scope of this case.
The proposed revisions will be considered in the formulation of a new
case.
23. Sale
One respondent agreed with the proposed language in FAR 45.604-3.
[[Page 38679]]
24. Scrap List
There is no revision to the proposed rule based on this category of
comment. One respondent requested that the paragraph (FAR 45.606-1(b))
be revised as follows: ``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
property management plan or approvals by the property administrator or
contracting officer). The Councils note the issue raised by the
commenter. The recommendations are outside of the scope of this case.
The proposed revisions will be considered in the formulation of a new
case.
25. Screening
One respondent agreed with the proposed language at FAR 45.602-
3(b)(3).
26. Storage
One respondent agreed with the proposed language at FAR 52.245-
1(j)(7)(ii).
27. Supply Source
One respondent agreed with the proposed language at FAR 52.251-1.
28. Title
There is no revision to the proposed rule based on this category of
comment. The respondent agrees, in two comments, with the proposed
language at FAR 52.245-1(e)(2)(ii) and (iii).
The respondent also proposes revising FAR 45.402(a). The Councils
note the issue raised by the commenter. The recommendations are outside
of the scope of this case. The proposed revisions will be considered in
the formulation of a new case.
29. Use
One respondent agreed with the proposed language at FAR 52.245-
1(c).
30. Administrative
One respondent agreed with the proposed language at FAR 52.245-1.
31. Wrong Case
One respondent submitted one comment opposing FAR 2009-005.
Summary of Proposed Rule Changes. The Councils made the following
changes to the proposed rule as a result of the public comments.
Revised FAR 45.101 and 52.245-1 to clarify the definition of
``equipment'' by including special test equipment and special tooling
in the exclusions.
Revised FAR 45.101 and 52.245-1 to clarify the definition of
``cannibalize.''
Revised FAR 45.101 and 52.245-1 to clarify the definition of
``Government-furnished property.''
Revised FAR 45.105 and FAR 52.245-1(g)(3) to clarify language
necessary for contractors to take the necessary corrective action as
specified by the schedule within the corrective action plan.
Revised FAR 52.245-1(j)(3)(iv)(A) to delete the language as
proposed in the proposed rule and by moving and retaining the language
at FAR 52.245-1(j)(3)(iv)(F) as paragraph (A).
Revised FAR 45.201, FAR 52.245-1(f)(1)(iii)(A)(4) and FAR 52.245-
1(f)(1)(vi)(B)(4) to delete the proposed rule language and retain the
current FAR language.
Revised FAR 52.245-1(j)(8)(ii) by deleting the language
``Government-affixed.''
Revised FAR 52.245-1(a) by removing language duplicating the
definition of contractor's managerial personnel.
Revised FAR 15.404-4(a)(3) by relocating the language to FAR
15.404(c)(3) and clarifying that contracting officers shall exclude the
cost of contractor-acquired property when calculating the Government's
pre-negotiation profit or fee objective.
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 Department of Defense, the General Services Administration, and
the National Aeronautics and Space Administration certify that this
final rule will not 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 does not
impose any additional requirements on small businesses. The rule does
not affect the method of managing Government property. The rule merely
clarifies and corrects the previous FAR rule.
C. Paperwork Reduction Act
The Paperwork Reduction Act does apply; however, these changes to
the FAR do not impose additional information collection requirements to
the paperwork burden previously approved under OMB Control Number 9000-
0075.
List of Subjects in 48 CFR Parts 2, 4, 15, 31, 32, 42, 45, and 52
Government procurement.
Dated: June 25, 2010.
Edward Loeb,
Director, Acquisition Policy Division.
Therefore, DoD, GSA, and NASA amend 48 CFR parts 2, 4, 15, 31, 32,
42, 45, and 52 as set forth below:
0
1. The authority citation for 48 CFR parts 2, 4, 15, 31, 32, 42, 45,
and 52 continues 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 2--DEFINITIONS OF WORDS AND TERMS
2.101 [Amended]
0
2. Amend section 2.101, in paragraph (b)(2), by removing from the
definition ``Plant clearance officer'' the words ``plants and Federal
installations'' and adding ``plants, Federal installations, and Federal
and non-Federal industrial operations,'' in its place; and removing
from the definition ``Special tooling'' the words ``test equipment,
and'' and adding ``tooling, and'' in its place.
PART 4--ADMINISTRATIVE MATTERS
0
3. Amend section 4.705-3 by adding paragraph (h) to read as follows:
4.705-3 Acquisition and supply records.
* * * * *
(h) Property records (see FAR 45.101 and 52.245-1): Retain 4 years.
PART 15--CONTRACTING BY NEGOTIATION
0
4. Amend section 15.404-4 by adding a sentence after the first sentence
of paragraph (c)(3) to read as follows:
15.404-4 Profit.
* * * * *
(c) * * *
(3) * * * Before applying profit or fee factors, the contracting
officer shall exclude from the pre-negotiation cost objective amounts
the purchase cost of contractor-acquired property that is categorized
as equipment, as defined in FAR 45.101, and where such equipment is to
be charged directly to the contract. * * *
* * * * *
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
31.205-19 [Amended]
0
5. Amend section 31.205-19(e)(2)(iv)(C) by removing ``52.245-
1(h)(1)(ii)'' and adding ``52.245-1(a)'' in its place.
[[Page 38680]]
PART 32--CONTRACT FINANCING
32.503-16 [Amended]
0
6. Amend section 32.503-16 by removing from paragraph (a) ``loss,
theft, destruction, or damage to'' and adding ``lost, stolen, damaged,
or destroyed'' in its place.
32.1010 [Amended]
0
7. Amend section 32.1010 by removing from paragraph (a) ``loss, theft,
destruction, or damage to property affected by the clause'' and adding
``lost, stolen, damaged, or destroyed property'' in its place.
PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES
0
8. Amend section 42.302 by revising paragraphs (a)(30)(iii) and
(a)(30)(v) to read as follows:
42.302 Contract administration functions.
(a) * * *
(30) * * *
(iii) Evaluate the use of Government property on a non-interference
basis in accordance with the clause at 52.245-9, Use and Charges;
* * * * *
(v) Modify contracts to reflect the addition of Government-
furnished property and ensure appropriate consideration.
* * * * *
PART 45--GOVERNMENT PROPERTY
0
9. Amend section 45.101 by--
0
a. Revising the definitions ``Cannibalize'', ``Equipment'',
``Government-furnished property'', and ``Government property'';
0
b. Removing from the definition ``Material'' the words ``and special
test equipment'' and adding ``special test equipment or real property''
in its place;
0
c. Removing the definition ``Plant equipment'';
0
d. Adding the definition ``Property records''; and
0
e. Revising the definition ``Real property.''
0
The revised and added text reads as follows:
45.101 Definitions.
* * * * *
Cannibalize means to remove parts from Government property for use
or for installation on other Government property.
* * * * *
Equipment means a tangible item that is functionally complete for
its intended purpose, durable, nonexpendable, and needed for the
performance of a contract. Equipment is not intended for sale, and does
not ordinarily lose its identity or become a component part of another
article when put into use. Equipment does not include material, real
property, special test equipment or special tooling.
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-furnished
property includes, but is not limited to, spares and property furnished
for repair, maintenance, overhaul, or modification. Government-
furnished property also includes contractor-acquired property if the
contractor-acquired property is a deliverable under a cost contract
when accepted by the Government for continued use under the contract.
Government property means all property owned or leased by the
Government. Government property includes both Government-furnished
property and contractor-acquired property. Government property includes
material, equipment, special tooling, special test equipment, and real
property. Government property does not include intellectual property
and software.
* * * * *
Property records means the records created and maintained by the
contractor in support of its stewardship responsibilities for the
management of Government property.
* * * * *
Real property. See Federal Management Regulation 102-71.20 (41 CFR
102-71.20).
* * * * *
0
10. Amend section 45.102 by revising paragraph (d) to read as follows:
45.102 Policy.
* * * * *
(d) Exception. Property provided under contracts for repair,
maintenance, overhaul, or modification is not subject to the
requirements of paragraph (b) of this section.
0
11. Amend section 45.104 by revising the introductory text of paragraph
(a) to read as follows:
45.104 Responsibility and liability for Government property.
(a) Generally, contractors are not held liable for loss, theft,
damage or destruction of Government property under the following types
of contracts:
* * * * *
0
12. Amend section 45.105 by revising the first sentence of paragraph
(b); revising paragraph (b)(1); and removing from paragraph (d)
``damage, destruction or theft'' and adding ``theft, damage or
destruction'' in its place.
The revised text reads as follows:
45.105 Contractors' property management system compliance.
* * * * *
(b) The property administrator shall notify the contractor in
writing when the contractor's property management system does not
comply with contractual requirements, and shall request prompt
correction of deficiencies and shall request from the contractor a
corrective action plan, including a schedule for correction of the
deficiencies and shall provide a schedule for their completion. * * *
(1) Revocation of the Government's assumption of risk for loss,
theft, damage or destruction; and/or
* * * * *
45.201 [Amended]
0
13. Amend section 45.201 by removing from paragraph (d) ``When use of
property on more than one contract is anticipated, any'' and adding
``Any'' in its place.
0
14. Amend section 45.402 by revising paragraph (a) to read as follows:
45.402 Title to contractor-acquired property.
(a) Title vests in the Government for all property acquired or
fabricated by the contractor in accordance with the financing
provisions or other specific requirements for passage of title in the
contract. Under fixed-price type contracts, in the absence of financing
provisions or other specific requirements for passage of title in the
contract, 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.
* * * * *
0
15. Revise section 45.502 to read as follows:
45.502 Subcontractor and alternate prime contractor locations.
(a) To ensure subcontractor compliance with Government property
administration requirements, and with prime contractor consent, the
property administrator assigned to the prime contract may request
support property administration from another contract
[[Page 38681]]
administration office. If the prime contractor does not provide consent
to support property administration at subcontractor locations, the
property administrator shall refer the matter to the contracting
officer for resolution.
(b) The prime property administrator shall accept the findings of
the delegated support property administrator and advise the prime
contractor of the results of property management reviews, including
deficiencies found with the subcontractor's property management system.
(c) Prime contractor consent is not required for support
delegations involving prime contractor alternate locations.
45.602-3 [Amended]
0
16. Amend section 45.602-3 by removing from paragraph (b)(3) ``North
Capitol and H Streets'' and adding ``732 North Capitol Street'' in its
place.
0
17. Revise section 45.604-3 to read as follows:
45.604-3 Sale of surplus personal property.
Policy for the sale of surplus personal property is contained in
the Federal Management Regulation, at Part 102-38 (41 CFR Part 102-38).
Agencies may specify implementing procedures.
0
18. Amend section 45.606-1 by revising paragraph (b) and adding
paragraph (c) to read as follows:
45.606-1 Contractor with an approved scrap procedure.
* * * * *
(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).
(c) Inventory disposal schedules shall be submitted for all
aircraft regardless of condition, flight safety critical 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 that are economically beneficial to
recover; or
(6) Is dangerous to the public health, safety, or welfare.
PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES
52.232-16 [Amended]
0
19. Amend section 52.232-16 by--
0
a. Removing from the clause heading ``(JUL 2009)'' and adding ``(AUG
2010)'' in its place;
0
b. Removing from paragraph (d)(2)(ii) ``under any other clause of this
contract'';
0
c. Removing from paragraph (d)(3) ``or special tooling''; and
0
d. Removing from paragraph (e) ``is damaged, lost, stolen, or'' and
adding ``is lost, stolen, damaged, or'' in its place.
52.232-32 [Amended]
0
20. Amend section 52.232-32 by--
0
a. Removing from the clause heading ``(JAN 2008)'' and adding ``(AUG
2010)'' in its place;
0
b. Removing from paragraph (f)(2)(ii) ``under any other clause of this
contract'';
0
c. Removing from paragraph (f)(3) ``or special tooling''; and
0
d. Removing from paragraph (g) ``is damaged, lost, stolen, or'' and
adding ``is lost, stolen, damaged, or'' in its place.
0
21. Amend section 52.245-1 by--
0
a. Revising the date of the clause;
0
b. In paragraph (a) by--
0
i. Revising the definitions ``Cannibalize'' and ``Equipment'';
0
ii. Adding two sentences to the end of the definition ``Government-
furnished property'';
0
iii. Adding two sentences to the end of the definition ``Government
property'';
0
iv. Removing from the definition ``Material'' the word ``end-item'' and
adding the words ``end item'' in its place; and removing the words
``and special test equipment'' and adding the words ``, special test
equipment or real property'' in its place;
0
v. Removing the definition ``Plant equipment'';
0
vi. Adding, in alphabetical order, the definition ``Property records'';
and
0
vii. Revising the definition ``Real property'';
0
c. Revising the first sentence of paragraph (b)(2), and paragraphs (c),
and (e)(2)(ii);
0
d. Removing from paragraphs (e)(2)(iii) and (f)(1)(i) the word
``material'' and adding the word ``property'' wherever it occurs (8
times);
0
e. Revising paragraph (f)(1)(v)(A), introductory text of paragraph
(f)(1)(vi), paragraphs (f)(1)(vi)(A), (f)(1)(vi)(B)(4),
(f)(1)(vi)(B)(10), (f)(1)(vii)(A), (f)(1)(viii)(B), (f)(1)(x), (g),
introductory text of paragraph (h)(1), paragraphs (h)(1)(ii) and
(h)(1)(iii), the first sentence of paragraph (h)(2), (h)(3),
introductory text of paragraph (i), and paragraph (j)(1)(i)(B);
0
f. Add paragraph (j)(1)(i)(C);
0
g. Revise paragraphs (j)(3)(iii)(E) and (j)(3)(iv);
0
h. Add paragraphs (j)(3)(v) and (j)(3)(vi);
0
i. Remove from paragraph (j)(7)(ii) the word ``facility'' and add the
word ``area'' in its place;
0
j. Revise second sentence of paragraph (j)(8)(ii); and
0
k. In Alternate I, revise the date of the alternate, and the first
sentence of paragraph (h)(1).
The added and revised text reads as follows:
52.245-1 Government Property.
* * * * *
GOVERNMENT PROPERTY (AUG 2010)
(a) * * *
* * * * *
Cannibalize means to remove parts from Government property for
use or for installation on other Government property.
* * * * *
Equipment means a tangible item that is functionally complete
for its intended purpose, durable, nonexpendable, and needed for the
performance of a contract. Equipment is not intended for sale, and
does not ordinarily lose its identity or become a component part of
another article when put into use. Equipment does not include
material, real property, special test equipment or special tooling.
Government-furnished property * * * Government-furnished
property includes, but is not limited to, spares and property
furnished for repair, maintenance, overhaul, or modification.
Government-furnished property also includes contractor-acquired
property if the contractor-acquired property is a deliverable under
a cost contract when accepted by the Government for continued use
under the contract.
Government property * * * Government property includes material,
equipment, special tooling, special test equipment, and real
property. Government property does not include intellectual property
and software.
* * * * *
Property records means the records created and maintained by the
contractor in support of its stewardship responsibilities for the
management of Government property.
* * * * *
Real property. See Federal Management Regulation 102-71.20 (41
CFR 102-71.20).
* * * * *
(b) * * *
(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, sale (as surplus
property), or other disposition, or via a completed investigation,
evaluation, and final determination for lost, stolen, damaged, or
destroyed property. * * *
* * * * *
(c) Use of Government property. (1) The Contractor shall use
Government property, either furnished or acquired under this
contract, only for performing this contract,
[[Page 38682]]
unless otherwise provided for in this contract or approved by the
Contracting Officer.
(2) Modifications or alterations of Government property are
prohibited, unless they are--
(i) Reasonable and necessary due to the scope of work under this
contract or its terms and conditions;
(ii) Required for normal maintenance; or
(iii) Otherwise authorized by the Contracting Officer.
(3) The Contractor shall not cannibalize Government property
unless otherwise provided for in this contract or approved by the
Contracting Officer.
* * * * *
(e) * * *
(2) * * *
(ii) Title vests in the Government for all property acquired or
fabricated by the Contractor in accordance with the financing
provisions or other specific requirements for passage of title in
the contract. Under fixed price type contracts, in the absence of
financing provisions or other specific requirements for passage of
title in the contract, 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.
* * * * *
(f) * * *
(1) * * *
(v) * * *
(A) The Contractor shall award subcontracts that clearly
identify assets to be provided and shall ensure appropriate flow
down of contract terms and conditions (e.g., extent of liability for
loss, theft, damage or destruction of Government property).
* * * * *
(vi) Reports. The Contractor shall have a process to create and
provide reports of discrepancies; loss, theft, damage or
destruction; physical inventory results; audits and self-
assessments; corrective actions; and other property related reports
as directed by the Contracting Officer.
(A) Loss, theft, damage or destruction. Unless otherwise
directed by the Property Administrator, the Contractor shall
investigate and promptly furnish a written narrative of all
incidents of loss, theft, damage or destruction to the property
administrator as soon as the facts become known or when requested by
the Government.
(B) * * *
(4) Unique-item Identifier (if available).
* * * * *
(10) A statement that the Government will receive any
reimbursement covering the loss, theft, damage or destruction in the
event the Contractor was or will be reimbursed or compensated.
* * * * *
(vii) * * *
(A) Consumed or expended, reasonably and properly, or otherwise
accounted for, in the performance of the contract, including
reasonable inventory adjustments of material as determined by the
Property Administrator; or a Property Administrator granted relief
of responsibility for loss, theft, damage or destruction of
Government property;
* * * * *
(viii) * * *
(B) Unless otherwise authorized in this contract or by the
Property Administrator the Contractor shall not commingle Government
material with material not owned by the Government.
* * * * *
(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,
theft, damage or destruction 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.
* * * * *
(g) Systems analysis. (1) The Government shall have access to
the Contractor's premises and all Government property, at reasonable
times, for the purposes of reviewing, inspecting and evaluating the
Contractor's property management plan(s), systems, procedures,
records, and supporting documentation that pertains to Government
property. This access includes all site locations and, with the
Contractor's consent, all subcontractor premises.
(2) Records of Government property shall be readily available to
authorized Government personnel and shall be appropriately
safeguarded.
(3) Should it be determined by the Government that the
Contractor's (or subcontractor's) property management practices are
inadequate or not acceptable for the effective management and
control of Government property under this contract, or present an
undue risk to the Government, the Contractor shall prepare a
corrective action plan when requested by the Property Administrator
and take all necessary corrective actions as specified by the
schedule within the corrective action plan.
(h) Contractor Liability for Government Property.
(1) Unless otherwise provided for in the contract, the
Contractor shall not be liable for loss, theft, damage or
destruction to the Government property furnished or acquired under
this contract, except when any one of the following applies--
* * * * *
(ii) The loss, theft, damage or destruction is the result of
willful misconduct or lack of good faith on the part of the
Contractor's managerial personnel.
(iii) The Contracting Officer has, in writing, revoked the
Government's assumption of risk for loss, theft, damage or
destruction, 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, theft, damage or destruction of Government property occurred
while the Contractor had adequate property management practices or
the loss, theft, damage or destruction 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 Contractor shall take all reasonable actions necessary
to protect the Government property from further loss, theft, damage
or destruction. * * *
(3) The Contractor shall do nothing to prejudice the
Government's rights to recover against third parties for any loss,
theft, damage or destruction of Government property.
* * * * *
(i) Equitable adjustment. Equitable adjustments under this
clause shall be made in accordance with the procedures of the
Changes clause. However, the Government shall not be liable for
breach of contract for the following:
* * * * *
(j) * * *
(1) * * *
(i) * * *
(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).
(C) Inventory disposal schedules shall be submitted for all
aircraft regardless of condition, flight safety critical 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 that are economically beneficial to
recover; or
(6) Is dangerous to the public health, safety, or welfare.
* * * * *
(3) * * *
(iii) * * *
(E) Precious metals in raw or bulk form;
* * * * *
(iv) The Contractor shall provide the information required by
FAR 52.245-1(f)(1)(iii) along with the following:
(A) Any additional information that may facilitate understanding
of the property's intended use.
(B) For work-in-progress, the estimated percentage of
completion.
(C) For precious metals, the type of metal and estimated weight.
(D) For hazardous material or property contaminated with
hazardous material, the type of hazardous material.
(E) For metals in mill product form, the form, shape, treatment,
hardness, temper, specification (commercial or Government) and
dimensions (thickness, width and length).
(v) Property with the same description, condition code, and
reporting location may be grouped in a single line item.
[[Page 38683]]
(vi) Scrap should be reported by ``lot'' along with metal
content, estimated weight and estimated value.
* * * * *
(8) * * *
(ii) * * * Unless otherwise directed by the Contracting Officer
or by the Plant Clearance Officer, the Contractor shall remove and
destroy any markings identifying the property as U.S. Government-
owned property prior to its disposal.
* * * * *
Alternate I (AUG 2010). * * *
(h)(1) The Contractor assumes the risk of, and shall be
responsible for, any loss, theft, damage or destruction of
Government property upon its delivery to the Contractor as
Government-furnished property. * * *
* * * * *
0
22. Amend section 52.245-2 by revising the date of the clause, and the
first two sentences of paragraph (b) to read as follows:
52.245-2 Government Property Installation Operation Services.
* * * * *
GOVERNMENT PROPERTY INSTALLATION OPERATION SERVICES (AUG 2010)
* * * * *
(b) The Government bears no responsibility for repair or
replacement of any lost, stolen, damaged or destroyed-Government
property. If any or all of the Government property is lost, stolen,
damaged or destroyed or becomes no longer usable, the Contractor
shall be responsible for replacement of the property at Contractor
expense. * * *
* * * * *
0
23. Amend section 52.245-9 by revising the date of the clause, and the
introductory text of paragraph (a); and removing the definitions
``Acquisition cost'', ``Government property'', ``Plant equipment'', and
``Real property''.
The revised text reads as follows:
52.245-9 Use and Charges.
* * * * *
USE AND CHARGES (AUG 2010)
(a) Definitions. Definitions applicable to this contract are
provided in the clause at 52.245-1, Government Property. Additional
definitions as used in this clause include:
* * * * *
0
24. Amend section 52.251-1 by revising the date of the clause, and the
last sentence of the clause to read as follows:
52.251-1 Government Supply Sources.
* * * * *
GOVERNMENT SUPPLY SOURCES (AUG 2010)
* * * The provisions of the clause entitled ``Government
Property,'' at 52.245-1, shall apply to all property acquired under
such authorization.
[FR Doc. 2010-15918 Filed 7-1-10; 8:45 am]
BILLING CODE 6820-EP-P