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Contractor Acquired Property


AllyM

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This is a Fixed Price contract for an IT solution. The solution requires the Contractor to acquire certain equipment to fulfill the solution; however, none of this equipment is a delivery item. Given that the Government did not require (per contract as noted deliverable)said equipment, nor inspect and accept these items, the title vests with the Contractor per 45.402(a). Couple questions, CAP is new to me: 1) Do we have to add all equipment as a CAP line item - not separately priced - to the contract? 2) Is this equipment the Contractor's to take at contract end?  Any info is much appreciated. Thank you.

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Government property may be divided into government-furnished property and contractor-acquired property.  The equipment you are talking about is not CAP, and is not government property at all -- the FAR's Government Property clause does not apply.

Yes, the contractor keeps the property at contract end, but not because of anything in the Government Property clause.  The contractor is free to sell or re-purpose the property at any time, before, during, or after contract performance.

Even if it were CAP, which it isn't, you would not need a separate CLIN for CAP.

You must not think of this property as CAP.  It isn't.

Does the government want to take possession of this equipment?

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Can you clarify what the nature of the “IT solution” is? I am assuming that this equipment isn’t a specified contract requirement, correct?

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47 minutes ago, ji20874 said:

Government property may be divided into government-furnished property and contractor-acquired property.  The equipment you are talking about is not CAP, and is not government property at all -- the FAR's Government Property clause does not apply.

Yes, the contractor keeps the property at contract end, but not because of anything in the Government Property clause.  The contractor is free to sell or re-purpose the property at any time, before, during, or after contract performance.

Even if it were CAP, which it isn't, you would not need a separate CLIN for CAP.

You must not think of this property as CAP.  It isn't.

Does the government want to take possession of this equipment?

Maybe, maybe not. What about when there are progress payments?

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here_2_help,

Nothing in the original posting suggests progress payments; indeed, the original poster's reliance on FAR 45.402(a) suggests there are no progress payments.  But if you think the contract might include progress payments after you read FAR 45.402(a), why don't you ask the original poster the question?

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45.101 definitions: “Contractor-acquired property means property acquired, fabricated, or otherwise provided by the contractor for performing a contract and to which the Government has title.”

If the government will directly pay the contractor full cost for property  acquired by the contractor to perform a fixed price contract, the government should obtain title to it and it becomes government property.

AllyM said that the contractor retains title to the property, so it is not “contractor acquired property”.  The government then should generally not finance or directly pay the contractor for it.


___________________________

 

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1 hour ago, joel hoffman said:

If the government will directly pay the contractor full cost for property  acquired by the contractor to perform a fixed price contract, the government should obtain title to it and it becomes government property.

We see things differently.  Maybe yes in some particular cases, but as a rule, no.  To me, the particular case you cited does not stand for a rule.

Example:  In a fixed-price contract for painting (with no progress payments 🙂), a contractor might buy a paintbrush and a few cans of paint -- the contractor wholly includes these costs in its price, and charges the full cost to the contract in its internal bookkeeping -- therefore, during performance, the contractor must treat the brush and cans as CAP and comply with the Government Property clause?  No. 

Maybe yes in a some particular cases*, but as a general rule, no.  At least, that's how I see things.

 

*I quickly admit there are some particular cases where it makes sense -- I have done it myself -- but these particular cases do not make a general rule.

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JI, I agree and the contractor would spread those costs over the contract performance.

But , generally it isn’t CAP, if the contractor retains title with no delivery to govt, etc.  In my opinion, there generally shouldn’t be a separate, direct payment line item for purchasing contractor owned property, like paint brushes etc.. That is consistent with 45.4.

My example was where the government negotiator for the mod had allowed the full cost of new, major capital plant and equipment that the contractor intended to keep and use on future contracts in the Kingdom, rather than deducting considerable depreciated/salvage/residual value.

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Ok, I admit that I don’t know how this service contractor would amortize/recover the cost of equipment needed to perform the effort in the case here in this thread.

Edit: However, the contractor should have included costs for it in the original contract price if it wants to be paid for utilizing it to “fulfill” the contract. Don’t add additional funds or new line items…

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19 hours ago, AllyM said:

The solution requires the Contractor to acquire certain equipment to fulfill the solution

So the real question here is - How does the property fit in with the policy FAR 45.102?  It is after all a contract for a solution!

Is this to simple of a view.   I win a contract that requires providing clean clothes.   The contract says the clothes must be cleaned by a washing machine.   I win the contract but I only have wash boards so I go buy a washing machine.   FAR part 45.102(a)!

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For newbies reading this thread, remember that Contractor-Acquired Property (CAP) does not mean property acquired by the contractor -- this might seem illogical, but that's how it is. 

Rather, CAP has more limited definition -- see FAR 45.101 and, more importantly, FAR 52.245-1(a).  These two places use the same words (but one has a comma that the other doesn't have).  In FAR settings, government property (GP) comprises government-furnished property (GFP) and contractor-acquired property (CAP).  Arithmetically, GP=GFP+CAP.  Or, using set notation, GP={GFP,CAP} and CAP∈GP.

If the contractor has title to the property, it is not CAP.

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22 hours ago, AllyM said:

This is a Fixed Price contract for an IT solution. The solution requires the Contractor to acquire certain equipment to fulfill the solution; however, none of this equipment is a delivery item. Given that the Government did not require (per contract as noted deliverable)said equipment, nor inspect and accept these items, the title vests with the Contractor per 45.402(a). Couple questions, CAP is new to me: 1) Do we have to add all equipment as a CAP line item - not separately priced - to the contract? 2) Is this equipment the Contractor's to take at contract end?  Any info is much appreciated. Thank you.

@AllyMDoes the contract include the clause at FAR 52.245-1, Government Property?

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52 minutes ago, ji20874 said:

For newbies reading this thread, remember that Contractor-Acquired Property (CAP) does not mean property acquired by the contractor -- this might seem illogical, but that's how it is. 

I don't understand that statement.

If the contract includes the clause at FAR 52.245-1, which applies to fixed-price contracts, the clause defines contractor-acquired property as follows:

Quote

Contractor-acquired property means property acquired, fabricated, or otherwise provided by the Contractor for performing a contract, and to which the Government has title.

I must be missing something, but I cannot figure out what I'm missing.

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1 hour ago, Vern Edwards said:

I don't understand that statement.

If the contract includes the clause at FAR 52.245-1, which applies to fixed-price contracts, the clause defines contractor-acquired property as follows:

“Contractor-acquired property means property acquired, fabricated, or otherwise provided by the Contractor for performing a contract, and to which the Government has title.”

I must be missing something, but I cannot figure out what I'm missing.

Vern, the OP said that the contractor will retain title and possession of the property. “the Government did not require (per contract as noted deliverable)said equipment, nor inspect and accept these items”.

It isn’t CAP. It’s simply equipment necessary for the contractor “to fulfill” the fixed price contract. 

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22 minutes ago, Vern Edwards said:

@joel hoffmanAre you ji20874's spokesperson? If so, how does your last post explain ji20874's seemingly paradoxical statement?

 

No, Vern.  I’m not his spokesperson. You asked AllyM if the clause at 52.245-1 is in the contract.

It appeared to me that you were intending to apply the Government Property clause to this equipment .

You also said: “I must be missing something, but I cannot figure out what I'm missing.“

It isn’t “government furnished or “contractor acquired property” per the clause.

It isn’t “government property”. Per AllyM’s description, It is simply contractor property that it acquired “to fulfill” the fixed price contract. 

Edited by joel hoffman
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So, ji’s statement doesn’t seem paradoxical - to me at least.

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3 hours ago, Vern Edwards said:

I must be missing something, but I cannot figure out what I'm missing.

I wrote that Contractor-Acquired Property (CAP) does not mean property acquired by the contractor -- this might seem illogical, but that's how it is.  Rather, CAP has a definition in the places to which I pointed, and which you cited.

Indeed, CAP does not simply mean any property acquired by the contractor.  Rather, CAP means means "property acquired . . . by the contractor . . . to which the Government has title."  

2 hours ago, Don Mansfield said:

Ji is writing carelessly

There is nothing careless in what I wrote.  Rather, it is careless to label any contractor acquired by a contractor as CAP.  When speaking of CAP in a FAR setting, one must know and use the FAR definition.  It the Government doesn't have title, it isn't CAP.  Just because a contractor acquires property doesn't mean it is CAP.

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On 1/9/2023 at 1:30 PM, AllyM said:

The solution requires the Contractor to acquire certain equipment to fulfill the solution; however, none of this equipment is a delivery item. Given that the Government did not require (per contract as noted deliverable)said equipment, nor inspect and accept these items, the title vests with the Contractor per 45.402(a). Couple questions, CAP is new to me: 1) Do we have to add all equipment as a CAP line item - not separately priced - to the contract? 2) Is this equipment the Contractor's to take at contract end?  Any info is much appreciated. Thank you.

It sounds to me that the contract may have directed the contractor to purchase this equipment. Was special test equipment ruled out? The cost of special test equipment is included in a proposal but dispositioned at the end of the contract by the government. Also, it sounds to me like the equipment might qualify as capital equipment. Was that ruled out? Capital equipment should not be included as a direct cost to the contract.  

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50 minutes ago, ji20874 said:

There is nothing careless in what I wrote.

Careless:

5 hours ago, ji20874 said:

For newbies reading this thread, remember that Contractor-Acquired Property (CAP) does not mean property acquired by the contractor -- this might seem illogical, but that's how it is. 

😦

Careful:

51 minutes ago, ji20874 said:

Indeed, CAP does not simply mean any property acquired by the contractor.

😀

Pedantic types might write something like 

CAP∈Property acquired by the contractor 

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Careless:

On 1/9/2023 at 2:58 PM, ji20874 said:

The equipment you are talking about is not CAP, and is not government property at all -- the FAR's Government Property clause does not apply.

Less Careless:

"Since I haven't read your contract, I can only answer generally. Typically, property acquired by the contractor under a fixed-price contract does not meet the definition of contractor acquired property as defined in the clause at FAR 52.245-1 because the Government doesn't have title. However, if a fixed-price contract provided for contract financing payments, the Government would have title to such property until final acceptance."

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49 minutes ago, Neil Roberts said:

It sounds to me that the contract may have directed the contractor to purchase this equipment. Was special test equipment ruled out? The cost of special test equipment is included in a proposal but dispositioned at the end of the contract by the government. Also, it sounds to me like the equipment might qualify as capital equipment. Was that ruled out? Capital equipment should not be included as a direct cost to the contract.  

Not sure what AllyM means by the term “the solution”.

She also said:

On 1/9/2023 at 3:30 PM, AllyM said:

Given that the Government did not require (per contract as noted deliverable)said equipment, nor inspect and accept these items, the title vests with the Contractor per 45.402(a).

 

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