Appendix — J & E Salvage Co. v. United States, 41 Fed. Cl. 76 (1998) (No. 97-2080)

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APPENDIX A — DECISION OF THE UNITED STATES

COURT OF APPEALS FOR THE FEDERAL CIRCUIT

DECIDED MARCH 25, 1998

UNITED STATES COURT OF APPEALS

FOR THE FEDERAL CIRCUIT

97-5066

J & E SALVAGE COMPANY, JOHN DARLINGTON, and

TERESA N. DARLINGTON, Executrix of the Estate of

EDWARD DARLINGTON,

Plaintiffs-Appellants,

V.

THE UNITED STATES,

Defendant-Appellee.

DECIDED: March 25, 1998

Before RICH, MICHEL, and SCHALL, Circuit Judges.

SCHALL, Circuit Judge.

DECISION

J&E Salvage Company and the other named plaintiffs

(collectively J&E) appeal the judgment of the United States

Court of Federal Claims (i) dismissing J&E’s Fifth Amendment

taking claim for failure to state a claim upon which relief could

be granted, J&E Salvage Co. v. United States, 36 Fed. Cl. 192,

196 (1996) (J&E IID), and (ii) dismissing J&E’s breach of contract

claim for lack of jurisdiction, J&E Salvage Co. v. United States,

37 Fed. Cl. 256, 260-63 (1997) (J&E IV). We affirm.

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Appendix A

DISCUSSION

I.

Ca May 19, 1992, at the request of the Department of

Defense, the Defense Reutilization and Marketing Office

(DRMO) held an auction at Cherry Point, North Carolina, to

sell surplus material. See J&E III, 36 Fed. Cl. at 193. John and

Teresa Darlington, as general partners of J&E, purchased several

“lots” of surplus merchandise at the auction. Specifically, J&E

purchased lots 42 through 47, which appeared to be large

containers used for shipping and storing helicopter

transmissions. The containers were bolted shut at the time of

the sale, so J&E was unable to determine what, if anything,

was inside the containers. The lots were described in the

invitation for Bids and the Notice of Award as: “Shipping &

Storage Container: 2 EA.” J&E paid a total of $1,075 for the

containers.

After J&E paid for the merchandise, it transported the

containers back to its place of business. Sometime thereafter,

the containers were opened and it was discovered that four of

them contained surplus helicopter transmissions valued at

$289,600 each. When J&E notified DRMO of this discovery,

DRMO claimed that the transmissions were still government

property and demanded their immediate return. J&E, however,

refused to return the transmissions. DRMO then filed suit in

the United States District Court for the Eastern District of North

Carolina seeking a return of the transmissions. In due course,

J&E filed a motion to dismiss for lack of jurisdiction, arguing

that the dispute was governed by the Contract Disputes Act, 41

U.S.C. §§ 601-613 (1994) (CDA), and that the district court

therefore was without subject matter jurisdiction.

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Appendix A

Rejecting J&E’s argument, the district court held that it

had jurisdiction and ordered J&E to return the transmissions to

the government. See United States v. J&E Salvage Co., No.

92-162-CIV-4-H (E.D.N.C. Aug. 19, 1994) (J&E I), rev'd, 55

F.3d 985 (4th Cir. 1995). J&E complied with the court’s order

and returned the transmissions on September 9, 1994. However,

J&E appealed the district court’s decision to the United States

Court of Appeals for the Fourth Circuit. On June 14, 1995, the

Fourth Circuit reversed the district court on the jurisdictional

issue and remanded with instructions to grant J&E’s motion to

dismiss. See United States v. J&E Salvage Co., 55 F.3d 985,

990 (4th Cir. 1995) (J&E IN).

On August 3, 1995, J&E sent a letter to G. Norman Acker,

III, an Assistant United States Attorney for the Eastern District

of North Carolina, requesting that the government return the

transmissions in light of the Fourth Circuit’s decision. Mr. Acker

referred J&E’s letter to counsel for DRMO. Thereafter, on

September 5, 1995, in a document titled “FINDING OF FACT

AND FINAL DECISION,” Dan Hurston, DRMO’s contracting

officer, denied J&E’s request for return of the helicopter

transmissions. In so doing, Mr. Hurston stated that “legal title

of the CH-46 transmissions did not transfer to JRE Salvage as

a result of the sale of the shipping and storage containers.”

Subsequently, J&E filed suit in the Court of Federal Claims

seeking compensation for the transmissions on the ground that

DRMO’s refusal to return them amounted to a Fifth Amendment

taking. The government moved to dismiss the complaint for

failure to state a claim upon which relief could be granted. The

trial court agreed and held, for various reasons, that J&E had

failed to state a Fifth Amendment taking claim. See J&E III, 36

Fed. Cl. at 194-96. However, instead of granting the

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Appendix A

government’s motion to dismiss, the court allowed J&E to

amend its complaint to allege a breach of contract. See id.

Eventually, the government moved to dismiss the breach of

contract claim for lack of subject matter jurisdiction. In J&E

IV, the court granted the government’s motion on the ground

that J&E had failed to submit a valid and certified claim to the

contracting officer as required by the CDA. See 37 Fed. Cl. at

260-63. In the alternative, the court held that even if it had

jurisdiction over the breach of contract claim, J&E would lose

on the merits. See id. at 263-66.

Il.

Whether a motion to dismiss for lack of jurisdiction has

been properly granted is a question of law which we review de

novo. See Gould, Inc. v. United States, 67 F.3d 925, 928 (Fed.

Cir. 1995). Similarly, whether a complaint has been properly

dismissed for failure to state a claim upon which relief may be

granted is also a question of law which we review de novo. See

Dehne v. United States, 970 F.2d 890, 892 (Fed. Cir. 1992).

A.

On appeal, J&E argues that the Court of Federal Claims

erred in concluding that it had failed to state a valid claim for a

Fifth Amendment taking. The court held that J&E could not

proceed with its taking claim because: (1) contractually-based

property rights generally do not give rise to taking claims; (2)

in the Cherry Point auction, the government was acting in its

proprietary capacity rather than in its sovereign capacity; and

(3) the purchase contract had not been fully performed and

therefore ownership of the transmissions had not vested in J&E.

We agree that J&E failed to state a claim for a Fifth Amendment

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Appendix A

taking, but we reach that result based upon our conclusion that

J&E never acquired a compensable property interest in the

helicopter traasmissions because the transmissions were never

part of the subject matter of the contract.

“{A] complaint should not be dismissed for failure to state

a claim unless it appears beyond doubt that plaintiff can prove

no set of facts in support of his claim which would entitle him

to relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

Therefore, when a plaintiff is unable to assert a set of facts

Supporting the claim, the motion to dismiss should be granted.

See Chang v. United States, 859 F.2d 893, 894 (Fed. Cir. 1988).

In ruling on a motion to dismiss, the court must “assume all

factual allegations to be true and to draw all reasonable inferences

in plaintiff’s favor.” Henke v. United States, 60 F.3d 795, 797

(Fed. Cir. 1995).

In order to state a valid claim for a Fifth Amendment taking,

J&E must establish a compensable property interest. See Skip

Kirchdorfer, Inc. v. United States, 6 F.3d 1573, 1580 (Fed. Cir.

1993). Here, J&E claims that it acquired a compensable property

interest when title to the transmissions passed to it under the

sales contract. We must therefore look to the contract of sale

and determine whether J&E acquired any property interest in

the transmissions as a result of its contract with DRMO.

Contract interpretation is a question of law which we review

de novo. See C. Sanchez & Son, Inc. v. United States, 6 F.3d

1539, 1544 (Fed. Cir. 1993). Where contract provisions are

clear and unambiguous, they must be given their plain and

ordinary meaning. See Alaska Lumber & Pulp Co., Inc. vy.

Madigan, 2 F.3d 389, 392 (Fed. Cir. 1993). As noted above,

the Invitation for Bids described the items for sale as “Shipping

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Appendix A

& Storage Container: 2 EA” The Notice of Award also described

the items in the same manner. These descriptions clearly and

unambiguously referred only to the containers and not to their

contents. There is no indication that either party intended to

buy or sell anything other than the containers themselves. We

agree with the Court of Federal Claims that “[t]he plain

unambiguous meaning of the contract of sale entered into

between plaintiffs and the Government grants plaintiffs a right

to the shipping and storage containers, nothing more.” J&E IV,

37 Fed. Cl. at 264.

J&E, however, argues that it acquired title to whatever was

physically located in lot numbers 42 through 47. In making

that argument, it assigns importance to the fact that DRMO

stated in the “GENERAL SALE TERMS AND CONDITIONS”

part of the contract, under the heading “CONDITION AND

LOCATION OF PROPERTY,” that it made “no warranty,

express or implied, as to the quantity, kind, character, quality,

weight, size, or description of any of the property.” We do not

believe that the government’s warranty disclaimer helps J&E,

however. The disclaimer simply precluded the purchaser from

alleging a breach of contract if the goods failed to accurately

match their description. This provision did not preclude the

government from recovering possession of merchandise

inadvertently contained within the goods actually sold.

J&E further argues that the container’s contents were made

part of the contract as a result of the operation of 40 U.S.C.

§ 484(d) in conjunction with the procedural requirements set

forth in the Defense Reutilization and Marketing Manual (the

DRMO Manual).' Section 484(d) provides that:

1. The DRMO Manual sets out Department of Defense policies and

procedures for the reutilization and marketing of DOD property.

——————————————EEE

ee

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Appendix A

A deed, bill of sale, lease, or other instrument

executed by or on behalf of any executive agency

purporting to transfer title or any other interest in

surplus property under this subchapter shall be

conclusive evidence of compliance with the

provisions of this subchapter insofar as concerns title

or other interest of any bona fide grantee or

transferree for value and without notice of lack of

such compliance.

40 U.S.C. § 484(d) (1994). The DRMO Manual requires that

all sales solicitations include “an accurate, complete description

of the property being offered for sale.” J&E therefore reasons

that, pursuant to § 484(d), the court must conclusively presume

that the government complied with the DRMO Manual by

accurately describing the lots as including the helicopter

transmissions, regardless of the fact that the government never

actually described the lots in such a manner. We disagree.

Section 484(d) prevents the government from challenging

the sale of surplus goods based on a claim of lack of authority

or mistake. See United States v. Jones, 176 F.2d 278, 288 (9th

Cir. 1949) (discussing section 25 of the War Surplus Property

Act of 1944 (WSPA) which was the predecessor of 40 U.S.C.

§ 484(d)).? In United States v. Jones, the government claimed

2. The War Surplus Property Act of 1944 § 25,50 U.S.C. § 1634 (1946)

(repealed 1949) was the predecessor of 40 U.S.C. § 484(d). Section 1634

stated:

A deed, bill of sale, lease, or other instrument executed by or

on behalf of any Government agency purporting to transfer

title or any other interest in property under this Act. . . shall be

conclusive evidence of compliance with the provisions of this

(Cont'd)

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Appendix A

that certain intra-departmental procedures were not properly

followed in offering universal gear joints for sale. There was

no question that the government had contracted to sell the gear

joints, however. The issue was whether the government could

rescind the contract for unilateral mistake. The court held that

although the facts might be sufficient to justify rescission, section

25 of the WSPA had made the sale immune against attack based

on lack of authority or mistake. See id. at 288.

Similarly, in Turney v. United States, 115 F. Supp. 457

(Ct. Cl. 1953), the government claimed that it lacked authority

to dispose of certain radar equipment that had been sold as

surplus material. The contract purported to transfer title to all

equipment at a military air depot. The Court of Claims held

that section 25 of the WSPA precluded the government from

challenging the sale of the equipment based on lack of authority.

See id. at 463.

In Jones and Turney, the goods clearly were within the

scope of the sales contracts involved; the only question was

whether the sale could be challenged by the government based

on lack of authority or mistake. In this case, the helicopter

transmissions were never part of the sales contract and thus

§ 484(d) is inapplicable. It is ciear from the plain language of

§ 484(d) that the conclusive presumption regarding title only

applies to the property which the instrument purports to transfer.

Here, the contract documents only purported to transfer an

(Cont'd)

Act ... insofar as title or other interest of any bona fide

purchasers for value, or lessees, as the case may be, is

concerned.

50 U.S.C. App. § 1634 (1946).

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Appendix A

interest in the storage containers. As far as these storage

containers are concerned, § 494(d) protects J&E’s property

interest against government claims of lack of authority or

mistake. However, § 484(d) does not create any presumptions

regarding title to the transmissions because they were not

mentioned either explicitly or implicitly in the contract

documents.

Further, government did comply with DRMO Manual

requirement that it provide an accurate description of the property

being offered for sale. Here, the only items offered for sale

were the storage containers and these were accurately described

in the contract documents. As discussed above, the helicopter

transmissions were never offered for sale.

Finally, in arguing that it acquired title to the helicopter

transmissions despite the fact that the contract documents

referred only to the storage containers. J&E relies upon the

unpublished opinion of the Armed Services Board of Contract

Appeals in Appeal of John T. Gonsalves, ASBCA No. 31874

(Mar. 10, 1986). In Gonsalves, a bidder purchased a number of

drums at a surplus auction for $25. Several of the drums were

later found to contain infrared missile heads. The bid documents

simply described the drums as: “Containers, Shipping: Drums,

various sizes.” The missile heads which were found in the drums

had a fair market value of $1,042.65. The board found that at

the time of the auction, Mr. Gonsalves realized that some of the

drums contained items inside and bid accordingly. The board

also found that the Navy knew that the missile heads were within

the drums and concluded that the contract could not be set aside

to correct a unilateral mistake. In a one paragraph analysis, the

board stated that:

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Appendix A

Doubtless the Navy knew the missile heads and

parts were within the drums, whether or not the Navy

conveyed this information to the DPDS [Defense

Property Disposal Service]. Repeatedly respondent

requests that we strictly construe the provisions of

their surplus sales contracts. Respondent cannot now

ask us to set aside a final sale to correct a mistake it

made.

Id. at 2. We do not find this reasoning persuasive. In its brief

Opinion in Gonsalves, the board failed to analyze the

fundamental question of whether the missile heads were within

the scope of the contract. We therefore decline to adopt the

board’s reasoning in the case.

For these reasons, we conclude that the helicopter

transmissions were not within the scope of the sales contract.

Accordingly, J&E never acquired a property interest in the

transmissions, and therefore failed in the Court of Federal Claims

to state a claim for a Fifth Amendment taking.

B.

J&E next argues that the court erred in holding that it lacked

jurisdiction to hear its breach of contract claim. The Court of

Federal Claims is a court of limited jurisdiction. See James M.

Ellett Constr. Co., Inc. v. United States, 93 F.3d 1537, 1541

(Fed. Cir. 1996). The CDA allows the Court of Federal Claims

to entertain claims arising out of any express or implied contract

for the procurement of property. See 41 U.S.C. § 602(a)(1). In

order for the court to have jurisdiction under the CDA, a

government contractor must present a valid claim to the

contracting officer and the contracting officer must issue a final

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Appendix A

decision on the claim.’ See 5 U.S.C. § 605(a), (b) (1994): James

M. Ellett, 93 F.3d at 1541-42. The CDA requires that “[a]ll

claims by a contractor against the government relating to a

contract shall be in writing and shall be submitted to the

contracting officer for a decision.” 41 U.S.C. § 605(a). However,

the CDA does not define what constitutes a claim. In order to

determine whether a particular demand constitutes a claim, the

court must examine the pertinent Federal Acquisition Regulation

(FAR), the language of the contract at issue, and the relevant

facts. See Reflectone, Inc. v. Dalton, 60 F.3d 1572, 1575 (Fed.

Cir. 1995). FAR 33.201 defines a claim as “a written demand

Or written assertion by one of the contracting parties seeking,

as a matter of right, the payment of money in a sum certain, the

adjustment or interpretation of contract terms, or other relief

arising under or relating to the contract.” 48 C.FR. § 33.201

(1997).

On August 3, 1995, J&E’s attorney sent a letter to Assistant

United States Attorney G. Norman Acker, III, demanding return

of the helicopter transmissions. The trial court concluded that

the letter did not constitute a valid claim because it failed to set

forth a contractual basis that would entitle J&E to relief, failed

to request a final decision, and was not submitted to the

contracting officer. We agree with the Court of Federal Claims

that J&E’s letter did not constitute a valid claim under the CDA.

We have strictly construed the CDA jurisdictional

requirements. See, e.g., Paul E. Lehman, Inc. v. United States,

3. If the contracting officer fails to issue a decision within the required

period, the claim is deemed denied, and the contractor may then file an appeal

with the appropriate board of contract appeals or a suit in the Court of Federal

Claims. See 41 U.S.C. § 605(c)(5) (1994); James M. Ellett, 93 F.3d at 1542

n.3,

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Appendix A

673 F.2d 352, 355 (Ct. Cl. 1982) (no jurisdiction to hear a

claim that was not certified, even if contracting officer has

already fully considered the claim on its merits because the

contracting officer had no authority to waive the certification

requirement that Congress imposed). Similarly, we must strictly

construe the requirement that a CDA claim be submitted to the

contracting officer. We have held that a contractor may Satisfy

this requirement if: (1) the contractor sends a proper claim to its

primary contact; (2) the claim contains a request for a final

decision of the contracting officer; (3) the contractor has a

reasonable expectation that such a request will be honored; and

(4) the primary contact in fact timely delivers the claim to the

contracting officer. See Neal & Co., Inc. v. United States, 945

F.2d 385,388-89 (Fed. Cir. 1991). In this case, J&E’s letter

simply stated “please treat this letter as a demand for the United

States to return the helicopter transmissions which it took from

J&E Salvage on September 9, 1994 pursuant to the Order of

Judge Howard dated August18, 1994.” The letter was not sent

to a contracting officer, and it did not request a final decision

from the contracting officer. Nor was there any suggestion in

the letter that J&E intended to invoke the CDA disputes process.

Furthermore, J&E in fact admits that in sending the letter to

Mr. Acker, it had no intent to submit a claim pursuant to the

CDA. We therefore conclude that J&E did not submit a valid

CDA claim. Nonetheless, J&E argues that it was actually the

government that submitted a valid claim when Mr. Acker

forwarded the August 3 letter to the DRMO. We disagree.

The Court of Federal Claims concluded that the government

had not submitted a claim. The court reasoned that the

4. Pursuant to the Federal Courts Administration Act of 1992, proper

certification of a CDA claim is no longer a jurisdictional requirement. See 41

U.S.C. § 605(d); James M. Ellett, 93 F.3d at 1545.

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Ap « dix A

Department of Justice simply forwarded J&E’s letter to the

appropriate agency. In addition, the court observed that the

government “neither demanded any form of relief nor requested

any modification of the contract.” J&E IV, 37 Fed. Cl. at 262.

Further, noting that the FAR requires that a claim be a written

demand or assertion, the court stated that there was no suggestion

that the government “made any sort of written demand or

assertion to the DRMO.” /d.

J&E argues that we should infer that the government made

a claim based on the totality of the circumstances and the fact

that the contracting officer issued a final decision. According to

J&E, the most logical inference is that either the Department of

Justice or DRMO demanded an interpretation of the contract

terms So as to give some color of legitimacy to its possession of

the transmissions. J&E further argues that we should not read

FAR 33.201 so as to place a requirement that claims by the

government be in writing, given the fact that 41 U.S.C. § 605

clearly omits such a requirement.

The CDA offers minimal guidance regarding what

constitutes a valid government claim, Stating simply that “{aJll

claims by the government against a contractor shall be the subject

of a decision by the contracting officer.” 41 U.S.C. § 605(a).

Government claims include those for reimbursement of costs

of reprocurement, recovery of excess costs due to defects in

performance, recovery of overpayments, recovery of payments

made on undelivered goods, setoff against costs later determined

to be unallowable, and claims for failure to comply with cost

accounting standards. See John Cibinic, Jr. & Ralph C. Nash,

Jr., Administration of Government Contracts 1278 (3d ed. 1995)

(collecting cases).

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Appendix A

We do not read the FAR as requiring that a government

claim be documented in a writing separate from the contracting

officer's final decision. Therefore, the lack of a written document

demand does not defeat J&E’s argument. However, we do not

find that the circumstances in this case suggest that the

government was asserting a claim. At the time J&E submitted

its August 3 letter, the government had possession of the

helicopter transmissions under a claim of ownership. There was

no reason for the government to submit a claim under these

circumstances because it had obtained everything to which it

believed it was entitled. The September 13, 1995 letter from

Mr. Acker to J&E’s counsel states simply that “I referred your

August 3, 1995 letter to the counsel for the DRMO for their

response.” There is no indication in this letter that the

government submitted a claim. Rather, the letter suggests that

Mr. Acker was simply forwarding J&E’s letter to the appropriate

government agency. The most logical inference is that the

contracting officer rendered a decision based on what he

believed to be a valid CDA claim submitted by J&E. In his

final decision, the contracting officer stated that he was “issuing

the final decision of the sales contracting officer regarding your

(J&E’s) demand arising under the sales contract.” The document

also stated that the final decision was “in reference to your

August 3, 1995 letter.” It therefore seems clear that this letter

was written solely in response to J&E’s August 3 letter, and not

in response to any claim submitted by the government.

It is well established that a contracting officer has no

authority to waive a requirement imposed by Congress. See,

e.g., Paul E. Lehman, 673 F.2d at 356. Therefore, even if the

contracting officer rendered what he believed to be a final

decision, such a decision would have no legal significance and

could not establish jurisdiction in the Court of Federal Claims.

=

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Appendix A

See id.; Skelly & Loy v, United States, 685 F.2d 414, 419 (Ct.

Cl. 1982).

For the foregoing reasons, we conclude that J&E’s breach

of contract claim was properly dismissed for lack of jurisdiction.

Each party shall bear its own costs.

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APPENDIX B — JUDGMENT OF THE UNITED STATES

COURT OF FEDERAL CLAIMS FILED FEBRUARY 11, 1997

IN THE UNITED STATES COURT

OF FEDERAL CLAIMS

No. 96-1 C

J & E SALVAGE CO., ET AL..,

v.

THE UNITED STATES

JUDGMENT

Pursuant to the court’s opinion, filed February 7, 1997,

granting defendant’s motion to dismiss.

IT IS ORDERED AND ADJUDGED this date, pursuant

to Rule 58, that the complaint is dismissed without prejudice

for lack of subject matter jurisdiction. No costs.

David A. Lampen

Clerk of Court

By: s/ Amelia C. Simmons

Deputy Clerk

February 11, 1997

NOTE: As to appeal, 60 days from this date, see RCFC 72, re

number of copies and listing of all plaintiffs. Filing fee is

$105.00.

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APPENDIX C — ORDER OF THE UNITED STATES

COURT OF FEDERAL CLAIMS FILED JULY 18, 1996

IN THE UNITED STATES COURT

OF FEDERAL CLAIMS

No. 96-1C

(Filed July 18, 1996)

J & ESALVAGE CO., et al.,

Plaintiffs,

V.

THE UNITED STATES,

Defendant.

Takings; claim for contents of containers bought at government

auction.

ORDER

MILLER, Judge.

This case is before the court on defendant’s motion to

dismiss for failure to state a claim upon which relief may be granted

pursuant to RCFC 12(b)(4). The issue to be decided is whether

defendant’s refusal to return to plaintiffs certain property placed

in containers purchased by plaintiffs constitutes a compensable

taking under the just compensation clause of the Fifth Amendment.

Argument is deemed unnecessary.

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Appendix C

FACTS

The following facts derive from the complaint and are

undisputed, unless otherwise noted. On May 19, 1992, at the

bequest of the United States Department of Defense, the Defense

Reutilization and Marketing Office (the “DRMO”) held an auction

at Cherry Point, North Carolina, to sell certain surplus materials.

John and Teresa Darlington, general partners at J & E Salvage

Co. (“plaintiffs”), purchased several “lots” of surplus

merchandise at this auction. At the time of the sale, the purchased

goods appeared to solely large containers used for shipping and

storing helicopter transmissions. Because the containers were

bolted shut at the time of the sale, plaintiffs were unable to ascertain

what, if anything, was inside the containers.

After plaintiffs paid for the merchandise, government

personnel loaded the goods onto plaintiffs’ truck for

transportation to their company in Onslow County, NC. At some

point after returning to their place of business, plaintiffs opened

the containers and discovered that four of them held surplus

helicopter transmissions valued at $289,660.00 each.

Plaintiffs notified the DRMO of their discovery so as to avoid

any accusations of having acquired the transmissions through

illegal means. The DRMO responded by informing plaintiffs that

the transmissions were still government property and should be

returned immediately. Plaintiffs refused to acquiesce.

Subsequently, as opposed to utilizing the Contract Disputes Acct,

41 U.S.C. §§ 601-613 (1994) (the “CDA”), the DRMO filed suit

in the United States District Court for the Eastern District of

North Carolina on November 12, 1992, seeking a return of the

transmissions.

en

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Appendix C

In their response to the lawsuit, plaintiffs claimed that the

CDA governed the matter and thus the federal district court was

without subject matter jurisdiciton to hear the case. The district

court held that it has requisite jurisdiciton and that the helicopter

transmissions were government property and required plaintiffs

to relinquish possession of the transmissions. Moreover, the

district court declined to dismiss the Government’s claim for

compensatory and punitive damages. United States v. J & E

Salvage Co., No. 92-162-CIV-4-H (E.D.N.C. Aug. 19, 1994)

(unpubl.).

Plaintiffs, fearing the district court’s contempt power, obeyed

the order and turned the transmissions over to the DRMO on

September 9, 1994. Furthermore, to avoid the potential financial

ruin of an adverse damages award, plaintiffs entered into a pre-

appeal stipulation agreement with the DRMO in which they agreed

to pay liquidated damages if the appeals court held that plaintiffs

had wrongfully converted the helicopter transmissions. In return

the DRMO agreed that if judgment were entered for plaintiffs, it

would return the transmissions. Plaintiffs subsequently appealed

the district court’s judgment to the United States Court of Appeals

for the Fourth Circuit on November 9, 1994. On June 14, 1995,

the Fourth Circuit reversed and remanded with instructions to

grant plaintiffs’ motion to dismiss for lack of subject matter

jurisdiciton. United States v. J& E Salvage Co., 55 F.3d 985

(4th Cir. 1995).

Subsequently, on August 13, 1995, plaintiffs’ counsel sent a

letter to the United States Attorney for the Eastern District of

North Carolina requesting that the DRMO return the helicopter

transmissions to plaintiff. In response the DRMO sent plaintiffs

a document written by Dan Hurston, who plaintiffs claim was not

the cognizant contracting officer, entitled “Finding of Fact and

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Appendix C

Final Decision.” This document indicated that the DRMO would

not return the transmissions to plaintiffs.

On January 2, 1996, plaintiffs filed a complaint in the United

States Court of Federal Claims seeking an award of damages in

the amount of $1,158,640.00, plus interest and attorneys’ fees.

In lieu of an answer, defendant moved to dismiss the complaint

for failure to state a claim upon which relief may be granted.

Defendant asserted that the dispute in this case is not a Fifth

Amendment takings claim, but is rather of a contractual nature.

Plaintiffs rejoined that full ownership of the transmissions vested

after the auction; thus, the DRMO’s refusal to return the

transmissions constitutes a taking in violation of the Fifth

Amendment.'

DISCUSSION

“[A] complaint should not be dismissed for failure to state a

claim unless it appears beyond doubt that the plaintiff can prove

no set of facts in support of his claim which would entitle him to

relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957). Accordingly,

if plaintiffs are unable to assert a set of facts supporting the claim,

the motion to dismiss should be granted. Chang v. United States,

859 F.2d 893, 894 (Fed. Cir. 1988). The severity of such a motion

requires that the court “assume all factual allegations to be true

and to draw all reasonable inferences in plaintiffs favor.” Henke

v. United States, 60 F.3d 795, 797 (Fed. Cir. 1995). To surmount

defendant’s motion to dismiss, plaintiffs must allege a set of facts

demonstrating a sufficient property interest in the helicopter

1. Plaintiffs have requested leave to amend their complaint, rather than

suffer a dismissal, should the court rule that plaintiffs have failed to state aclaim

for a taking.

niin idea

2la

Appendix C

transmissions to render the Government’s refusal to return the

transmissions a taking in violation of the Fifth Amendment.

Plaintiffs contend that the parties entered into an “as-is”

contract for the auction sale of certain surplus goods. Plaintiffs

argue that the contract was fully performed upon the completion

of the sale and they had obtained title and ownership of the

helicopter transmissions. As a consequence plaintiffs assert that

the Government’s failure to return the transmissions constitutes

a taking in violation of the Fifth Amendment. Defendant, however,

suggests that plaintiffs’ claim should properly be characterized

as a breach of contract, not a taking.

To state a valid claim for a taking under the Fifth

Amendment’s just compensation clause, plaintiffs must establish

a compensable property interest. Lucas v. South Carolina

Coastal Council, 505 U.S. 1003, 1027 (1992) (regulatory taking);

Kaiser Aetna v. United States, 444 U.S. 164, 179-80 (1979) (taking

through physical invasion). If a claimant fails to establish a

compensable property interest, no further analysis is necessary.

In this case plaintiffs allege a compensable property interest

that is derived through their sales contract with the DRMO.

Plaintiffs’ reliance on an alleged contractually-based property right

poses a significant hurdle that must be overcome. “(T]he concept

of taking as a compensable claim theory has limited application

to the relative rights of party litigants when those rights have

been voluntarily created by contract. In such instances,

interference with such contractual rights generally gives rise to a

breach claim not a taking claim.” Baggett Transp. Co. v. United

States, 969 F.2d 1028, 1034 (Fed. Cir. 1992) (quoting Sun Oil

Co. v. United States, 215 Ct. Cl. 716, 770, 572 F.2d 786, 818

(1978) (citation omitted)); see also J.J. Henry Co. v. United States

22a

Appendix C

188 Ct. Cl. 39, 46, 411 F.2d 1246, 1249 (1969) (“The amendment

has limited application to the relative rights in property of parties

litigant which have been voluntarily created by contract.”)

Not every deprivation of use or control constitutes a taking.

Sun Oil Co., 215 Ct. Cl. at 769, 572 F.2d at 818. Furthermore,

“(w]hen the government ‘takes’ property, it exercises its rights

as sovereign to acquire property from the rightful owner for the

public good.” DSI Corp. v. United States, 228 Ct. Cl. 299, 302,

655 F.2d 1072, 1074 (1981). In the case at bar, plaintiffs do not

allege or argue that the Government intended to take the

transmissions for the public good. See J.J. Henry Co., 188 Ct.

Cl. at 46, 411 F.2d at 1249. Rather, nothing in the complaint, or

that reasonably could be inferred from it, indicates that the

Government was acting other than in its proprietary capacity to

dispose of certain surplus materials among which were the

helicopter transmissions in question.2 When the Government

“comes down from its position of sovereignty, and enters the

domain of commerce, it submits itself to the same laws that govern

individuals there.” Sun Oil Co., 215 Ct. Cl. at 770, 572 F.2d at

818, (quoting Cooke v. United States), 91 U.S. 389, 398 (1875)).

2. Plaintiffs have suggested that the auction to dispose of the surplus

property was a special situation wherein the Government acted in its soverei gn

capacity to simply dispose of large amounts of unneeded property as promptly

as possible. In such situations, plaintiffs contend, each participant assumes a

certain amount of risk with regard to the transaction. In support of this argument,

plaintiffs rely on Appeal of John T. Gonsalves, ASBCA No. 31874 (1986), an

unpublished decision wherein the Armed Services Board of Contract Appeals

refused to require a bidder to return 43 seeker heads for sidewinder missiles

that the Navy had inadvertently left in containers purchased at a surplus sale.

While Gonsalves may be persuasive with respect to the scope of the sales

contract, that the ASBCA entertained the case certainly militates against plaintiffs’

argument that the action is a taking.

ipermeiniemiaiieieiiail

23a

Appendix C

As a consequence, a takings claim cannot be based on the

Government’s acting in its proprietary capacity. Alaska Airlines,

Inc. v. Johnson, 8 F.3d 791, 798 (Fed. Cir. 1993).

Moreover, the parties in this case dispute the terms of the

contract of sale. The Government clearly did not utilize its position

as sovereign to appropriate private property from its rightful

owner. Instead, each party is asserting a claim of right to the

helicopter transmissions in question, so that neither party has

clear title to the property. The dispute devolves to whether the

Government breached the terms of its contract of sale with

plaintiffs by failing to provide plaintiffs with all of the property to

which plaintiffs believe they are entitled. Ina similar situation, the

United States Court of Claims noted that: “In essence, th[e]...

case involved a contest between two parties over conflicting

claims of ownership. On such facts, it is axiomatic that there is

not taking where, pursuant to a court order, the government is in

possession of property to which it asserts a claim of rightful

ownership.” DS/ Corp., 228 Ct. Cl. at 303, 655 F.2d at 1074.

Plaintiffs also assert that upon paying for the surplus goods,

the contract was fully performed and that they had acquired clear

title to the helicopter transmissions. Therefore, according to

plaintiffs, this action cannot be of a contractual nature and, in

fact, properly is characterized as a taking. However, the

Government’s alleged failure to provide plaintiffs with all of the

property to which plaintiffs believe they are entitled indicates that

the contract cannot have been fully performed. Because the

contract has not been fully performed, ownership has not vested

with plaintiffs. Plaintiffs therefore have failed to allege a set of

facts supporting a takings claim under the Fifth Amendment.

24a

Appendix C

In evaluating plaintiffs’ request to amend their complaint,

the court must consider “undue delay, bad faith or dilatory motive

on the part of the movant, repeated failure to cure deficiencies

by amendments previously allowed, undue prejudice to the

opposing party by virtue of allowance of the amendment, [or]

futility of amendment. . . .” Forman y. Davis, 371 U.S. 178, 182

(1962). No factors are present that would suggest that the court

should not grant plaintiffs’ request for leave to amend. Cf. Mitsui

Foods, Inc. v. United States, 867 F.2d 1401, 1404 (Fed. Cir.

1989) (denying plaintiff leave to amend on ground of futility).

Rather than dismissing plaintiffs’ claim pursuant to RCFC

12(b)(4), the court grants plaintiffs leave to amend their complaint

to allege a breach of contract claim.>

CONCLUSION

Accordingly, based on the foregoing,

IT IS ORDERED, as follows:

1. Defendant’s motion to dismiss is denied.

2. By August 1, 1996, plaintiffs may amend their complaint

to allege a breach of contract claim, with service by overnight

express mail.

3. Inits reply defendant noted that it opposes plaintiffs’ request to amend

their complaint and that, if such leave is granted, defendant likely would file a

motion pursuant RCFC 12(b)(1) to dismiss for lack of subject matter jurisdiction.

In support of its motion to dismiss, defendant included several documents as an

appendix to its reply brief. These documents would controvert plaintiffs’ version

of the terms of sale and be appropniate for consideration on a motion for summary

judgment. The court, however, cannot consider material beyond the pleadings

when evaluating a motion to dismiss under RCFC 12(b)(4).

25a

Appendix C

3. Defendant shall respond to plaintiffs’ amended complaint

by August 11, 1996, with service by overnight express mail.

s/ Christine O.C. Miller

Christine Odell Cook Miller

Judge

26a

APPENDIX D — ORDER OF THE UNITED STATES COURT

OF FEDERAL CLAIMS FILED SEPTEMBER 20, 1996

IN THE UNITED STATES COURT

OF FEDERAL CLAIMS

No. 96-1C

(Filed Sept. 20, 1996)

J & E SALVAGE CO., et al.,

Plaintiffs,

v.

THE UNITED STATES,

Defendant.

ORDER

This case is before the court on plaintiffs’ motion for

reconsideration of an order entered on July 18, 1996, denying

defendant’s motion to dismiss. Plaintiffs ask the court 1) to

reconsider the finding that plaintiffs had failed to state a claim

in support of a taking under the just compensation clause of the

Fifth Amendment, and 2) to allow plaintiffs to amend their

complaint to allege a breach of contract claim.

A motion for reconsideration is addressed to the court’s

discretion. Yuba Natural Resources, Inc. v. United States, 904

F.2d 1577, 1583 (Fed. Cir. 1990). This showing, under RCFC

59, “must be based upon manifest error of law, or mistake of

act, and is not intended to give an unhappy litigant an additional

ws ee

27a

Appendix D

chance to sway the court.” Circle K Corp. v. United States, 23

Cl. Ct. 659, 664-65 (1991) (citation Omitted); see Cohen vy.

Austin, 869 F. Supp. 320, 321, (E.D. Pa. 1994) (discussing

errors in law and fact). To gain relief plaintiffs must demonstrate:

1) that there has been an intervening change in the controlling

law; 2) that evidence previously unavailable has become

available; or 3) that the motion is necessary to prevent manifest

injustice. Bishop v. United States, 26 Cl. Ct. 281, 286 (1992);

Aerolease Long Beach y. United States, 31 Fed. Cl. 342, 376

(quoting Bishop, 26 Cl. Ct. at 286) aff'd, 39 F.3d 1198 (Fed.

Cir. 1994) (Table).

Plaintiffs first contend that, in an action involving surplus

sales, the Government is acting in its sovereign, as opposed to

its proprietary, capacity. In support of this contention, plaintiffs

rely on United States v. Jones, 176 F.2d 278 (9th Cir. 1949),

In making a choice of law determination, Jones states: “This is

a case in which the Government, in its sovereign capacity, deals

with property which it owns.” Jd. at 281. The meaning of the

term “sovereign capacity” only becomes clear if one considers

the quotation on which the Jones court relied:

Every acquisition, holding, or disposition of

property by the Federal Government depends upon

proper exercise of a constitutional grant of power.

...The validity and construction of contracts

through which the United States is exercising

constitutional functions, their consequences on the

rights and obligation of the parties, the titles or liens

which the create or permit, all present questions of

federal law. ...

28a

Appendix D

United States v. County of Allegheny, 322 U.S. 174, 182. 183

(1944) (quoted in Jones, 176 F.2d at 281). The Ninth Circuit

in Jones sought to illustrate the fundamental point that, in order

for the Government to act, a grant of power from the

Constitution to the sovereign must be present. Allegheny, 322

U.S. at 182. This does not mean that every act by the

Government is a sovereign act.

As plaintiffs note, the Government’s power to contract is a

characteristic of its sovereignty. See United states v. Hodson.

77 U.S. 395, 407 (1870): United States v. Tingey, 30 U.S. 115,

128 (1831). However, not every contract that the Government

enters into is one that involves a use of sovereign authority. To

determine if the Goverament has acted in a sOvereign or

proprietary capacity, one must examine “the nature of the

government's action and the relationship of the parties involved.”

Juda v. United States, 6 Cl. Ct. 441, 454 (1984). In this case

the Government has “come[] down from its position of

sovereignty, and enter[ed] the domain of commerce. ... Cooke

v. United States, 91 U.S. 389, 398 (1875).

To buttress their takings claims, plaintiffs rely primarily on

Turney v. United States, 126 Ct. Cl. 202. 115 F. Supp. 457

(1953), although plaintiffs previously had not brought this case

to the court’s attention. In Turney the Government inadvertently

included certain military radars in a sale of surplus equipment

held in the Philippines. Upon realization of the mistake, the

Government exerted direct and Significant influence on the

Philippine government to place an embargo on the surplus

material purchased by plaintiff that would permit the United

States to repossess the radars. The United States Court of Claims

held that such behavior constituted a taking. /d. at 214, 115 F

Supp. at 463.

29a

Appendix D

Turney is clearly distinguishable from the instant case. The

Federal Circuit has noted that the Turney rationale for finding a

taking was that the Government had exerted “substantial, direct

involvement in view of then-pervasive United States military

and economic presence.” Erosion Victims of Lake Superior

Regulation v. United States, 833 F.2d 297, 300 (Fed. Cir. 1987).

Such influence is not present in the case at bar. The Government

did not exert its sovereign power to repossess the helicopter

transmissions at issue. Rather, the Government was operating

under a claim of right provided by what at that point was a

valid court order. That the issuing court was later found to lack

subject matter jurisdiction does not alter the fact that when the

Government took possession of the transmissions. it did so under

a claim of right. As the United States Court of Claims has

previously noted: “[I]t is axiomatic that there is no taking where,

pursuant to a court order, the government is in possession of

property to which it asserts a claim of rightful ownership.” DS]

Corp. v. United States, 228 Ct. Cl. 299, 303, 655 F.2d 1072,

1074 (1981). Accordingly, based on the foregoing,

IT IS ORDERED, as follows:

Plaintiffs’ motion for reconsideration of the order entered

on July 18, 1996, is denied. See Order entered on August 9,

1996.

s/ Christine O.C. Miller

Christine Odell Cook Miller

Judge

30a

APPENDIX E — OPINION OF THE UNITED STATES

COURT OF APPEALS FOR THE FOURTH CIRCUIT

DECIDED JUNE 14, 1995

PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNITED STATES OF AMERICA,

Plaintiff-Appellee,

V.

J & ESALVAGE COMPANY; JOHN DARLINGTON; TERESA

N. DARLINGTON, Executrix of the Estate of Edward Darlington,

Defendants-Appellants.

Appeal from the United States District Court

for the Eastern District of North Carolina, at New Bern.

Malcolm J. Howard, District Judge.

(CA-92-162)

Argued: May 1, 1995

Decided: June 14, 1995

Before HALL, WILKINSON, and HAMILTON, Circuit Judges.

o* * *

3la

Appendix E

OPINION

WILKINSON, Circuit Judge:

The issue in this appeal is whether the district court had

subject matter jurisdiction over claims brought by the United States

against a government contractor regarding the ownership of

property purchased at a military surplus auction. Relying on the

Contract Disputes Act (“CDA”), 41 U.S.C. § 601 et seq., the

district court determined that it lacked jurisdiction over the

government’s contract claims, yet it allowed additional claims

styled as tort actions for “conversion” and “replevin” to proceed.

We believe that this entire matter was essentially a contract dispute

within the ambit of the Contract Disputes Act, and that the district

court lacked jurisdiction to decide it.

‘:

On May 19, 1992, appellant J&E Salvage Co. (“J&E”)

purchased seven lots of shipping and storage containers at

Defense Reutilization and Marketing Officer (“DRMO”) surplus

auction in Cherry Point, North Carolina. J&E generally bought

such containers at government auctions for the purpose of

converting them into vats of selling them as scrap metal. This

sale was conducted under the terms and conditions of a DRMO

“Sale by Reference” pamphlet issued to all potential buyers at

the surplus auction. A bill of sale, titled as a “Notice of Award,”

was also issued by the DRMO to J&E at the time of purchase.

Unbeknownst to either J&E or the DRMO, the storage bins

purchased at the auction contained four CH-46 helicopter

transmissions. J&E discovered the transmissions roughly two or

three weeks after the sale. John Darlington, one of the partners in

32a

Appendix E

J&E, contacted Alice Martin, the DRMO sales contracting officer,

and notified her about the transmissions. Martin and several other

DRMO officials asked Darlington to return the transmissions,

but he refused, arguing that J&E had lawfully purchased them at

the Cherry Point auction.

The United States then brought this action in federal district

court in the Eastern District of North Carolina to recover the

transmissions. The government alleged several causes of action

including rescission of the contract because of mutual mistake of

fact, conversion, and replevin. In reply, J&E argued that the

district court lacked subject matter jurisdiction over the

government’s case because the matter belonged within the

exclusive province of the administrative scheme established by

the Contract Disputes Act. Acting upon the recommendations of

a magistrate judge, the district court concluded that it had

jurisdiction over the government’s “tort” claims of conversion

and replevin, but not over the contract claim for mutual mistake

of fact. The court then proceeded to reach the merits of the case,

finding that the United States was the true owner of the

transmissions, and granted summary judgment in favor of the

government. J&E now appeals.

II.

A.

Federal jurisdiction over civil actions initiated by the United

States government is provided by 28 U.S.C. § 1345, which states:

Except as otherwise provided by Act of Congress,

the district courts shall have original jurisdiction of

all civil actions, suits or proceedings commenced by

33a

Appendix E

the United States, or by any agency or officer thereof

expressly authorized to sue by Act of Congress.

28 U.S.C. § 1345 (1993). Thus, federal courts have jurisdiction

over any case brought by the United States as a plaintiff unless

Congress has “otherwise provided” for jurisdiction elsewhere.

One area in which Congress has so “otherwise provided” is

the Coniract Disputes Act, 41 U.S.C. § 601 et seq. (1988). The

Contract Disputes Act is a comprehensive statutory scheme for

resolving contractual conflicts between the United States and

government contractors. It applies, inter alia, to actions involving

“any express or implied contract. . . entered into by an executive

agency for ... the disposal of personal property.” 41 U.S.C.

§ 602. Under the CDA, government claims against a contractor

must first be the subject of a decision by the contracting officer,

defined as “any person who ... has the authority to enter into

and administer contracts and make determinations and findings

with respect thereto.” 41 U.S.C. §§ 601(3), 605(a). The decision

by the contracting officer may be appealed to an agency board

of contract appeals or to the United States Court of Federal

Claims. 41 U.S.C. §§ 607(d), 609(c). Further appeals from these

bodies must be filed with the United States Court of Appeals for

the Federal Circuit. 41 U.S.C. § 607(g)(1); see United States v.

Rockwell International Corp., 795 F. Supp. 1131, 1134 (N.D.

Ga. 1992).

The review procedures under the CDA are exclusive of

jurisdiction in any other forum. 41 U.S.C. § 605(b); see also

Management Science America, Inc. v. Pierce, 598 F. Supp. 223,

225 (N.D. Ga. 1984), aff'd, 778 F.2d 792 (11th Cir. 1985). Thus,

federal district courts lack jurisdiction over government claims

against contractors which are subject to the CDA. See S. Rep.

34a

Appendix E

No. 1118, 95th Cong., 2d Sess. 10, reprinted in 978 U.S.C.C.A.N.

5235, 5244 (noting that “U.S. district court jurisdiction is

eliminated from Government contract claims”’).

In order to determine whether the CDA applies, federal courts

generally look to whether the dispute at issue is one of contract.

See Ingersoll-Rand Co. v. United States, 780 F.2d 74, 76 (D.C.

Cir. 1985). The court in Megapulse, Inc. v. Lewis, 672 F.2d 959

(D.C. Cir. 1982), stated that courts should attempt “to make

rational distinctions between actions sounding genuinely in

contract and those based on truly independent legal grounds.”

672 F.2d at 969-70. The Megapulse court further noted that when

examining “competing” jurisdictional bases, the issue is “to

determine if the claim so clearly presents a disguised contract

action that jurisdiction over the matter is properly limited to the

Court of Claims.”' Jd. at 968.

It is well-established therefore that disguised contract actions

may not escape the CDA. See, e.g., Ingersoll-Rand, 780 F.2d at

77; American Science & Engineering, Inc. v. Califano, 571 F.2d

58, 61 (1st Cir. 1978). Neither contractors nor the government

may bring a contract action in federal district court simply by

recasting claims in tort language or as some statutory or regulatory

violation. See Sealtite Corp. v. General Services Admin., 614 F.

Supp. 352, 254 (D. Colo. 1985) (rejecting attempt to “circumvent

the [CDA] by characterizing dispute as an action in replevin”).

1. This mode of analysis was developed in the parallel context of contractor

claims against the government through 28 U.S.C. § 1346, as opposed to the

§ 1345 action in this case. Both situations, however, deal with the identical

question of the applicability of the CDA. Thus, we find that the Megapulse

analysis is equally pertinent in the setting of government claims against conractors.

See S. Rep. No. 1118, reprinted in U.S.C.C.A.N. at 5260 (noting intent of

Congress is to provide “equal rights” under the CDA to both the government

and contractors).

35a

Appendix E

Effective enforcement of the jurisdictional limits of the CDA

mandates that courts recognize contract actions that are dressed

in tort clothing.

B.

This action by the United States is essentially one of contract,

despite the government’s efforts to present it as a tort case. The

crux of the case rests on a specific contract — the bill of sale

between J&E and the DRMO. The merits question presented is

one of contract interpretation, i.e., did the bill of sale and the

accompanying DRMO sales pamphlet allow a transfer of

ownership of the hidden transmissions along with the containers

purchased at the auction. This is a classic “scope of the contract”

issue. See International Engineering Co. v. Richardson, 512

F.2d 573, 578 (D.C. Cir. 1975), cert. denied, 423 U.S. 1048

(1976); see also John Calamari & Joseph M. Perillo, Contracts

§ 3-10 (3d ed. 1987). In order to decide this question, it is

impossible to ignore the terms of the contract documents

surrounding the sale. For example, the DRMO sales pamphlet

specifically states that all property sold at auction is “as is.” On

the other hand, the bill of sale lists the items sold as “containers”

and makes no reference to transmissions. The meaning of these

provisions controls the outcome of this case. Hence, “it is possible

to conceive of this dispute as entirely contained within the terms

of contract.” Jngersoll-Rand 780 F.2d at 78.

Alternatively, the question could be phrased as whether the

sale was void for unilateral or mutual mistake of fact. Again,

however, the source of the rights the government seeks to vindicate

are rooted firmly in contract. See Megapulse, 672 F.2d at 968.

Mistake of fact, the government concedes, is unquestionably a

contract doctrine. See Calamari, Contracts § 9-26.

36a

Appendix E

Every aspect of this case relates to these contract questions.

All the evidence gathered during the discovery process deal with

the documents generated during the sale, the conduct of the

auction, and the authority of the DRMO to enter into sales

contracts. Furthermore, the dispute involves issues of custom

and practice in government auctions. J&E contends, for example,

that it is commonly understood that auction purchases of

“container” include whatever may happen to be in the containers.

This matter therefore calls for background in the field of

government contracting — a subject within the unique expertise

of the Court of Claims. /ngersoll-Rand, 780 F.2d at 78.

Perhaps most telling of all, the briefs of the parties allude

over and over to the contractual issues that govern this dispute.

In addition to arguing at length that either a unilateral or mutual

mistake of fact prevented the formation of a contract, the

government refers repeatedly to questions about party “intent,”

“meaning of minds,” the “binding force of the contract,” and the

“terms of the sale,” and relies heavily on contract cases. Likewise,

the government argues extensively about why these rules of

contract law should apply to government contracts generally and

this case in particular, apparently blind to the contradiction

between its position on the merits and its jurisdictional contention

that this is not a contract case. See Manshul Construction Co. v.

United States, 687 F. Supp. 60, 62 (E.D.N.Y. 1988) (“[P]etitioner,

despite strenuous efforts to avoid doing so, occasionally lapses

into language that reveals the fundamentally contractual origins

of the [case]”).

The district court also acknowledged that this is at heart a

contract case when it noted that the “only real dispute is whether

the United States is the true owner of the transmissions,” and

then proceeded to answer that question by looking to contract

J tele jel Nd acta

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SAD nck tr bee can

CSL OLN OSE. VELEN

37a

Appendix E

law. The court’s opinion granting summary judgment, like the

government’s brief, is replete with references to contract issues

and the contractual documents at the center of this controversy.

In particular, the district court relied on theories of “void versus

voidable” contracts, mistake of fact, and the doctrine of

“unknown contents,” and ultimately held that “no valid contract

was formed to sell the transmissions.”

The district court also rejected the government’s claim for

punitive damages, which is another factor suggesting that the case

was more an action in contract than in tort. Moreover, the principal

remedy sought by the government and granted by the district

court was rescission of the sale and the return of the transmissions.

This was, of course, a contract remedy. See Ingersoll-Rand,

780 F.2d at 79-80 (CDA controls when party is seeking contract

remedy).

The government’s claims of “conversion” and “replevin” are

merely transparent reformulations of the contract dispute. A tort

claim of conversion requires showing some unauthorized act of

control over property belonging to another. See United States v.

Stockton, 788 F.2d 210, 216 (4th Cir.), cert. denied, 479 U.S.

840 (1986). In this case, arguing that J&E “converted” the

transmissions is the same thing as saying that the transmissions

were not covered by the bill of sale. Of course, the mere fact that

a court has to decide some contract issues in the course of

resolving a tort action does not automatically convert the claim

into one sounding in contract if there is some independent basis

for the tort clam. Megapulse, 673 F.2d at 969. See also

Restatement (Second) of Contracts § 355 (1981). Here, however,

there is not independent basis for a tort. The contract between

the parties is the alpha and omega of this dispute. Because the

government’s allegations are no more than cloaked contract

38a

Appendix E

claims, they belong in the Court of Claims under the CDA, and

the district court lacked jurisdiction over them.’

i

Finally, several important considerations counsel against

overly narrow definitions of what qualifies as a “contract action”

for purposes of the CDA. First, allowing the government to attack

contracts of sale with private parties by manufacturing tort claims

undermines the express intent of Congress to reduce and simplify

disputes over the sale of surplus government property. See 40

U.S.C. § 484. The statutory provisions for governing the disposal

of government property indicate, for instance, that bills of sale

are to be conclusive evidence of title, thereby providing some

measure of certainty to private purchases of government material.

40 U.S.C. § 484 (d). Converting claims into tort actions side-

steps these rules, and thus must be discouraged.

Second, respect for the jurisdictional route set forth in the

CDA avoids the inefficiencies involved in splitting an action

between two different forums. As the district court acknowledged,

the core contract question belongs in the Court of Federal Claims.

Taking up the same claim in federal district court merely because

an artful pleader is able to term it a tort significantly increases the

costs of litigation for the government, the private contractor, and

the judicial system. Circumvention of the CDA’s jurisdictional

mandate scatters government contract claims across the judicial

2. The district court relied heavily on Megapulse, which found the action

therein was not a disguised contract claim. We think that the Megapulse analysis

supports the result reached here. The facts of Megapulse, however, are different

from the instant case. There, the dispute arose prior to the contract, no contract

remedy was sought, and several independent statutory issues were presented.

That case was more than simply a tort reformulation of a contract dispute.

ee em er

39a

Appendix E

landscape. If the case can be resolved on a contract basis in the

Claims Court, the most efficient procedure is to dismiss any

phantom “tort” allegations tacked on to the contract claim.

Third, by calling contract actions what they truly are and

enforcing the jurisdictional limits of the CDA, we effectuate

Congress’ intent to employ the expertise of the Court of Claims

in these matters. For example, in addition to questions about

auction customs, this case raises issues about the meaning of

“surplus property” under 40 U.S.C. §§ 472(g) and 484(d), DRMO

property disposal procedures, the extent of DRMO authority,

and the proper interpretation of DRMO sales pamphlet terms. As

noted above, the Court of Claims has specialized experience

regarding the intricate world of government contracting. Congress

believed that issues like the ones presented here will be most

accurately and consistently resolved by a tribunal dedicated to

this particular subject. This case provides a good example of the

kind of government contract action that belongs within the

specialized scheme provided by the CDA.

Il.

For the foregoing reasons, the judgment of the district court

is reversed and remanded with instructions to grant defendant’s

motion to dismiss the action for want of subject matter

jurisdiction. Nothing herein shall prevent a transfer of this action

to a proper forum under the provisions of 28 U.S.C. § 1631, if

the district court finds such transfer appropriate.

REVERSED AND REMANDED

40a

Appendix E

HALL, Circuit Judge, dissenting:

As the majority readily acknowledges, ante at 7, an

unauthorized act of control over property belonging to another

constitutes the tort of conversion. When John Darlington

telephoned Alice Martin, the sales contracting officer at DRMO,

to tell her that he had discovered the transmissions, Martin told

Darlington that J&E should give them back. Within a few days,

another DRMO representative called Darlington to repeat Martin’s

request. These conversations were followed by a written demand

for the transmissions’ return.

If the transmissions belonged to DRMO, then J&E’s failure

to return them was a conversion — and thus a tort. Although

settling the issue of ownership in this case would necessarily

involve examining the contract between J&E and DRMO, such

an examination does not transmogrify a tort claim into a contract

claim. J&E has now returned the transmissions; the only substantial

issues that remain are whether the government owned them, and,

if so, the damages to which it is entitled as a result of J&E’s

tortious conduct.

The Court of Claims, though proficient in settling contract

disputes, is powerless to decide tort cases. See, e.g.,

Transcountry Packing Co. v. United States, 568 F.2d 1333, 1336

(Ct. Cl. 1978) (“This court . . . does not have jurisdiction over

tort claims.”) (citation omitted). Today, the majority remarkably

announces that such cases are likewise outside the reach of the

district court. Although Lewis Carroll might have fancied such a

result, I do not.

[respectfully dissent.

4la

APPENDIX F — APPEAL OF JOHN T. GONSALVES

ARMED SERVICES BOARD OF CONTRACT APPEALS

ASBCA No. 31874

Appeal of —

John T. Gonsalves

Under contract No. 41-4355-326

APPEARANCES FOR THE APPELLANT:

John T. Gonsalves, President

APPEARANCES FOR THE GOVERNMENT:

Roberta T. Eaton, Esq.

Trial Attorney,

Defense Reutilization and Marketing Service

Federal Center (DLA)

Battle Creek, Michigan

OPINION BY ADMINISTRATIVE JUDGE SCHEPERS

PURSUANT TO RULE 12.2

At a Defense Property Disposal sale appellant purchased

drums which were found to contain infrared receivers/seeker

heads. The parties dispute whether the Government may demand

return of these items.

SUMMARY FINDINGS AND CONCLUSIONS

At auction appellant purchased item 128 for $25.00 which

was described as follows:

42a

Appendix F

128. CONTAINER, SHIPPING; Drums, various sizes.

Est. 400 ea.

1 LOT

The Instructions, Terms & conditions applicable to the sale

contain the General Provisions which include: paragraph 2,

Condition and Location of Property; paragraph 30, Guaranteed

Descriptions; and paragraphs D and C, Award of Contract.

Some of the drums had labels which read “Seeker Head”.

“Receiver Infrared” and “[ R Det. Hed.” The labels were green

in color with “NON-RF[“ and “Special Handling”, also printed

on them.

Appellant realized by inspection that some of the drums

contained items inside and “bid accordingly.”

Appellant removed the drums in increments, completing

the removal by 2 July 1984.

Each drum with items inside weighed approximately 40

pounds more than empty drum.

When he opened the drums and saw the items, appellant

assumed he had obsolete surplus electronic junk.

At the suggestion of a surplus dealer friend, appellant

contacted a former Navy sales official who referred appellant to

the Aviation Supply Office. Appellant thought he was contacting

surplus dealers, but later found it was the Department of the

Navy. This contact was on 26 June 1984.

43a

Appendix F

Respondent’s investigation revealed that the infrared

receivers/seeker heads has been declassified by the Navy and

that appellant had approximately 43 of the seeker heads.

Respondent states the fair market value of the sidewinder

missile heads is $33.63 each for the 19 complete units and

$16.82 each for the 24 incomplete units for a total of $1,042.65.

Appellant states that had respondent approached him in a

business like manner, acknowledging that appellant is the owner

of the seeker heads, the parties could have reached an amicable

solution that would only entail appellant’s costs for transporting

the containers to appellant’s shop.

Respondent contends that it is entitled to either pick up the

missile heads or to demand an amount of $1,042.65 from

appellant.

Doubtless the Navy knew the missile heads and parts were

within the drums, whether or not the Navy conveyed this

information to the DPDS. Repeatedly respondent requests that

we strictly construe the provisions of their surplus sales contracts.

Respondent cannot now ask us to set aside a final sale to correct

a mistake it made.

Accordingly, the appeal is sustained.

Dated 10 March 1986.

s/ Jean Schepers

JEAN SCHEPERS

Administrative Judge

Member of the Armed Services

Board of Contract Appeals

44a

APPENDIX G — SALE OF GOVERNMENT PROPERTY,

GENERAL SALE TERMS AND CONDITIONS

PART 2

DO NOT RETURN WITH BID

SALE OF GOVERNMENT PROPERTY

GENERAL SALE TERMS AND CONDITIONS

1. INSPECTION.

The Bidder is invited, urged, and cautioned to inspect the

property prior to submitting a bid. Property will be available for

inspection at the places and times specified in the Invitation.

2. CONDITION AND LOCATION OF PROPERTY.

Unless otherwise provided in the Invitation, all property listed

therein is offered for sale “as is” and “where is.” Unless otherwise

provided in the Invitation, the Government makes no warranty,

express or implied, as to quantity, kind, character, quality, weight,

size, or description of any of the property, or its fitness for any

use or purpose. Except as provided in Conditions No. 12 and 14

or other special conditions of the Invitation, no request for

adjustment in price or for rescission of the sale will be considered.

This is not a sale by sample.

3. CONSIDERATION OF BIDS.

(a) Unless otherwise provided in the Invitation, telegraphic

or telephonic bids will not be considered.

(b) The Bidder agrees that his bid will not be withdrawn

within the period of time specified for the acceptance thereof

45a

Appendix G

following the opening of bids (60 calendar days if no period is

specified by the Government or by the Bidder, but not less than

; 10 calendar days in any case) and that during such period his bid

will remain firm and irrevocable. The Government reserves the

right to reject any or all bids, including bids under which a Bidder

would take unfair advantage of the Government or other Bidders,

to waive any technical defects in bids, and unless otherwise

specified by the Government or by the Bidder, to accept any one

item or group of items in the bid as may be in the best interest of

the Government. Unless the Invitation otherwise provides, a bid

covering any listed item must be submitted on the basis of the

unit specified for that item and must cover the total number of

units designated for that item.

4. FORMS OF BID DEPOSITS AND PAYMENTS.

Unless otherwise provided in the Invitation, bid deposits

(when required by the Invitation) and payments shall be in U.S.

currency or any form of credit instruments other than promissory

notes, made payable on demand in U.S. currency: Provided, That

uncertified personal or business checks must be first party

instruments: Provided further, That if in connection with any prior

sale, the Bidder or Purchaser tendered an uncertified personal or

business check which was not paid by the drawee for any reason

and the Bidder, Purchaser, and the Drawer of the check were so

notified in writing by the selling agency, uncertified personal or

business checks will not be an acceptable form of bid deposit or

payment. Bids submitted after the effective date specified in the

written notification referred to which are not accompanied by the

proper bid deposit will be summarily rejected.

46a

Appendix G

5. BID PRICE DETERMINATION.

When bids are solicited on a unit price basis. Bidders will

insert their unit prices and total prices in the space provided for

each item.

(a) In the event the Bidder inserts a total price on the item

but fails to insert a unit price, the Government will determine the

unit price by dividing the total price by the quantity of the item

set out in the Invitation. The unit price so determined shall be

used for the purpose of bid evaluation, award, and all phases of

contract administration.

(b) When bids are solicited on a “lot” basis, Bidders should

submit a single total price in the Total Price Bid column of the

bid sheet. Bidders should not make any entry in the Unit Price

Bid column. In the event a Bidder submits a total bid price and

also a unit bid price which are not identical, the unit bid price will

not be considered.

6. PAYMENT.

The Purchaser agrees to pay for property awarded to him in

accordance with the prices quoted in his bid. Subject to any

adjustment made pursuant to other provisions of this contract,

payment of the full purchase price, after applying the total bid

deposit, if any, must be made within the time specified in the

Invitation and prior to delivery of any of the property. If an

adjustment is made requiring additional payment, such payment

must be made immediately upon notice of such adjustment. In

the absence of any debts owed to the selling agency, where the

total sum becoming due to the Government from the Purchaser

on a contract awarded to him under the Invitation is less than the

47a

Appendix G

total amount deposited with his bid, the difference will be promptly

refunded and also, deposits accompanying bids which are not

accepted will be promptly refunded to the Bidder. No refund or

demands will be made for any amount less than one dollar ($1).

7. TITLE.

% Unless otherwise provided in the Invitation, title to the

property sold hereunder shall vest in the Purchaser as and when

removal is effected. On all motor vehicles and motor-propelled

or motor-drawn equipment requiring licensing by a State motor

vehicle regulatory agency, a certificate of release, Standard Form

97, will be furnished for each vehicle and piece of equipment

unless otherwise provided in the Invitation.

8. DELIVERY, LOADING, AND REMOVAL OF

PROPERTY.

(a) Unless otherwise provided in the Invitation, the Purchaser

shall be entitled to obtain the property upon full payment therefor

with delivery being made only from the exact place where the

property is located within the installation. The Purchaser must

make all arrangements necessary for packing, removal, and

transportation of property. The Government will not act is liaison

in any fashion between the Purchaser and carrier, nor will the

Government recommend a specific common carrier. Loading will

only be performed as set forth in the Invitation, and unless

otherwise provided in the Invitation, loading will not be performed

on Saturdays, Sundays, Federal holidays, or any day that the

installation where the property is located is closed. Where it is

provided that the Government will load, the Government will make

the initial placement of the property on conveyance(s) furnished

by the Purchaser and the initial placement on the Purchaser’s

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48a

Appendix G

conveyance shall be as determined by the Government. Unless

otherwise provided in the Invitation, the Government will not

block, chock, brace, lash, band, or in any other manner secure

the cargo on such conveyance(s) furnished by the Purchaser.

(b) Where it is provided in the Invitation that the Government

will not load or that the Purchaser will load, the Purchaser will

make all arrangements and perform all work necessary to effect

removal of the property. The Purchaser shall remove the property

at his expense within the period of time allowed in the Invitation.

If the Contracting Officer determines that the failure to remove

the property within the period of time originally allowed arose

out of causes beyond the control and without the fault or

negligence of the Purchaser, such determination shall be reduced

to writing, and a reasonable extension of time for removal shall

be allowed. Such causes may include, but are not restricted to,

acts of God or of the public enemy, acts of the Government in

either its sovereign or contractual capacity, fires, floods,

epidemics, quarantine restrictions, strikes, freight embargoes, and

severe weather. If the Purchaser is permitted to remove the

property after the expiration of the time originally allowed for

removal or any additional time allowed by the Contracting Officer

pursuant to this clause, the Government, without limiting any other

rights which it may have, may require the Purchaser to pay a

reasonable storage charge. The Purchaser shall reimburse the

Government for any damage to Government property caused

during the removal operations by the Purchaser or his authorized

representative.

(c) Items purchased under the Invitation will be released only

to the Purchaser or his authorized representative. The authorized

representative must furnish authorization from the Purchaser to

the Custodian of the property location before any delivery or

w

3

4

2

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49a

Appendix G

release will be made. When property is described as being boxed,

packed, crated, skidded, or in containers, the Government does

not warrant that the property, as packaged, is suitable for shipment.

(d) Segregation, culling, or selection of property for the

purpose of effecting partial or increment removals will not be

permitted except as specifically authorized and prescribed by the

Government.

9. DEFAULT.

If, after the award, the Purchaser breaches the contract by

failure to make payment within the time allowed by the contract

as required by Condition No. 6, or by failure to remove the

property as required by Condition No. 8, then the Government

may send the Purchaser a 15-day written notice of default

(calculated from date of mailing), and upon Purchaser’s failure

to cure such default within that period (or such further period as

the Contracting Officer may allow) the Purchaser shall lose all

right, title, and interest which he might otherwise have acquired

in and to such property as to which a default has occurred. The

Purchaser agrees that in the event he fails to pay for the property

or remove the same within the prescribed period(s) of time, the

Government shall be entitled to retain (or collect) as liquidated

damages a sum equal to the greater of (a) 20 percent of the

purchase price of the item(s) as to which the default his occurred,

or (b) $25, or the purchase price of such item(s) if the

a * *

50a

APPENDIX H — DEFENSE REUTILIZATION AND

MARKETING MANUAL

DoD 4160.21-M

MARCH 1990

DEPARTMENT OF DEFENSE

UNITED STATES OF AMERICA

DEFENSE

REUTILIZATION AND MARKETING

MANUAL

DEPARTMENT OF DEFENSE

OFFICE OF THE ASSISTANT

SECRETARY OF DEFENSE

PRODUCTION & LOGISTICS

Cn eT! epee Pre

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Appendix H

ASSISTANT SECRETARY OF DEFENSE

WASHINGTON, D.C.. 20301-8000

PRODUCTION AND LOGISTICS DOD 4160.21-M

23 Mar 90

FOREWORD

This manual is used under the authority of DoD Directive 4160.21 :

“DoD Personal Property Utilization and Disposal Program.” Its

purpose is to set forth DoD policy and prescribe uniform

procedures for the reutilization and marketing of DoD personal

property. Except where otherwise indicated, this manual is

applicable to all elements of the DoD and their subordinate

commands, installations, and activities.

DoD 4160.21-M is retitled “Defense Reutilization and Marketing

Manual.” It is restructured to reflect a renumbering of chapters

to provide an orderly sequence of reutilization and marketing

procedures for personal property of DoD Components.

Recommended revisions to this manual should be submitted

through proper DoD Component channels to:

Director

Defense Logistics Agency

ATIN: DLA-SMP

Cameron Station

Alexandria, Virginia 22304-0100

DoD components may obtain their copies of this manual through

their publication channels. Other Federal agencies and the public

52a

Appendix H

may obtain copies from HQ Defense Logistics Agency, ATTN:

DLA-XPD, Cameron Station, Alexandria, Virginia, 22304-0100.

s/ Diane K. Morales

Diane K. Morales

Deputy Assistant Secretary

(Logistics)

This manual supersedes DoD 4100.21-M, 15 Sep 82, and Changes |

through Q.

53a

Appendix H

CHAPTER I

INTRODUCTION

A. GENERAL. This manual implements DoT directives and

instructions which affect the reutilization and marketing of

personal property and takes precedence over conflicting

instructions.

B. PURPOSE.

1. The purpose of this manual is to prescribe the policies

and procedures to be followed by DoD installations worldwide

for the reutilization and marketing of excess, surplus, and foreign

excess personal property and other categories of property as

covered here.

2. The policies and procedures in this manual take

precedence over conflicting instructions in Defense Agency and

Military Service regulations.

C. SCOPE AND APPLICABILITY.

1. The contents of this manual are applicable to all elements

of the DoD, their subordinate commands, installations, and

activities, worldwide, except as otherwise indicated. It applies to

the reutilization and final disposition of supply system stocks,

excess, surplus and foreign excess personal property, and other

property as authorized.

2. Unless otherwise stated, this manual is not applicable to:

54a

Appendix H

a. Items under management control or the Defense

Nuclear Agency in Federal Supply Group 11; all Department of

Energy (DoE) special design and quality controlled items; and all

DoD items designed specifically for use on or with nuclear

weapons (identified by manufacturers’ codes 57991, 67991,

77991, and 87991 in the Defense Logistics Services Center master

item file). These items shall be processed in accordance with

Technical Publication, Supply Management of Nuclear Weapons

Materiel. DoE-DNA TP 100-1. Navy SWOP 100-1. Army TM

39-10-0-1. Air Force T.O. 11N- 1DO-1.

ie ryptologic Materiel. This materiel shall be processed

in accordance with NACSI 2001 (FOUO) and NSA Circular

60-5(C).

c. Naval Nuclear Propulsion Plant Materiel. This materiel

shall be processed in accordance with NAVSEAINST C5511.32

and SPCCINST 4440-376H as stated in paragraph B69, Chapter

VII, Property Requiring Special Processing.

d. Contractor Inventory and Army Corps of Engineers

Civil Works Property. When considered to be in the best interest

of the U.S. Government, the services of Defense Reutilization

and Marketing Offices (DRMOs) and Defense Reutilization and

Marketing Regions (DRMRs) may be used.

e. Automation Equipment (AE) items under the

management control of the Defense Automation Resources

Information Center (DARIC).

D. OBJECTIVES. Personal property (including scrap) shall be

reutilized or disposed of in a manner that ensures maximum use

to satisfy valid needs, permits authorized donations, obtains

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55a

Appendix H

optimum monetary return to the U.S. Government for property

sold, protects the environment, and minimizes the need for

abandonment or destruction. The procedures, codes and uniform

formats of the Military Standard Data Systems, Military Standard

Requisitioning and Issue Procedures (MILSTRIP), Military

Standard Transaction Reporting and Accounting Procedures

(MILSTRAP), etc., shall be used to the maximum extent possible

in all property reutilization and marketing transactions. Precious

metals bearing scrap and end items containing precious metals

shall be disposed of in a manner which will assure cost effective

disposition and recovery of precious metals when economically

feasible under the Precious Metals Recovery Program. Military

Service excesses containing components required to offset buy,

budget, and repair needs shail be reclaimed before disposal.

/. Donation.

a. Donation of personal property in the United States,

American Samoa, Guam, Puerto Rico, TTPI, and the Virgin

Islands shall be made to eligible donees after it has been

determined through the reutilization screening process, that no

Federal need exists for the property.

b. Donation of foreign excess property shall be made

under authority contained in 40 U.S.C. 512 and as further carried

out in this manual.

2. Sale. Personal property shall be advertised for sale only

after prescribed reutilization, transfer, and donation actions have

been taken. Defense Reutilization and Marketing Service

(DRMS) shall employ the most efficient and economical methods

of identifying, segregating, merchandising, and selling personal

property.

56a

Appendix H

a. Sale of personal property in the United States.

American Samoa, Guam, Puerto Rico, TTPI, and the Virgin

Islands shall be conducted as authorized and prescribed in this

manual, under authority delegated to the Secretary of Defense by

the Administrator of General Services.

b. Sale of personal property in overseas areas (other

than named in subparagraph D2a) shall be conducted by the

Defense Logistics Agency (DLA) under authority delegated by

the DoD, and as prescribed in this manual. Sales in nonexempted

overseas areas shall be subject to security trade controls issued

by the Deputy Under Secretary of Defense (Trade Security Policy)

(DUSD(TSP)), as set forth in this manual.

c. Withdrawal from Sale. As a general policy, property

once advertised for sale may not be withdrawn. Exceptions to

this general statement shall be permitted only when property

involved is required in support or approved U.S. Government

programs, and the action is determined to be in the best interest

of the U.S. Government. Heads of DoD components shall ensure

that this withdrawal authority is stringently controlled and applied.

(This policy is predicated upon the workload and adverse public

relations, up to and including court cases, which result unless

careful control is placed on withdrawals. )

3. Coordination. Coordination shall be made with:

a. The Department of State, or the U.S. Diplomatic

Missions in the country or countries concerned, regarding the

reutilization and marketing of personal property in foreign

countries to assure conformance with United States foreign

policies.

S7a

Appendix H

b. The Department of the Treasury, relative to the

acceptance of foreign currencies in payment for personal property.

c. The Bureau of Domestic Business Development,

Department of Commerce, concerning proposed sales or personal

property which could have an impact on United States markets.

d. The Department of Justice to obtain antitrust advice

on certain sales as prescribed in this manual. Instances of

suspected collusion shall be referred to the Department of Justice

or the Department of State representative.

e. The Military Services Defense Agencies, and the

General Services Administration (GSA) when changes to this

publication are proposed.

4. Demilitarization. Personal property shall be demilitarized

in accordance with policy and procedures covered in DoD

4160.21-M-1, Defense Demilitarization Manual.

5. Classified Material. Items which are classified may not

be released to a DRMO for final disposition until they have been

declassified in the manner prescribed by the owning DoD

component.

6. Abandonment or Destruction. Personal property which

cannot be disposed of through authorized sale or donation

procedures may be abandoned or destroyed as set forth in this

manual.

a. Abandonment or destruction of property may not be

accomplished in a manner detrimental or dangerous to public

58a

Appendix H

health, safety, or the environment, or which may cause infringement

on the rights of others.

b. Bejore any abandonment action is taken of foreign

excess personal property, the advice or the local representative

of the Department of State must be obtained to prevent, in

particular, the possibility of such property falling into the hands

of individuals or firms intending to put it to uses unfavorable or

harmful to the interests of the United States.

c. Personal property shall be donated under authorized

surplus and foreign excess property donation procedures in

~—preference to abandonment or destruction.

7. Precious Metals Recovery. Precious metals contained in

scrap or other personal property shall be recovered for DoD use

or as Government furnished material (GFM). Policy and

procedures for the recovery of precious metals are contained in

Chapter X, Precious Metals Recovery Program.

8. Reclamation. Components contained in Military Service

excesses shall be reclaimed to fill internal service needs or

interservice/ Defense Agency needs as prescribed in paragraph

A, Chapter IV. Interservice Utilization of Supply System Stocks.

9. Environmental Considerations. Guidance concerning

environmental considerations in the disposal of hazardous

property is included in Chapter 1X, Hazardous Property

Management.

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59a

Appendix H

E. PERSONNEL AND TRAINING.

1. Selection of Key Personnel. Exceptional care shall be

exercised in the selection and assignment of personnel to property

reutilization and marketing functions. The magnitude of the

reutilization and marketing program and its effects on public

relations require that only qualified personnel be assigned to this

program. The duties and responsibilities attendant with

reutilization and marketing positions require that key personnel

possess more than an average amount of ingenuity,

aggressiveness, conscientiousness, and diplomacy, and that they

be well versed in DoD personal property reutilization and

marketing policy, regulations, and procedures.

2. Training.

a. Property Reutilization and Marketing Personnel.

(1) To provide fur a more effective career program

for functions relating to the reutilization and marketing or excess,

surplus, and foreign excess property, training is of great

importance.

(2) The magnitude of importance of the reutilization

and marketing program requires that key personnel connected

with the program receive training in the field or property

reutilization and marketing, related technical areas, safety,

environmental protection, administration, and management.

b. Formal training in the area of reutilization and

marketing is covered in DoD Directive 5010.16, Defense

Management Education and Training Program.

60a

Appendix H

F. CONFERENCES.

1. Conferences are invaluable to exchange ideas, resolve

differences and problems, and to discuss other matters of mutual

interest to conferees, as well as for an interchange of views in

order to develop and nurture mutual understanding among the

participants. With the increased magnitude of property

reutilization and marketing, operating procedures must be

reviewed continually to assure they are focused in the proper

direction to ensure standardization. Due to the nature of the

reutilization and marketing program, which requires dealing with

the general public, it is extremely important that problems as they

arise are recognized and acted upon to avoid incidents which are

not in the best interest of the U.S. Government.

2. Reutilization and marketing conferences shall generally

be of a specialized nature depending upon the functions and

responsibilities or the organization convening the conference. DLA

shall hold conferences for its representatives and Military Service/

Defense Agency representatives to discuss areas of common

concern and resolve differences. Air Force shall chair a DoD

Reclamation Work Group, consisting of representatives from each

Service and DLA, concerning DoD aircraft, aircraft engines, and

end item reclamation policy and procedures.

3. Guidelines for property reutilizaton and marketing

conferences are as follows:

a. Any entity may request a conference be convened.

b. Conferences shall be of the working type, with a

minimum of formal presentation and a maximum or open exchange

of thought through discussion or agenda subjects.

6la

Appendix H

c. The organization convening the conference shall

ensure an agenda is developed and submitted to the next higher

management echelon for review, when pertinent, before publication.

Participation by entities outside DoD (such as, representation of

Federal civil agencies or private industry) depends upon the scope

and type of conference. Conference sites shall be selected with

consideration of minimizing travel. The length of conferences

shall be predicated upon the subject matter and scope of

participation.

d. Type and frequency of conferences.

(1) Defense Logistics Agency — as required.

Participation shall include reutilization and marketing personnel

from HQ DLA, DRMS, selected DRMRs, representatives from

Army, Navy, Air Force, Marine Corps, Coast Guard, Defense

Agencies and when necessary, representatives of other

Government agencies.

(2) Air Force — annual or more often as necessary.

Participation shall include the DoD Reclamation Work Group

members and other participants as considered pertinent.

e. Summary of Conferences. A summary shall be

made available to the headquarters concerned and all participants

after the completion of a conference. The summary shall outline

each subject discussed and state the resultant conclusions.

62a

Appendix H

CHAPTER II

RESPONSIBILITIES

A. GENERAL.

1. The Federal Property and Administrative Services Act of

1949, as amended (Act of 30 June 1949, 63 Stat. 377, 40 U.S.C.

471), assigned the responsibility for the supervision and direction

over the disposition of excess and surplus property to the

Administrator of General Services. The Act further assigned the

responsibility for supervision and direction over the disposition

of DoD foreign excess property to the Secretary of Defense.

2. The Administrator of General Services delegated to the

Secretary of Defense the responsibility for the disposition of

excess and surplus property generated by the DoD.

3. The Secretary of Defense has assigned to the Director.

DLA responsibility for the administration of the DoD Personal

Property Reutilization and Marketing Program and the DoD

Precious Metals Recovery Program.

B. RESPONSIBILITIES OF DEFENSE LOGISTICS AGENCY

(DLA).

1. Administer the DoD Personal Property Reutilization and

Marketing Program worldwide in the role of integrated program

manager and administer the Precious Metals Recovery Program.

2. Establish, coordinate and supervise policy, system

concepts and requirements, resource management, program

guidance, budgeting and funding, training and career development,

init ena hot all A

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63a

Appendix H

management review and analysis, internal control measures, and

schedule crime prevention surveys relatable to the DoD Personal

Property Reutilization and Marketing Program and the Precious

Metals Recovery Program.

3. Apprise the Assistant Secretary of Defense (Production

and Logistics) (ASD(P&L)) of progress and significant

developments within the DaP Personal Property Reutilization

and Marketing Program and the Precious Metals Recovery

Program.

4. Maintain the DoD 4160.21-M ina current status to reflect

policy guidance prescribed, by the ASD(P&L) or other

organizational elements of the Office of the Secretary or Defense,

Coordinate changes to the DoD 4160.21-M, before publication,

with the Military Services, other DoD components, and Federal

civil agencies when the proposed change affects their areas of

responsibility or operation; refer to the ASD(P&L) with pertinent

comments unresolved nonconcurrences with proposed changes.

As an objective, change action to this manual shall be initiated

not less frequently than on a semiannual basis.

NOTE. Interim instructions reflecting new/revised policy shail

be issued after proper coordination has been obtained. These

issuances shall be coordinated in the some manner as formal

changes to this manual.

5. Promote maximum reutilization of excess, surplus, and

foreign excess personal property.

6. Establish/disestablish Defense reutilization and marketing

organizations under the control of the DLA and coordinate such

action with the Military Services and other DoD components when

64a

Appendix H |

it will affect the disposal support currently being provided their

activities. Except when diplomatic considerations do not permit

it in overseas areas, this formal coordination shall be accomplished

in sufficient time for the Military Service or other DoD components

affected to properly program and acquire resources, in accordance

with prescribed procedures. Coordinate such establishment/

disestablishment with ASD (P&L).

7. Administer the DoD donable surplus personal property

program as it applies to approved Service Educational Activities.

This includes such actions as prescribing procedures,

development of donation agreements, and processing requests

to higher authority for deviation from formal agreements.

8. Assure maximum compatibility between documentation

procedures, codes, and formats used in property reutilization

and marketing systems and the military standard systems.

9. Program, budget, fund, account, allocate, and control

personnel spaces and other resources for its respective activities.

10. Prepare and distribute reports as prescribed.

1]. Assume the worldwide disposal of all DoD hazardous

property except for those categories specifically designated in

paragraph B1. Chapter IX. Hazardous Property Management.

(DLA may perform a sale/ultimate disposal service on a

case-by-case basis. In these cases, specific funding shall be

confirmed in writing.)

Torey ee

65a

Appendix H

C. RESPONSIBILITIES OF THE MILITARY SERVICES.

1. Recommend fo the Director, DLA, for action policy and

procedural changes, and participate in decision-making processes

pertaining to the DoD Personal Property Reutilization and

Marketing Program and the DoD Precious Metals Recovery

Program. Information copies of such recommendations shall be

furnished to the ASD(P&L).

2. Provide assistance to the Director, DLA, upon request,

in the resolution of mutual problems within the DoD Personal

Property Reutilization and Marketing Program and the DoD

Precious Metals Recovery Program.

3. Furnish to the Director, DLA, mutually agreed upon data

necessary to administer the DoD Personal Property Reutilization

and Marketing Program and the DoD Precious Metals Recovery

Program.

4. Promote maximum reutilization of supply system stocks,

excess, surplus, and foreign excess personal property and fine

precious metals for internal use or as GFM.

5. Nominate schools or organizations in the United States.

American Samoa, Guam, Puerto Rico, TTPI, and the Virgin

Islands to the ASD(P&L) for special interest consideration as

Service Educational Activities.

a. Recommend to ASD(P&L) categories of property

considered usable by, and necessary for, Service Educational

Activities.

66a

Appendix H

b. Inspect annually the property administration of

schools or organizations sponsored by the Military Service to

assure compliance with the donation agreement, and specifically

to review categories and quantities of property received to assure

that only that type and quantity of property actually needed is

acquired. National organizations such as Boy Scouts and Boys

Clubs are exempt from the annual inspection requirement of the

Military Services.

6. Provide support to tenanted DRMRs and their field sales

offices. and DRMOs, under applicable interservice support

agreements. Except when diplomatic considerations do not permit

it in overseas areas, the disestablishment of the host of one of

these offices shall be formally coordinated with DLA to properly

plan and program the realignment of reutilization and marketing

support which should occur as a result of the disestablishment.

7. Accomplish the disposal of property not authorized by

this manual for transfer to a disposal account.

8. Participate in the Precious Metals Recovery Program to

the maximum extent, and:

a. Maintain a focal point to coordinate on all matters

pertaining to the Precious Metals Recovery Program.

b. Maximize the use of fine precious metals for authorized

internal use or as GFM.

c. Identify the type, quantity, and location of the precious

metal contained in the item management assigned assets. Notify

DLA in order that such items may be included in the Federal

Catalog records.

en Siete Revs Sete ee Oe ee Te ete

67a

Appendix H

d. Operate recovery equipment currently under their

purview, and additional equipment, if required, when jointly

agreeable and approved by DLA. Perform maintenance which

can be accomplished by operator or activity maintenance

personnel for equipment they operate. Advise DLA when major

repairs or services are needed and skills or parts are not available

at the local activity for equipment they operate. Recommend to

DLA when replacement equipment is needed to maximize recovery

efforts.

e. Transfer precious metals-bearing material to the

nearest DRMO or, when jointly agreeable or approved by

DRMS-OCP and subject to receipt of fund citation from

DRMS-OCP, ship to other collection or recovery activity

designated by DRMS.

f. Assist in the identification of additional generating

activities within DoD and report to DLA.

9. Conduct property reutilization and marketing training

courses (Army only).

10. Administer reclamation programs and accomplish

reclamation of needed items from Military Service excess material.

11. Store and reclaim excess complete aircraft (Air Force

only).

12. Administer the reclamation and rernoval of equipment

and spare parts from stricken naval vessels (Navy only).

13. Establish and administer disposal accounts, as jointly

agreed to by DLA and the Military Services, to support the

68a

Appendix H

demilitarization and reclamation functions to be performed by

the Military Services.

14. Report surplus merchant vessels or vesse!s of 1500 gross

tons or more, capable of conversion to merchant use, to the

Office of Management Services (Code MAR-310), Maritime

Administration. U.S. Department of Transportation, 400 Seventh

Street SW., Washington, DC 20590.

15. Establish the program and direct operations related to

lumber and timber products.

16. Dispose of hazardous property specifically designated

in paragraph Bl, Chapter IX, Hazardous Property

Management.

D. RESPONSIBILITIES OF DEFENSE REUTILIZATION AND

MARKETING SERVICE (DRMS).

1. Exercise program management and staff supervision of

the DoD Personal Property Reutilization and Marketing

Program.

2. Manage the assigned DoD screening systems for screening

excess personal property within the Military Services, Defense

Agencies and eligible foreign countries.

3. Release DoD excess personal property to GSA for Federal

civil agency screening as provided in Chapter XI, Reutilization

Screening of Excess Personal Properly.

4. Assure donation policies and procedures are carried out.

= oe 6h et Ete Its See IS.

69a

Appendix H

5. Carry out policies and develop procedures and techniques

for publication here or in other approved media after coordination

by HQ DLA with the Military Services.

6. Maintain and control the consolidated DoD bidders list

and serve as the DoD focal point for inquiries pertaining to the

sale of disposable preerty.

7. Develop and administer a system for controlling in

consonance with DLA system requirements and accounting for

all disposable property.

8. Develop, compile, and publish pertinent data relating to

the reutilization, donation, and marketing of excess, surplus,

and foreign excess property.

9. Act as the principal advisor and assistant to DLA in

administering the implementation of the DLA Programs for

Protective Services, Personnel and information Security as related

to the DoD Personal Property Reutilization and Marketing

Program.

10. Develop programs for surveillance of disposable

property and related operations to assure optimum reutilization,

proper demilitarization, and performance of functions under

pertinent regulations.

11. Manage the DRMRs, including control and distribution

of approved resources (such as, personnel and facilities) and

procedures.

12. Operate the Precious Metals Recovery Program.

70a

Appendix H

13. Maintain and publish the Directory of DoD Reutilization

and Marketing Program Contact Points. Changes shall be issued

as required, but as a minimum annually.

14. Maintain effective liaison and take coordinated actions,

through proper channels, to assist in resolving, eliminating, or

reducing operating problems.

15. Prepare and distribute reports as prescribed.

10. Dispose of hazardous property as delegated by DLA.

E. RESPONSIBILITIES OF DEFENSE REUTILIZATION AND

MARKETING REGIONS (DRMRs).

1. Exercise operational supervision of assigned field sales

offices, and DRMOs.

2. Perform centralized support service functions needed for

operational control, coordination, and administrative support to

include coordination of civilian personnel administration and

training, and coordination of the interservice support agreements.

3. Perform surveillance and give technical assistance to

DRMOs to assure performance of functions in accordance with

regulations. In addition, review DRMO operations to ensure

proper identification of Munitions List and Strategic List items

and that related demilitarization functions are done.

4. Monitor property accountability, appoint Accountable

Property Officers, and approve adjustments/corrections to

property accounts for assigned DRMOs.

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Appendix H

5. Monitor DRMO excess reporting and physically screen,

as necessary, any property located at the DRMO to promote

reutilization of excess property.

6. Furnish technical guidance in all areas of property

reutilization and marketing to DRMOs.

7. Prepare sale solicitations, conduct sales, and execute and

administer all sales contracts including the processing of disputes,

protests, and claims pertaining to sales and sales contracts.

8. Comply with implementing guidance relative to

relationships with Commanders of Unified Commands as

prescribed in DoD Directive 5105.22, Defense Logistics Agency

enclosure 2. (Overseas only.)

9. Assume responsibility for integrated management of

disposable Military Assistance Program (MAP) property.

(Overseas only.)

10. Maintain a “Central Unit” to implement and monitor

guidance on the DoD Security Trade Control Program (DoD

Instruction 2030.6. Jmplementing Procedures for Security Trade

Controls on Sales for Foreign Excess Personal Property, and

DoD Directive 2030.7, Security Trade Controls on DoD

Personal Property Sold in Foreign Areas). (Overseas only.)

11. Monitor DRMO operational aspects of the Precious

Metals Recovery Program within assigned geographical areas and

provide support through Disposal Service Representatives, to

DoD and participating Federal civil agencies.

72a

Appendix H

F. RESPONSIBILITIES OF DEFENSE REUTILIZATION AND

MARKETING OFFICES (DRMOs).

1. Provide technical assistance (such as, explanation of turn

in procedures, training in scrap segregation practices) to generating

activities, not in conflict with this manual, military standard

procedures, or other regulations.

2. Receive excess, surplus, foreign excess, nonsalable

materiel, and other authorized turn ins from generating-activities.

3. Maintain property accountability and control or DLA

property reutilization and marketing assets and furnish input for

establishment and updating of centralized accounting record.

4. Maintain adequate liaison with generating activities to

ensure visibility of generations to avoid unmanageable fluctuations

in workload.

5. Inspect and classify property; verify identity and quantity;

determine disposal condition code and process for reutilization

and marketing actions.

6. Provide storage for property and assure that stored

property is properly protected and secured.

7. Represent their parent agency in matters pertaining to

established interservice support agreements and coordinate with

local installation personnel in resolving matters or mutual concern.

8. Promote and ensure maximum conservation of strategic

and critical materials and precious metals.

= Ri Ek ag a i ae

73a

Appendix H

9. Conduct periodic physical inventory of disposable

property on hand; prepare inventory adjustment documents when

required.

10. Provide for screening of excess and surplus property.

11. Provide technical and management assistance to all

authorized screeners, donees, and other interested persons.

12. Accomplish authorized transfer of property to DoD and

Federal civil agencies.

13. Process approved donation requests and release property

to authorized donees.

14. Perform research to determine market potential of

property available for sale.

15. Coordinate with the DRMRs to promote effective

marketing techniques in the sale of property.

16. Segregate, lot, display, and describe property in

accordance with good merchandising practices and techniques.

17. Identify and segregate scrap and manage scrap

operations in accordance with recognized practices.

18. Prepare and submit listings of property for sale and

recommend the method of sale when pertinent. Recommend

special conditions for unusual requirements or restrictions for

inclusion in the sale as applicable.

74a

Appendix H

19. Promote and conduct, as authorized by the servicing.

DRMR, local sales to expedite the process of removal of property

if inclusion in regional or national sales would not be

advantageous.

20. Conduct retail sales or property as authorized.

21. Provide technical assistance to prospective purchasers.

22. Assure that demilitarization or destruction of surplus or

foreign excess personal property is accomplished as required.

23. Release property to buyers upon receipt of proper

documentation.

24. Provide assistance to Sales Contracting Officers as

required to administer the terms of the sale.

25. Deposit sale proceeds and other funds received,

including storage charges.

26. Supervise operations of its field offices.

27. Accomplish demilitarization of inert Munitions List and

Strategic List iterns that must be demilitarized before disposal.

28. Where local demilitarization is not feasible, prepare,

package, and crate small arms weapons and parts for shipment

to Rock Island for demilitarization in accordance with DoD

4160.21-M-1. and DoD 5100.76-M, Physical Security of Sensitive

Conventional Arms, Ammunition, and Explosives.

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75a

Appendix H

29. Promote the DoD Precious Metals Recovery Program

and:

a. Accept excess/surplus precious metals-bearing

material from DoD components and participating Federal civil

agencies in their areas.

b. Process such material in accordance with Precious

Metals Recovery Program operatiig procedures contained in

Chapter X, Precious Metals Recovery Program.

c. Maintain liaison with generating activities so that

technical assistance can be given as needed.

d. Accept custodial responsibility for silver recovery

supplies and equipment in their possession.

¢. Supervise, in conjunction with the DRMS-OCP,

precious metals recovery operations of subordinate field offices.

tf. Operate silver recovery equipment at DRMOs which

are assigned central silver recovery responsibilities for hypo,

perform maintenance, and identify and recommend repair parts

and services needed to maximize recovery efforts.

G. RESPONSIBILITIES OF DEFENSE REUTILIZATIONS

AND MARKETING REGION PACIFIC (DRMR-P) FIELD

OFFICES. As DRMR-P extensions, they are responsible for the

following within designated countries:

1. Represent DRMR-P Commander as point of contact in

relations with Unified Commands, Service components, MAAGs,

U.S. Embassy, and foreign government sales missions.

76a

Appendix H

2. Perform supervision and procedural direction of the

property reutilization and marketing operations.

3. Perform supervision and procedural direction in

reutilization, marketing, and sales.

4. Perform physical assistance and operational review of

assigned property reutilization and marketing operations.

H. RESPONSIBILITIES OF DEFENSE PRECIOUS METALS

RECOVERY FACILITY (PMRF-XE). This facility is responsible

for collection of precious metals-bearing property, such as

batteries, high purity precious metals scrap, film, and silver

recovery cartridges. The facility also performs assays of materials

to determine precious metal content. Fuil responsibilities of the

PMRF-XE and other special assignments relating to precious

metals recovery are contained in Chapter X, Precious Metals

Recovery Program.

I. RESPONSIBILITIES OF INVENTORY CONTROL POINTS

(ICPs)

1. Assure maximum reutilization of property located in the

DRMOs.

2. Prepare and forward interrogations to other ICPs in

accordance with Chapter IV, Interservice Utilization of Supply

System Stocks.

3. Process other ICP interrogations/requisitions (fill/kill) for

requirements assigned a Uniform Material Movement and Issue

Priority System (UMMIPS) Priority Designator falling within Issue

77a

Appendix H

Priority Group 1 (Priorities 01-03) considering on-hand assets to

the same extent it would to satisfy its own Service requisitions.

4. Prepare data, reports, and recommendations as prescribed

here and maintain backup materiel for audit review.

5. Provide DRMS with points of contact for policy and

operational matters, such as: Reutilization, Donation,

Demilitarization, Precious Metals, Hazardous Property.

6. Identify items that must be demilitarized and accomplish

demilitarization of those items which cannot be physically

accepted by a DRMO in accordance with DoD policy.

7. Assure the submission of available technical data needed

in preparing specialized offers and reclamation requirements, when

requested.

8. Identify items that need reclamation and, as applicable,

advise Military Service/ Defense Agency ICPs//ntegrated Materiel

Managers (IMMs) of items considered to have reclamation

potential.

9. Prepare and forward reclamation transactions for the

interservice interchange of data for component parts with

reclamation potential.

10. Process reclamation notifications/data interchange

transactions of other ICPs.

//. Participate in all other programs specified at this manual.

|

78a

Appendix H

CHAPTER VI

RECEIPT AND HANDLING OF PROPERTY

AT DEFENSE REUTILIZATION AND

MARKETING OFFICES

A. LOCATION.

1. A suitable location, separate and apart from host

installation active stocks, shall be established at each DRMO for

the receipt and storage of excess, surplus, or foreign excess

personal property. This area shall be of sufficient size to permit

proper segregation or material and should be convenient to a

road net and railroad siding. The DRMO shall be responsible for

warehousing or otherwise storing all property physically received

and shall be responsible for:

a. Administering the established locator system for all

property under the control of the DRMO.

b. Property segregation bins or areas prominently

marked, labeled, or tagged so as to be readily identifiable with

the proper locator record. Property should, to the extent

practicable, be baled, boxed, bundled, bagged, binned, or

otherwise stored to prevent mixing and to facilitate handling and

accessibility.

c. Separate storage locations when sufficient space,

covered and open, is available for property that must undergo

centralized and local area screening. Sale of property should be

conducted from these locations to avoid double handling of

property.

79a

Appendix H

d. Adequate covered storage space for the protection

from the elements of such items as papers, textiles, and other

sensitive items of property. Materials shall be stored so as to

prevent contamination or mixing and to be readily accessible for

inspection.

e. Hazardous waste storage facilities operated by

DRMO, meeting all applicable environmental standards and

requirements, including the requirements of RCRA, as amended,

and the National Environmental Policy Act (NEPA).

2. The organizational elements of a DRMO shall be

positioned so that the flow of materials and paperwork is orderly

from the time of receipt to ultimate disposal.

a. The receiving section should be located near the

entrance to the DRMO warehouse or yard for convenience in

property verification so that the property may be directed to a

prearranged storage location. DRMOs should encourage

generating units to furnish advance copies of the DTID, or other

documentation to permit preplanning for storage purposes.

b. The storage location for scrap property shall be

separate from that of usable property and should be situated near

railroad facilities, if available. Truck scales for weighing the scrap

should be located adjacent to the receiving section. Railroad

scales should also be made available where possible.

c. Property appearing on a sale solicitation (catalog)

and property awaiting sale shall be separated by signs from

property being screened for reutilization, transfer, or donation

to eliminate confusion on the part of inspecting bidders and

screeners.

Pee eT et en tee ee

80a

Appendix H

B. FACILITIES AND EQUIPMENT REQUIREMENTS.

1. Equipment. The host activity shall furnish the DRMO

maintenance support of operating equipment and vehicles. Use

of available equipment and vehicles to support both normal

and temporary needs shall be obtained from the host as

available. This support shall be identified in an /SA.

2. Facilities. The host activity shall furnish the DRMO such

facilities as are necessary to do the assigned reutilization and

marketing mission. All DRMO facilities are owned by the host

and shall be identified in an ISA. Host site approval must be

obtained for all facility improvement projects. Nonreimbursable

host maintenance and repair support, not exceeding that

prescribed by the regulations of the host activity, shall be

included in the ISA.

C. SAFEGUARDING MATERIAL. The DRMO yard shall be

fenced or otherwise protected to ensure that materials are

safeguarded against theft, pilferage, or unauthorized withdrawals.

Support to DRMOs on security matters is covered in ISAs among

investigative agencies and implementing security regulations

of the Military Services Defense Agencies.

D. DISPOSAL PROCESSING.

1. The DRMO is responsible for reutilizalion and marketing

of all DoD generated excess, surplus, and foreign excess, and

other personal property authorized for turn in (excluding

nonsalable property) except those specific categories identified

im, subparagraph D2 below.

8la

Appendix H

a. The DRMO shall physically accept and process

property for which it has reutilization and marketing

responsibility. There are, however, certain categories of property,

such as radioactive materiels (see paragraph B, Chapter VIII,

Property Requiring Special Processing), which the DRMO may

not accept physically based upon special storage or special

handling needs. When this occurs accountability shall be accepted

by the DRMO and the property processed for reutilization,

transfer, donation, and sale actions even though the property

physically remains in place. Accountability of property which is

not reutilized or sold may not be returned to the generating activity.

Hazardous property shall be disposed of on hazardous waste

service contracts. Other property shall be downgraded to scrap,

processed for abandonment or destruction, or disposed of by

service contract. Where the DRMO lacks resources or the

technical expertise to physically handle property for which it has

reutilization and marketing responsibility, the DRMO shall

arrange for such support with the local host installation or the

generating activity on a case-by-case basis. Reimbursement shall

be as shown in the existing JSA and related governing documents.

b. The following types of property may not be physically

accepted by any DRMO regardless or its resources or technical

expertise unless specifically authorized by DRMS.

(1) Live animals.

(2) Explosives and ammunition.

(3) Incendiary products.

(4) Drugs, biologicals, and controlled substances.

82a

Appendix H

(5) Nitrate base film.

(6) Psychodiagnostic test sets.

c. Acceptance or physical custody of hazardous material

shall be determined based upon the guidelines in paragraph C.

Chapter IX, Hazardous Property Management.

2. The DRMO may not accept (either physically or on its

account) the following categories of property and no reutilization

or sale service shall be given.

a. Radioactive waste, thermal batteries, and unsalable

material of a nonhazardous nature; that is, material for which sale

or other disposal is prohibited by U.S. law or Federal or military

regulations. This category includes, but is not limited to classified

material. DoD inspection stamps and devices, consecrated

religious items, and cryptographic equipment.

b. Hazardous property designated for disposal by the

Military Services as stated in Chapter LX, Hazardous Properiy

Management.

c. Refuse and trash; that is, post consumer waste material

such as litter and rubbish collected by the installation engineer.

The collection of refuse and trash is the responsibility of the

installation engineer, however, some refuse and trash when

properly segregated may possess reutilization, transfer, donation,

or sale potential. The DRMO shall assist the host installation by

advising the commander or his or her designee or any known

possibility to dispose of property through established DRMO

channels based upon proper segregation techniques. Proper

83a

Appendix H

Segregation action shall be performed and monitored by personnel

of the host installation, not the DRMO.

3. Nonsalable materiel (other than refuse and trash); that is,

materiel which has no reutilization, transfer, donation or sale

value as determined by the DRMO, but is not otherwise restricted

from disposal by U.S. law or Federal or military regulations.

The DRMO is responsible for accepting and processing this type

property and shall ensure that ultimate disposition is by the most

economical and practical method possible. The following methods

should be considered:

a. The possibility of sale if the property were relotted

and readvertised.

b. The possibility of donation under the criteria of

paragraph C, Chapter XV, Abandonment or Destruction: and

paragraph N2, Chapter XVI, Sale, Abandonment, or

Destruction of Foreign Excess Personal Property.

c. The disposal of property in a sanitary fill. A small

volume of some types of property may be disposed of through

refuse and trash collection service under the existing ISA.

d. Service contract. This method should be applied asa

last resort when all other alternatives are not possible or are not

economically practicable.

E. TURN IN CRITERIA.

1. Generating activities shall comply with their Service/

Agency retention and disposal policy and procedures when

processing property to the DRMO.

84a

Appendix H

2. Usable property shall be turned in as individual line

items unless authorized for batch lotting as shown below. The

objective of batch lotting is to reduce the cost, physical handling,

and administrative time needed to process the item through

disposal. Generating activities are encouraged to batch lot low

dollar value property for turn in on a single DTID based upon the

following criteria:

a. All Munitions List and Strategic List Items that must

be demilitarized are excluded.

b. Property that needs special handling as defined in

Chapter VIII, Property Requiring Special Processing, is

excluded.

c. Items designated as critical by the wholesale inventory

manager are excluded.

d. /tems determined to be pilferable or sensitive are

excluded.

e. Hazardous property may not be batch lotted.

f. Batch lotted property shall be collected in a container

no larger than a standard triwall container or box pallet in one of

the following options.

(1) Option 1 — Collect by FSG, line item value of

$50 or less. Each container shall bear only those items of the

same FSC. The extended dollar value (quantity times unit price)

for any individual line item may not exceed $50. This is the most

desirable method of batching. Retention of FSC integrity through

85a

Appendix H

planned stock picking will be beneficial during later DRMO

processing by improving reutilization, transfer, and donation,

or increasing sale proceeds.

(2) Option 2 — Collect by FSG, line item value of

$35 or less. Each container shall bear only those iteins of the

same FSG. The extended dollar value (quantity times unit price)

for any individual line item may not exceed $35. This option is

less desirable than Option I for DRMO processing. However,

generating activities may use this option when storage problems

or processing constraints override reutilization, transfer,

donation, and sale considerations.

(3) Option 3 — Collect without regard to FSC or

FSG, line item value of $20 or less. Extended dollar value (quantity

times unit price) for any individual line item may not exceed $20.

This is the least desirable option because of the potential for

reduced reutilization, transfer, donation, or sale proceeds due

to the nonhomogeneous nature of the items in the batch lot. As in

Option 2, however, operational conditions may dictate selection

of this option. NOTE: Because of special processing needs,

eligible Navy Supply Operations Assistance Program (SOAP)

and Intrafleet supply Support Operation Team (ISSOT) items

shall be batched under this option in individual ship lots regardless

of the number of containers/pallets involved.

3. Scrap.

a. The segregation of scrap materials is simplified and

the cost of handling is kept to a minimum if materials are separated

at the source. Commingling materials considerably reduces and,

in some instances, destroys the value of the scrap material. Asa

general policy, segregation of scrap will not be carried beyond

86a

Appendix H

the minimum point necessary to facilitate reutilization, transfer,

donation, or sale in the best interest of the U.S. Government.

Initial segregation of scrap is the responsibility of the generating

unit. The DRMO shall furnish guidance, and where feasible,

containers to the scrap generator at the source. The activity

collecting the scrap or waste shall maintain segregation to the

delivery point. (See DoD 4160.21-H, Defense Scrap Yard

Handbook.)

b. Scrap material generated from explosive and

incendiary items and chemical ammunition is considered to be

dangerous property and may not be commingled with other types

or property. This property shall be processed in accordance with

DoD 4160.21-M-1, and paragraph B35. Chapter VIII. Property

Requiring Special Processing.

4. Delivery toa DRMO.

a. The responsibility for expenses incurred in

reutilization, transfer, donation, and sale of excess/surplus

personal property is defined as the point at which accountability

is transferred from the generating activity toa DRMO/SDPDA.

All expenses incurred before acceptance of accountability by a

DRMO/SDPDA shall be borne by the generating activity.

Conversely, all expenses incurred after acceptance of

accountability by a DRMO shall be borne by DLA and expenses

for SDPDAs shall be borne by the respective Military Service.

On a case-by-case basis exceptions to this policy may be

negotiated at the department level. This policy applies to all

generations; such as, appropriation fund property,

nonappropriation funded property, industrial funded property,

contractor inventory property.

87a

Appendix H

b. Property capable of spilling or leaking may not be

transferred to a DRMO/SDPDA in open, broken, or leaking

containers.

F. DOCUMENTATION.

1. Property shall be turned in to the DRMO ona DD Form

1348-1, DTID, with DIC A5J. Guidance for preparation of a

DTID is contained in DoD 4000.25-1-M. appendix C46 (excerpt

at attachment 1, this chapter). (Specific guidelines for turn in of

hazardous property are found in paragraph D, Chapter LX.

Hazardous Property Management, this manual. The fallowing is

the minimum information that must be on the DTID.

a. Usable Property.

(1) NSN (when assigned to the item). When a valid

NSN is not known, the generating activity shall provide a

manufacturer identity code and part number, if known, or best

available identifying data, including FSG.

(2) Nomenclature (noun name asa minimum).

(3) Unit of issue.

(4) Quantity.

(5) Unit acquisition cost.

(6) Supply condition code. (See attachment 2, this

chapter.)

88a

Appendix H

(7) Document number. (Must contain the DoDAAC

in the first six positions, or other identification of the generating

activity when a DoDAAC has not been assigned. Where a

DoDAAC has not been assigned, the first position must be a

MILSTRIP Service assigned code (alpha) and positions 7 through

14 must include the Julian date and a serial number). Unless

otherwise authorized by the ICP, the document number must

be that of the supply, maintenance, or using activity turning

the property in to the DRMO. The DRMO shall reject any

proposed turn in where the intermediate activity changes the

original consignee to that of the DRMO.

(8) Category of property (such as foreign equity,

MAP), and if proceeds are to be deposited to other than the

General Fund Receipt Account, the reimbursement data to include

the account to be credited.

(9) Weight and cube; estimated, if unknown.

(10) Value and list of component parts that have been

removed from major end items of equipment or a copy of the

Limited Technical Inspection (LTI) form showing the nature

and extent of repair required.

(11) Demilitarization code.

(12) Reclamation requirements data, if applicable.

(13) Disposal authority code.

(14) Precious metals indicator code.

89a

Appendix H

b. Usable property may be batch lotted by the generating

activity. Based upon the option selected in paragraph E2, this

chapter, the following minimum data must be included on the

DTID for each lot.

(1) FSC/FSG followed by the word BATCH. When

Option 3 is selected, the NSN field must be blank.

(2) Document numbers. (See subparagraph Fla(7).)

(3) Quantity is optional. If blank, DRMO shall

estimate.

(4) Demilitarization code reflecting the strongest

demilitarization code of all items in the batch,

(5) Total acquisition value of the lot is optional. If

blank, DRMO shall use $2 as the average unit cost per pound.

(6) Shipping point. DoDAAC, or activity in-the-clear

address.

(7) Ship to DRMO, DoDAAC, or activity in-the-clear

address.

(8) Certification as follows: “I certify that this lot is

in compliance with current disposal policy” followed by the date,

signature, and printed or typed name of the certifying individual.

c. Scrap and waste.

(1) Basic material content.

_

90a

Appendix H

(2) Estimated weight.

(3) If proceeds are to be deposited to other than the

General Fund Receipt Account, the reimbursement data to include

the account to be credited (such as. Industrial Fund,

Nonappropriated Fund).

(4) Document number.

(5) Precious metals indicator code.

2. A minimum of four legible copies of the DTID must be

furnished the DRMO and accompany the property. The DRMO

shall return to the turn in activity within 5 working days from

receipt of property one copy of the DTID as a valid receipt

document. Five legible copies of the DTID must be furnished to

the DRMO if the turn in activity desires an interim “proof or

delivery” copy of the document. This copy may not be used to

adjust accounting records.

G. RECEIPT OF PROPERTY. This paragraph gives uniform

procedures for the receipt, handling, and storage of excess,

surplus, and foreign excess property.

1. One of the most critical and important stages in the flow

of property through the reutilization and marketing system is

when the property is initially received at the DRMO. The DRMOs

have the responsibility for the receipt, classification, processing,

safeguarding, storing, and shipping of all property received. This

includes property to be accounted for as items, and properly

segrerated scrap and waste having a reutilization, transfer,

donation, or sale value, and material destined for ultimate disposal.

The DRMO shall give assistance, as requested, in tracing DTIDs

ee ee eT

9la

Appendix H

when an intransit control followup has been received by the

generating or shipping activity. The DRMO must maintain Close

liaison with the generating activities to ensure that:

a. Scheduling is done taking into consideration the

DRMO’'s receiving capability and the volume of property to be

turned in.

b. Assistance is given to the generating activity when

needed to assure proper segregation of scrap and waste material

before turn in to the DRMO. If the quantities generated, market

conditions, or local trade practices warrant further segregation

shall be made as outlined in DoD 4160.21-H.

c. Local DRMO developed written guidance on disposal

turn ins is given to generating activities. Such guidance shall be

of an assistance type rather than directive in nature.

d. Inspection of the property is performed in place if it

is more advantageous to do so because of the size, weight, or

category of the property. Excess property not transferred

physically to the DRMO shall be tagged with a status tag

indicating the Federal Condition Code and DRMO

accountability.

e. Property classified as “condemned” by the generating

activity is processed for disposition in accordance with the

circumstances on which the classification is based. Material

“condemned” solely due to its degree of unserviceability or age

(shelf life) may have some use potential and should be processed

accordingly.

“a

92a

Appendix H

f. All property (except unsalable), scrap, and refuse and

trash with a reutilization, transfer, donation, or sale value are

being processed as set forth in this manual.

g. No salable property or refuse or trash with

reutilizaton, transfer, donation, or sale potential is being disposed

of by dumping in landfills.

(1) DRMOs shall apprise generating activities of their

(the generating activities’) responsibility to assure that all salable

material is turned in to the DRMO.

(2) Ifthe DRMO has knowledge that salable material

is being dumped in a sanitary fill, the DRMO chief shall initiate a

letter to the installation commander regarding the matter.

h. Property has received proper protection and care in

handling before it is transferred to a DRMO, preventing damage

from unnecessary exposure to the elements. Property turned in

as condemned may still be usable and its preservation may

benefit the reutilization and marketing programs. Instances of

apparent improper handling of Government property shall be

brought to the attention of the generating activity or installation

commander for remedial action. Recurrent instances of improper

care or handling of property shall be documented for referral to

HQ DLA and the Military Services/Defense Agencies.

2. The receiving and storage segment of the DRAM shall:

a. Assure that all property, including scrap, turned in

to the DRMO is accompanied by the needed number of copies

of the DTID properly prepared (see paragraph F2) and determine

ii staan aia ac ae ccceceaat

93a

Appendix H

that special handling has been given the items covered in Chapter

VIII. Property Requiring Special Processing.

b. Inspect property upon receipt. Inspection shall consist

of verifying property description and quantity and assuring that a

valid Supply Condition Code (attachment 2, this chapter) was

assigned by the generating activity. A Disposal Condition Code

(attachment 3, this chapter) shall be assigned by the DRMO to

form a two-digit Federal Condition Code that must be perpetuated

throughout the screening process (examples: A2, D9, G7).

Inspection checks shall be made to give reasonable assurance

that all information relating to the property is factual. Jf a

discrepancy in a shipment exists, one signed copy of the DTID

noting the discrepancy shall be sent to the generating activity

within 5 working days from receipt. The generating activity shall

initiate action to resolve the discrepancy upon receipt of the

receipt copy of the DTID. If the discrepancy is not resolved

within a reasonable period of time, the shipment shall be returned.

c. Property received in place by the DRMO is tagged

for identification purposes. (Property should be consolidated.

physically in a designated area, but may be left in place if this

action is determined locally to be justified for economic or other

valid reasons.) The activity having physical custody shall be

responsible for care and protection of this property until it is

disposed of or moved to the DRMO.

3. Batch lotting of property may also be accomplished by a

DRMO after receipt in accordance with internal operating

guidance. When this action is taken, the DRMO is responsible

for ensuring a receipt copy is returned for each DTID received

and that assistance is provided in tracing any DTID for which the

receipt copy has not been received by the generating activity.

94a

Appendix H

4. Based upon requests from inventory managers for visibility

through FES of low dollar value items that are in short supply,

long procurement lead time, out of production, and for other

reasons. DRMS may authorize an exception to the FSG/FSC

lotting procedure at the DRMO.

5. Generating Activities.

a. Generating activities shall reflect on the DTID all

property that must be identified for special processing, such as

shelf life, automation equipment, redistributable MAP, hazardous

material. (see Chapter VIII, Property Requiring Special

Processing; and Chapter IX, Hazardous Property Management),

as well as property which is authorized for direct reimbursement

to a deposit fund account other than the General Fund Receipt

Account 97R2651 (such as, nonappropriated fund, industrial

fund). DTIDs without special processing or direct reimbursement

data shall be processed as normal DoD excess property. 2

b. Military activities, such as National Guard units,

ROTC units, Reserve units (for U.S. Army, this includes

supporting activities that service the Reserve units), and recruiting

offices generating Military Service excess or surplus property

which do not have an assigned DRMO or agent, shall physically

turn in their property to the nearest DRMO when economical and

feasible. However, arrangements must be made with the DRMO

to include placing into effect an ISA, when necessary, to assure

that adequate facilities and resources exist or can be made available

to the DRMO to process the additional workload. Where it is

impractical or uneconomical to move the property, it shall be

referred to the nearest DRMO, which in turn shall offer the

property for screening and include these items in its own listing

when referred to a DRMR, specifying the name and address of

|

ee a ee

95a

Appendix H

the agency at which the property is located. Exception to the

above is authorized where activities are attached to a specific

installation for logistical support and delivery of property to the

installation is more economical.

c. The DoD, as a service to the DoT, shall process U.S.

Coast Guard excess and surplus property located in the United

States, American Samoa, Guam, Puerto Rico, TTPI, and the

Virgin Islands. The principles outlined below shall apply in these

processing actions (See paragraph K8, Chapter XIV, Sales, for

sale proceeds accounting instructions for Coast Guard owned

property. )

(1) Coastal Guard excess personal property (except

property located in the U.S. Coast Guard Yard, Curtis Bay,

Maryland) shall be transferred to the nearest DRMO after internal

Coast Guard screening is complete. If size or economics prevent

physical transfer of property, the Coast Guard shall transfer

accountability but retain custodial responsibility for the property.

(2) The Coast Guard district office or the unit having

custody of excess property shall advise the DRMO of a proposed

transfer of excess property. No shipments shall be made to

DRMOs without notification unless local arrangements to the

contrary have been made.

(3) Certain items, such as aircraft, vessels and motor

vehicles, may be reported by the Coast Guard direct to the DRMR

if reutilization, transfer, and donation screening, as well as

demilitarization, has been completed. Where this option is

exercised, the Coast Guard shall do those functions relating to

sales (descriptions, releases, etc.).

ima a ai a a ii

96a

Appendix H

(4) Documents covering turn in of property to

DRMOs shall contain the information listed in paragraph F.

Transportation of material to the DRMO shall be arranged for by

the Coast Guard.

(5) Reimbursement may not be made to the Coast

Guard for excess property physically transferred to a DRMO.

(6) Requests for onsite inspection or shipment of

property retained in Coast Guard Custody shall be mutually agreed

to by, the DRMO and the Coast Guard custodian.

(7) Classified property or property that must be

demilitarized (except aircraft) may not be transferred to DRMOs

as items or as scrap. Processing of this property for disposal

shall be the responsibility of the Coast Guard. Coast Guard aircraft

may be transferred to the Aerospace Maintenance and

Regeneration Center. Davis-Nionthan Air Force Base. Arizona,

if agreed to in an ISA between the Coast Guard and the Air

Force.

(8) Coast Guard excess property not transferred

physically toa DRMO and under going reutilization, transfer,

and donation screening, may not be withdrawn for Coast Guard

use without authorization. Requests for withdrawal shall be

submitted to the DRMO for necessary action.

H. STATUS OF PROPERTY. Property whether usable or scrap,

which is transferred to the DRMO, must be identified Clearly as

to its current status from the time of receipt until final removal.

By clearly identifying the status of property, confusion on the

part of reutilization and donation screeners and inspecting bidders

should be minimized, if not eliminated. Storage areas shall be set

aside and the status of the property shall be shown.

97a

Appendix H

CHAPTER *

ATTACHMENT I

DISPOSAL TURN IN DOCUMENT ENTRIES

DD Form 1348-1, DoD Single Line Item Release/Receipt

Document (Ref. DoD 4000.25-1 -M)

Item Record Position Identification or

Source of Data

Document 1-3 Perpetuate from

Identifier source document.

Code For locally

determined

excesses generated

at base, post,

camp, or station,

assign a DI code

as determined by

the Service/ Agency

procedures.

Routing 4-6 The RI Code of the

Identifier shipping activity or

Code leave blank when

shipping activity is

not assigned a RI

Code.

Media and 7 Leave blank.

Status Code

98a

Appendix H

Item Record Position Identification or

Source of Data

Stock or Part 8-22 The stock or part

Number number being

turned in. For

subsistence items

enter the Type of

Pack Code in rp

21.

Unit of Issue 23-24 The unit of issue of

the stock or part

number being

turned in.

Quantity 25-29 The quantity being

turned in to

DRMO.

Document 30-43 Perpetuate from

Number source document.

This cannot be

the same

document

number that was

used to receive the

materiel. For

locally

determined

excesses

generated at

base, post, camp,

Item

Suffix Code

Supplementary

Address

Signal Code

Blank

Distribution

Code

Retention

Quantity

Precious

Metals Indicator

Code

99a

Appendix H

Record Position

44

45-50

Identification or

Source of Data

or Station, assign

a document

number as

determined by

Service/Agency

procedures.

Leave blank.

Enter DoDAAC of

predesignated

cosignee DRMO.

Leave blank.

Leave blank.

Leave blank.

Enter the quantity

to be retained in

inventory or

leave blank.

Enter applicable

code (DoD

4000.15-1-M).

100a

Appendix H

Item Record Position Identification or

Source of Data

APDE 63 Enter applicable

Identification Code Identification

code

(DoD 4000.25-1-

M, appe

Disposal 64 Enter applicable

Authority Disposal

Code Authority Code

see 4000.25-1-M,

appendix B26).

Demilitarization 65 Code assigned as

Code required by DoD

4160.21-M-].

When

demilitarization

has been

accomplished by

transfer to a

DRMO, the

demilitarization

certificate

as required by

DoD

4160.21-M-1

must be reflected

blocks W-Y)

Pa se ct 9.0

Item

Reclamation

Code

Routing

Identifier

Code

Ownership

Supply

Condition

Code

Management

10la

Appendix H

Record Position Identification or

Source of Data

66 Enter Code “Y” if

reclamation was

performed prior to

release to DRMO.

Enter Code “R” if

reclamation is to

be performed after

turn in to DRMO.

Enter Code “N” if

reclamation is not

required.

67-69 Perpetuate from

Delivery Release

Order (DRO)

70 Enter applicable

code or leave

blank.

71 Enter applicable

code (see

MILSTRIP,

appendix B13)

72 Perpetuate from

source document

or leave biank.

Item

Screening

Code

Unit Price

Block(s)

A

102a

Appendix H

Record Position Identification or

Source of Data

73 Leave blank.

74-80 Enter the unit price

for the NSN/part

number shown in

rp 8-22.

Entries

The shipping point identified by name

and DoDAAC.

The cosignee DRMO by DoDAAC name,

and address. This will be the

designated consignee DRMO and shall

be entered by the generating activity.

Insert HM, if turn in is hazardous

material or HW, if turn in is hazardous

waste.

The category identifying the property as

requiring special handling by disposal.

These categories are not readily

identified by individual nomenclature

and must be entered “in the clear” in

this block, The listing below is an

example of the various categories.

Block(s)

103a

Appendix H

Entries

1. Contractor Inventerv

2. Foreign Equity Property

3. Industrial Fund Property

4. Radioactive Materiel

5. Red Cross Property

6. Redistributable MAP Property

7. Shelf-Life Property

8. Nonappropriated Fund Property

9. Recycling Program Property

The extended value of the transaction.

The location from which materiel is to

be selected, if required by the shipper.

Coded cargo data, if required by the

shipper.

The number of units of issue in a

package, if required by the shipper.

The unit weight applicable to the unit of

issue, if required by the shipper.

Block(s)

J

104a

Appendix H

Entries

The unit cube applicable to the unit of

issue, if required by the shipper.

Uniform Freight Clarification, if required

by the shipper.

National Motor Freight Classification, if

required by the shipper.

Freight rate, if required by the shipper.

For internal use.

Date of document preparation, if

required by the shipper.

For internal use.

The quantity actually (transferred to

DRMO, if different from rp 25-29.

For internal use.

The quantity actually receipted for by the

DRMO.

Self-explanatory.

Enter mode of shipment code

(MILSTAMP, appendix B6), if required

by the shipper.

Block(s)

W,Y

1 thru 6

7 thru 10

AA

BB-EE

105a

Appendix H

Entries

1. For non-NSN items, enter as much

descriptive information as possible in

blocks “W” and “Y”, and/or attach

additional documentation with these

data if needed.

2. For NSN items, blocks “W”and “Y”

shall be used for internal use and block

“X” may contain the noun.

3. Specified additive data or certification

required from the generating source for

specific types of property should be

entered in this space or attached.

Skipper use.

DRMO use.

Enter word “NAF” (for nonappropriated

fund weapons).

Enter appropriation citation to be

credited with the proceeds from sale or

transfer when reimbursement to a

specific fund other than the DLA

Deposit Fund Account is authorized.

Leave blank if sale proceeds are to be

deposited to the DLA Deposit Fund

Account.

106a

Appendix H

Block(s) Entries

FF-GG DRMO use.

11] thru 15 For optional use by the DRMO.

Code

A

107a

Appendix H

CHAPTER VI

ATTACHMENT 2

SUPPLY CONDITION CODES

Title

Serviceable

(Issuable Without

Qualification)

Serviceable

(Issuable Without

Qualification)

Serviceable

(Priority Issue)

Definition

New, used, repaired, or

reconditioned material which is

serviceable and issuable to all

customers without limitation or

restriction. Includes material with

more than 6 months’ shelf life

remaining.

New, used, repaired, or

reconditioned material which is

serviceable issuable for its intended

purpose but which is restricted from

issue to specific units, activities or

geographical areas by reason of its

limited usefulness or short service

life expectancy. Includes material

with 3 through 6 months’ shelf life

remaining.

Items which are serviceable and

issuable to selected customers,

but which must be issued before

Condition A and B material to

avoid loss cr as a usable asset.

Includes materials with less than

3 months shelf life remaining.

Code

D

108a

Appendix H

Title Definition

Serviceable Serviceable material which

(Test/Modification) requires’ test, alteration,

Unserviceable

(Limited Restoration)

Unserviceable

(Reparable)

Unserviceable

(Incomplete)

Unserviceable

(Condemned)

modification, conversion, or

disassembly. (This does not

include items which must be

inspected or tested immediately

prior to issue.)

Material which involves only

limited expense or effort to restore

to serviceable condition and which

is accomplished in the storage

activity where the stock is located.

Economically reparable material

which requires repair, overhaul, or

reconditioning (includes reparable

items which are radioactively

contaminated).

Material requiring additional

parts or components to complete

the end item prior to issue.

Material which has been

determined to be unservicable and

does not meet repair criteria

(includes condemned items which

are radioactively contaminated).

109a

Appendix H

Code Title Definition

S Unserviceable Material that has no value except

(Scrap) for its basic material content. No

stock will be recorded as on hand

in Condition Code S. This code

is used only on transactions

involving shipments to DRMOs.

Material may not be transferred to

Condition Code S prior to turn in

to DRMOs if material is recorded

in Condition Code A through H

at the time material is determined

excess. Material identified by NSN

may not be identified by this

Condition Code.

NOTE: For acomplete listing of Supply Condition Codes

(including those codes not used in reutilization and marketing)

see DoD 4000.25-2-M. Military Standard Transaction

Reporting and Accountin g Procedures (MILSTRAP).

110a

Appendix H

CHAPTER VI

ATTACHMENT 3

DISPOSAL CONDITION CODES

Code Title

l Unused-good

2 Unused-fair

3 Unused-poor

4 Used-good

5 Used-fair

Definition

Unused property that is usable without

repairs and _ identical or

interchangeable with new items from

normal supply source.

Unused property that is usable without

repairs, but is deteriorated or

damaged to the extent that utility is

somewhat impaired.

Unused property that is usable without

repairs, but is considerably

deteriorated or damaged. Enough

utility remains to classify the property

better than salvage.

Used property that is usable without

repairs and most of its useful life

remains.

Used property that is usable without

repair, but is somewhat worn or

deteriorated and may soon require

repairs.

Code Title

6 Used-poor

7 Repairs

required-good

8 Repairs

required-fair

y) Repairs

required-poor

X Salvage

S Scrap

llla

Appendix H

Definition

Used property that may be used

without repairs, but is considerably

worn or deteriorated to the degree that

remaining utility is limited or major

repairs will soon be required.

Required repairs are minor and

should not exceed 15 percent of

original acquisition cost.

Required repairs are considerable

and are estimated to range from 16

percent to 40 percent of original

acquisition cost.

Required repairs are major because

the property is badly damaged, worn,

or deteriorated, and are estimated to

range from 41 percent to 65 percent

of original acquisition cost.

Property has some value in excess or

its basic material content, but repair

or rehabilitation to use for the

originally intended purpose is clearly

impractical. Repair for any use would

exceed 65 percent of the original

acquisition cost.

Material that has no value except for

its basic material content.

lil2a

Appendix H

CHAPTER VII

ACCOUNTING FOR PROPERTY IN

REUTILIZATION AND MARKETING

A. GENERAL.

1. Documentation. Excess, surplus, or foreign excess

property turned in or reported to the DRMO/SDPDA shall be

accompanied by the specified number of copies of the DTID.

Before accepting the material, the receiving segment of the DRMO/

SDPDA shall ensure that the document is properly prepared and

that the descriptions and quantities listed are accurate. In all cases,

records shall be maintained so that an item of property can be

traced from receipt to disposal and make available the necessary

data for the quarterly report prescribed in Chapter XVIII, Reports

and Forms/Formats.

2. Segregation and Classification.

a. Property reutilization and marketing records must be

maintained in sufficient detail to support the reimbursement

accounting procedures set forth in Chapter XIV Sales. Material

may be combined in sale lots regardless of the original financing

appropriation or stock fund source from which the material was

transferred except for: Foreign equity property; nonappropriated

fund property; U.S. Coast Guard aircraft; vessels, boats, and

vehicles; and property located at the Coast Guard Yard, Curtis

Bay, Maryland. The identity of these exceptions must be

maintained throughout the system to ensure reimbursement to

the local or departmental account as designated by the Military

Services/Defense Agencies. Industrial fund scrap may be

physically combined with other scrap when considered

ll3a

Appendix H

advantageous; however, accounting records shall be maintained

to substantiate prorating of the proceeds. When stock fund

property is transferred to the DRMO, the identity of the property

as stock fund need not be maintained in property reutilization

and marketing records. Such property may be grouped with

other types of property when lotting for sale.

b. When end items are turned in to the DRMO as scrap

and the end items are reclaimed or disassembled for the usable

components having further reutilization, transfer, donation, or

sale value, the records of the DRMO shall be adjusted to reflect

the acquisition cost (estimated, if not known) of the components

removed.

c. When disposal condition code X (salvage) property

which need not be demilitarized is determined by the DRMO to

have scrap value only, it may be classified and processed as

scrap upon receipt.

d. Repair parts or components of combat vehicles and

equipment, and weapons which, in the opinion of the DRMO,

have no commercial value other than for basic material content,

may be downgraded to scrap after the ESD and completion of

any required demilitarization.

e. When an item of specific nomenclature has been offered

on a competitive sale and no bid has been received, or bids

received are less than the scrap value of the item, the property

may then be reoffered for scrap and the records adjusted

accordingly. Similar items later received within a 12-month period,

may be considered as scrap for sale purposes, after screening.

When property is offered as an item and the bid price is equivalent

tu scrap value, it may be accepted for that sale and the DRMR

lida

Appendix H

shall request the DRMOs within its geographical area to submit

after screening, future generations of such property as scrap for

sale purposes. This action is acceptable provided it is taken within

a 12-month period after the previous sale offering (of the item)

and a review by the DRMR or DRMO of such property shows

that marketability remains unchanged.

f. When obsolete printed materials are turned in to the

DRMO as usable items with acquisition value, and it is determined

that they have no reutilization, transfer, or donation potential

and only scrap market value, these items shall be expended to

scrap upon receipt.

3. Scrap Accounting. Estimated weight may be used for

receiving scrap if scales are not available or if weighing is

impractical. The degree of accuracy considered acceptable is 25

percent for property sold by the ton, and 10 percent for property

sold by the pound. Overages and shortages discovered on release

of property which exceed allowable tolerances shall be adjusted.

B. DISCREPANCIES AND ADJUSTMENTS.

1. General Discrepancies in item identification, quantity,

condition, or price data which are disclosed before acceptance

or accountability shall be resolved and corrected during the receipt

process. Any discrepancies which are discovered after acceptance

of accountability; that is, differences between recorded balances

and quantities on hand shall be processed as inventory adjustment

actions. The procedures for processing inventory adjustment

actions are contained in DoD Instruction 4140.35. Physical

Inventory Control for DoD Supply System Material and DoD

4000. 25-2-M.

l15a

Appendix H

2. Property not in DRMO Custody. When property for which

the DRMO has accountability but has not assumed custodial

responsibility becomes lost, damaged, or destroyed, the custodial

activity having responsibility for the property shall investigate

the circumstances surrounding the discrepancy. The DRMO

shall provide the investigating custodial activity with requested

item identification number such as NSN and DTID number or

copies of documentation pertinent to the item lost. damaged, or

destroyed. If the custodial activity investigation determines the

discrepancy is due to a record keeping error, it shall inform the

DRMO which shall prepare the proper inventory adjustment

document as provided in subparagraph B1. If the discrepancy

is not due to a record keeping error, the custodial activity having

responsibility for the property lost, damaged, or destroyed must

prepare a DD Form 200, Report of Survey, according to criteria

contained in DoD 7200.10-M, Department of Defense

Accounting and Reporting of Government Property Lost,

Damaged, or Destroyed. The responsible custodial activity must

provide the DRMO a completed copy of the DD Form 200 as

Supportive documentation for the DRMO to adjust the

discrepancy off its accountable records.

C. PHYSICAL INVENTORY AND LOCATION SURVEY.

Usable property which remains as a debit balance on the DRMO

account in excess of 12 months shall be inventoried not later

than the 13th month of accountability and reviewed monthly

thereafter. Discrepancies disclosed by inventories shall be adjusted

(see paragraph B1).

D. AUDITS. When it is desired to obtain or confirm data on

material transferred to or from disposal accounts, and this involves

crossing command lines, the policy in DoD Directive 7600.2,

Audit Policies, shall govern. This directive is further implemented

1l6a

Appendix H

by the Military Services and DLA in AR 36-5, Processing Internal

and External Audit Reports and Followup on Findings and

Recommendations; SECNAVIST 7510.7C, Department of the

Navy Audit Manual for Management; AFR 175-4, Internal

Auditing in the Air Force; and DLAR 7000. /3, Internal Review,

respectively.

d. Items of clothing and individual! equipment may not

be mutilated by culling, painting, tearing etc. to prevent reentry

into the supply system and to preserve the sale value, items of

clothing and individual equipment may be marked by the

generating activity when markings are required by the Military

Service regulation before turn in to a DRMO. Such markings

shall be limited to methods specified in attachment 6, this

chapter.

17. Commercial Recovery of Chemical Materials.

a. When it is uneconomical to process chem

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