Federal Acquisition Regulation; Government Property

SUMMARY: The Civilian Agency Acquisition Council and the Defense

Acquisition Regulations Council are proposing to amend the Federal

Acquisition Regulation (FAR) to simplify procedures and eliminate

requirements related to the management and disposition of Government

property in the possession of contractors. This regulatory action was

not subject to Office of Management and Budget review under Executive

Order 12866, dated September 30, 1993. This is not a major rule under 5

U.S.C. 804.

DATES: Comments on the proposed rule should be submitted in writing to

the FAR Secretariat at the address shown below on or before August 1,

1997 to be considered in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to:

General Services Administration, FAR Secretariat (MVR), 1800 F Street,

NW, Room 4035, Washington, DC 20405.

E-mail comments submitted over Internet should be addressed to:

[email protected]. Please cite FAR case 95-013 in all

correspondence related to this case.

FOR FURTHER INFORMATION CONTACT: Ms. Angelena Moy (703) 695-1097/1098

(E-Mail: [email protected]), or Ms. Linda Klein at (202) 501-3775 for

information about content or clarification. For information pertaining

to status or publication schedules, contact the FAR Secretariat, Room

4035, GS Building, Washington, DC 20405 on (202) 501-4755. Please cite

FAR case 95-013.

SUPPLEMENTARY INFORMATION:

A. Background

On September 16, 1994, the Director, Defense Procurement, published

in the Federal Register a notice of public hearings and advance notice

of rulemaking announcing an initiative to rewrite the Government

property rules in Part 45 of the Federal Acquisition Regulation (FAR)

and requesting public comments or suggestions. Approximately 500

comments covering a broad range of property related topics were

received from 22 entities. The Director, Defense Procurement, convened

an interagency team to assess the comments and suggestions, recommend

process improvements, identify overly burdensome Government

requirements, and simplify the Government property rules. The team

included representatives from the Departments of Defense, Energy, and

Transportation, the Environmental Protection Agency, the National

Institutes of Health, and the National Aeronautics and Space

Administration. Additional public participation in the rulemaking

process was obtained through a series of public meetings conducted

between November 1994 and October 1996. Each meeting was publicized in

the Federal Register and public suggestions or comments were invited.

The team's work products also were posted on the Internet

(www.acq.osd.mil/dp/mpi) to provide additional opportunities for

Government and public sector participation.

This proposed rule replaces FAR Part 45 and FAR 52.245 and makes

conforming changes to FAR Parts 4, 7, 8, 15, 16, 17, 22, 27, 28, 31,

32, 35, 42, 43, 44, 49, 51, 52, and 53. The significant changes to the

existing rule are--

1. Contractor requirements. Contractor requirements have been

simplified, removed from FAR Part 45, and consolidated in the

appropriate contract clauses at FAR 52.245.

2. Definitions. Definitions are consolidated in FAR 52.245-3,

Government Property Control (three unique definitions are used in FAR

52.245-5, Rental Charges for Commercial Use), and the number of

definitions is reduced.

The following definitions are not used in the proposed contract

clauses and are deleted:

Accessory item

Auxiliary item

Common item

Contractor acquired property

Contractor inventory

Custodial records

Discrepancies incident to shipment

Facilities

Facility contract

Government production and research property

Individual item record

Line item

Nonseverable and Utility distribution system

Plant clearance

Plant clearance period

Plant equipment

Public body

Reportable property

Reporting Activity

Salvage

Screening completion date

Serviceable or usable property

Stock record

Summary record

Surplus property

Surplus Release Date (SRD)

The terms ``Equipment,'' ``Low value property,'' ``Preventive

maintenance,'' and ``Sensitive property'' are used in the proposed

clauses and consequently defined. Although not used in a contract

clause, a definition of ``Unique Federal property'' is added to clarify

an entry on proposed SF 1422, ``U.S. Government Property in the Custody

of Contractors.'' Other definitions have been modified to improve

clarity and achieve consistency. The definition of ``termination

inventory'' is modified and moved to FAR Part 49.

3. Contract clauses. The number of property clauses is reduced from

19 to 7. Most ``facilities'' clauses are eliminated. Facilities

contracts are contracts for services (see FAR 37.101) and unique FAR

coverage is, generally, unnecessary. FAR Subpart 45.4 of the proposed

rule addresses the limited circumstances under which property

management contracts might be appropriate. The corresponding contract

clause is FAR 52.245-6.

4. Process based property control system. The proposed rule moves

toward a process-based, rather than a requirements-driven, system.

5. Tracking, reporting, and inventorying low value property.

Tracking, reporting, and inventorying property whose acquisition cost

is $1,500 or less is not required until contract completion or

termination. Contractors may report the loss, theft, or destruction of,

or damage to, such property if the property is necessary for continued

contract performance. Industry representatives estimated that 80

percent of all property items have acquisition costs less than $1,500.

Although some industry representatives expressed a preference for a

higher threshold, the Government does not have and was not presented

with any data to support an increased threshold. The collection of

stratified data to permit a reasonable reassessment of the proposed

threshold is one function of

[[Page 30187]]

the property report discussed in paragraph 7.

6. Recordkeeping. The number of records contractors must maintain

is reduced from 19 to 7, and the content of each record has been

simplified and revised to reflect commercial practice more closely.

7. Reports. The proposed rule includes a standard form for

reporting property in a contractor's custody. An agency may require the

use of equivalent forms when, in the agency's opinion, the standard

form does not obtain information of a type or in a format necessary for

the agency's financial or property management obligations.

8. Special test equipment pre-acquisition screening. The

requirement currently in FAR 52.245-18(b) to obtain the contracting

officer's approval prior to fabricating or acquiring special test

equipment is eliminated.

9. Title. The clauses at FAR 52.216-7, 52.232-16, and 52.232-32

have been modified to clarify that the Government obtains title to

items acquired or fabricated by contractors only when the items' costs

are allocable as direct costs to Government contracts.

10. Right to title. The proposed rule contains a ``Special Tooling

and Special Test Equipment--Right to Title'' clause that provides the

Government the right, under fixed-price contracts, to take title to

special tooling or special test equipment items that are not contract

deliverables if the costs of the tooling or test equipment have been

allocated as direct costs to a contract. The clause requires the

Government to exercise that right within specified time periods and

permits equitable price adjustments if a contractor is required to

store property subsequent to the Governments assumption of title. Most

of the recordkeeping requirements in the current ``Special tooling''

clause, FAR 52.245-17, are eliminated.

11. Inventory schedules/Scrap lists. The five inventory schedules

currently identified in FAR 45.606-5 are replaced by one inventory

disposal schedule. The requirement to screen scrap for re-utilization

outside the contracting agency is eliminated. Contractors that have

Government approved scrap procedures may report scrap on scrap lists in

lieu of inventory disposal schedules and dispose of the scrap without

Government approval if the Government fails to provide disposition

instructions within 60 days following receipt of an acceptable scrap

list. Contractors similarly may dispose of scrap reported on an

inventory disposal schedule if the Government fails to provide

disposition instructions within 120 days following receipt of an

acceptable inventory disposal schedule.

12. Screening for disposal. The screening process has been

simplified and screening times shortened. The screening of scrap is not

required. The screening period for standard items is reduced from 90 to

56 days, the limited screening category is eliminated, screening of

special tooling is reduced from 60 to 25 days, the screening of special

test equipment that contains general purpose components is reduced from

90 to 56 days, and the screening period for special test equipment that

does not contain general purpose components is reduced from 60 to 25

days.

13. Rental charges. ``Rental Charges for Commercial Use'' clause,

FAR 52.245-5, replaces the ``Use and Charges'' clause at FAR 52.245-9.

The new clause replicates commercial practice by permitting rental

charges to be based upon appraisals, charges rent only for the time

property is actually used for commercial purposes, and permits

negotiation of alternate means for determining a reasonable rental

charge. These changes should reduce contractor rental costs and

facilitate the use of Government property for commercial purposes.

B. Regulatory Flexibility Act

An Initial Regulatory Flexibility Analysis (IRFA) has been prepared

and demonstrates that the rule will not have a significant economic

impact on a substantial number of small entities within the meaning of

the Regulatory Flexibility Act, 5 U.S.C. 601, et seq. The IFRA is

summarized as follows:

Government contractors have identified the management and

disposal of Government property in their possession as a significant

cost driver. Title II of the Federal Property and Administrative

Services Act of 1949, Public Law 152, as amended requires, in part,

executive agencies to account for Government property, determine

when such property is excess, and to dispose of excess Government

property promptly. Generally, for Government property in the

possession of contractors, the Government relies on the contractors'

property management systems to keep the records and generate the

reports needed to assure the Government's compliance with statutory

requirements. It is estimated that approximately 4,450 small

businesses have Government property in their possession. This

proposed rule substantially decreases the impact of the current FAR

provisions by simplifying recordkeeping requirements, reducing the

number of records to be maintained, reducing the number of reports

to be submitted, eliminating inventory and tracking requirements for

Government property that has an acquisition cost of $1,500 or less,

and replacing five inventory schedules with one inventory disposal

schedule. The small business impact is estimated to be $14,036,842

or $3,154 per small business Government contractor. That amount is

not considered significant because the rule applies only to those

small businesses who request Government property to perform a

contract or create Government property during contract performance

and contract prices compensate such contractors for their Government

property management activities. The records and reports required by

the proposed rule have been reduced to the minimum necessary to

assure compliance with the Government's statutory accountability and

disposal requirements.

The IRFA has been submitted to the Chief Counsel for Advocacy of

the Small Business Administration. A copy of the IRFA may be obtained

from the FAR Secretariat. Comments are invited from small businesses

and other interested parties. Comments from small entities concerning

the affected FAR parts also will be considered in accordance with

Section 610 of the Act. Such comments must be submitted separately and

cite FAR Case 95-013 in correspondence.

C. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (Pub. L. 104-13) applies

because the proposed rule imposes reporting or information collection

requirements, or collections of information from offerors, contractors

or members of the public which require the approval of the Office of

Management and Budget (OMB) under 44 U.S.C. 3501, et seq. A request for

review of the information collection requirements has been submitted to

the Office of Management and Budget under Section 3507(d) of the Act.

Review of the information collection requirements has been

requested as a new clearance, ``FAR Part 45, Government Property,''

which will replace the present FAR requirements currently approved by

the Office of Management and Budget (OMB) under OMB Control Number

9000-0075.

The information collection includes the requirements relating to

FAR Part 45 and 52.245.

a. FAR 52.245-3(f) and Alternate I, paragraph (f) to that clause,

require contractors to maintain records of Government property.

b. FAR 52.245-3(h) requires contractors to conduct property

inventories. The frequency and method used are negotiable.

c. FAR 52.245-1(f)(4) and Alternate I, paragraph (f)(7), FAR

52.245-4(f)(7), and FAR 52.245-6(i)(6) require contractors to notify

the Government promptly following the loss, theft, or destruction of,

or damage to, Government property.

d. FAR 52.245-1(f)(5) and Alternate I, paragraph (f)(8), FAR

52.245-4(f)(8), and

[[Page 30188]]

FAR 52.245-6(i)(7) require contractors to notify the Government upon

contract completion of low value property (<$1,500 per item) that has

been lost, stolen, damaged, or destroyed.

e. FAR 52.245-1(j)(3) and (j)(4), FAR 52.245-4(h)(1)(iii) and

(h)(4), and FAR 52.245-6(j) and (j)(4) require contractors to report

excess property on inventory disposal schedules.

f. FAR 52.245-2(c) requires contractors that have fixed-price

contracts to identify and report excess special tooling and special

test equipment to which the Government has a contractual right to take

title.

g. FAR 52.245-3(g)(1) requires contractors to submit an annual

report, by contract, of Government property in their possession.

h. FAR 52.245-3(g)(2) and Alternate I, paragraph (g)(1), require

contractors to report the receipt of Government property intended for

other persons.

The information will be used to control and account for Government-

owned property in the possession of contractors.

Annual Reporting Burden: Public reporting burden for this

collection of information is estimated to average .377 hours per

response, including the time for reviewing instruction, searching

existing data sources, gathering and maintaining the data needed, and

completing and reviewing the collection of information.

The annual reporting burden is estimated as follows: Respondents:

6,850; Responses per respondent: 1,217; Total annual responses:

8,339,472; Preparation hours per responses: .377; and Total response

burden hours: 3,146,848.

D. Request for Comments Regarding Paperwork Burden

Members of the public are invited to comment on the recordkeeping

and information collection requirements and estimates set forth above.

Please send comments to: Office of Information and Regulatory Affairs,

Office of Management and Budget, Attention: Mr. Peter N. Weiss, FAR

Desk Officer, New Executive Office Building, Room 10102, 725 17th

Street, NW, Washington, DC 20503.

Also send a copy of any comments to the FAR Secretariat at the

address shown under ADDDRESSES. Please cite FAR Case 95-013--Government

Property, in all correspondence related to this estimate.

List of Subjects in 48 CFR Parts 4, 7, 8, 15, 16, 17, 22, 27, 28,

31, 32, 35, 42, 43, 44, 45, 49, 51, 52, and 53

Government procurement.

Dated: May 27, 1997.

Edward C. Loeb,

Director, Federal Acquisition Policy Division.

Therefore, it is proposed that 48 CFR Parts 4, 7, 8, 15, 16, 17,

22, 27, 28, 31, 32, 35, 42, 43, 44, 45, 49, 51, 52, and 53 be amended

as set forth below:

1. The authority citation for 48 CFR Parts 4, 7, 8, 15, 16, 17, 22,

27, 28, 31, 32, 35, 42, 43, 44, 49, 51, 52, and 53 continues to read as

follows:

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

PART 4--ADMINISTRATIVE MATTERS

4.804-4 [Amended]

2. Section 4.804-4 is amended in the introductory text of paragraph

(b) by removing the word ``Facilities'' and inserting ``Property

management'' in its place.

PART 7--ACQUISITION PLANNING

3. Section 7.105(b)(14) is revised to read as follows:

7.105 Contents of written acquisition plans.

* * * * *

(b) * * *

(14) Government furnished property. Identify any property to be

furnished to contractors and discuss any associated considerations,

such as the property's availability and compliance with the

requirements of 45.201.

* * * * *

7.501 [Amended]

4. Section 7.501 is amended in the second sentence of paragraph (b)

by removing ``facilities operations and maintenance'' and inserting

``property management'' in its place.

PART 8--REQUIRED SOURCES OF SUPPLIES AND SERVICES

5. Section 8.101 is revised to read as follows:

8.101 Definition.

Excess personal property means any personal property (see 52.245-3)

under the control of a Federal agency that the agency head or a

designee determines is not required for its needs or for the discharge

of its responsibilities.

PART 15--CONTRACTING BY NEGOTIATION

6. Section 15.608 is amended by adding paragraph (a)(4) to read as

follows:

15.608 Proposed evaluation.

(a) * * *

(4) Government property adjustment. Offerors who will use

Government property to perform a contract have a price advantage

relative to competitors who will use their own property or will acquire

or fabricate property to perform that contract. When evaluating offers,

that advantage must be eliminated to the extent practicable.

(i) Adjust offers by applying a rental equivalent evaluation

factor. The factor should be appropriate for the type and amount of

property to be furnished to the contractor. To the extent practicable,

use the rental guidelines in 52.245-5, ``Rental Charges for Commercial

Use'' clause when determining the evaluation factor.

(ii) It is not necessary to calculate a Government property

adjustment when--

(A) The solicitation requires the offerors to use specific

Government furnished property items during contract performance;

(B) It is apparent that the difference between the offer(s) most

advantageous to the Government and the competing offer(s) is (are) so

great that a rental adjustment will not affect source selection; or

(C) The Government property is offered on an ``as is'' basis and

the contract stipulates that the contractor's costs to transport the

property and make it suitable for the contractor's intended use do not

increase the contract price or fee.

* * * * *

PART 16--TYPES OF CONTRACTS

16.307 [Amended]

7. Section 16.307 is amended--

By adding a Note at the end of the section to read ``Note to

section 16.307: This section does not apply to property management

contracts (see 45.401-3).'';

In the first sentence of paragraph (a)(1) by removing the

parenthetical ``(other than a facilities contract)'';

In paragraph (b) by removing the parenthetical ``(other than a

facilities contract or a construction contract)'';

In paragraph (d) by removing the parenthetical ``(other than a

facilities contract)'';

In paragraph (e)(1) by removing ``or a facilities contract''.

In paragraph (f)(1) by removing the parenthetical ``(other than a

facilities contract)'';

By removing paragraph (g) and redesignating paragraph (i) as (g)

and amending it by removing the last sentence; and

By removing paragraph (h).

[[Page 30189]]

PART 17--SPECIAL CONTRACTING METHODS

8. Section 17.603 is amended by revising paragraph (a)(5) to read

as follows:

17.603 Limitations.

(a) * * *

(5) Functions that can more properly be accomplished in accordance

with subpart 45.2, Furnishing Government Property.

* * * * *

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS

9. Section 22.407 is amended by revising paragraph (d) to read as

follows:

22.407 Contract clauses.

* * * * *

(d) The contracting officer shall insert the clause at 52.222-17,

Labor Standards for Construction Work--Facilities Contracts, in

solicitations and contracts for property management contracts (see

subpart 45.4) that may require covered construction work (see

22.402(b)) to be performed in the United States.

PART 27--PATENTS, DATA, AND COPYRIGHTS

27.409 [Amended]

10. Section 27.409 is amended in the first sentence of paragraph

(e) by removing the word ``facilities'' and inserting ``property'' in

its place.

PART 28--BONDS AND INSURANCE

11. Section 28.303 is revised to read as follows:

28.303 Insurance against loss of or damage to Government property.

When the Government requires or approves insurance to cover loss,

theft, or destruction of or damage to Government property (see 45.104,

Risk of loss), it may be provided by specific insurance policies or by

inclusion of the risks in the contractor's existing policies. The

policies shall disclose the Government's interest in the property.

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

31.106 [Removed and Reserved]

12. Section 31.106 is removed and reserved.

31.205-40 [Amended]

13. Section 31.205-40 is amended in paragraph (a) by removing the

citation ``45.101'' and inserting ``52.245-3'' in its place.

PART 32--CONTRACT FINANCING

32.403 [Amended]

14. Section 32.403 is amended by removing and reserving paragraph

(c).

32.407 [Amended]

15. Section 32.407 is amended by removing and reserving paragraph

(c).

32.503-15 [Removed and Reserved]

16. Section 32.503-15 is removed and reserved.

17. Section 32.705-2 is amended by revising paragraph (a); removing

paragraph (b); and redesignating paragraph (c) as (b). The revised text

reads as follows:

32.705-2 Clauses for limitation of cost or funds.

(a) The contracting officer shall insert the clause at 52.232-20,

Limitation of Cost, in solicitations and contracts (except property

management contracts) if a fully funded cost-reimbursement contract is

contemplated whether or not the contract provides for payment of a fee.

* * * * *

PART 35--RESEARCH AND DEVELOPMENT CONTRACTING

18. Section 35.014 is revised to read as follows:

35.014 Title to tangible personal property.

Use the clause at 52.245-4 with its Alternate I when contracting

for basic or applied scientific research on a cost-reimbursement basis

and it is in the Government's interest to provide nonprofit

organizations whose primary purpose is the conduct of scientific

research or nonprofit institutions of higher education title to

equipment or other tangible personal property purchased for contract

performance that has an acquisition cost of less than $5,000 per

property item.

PART 42--CONTRACT ADMINISTRATION

19. Section 42.302 is amended by revising paragraphs (a)(27),

(a)(28), and (a)(30) to read as follows:

42.302 Contract administration functions.

(a) * * *

(27) Determine reasonable rentals for noninterference use of

Government property for commercial purposes (see 52.245-1, 52.245-4,

52.245-5, and 52.245-6).

(28) Perform necessary screening, redistribution, and disposal of

Government property.

* * * * *

(30) For property management contracts--

(i) Evaluate contractor requests for repair, or replacement of or

changes to existing property and provide appropriate recommendations to

the contracting officer; and

(ii) Ensure payment by the contractor of any rental due.

* * * * *

PART 43--CONTRACT MODIFICATIONS

43.205 [Amended]

20. Section 43.205 is amended by removing paragraph (b)(5) and

redesignating paragraph (b)(6) as (b)(5).

PART 44--SUBCONTRACTING POLICIES AND PROCEDURES

44.101 [Amended]

21. Section 44.101 is amended by removing the definition

``Facilities''.

22. Section 44.201-2 is amended by revising paragraph (a) to read

as follows:

44.201-2 Cost-reimbursement and letter prime contracts.

(a) Consent is required under cost-reimbursement and letter prime

contracts for subcontracts that have experimental, developmental, or

research work as one of their purposes.

* * * * *

23. Section 44.202-2 is amended by revising paragraphs (a)(2) and

(a)(10) to read as follows:

44.202-2 Considerations.

(a) * * *

(2) Is the subcontract for property that is available from

Government sources (see 45.201)?

* * * * *

(10) Has adequate consideration been obtained for any proposed

subcontract that will involve the use of Government furnished property?

* * * * *

24. Part 45 is revised to read as follows:

PART 45--GOVERNMENT PROPERTY

Subpart 45.0--Scope and Definitions

Sec.

45.000 Scope of part.

45.001 Definitions.

Subpart 45.1--General

45.101 Policy.

45.102 Contract clauses.

45.103 Contractor acquired or fabricated property.

[[Page 30190]]

45.104 Risk of loss.

45.105 Right to title, special tooling and special test equipment.

Subpart 45.2--Furnishing Government Property

45.201 Furnishing property for performance of a Government

contract.

45.201-1 Criteria.

45.201-2 Additional restrictions.

45.201-3 Documentation requirements.

45.201-4 Competitive advantage.

45.201-5 Solicitation requirements.

45.201-6 Postaward requests for Government property.

45.201-7 Repair or replacement of Government property.

45.202 Property furnished for commercial purposes.

Subpart 45.3--Government Property Management

45.301 Property control systems.

45.301-1 Preaward considerations.

45.301-2 Reviews and approvals.

45.302 Government property records.

45.303 Property accountability.

45.303-1 Accountability.

45.303-2 Transferring accountability.

45.304 Property Disposal.

45.304-1 Government furnished property to be returned to the

contracting activity.

45.304-2 Disposal priorities.

45.304-3 Inventory disposal schedules.

45.304-4 Scrap lists.

45.304-5 Screening.

45.304-6 Standard screening.

45.304-7 Special screening requirements.

45.304-8 Waiver of screening requirements.

45.304-9 Interagency property transfer costs.

45.304-10 Sale of surplus government property.

45.304-11 Proceeds from sales.

45.304-12 U.S. Government property in foreign countries.

45.304-13 Destruction or abandonment.

Subpart 45.4--Property Management Contracts

45.401 Contracting for property management.

45.401-1 General.

45.401-2 Contracts to preserve or maintain an essential industrial

capability.

45.401-3 Consolidating property management.

Authority: 40 U.S.C. 486(c); 10 U.S.C. chapter 137; and 42

U.S.C. 2473(c).

Subpart 45.0--Scope and Definitions

45.000 Scope of part.

This part prescribes policies for authorizing contractors to

acquire property for the Government, furnishing Government property to

contractors, contractors' use and management of Government property,

and, except for real property, the disposal of Government property. It

does not apply to--

(a) Property leased under the provisions of 10 U.S.C. 2667,

``Leases: nonexcess property''; or

(b) Property to which the Government has obtained title, a lien, or

other security interest solely as a result of financing arrangements

under fixed-price contracts.

45.001 Definitions.

As used in this Part--

Contractor's managerial personnel means the contractor's directors,

officers, and any of the contractor's managers, superintendents, or

equivalent representatives who have supervision or direction of all or

substantially all of the contractor's--

(1) Business; or

(2) Operations at a site connected with performance of this

contract.

Equipment means items whose use is not limited to, or with only

minor modification would not be limited to, the development,

production, or maintenance of a particular item or the performance of a

particular service. The term includes, but is not limited to, automated

data processing equipment, office equipment, construction equipment,

hand tools, machine tools (other than special tooling), test equipment

(other than special test equipment or components thereof), furniture,

and vehicles.

Government property means property the Government owns or leases.

Government--furnished property means property provided by the

Government to a contractor for performance of a contract.

Low value property means equipment, special tooling, or special

test equipment that has an acquisition cost of $1500 or less and is not

sensitive property.

Material means property to be consumed or expended to perform a

service or produce a deliverable end item and property incorporated

into or attached to an end item. The term includes assemblies,

components, parts, raw and processed materials, and supplies that may

be consumed in normal use in performing a contract. It does not include

equipment, real property, special test equipment, special tooling, or

unique Federal property.

Nonprofit organization means a business entity organized and

operated exclusively for charitable, scientific, or educational

purposes, the net earnings of which do not inure to the benefit of any

private shareholder or individual, that is exempt from Federal income

taxation under section 501 of the Internal Revenue Code and does not

conduct a substantial portion of its activities carrying on propaganda

or otherwise attempting to influence legislation or participating in

any political campaign on behalf of any candidate for public office.

Personal property means property of any kind or interest in it

except real property, battleships, cruisers, aircraft carriers,

destroyers, submarines, and records of the Federal Government.

Plant clearance officer means a person appointed to perform plant

clearance functions.

Precious metals means silver, gold, platinum, palladium, iridium,

osmium, rhodium, and ruthenium.

Preventive maintenance means regularly scheduled maintenance

performed to sustain suitability for intended use and detect and

correct minor deficiencies before they result in serious consequences.

Property means real and personal property.

Property administrator means a person appointed to perform

Government property administration.

Real property means land and rights in land, ground improvements,

utility distribution systems, and buildings and other structures. It

does not include foundations and other work necessary for installing

special tooling, special test equipment, or equipment.

Rental period means the calendar period during which Government

property is made available for commercial purposes.

Rental time means the number of hours, to the nearest whole hour,

rented property is actually used for commercial purposes. It includes

time to set up the property for such purposes, perform required

maintenance, and restore the property to its condition prior to rental

(less normal wear and tear).

Scrap means personal property that has no value except its basic

metallic, mineral, or organic content.

Sensitive property means property potentially dangerous to the

public safety or security if stolen, lost, or misplaced, or that must

be subject to exceptional physical security, protection, control, and

accountability such as classified property, weapons, ammunition,

explosives, controlled substances, radioactive materials, hazardous

materials or wastes, or precious metals.

Special test equipment means a test unit or units designed,

fabricated, or modified to accomplish special purpose testing,

groupings of such items, general purpose items, or any combination

thereof, that are interconnected and interdependent so as to become a

new functional entity.

Special tooling means items, such as jigs, dies, fixtures, molds,

patterns, taps, gauges, or other equipment and manufacturing aids,

which are of such

[[Page 30191]]

a specialized nature that without substantial modification or

alteration their use is limited to the development, production, repair,

or maintenance of particular supplies or components thereof, or to the

performance of particular services.

Unique Federal property means Government-owned personal property,

or components thereof, that is specially designed to perform or support

the mission of one or more Federal agencies and is not available to the

public.

Work in process means bench stock materials, complete or incomplete

fabricated parts, subassemblies, assemblies, and similar items that are

created during production of deliverable end items or are required to

construct special tooling or special test equipment needed to produce

deliverable end items.

Subpart 45.1--General

45.101 Policy.

(a) Agencies shall not direct, require, or specify for contract

performance the use of specific commercially available items or

software that will become Government property under a contract unless

the contract's stated purpose is the acquisition of such items.

(b) Agencies shall not authorize contractors to acquire for the

Government--

(1) Property not required for performance of a contract or

subcontract thereunder;

(2) Real property, alterations thereof, or improvements thereto,

unless the contract's purpose is the maintenance of an essential

industry capability or the performance of alterations or improvements

to real property that are necessary to maintain an essential industrial

capability;

(3) Commercially available items, equipment, or computer software

unless the contract's stated purpose is the acquisition of such items

(see 45.101(c) for nonprofit organizations).

(c) Under contracts for basic or applied scientific research,

contracting officers may authorize nonprofit organizations whose

primary purpose is the conduct of scientific research or nonprofit

institutions of higher education to acquire tangible personal property

for the Government including commercially available items or equipment.

(d) Except as provided in subpart 45.2, agencies shall not furnish

Government property to contractors.

(e) Under fixed-price or labor-hour contracts, agencies shall not

exercise the Government's right to take title to special tooling or

special test equipment unless the tooling or test equipment will be

needed for follow-on competitive procurements, component break-out, or

mobilization.

45.102 Contract clauses.

(a)(1) Use the clause at 52.245-1, Government Furnished Property

(Fixed-Price and Labor-Hour Contracts), in solicitations and contracts

for supplies, services, or research and development to be awarded on a

fixed-price competitive basis or competitive labor-hour contracts. Do

not use the clause in contracts for commercial items or when Government

property will not be furnished for contract performance.

(2) Use the clause with its Alternate I when the contract price

will not be based upon adequate price competition, the price is set by

law or regulation, or, when it is in the Government's interests to do

so, in fixed-price contracts for services to be performed primarily on

real property owned or leased by the Government (see 45.104(b)).

(b) Use the clause at 52.245-2, Special Tooling and Special Test

Equipment--Right to Title (Fixed-Price Contracts), in fixed-price

solicitations and contracts (other than sealed bids) for supplies,

services, or research and development where the effort to be performed

will require the contractor to acquire or fabricate special tooling or

special test equipment.

(c) Use the clause at 52.245-3, Government Property Control, in all

solicitations and contracts that include the clause at 52.245-1,

52.245-4, or 52.245-6. Use the clause at 52.245-3 with its Alternate I

when the Government will maintain the Government's official property

records (see 45.302(b)).

(d) Use the clause at 52.245-4, Government Property (Cost-

Reimbursement and Time and Material Contracts), in all cost-

reimbursement or time-and-material contracts. Use the clause with its

Alternate I in contracts for basic or applied scientific research to be

conducted by nonprofit organizations whose primary purpose is the

conduct of scientific research or nonprofit institutions of higher

education (see 35.014).

(e) Use the clause at 52.245-5, Rental Charges for Commercial Use,

in all solicitations and contracts that include the clauses at 52.245-

1, 52.245-4, or 52.245-6, except when contracting under the Armament

Retooling and Manufacturing Support Act of 1992. The clause is optional

for such contracts.

(f) The clause at 52.245-6, Government Property--Property

Management Contracts, may be used in lieu of the clauses at 52.245-1

and 52.245-4 when a contractor will be performing multiple Government

contracts at a single location, and it is in the Government's interests

to consolidate under one contract the management of and accountability

for the Government property at that location.

(g) Use the clause at 52.245-7, Liability for Government Property--

Demolition Services Contracts, in addition to the clauses prescribed at

37.304 in solicitations and contracts for dismantling, demolition, or

removal of improvements.

(h) A Government property clause is not required in purchase orders

for property repair when the total acquisition cost of the items to be

repaired is less than $100,000 and such items are the only Government

property furnished under the purchase order.

(i) When contracting for services to be performed entirely on

property owned or leased by the Government and the contracting officer

determines in writing that it is in the Government's interests to have

a contractor record, inventory, and immediately report loss, theft, or

destruction of, or damage to, Government property regardless of the

property's value, the clauses at 52.245-1, 52.245-1 with its Alternate

I, 52.245-3, 52.245-4, and 52.245-6 may be modified to delete

references to low value property.

45.103 Contractor acquired or fabricated property.

(a) As defined in 52.245-3, the term ``equipment'' describes items

whose use is not limited to the development, production, or maintenance

of a particular item or the performance of a particular service. A

contractor's contention that such equipment was acquired to perform a

specific contract and is not needed for any other purpose does not

alter the fact that such items are general purpose items that might not

qualify for treatment as direct costs under the contractor's cost

accounting practices and FAR 31.202.

(b) For purposes of the clause at 52.245-3, Government Property

Control, property acquired or fabricated by a contractor for

performance of a Government contract becomes Government property under

a fixed-price contract or labor-hour contract when the Government

accepts deliverable property or, as provided in the clause at 52.245-2,

Special Tooling and Special Test Equipment--Right to Title (Fixed-Price

Contracts), takes title to property not scheduled for delivery. Under

cost-reimbursement or time-and-material contracts, property acquired or

fabricated by a contractor for

[[Page 30192]]

performance of its contract becomes Government property at the times

specified in the clause at 52.216-7, Allowable Cost and Payment.

Alternate I to the clause at 52.245-4, Government Property (Cost-

Reimbursement and Time-and-Material Contracts), and 35.014 describe the

circumstances under which title to equipment or other tangible personal

property may be vested in nonprofit organizations whose primary purpose

is the conduct of scientific research or nonprofit institutions of

higher education when such organizations are performing government

contracts for basic or applied scientific research.

(c) Property to which the Government obtains or takes title at a

contractor or subcontractor managed facility is considered property in

the contractor's possession until the property is placed on board a

carrier's conveyance (F.O.B. Origin) or delivered at the specified

F.O.B. destination point. The contractor is liable for loss, theft, or

destruction of, or damage to, that property in accordance with the

clause at 52.245-1 or 52.245-4. Property administrators should verify

that the contractor enters such property into its Government property

control system if required by the contract.

(d) When property accepted by the Government or property to which

the Government has taken title under the clause at 52.245-2 will be

furnished to the contractor for performance of the contract under which

acceptance occurred or title was obtained, or will be furnished to a

contractor for performance of another Government contract, the

receiving contract must be modified to identify the property as

government furnished property. If the receiving contract does not

contain the clause at 52.245-1 or 52.245-4, the modification should add

the appropriate property clause, other clauses prescribed for use with

that clause, and, notwithstanding any other provision of the receiving

contract, specify that the property is furnished in accordance with the

terms of the clauses added.

45.104 Risk of loss.

(a) The contractor is liable for loss, theft, or destruction of, or

damage to, Government property under competitively awarded labor-hour

contracts and competitively awarded fixed-price contracts. Under other

contract types, the contractor is liable for such loss, theft,

destruction, or damage until it establishes a Government property

control system and the system is approved by a Government property

administrator. Except as provided in paragraphs (f)(3) and (f)(4) of

Alternate I to 52.245-1, paragraphs (f)(2) and (f)(4) of the clause at

52.245-4, or paragraph (i)(2) or (i)(3) of the clause at 52.245-6, the

Government assumes such risks during any period in which the contractor

maintains an approved system (see 52.245-3).

(b) When contracting on a fixed-price competitive basis for

services to be performed on real property owned or leased by the

Government, contracting officers may use Alternate I to the clause at

52.245-1 to limit a contractor's risks of damage to, or loss, theft, or

destruction of, Government furnished property, provided such limitation

would reduce significantly the costs of contract performance. Annotate

the contract file with appropriate documentation.

(c) Contracting officers shall require contractors to assume the

risks of, and reimburse the Government for, damage to (except

reasonable wear and tear) or loss, theft, or destruction of, Government

property that occurs while the property is being used for commercial

purposes. If the damaged, lost, stolen, or destroyed property is

required for continued performance of a Government contract and cannot

be repaired or replaced by the contractor without affecting scheduled

deliveries, restitution should include schedule adjustments at no cost

to the Government. Negotiate an equitable adjustment in price in lieu

of repair or replacement when the property is not required for

continued performance of a government contract.

45.105 Right to title, special tooling and special test equipment.

(a) Under the clause at 52.245-2, Special Tooling and Special Test

Equipment Right to Title (Fixed-Price Contracts), the Government has

the right to take title to special tooling or special test equipment

that is not deliverable under a contract if the tooling or test

equipment costs were allocated to the contract as direct costs. The

right must be exercised within 120 days following the contractor's

notice that special tooling or special test equipment items are no

longer required for contract performance unless the contractor and the

Government have agreed to a different period.

(b) The contractor is obligated to store the property at its

expense during the notice period. Storage subsequent to an election of

title is at Government expense.

Subpart 45.2--Furnishing Government Property

Sec. 45.201 Furnishing property for performance of a Government

contract.

45.201-1 General.

Subject to the additional restrictions and documentation

requirements in 45.201-2 and 45.201-3, Government property other than

commercial items (see 2.101) may be furnished for performance of a

contract only when at least one of the criteria in paragraph (a) of

this section is satisfied. Government-owned commercial items may be

furnished to contractors only under the circumstances described in

paragraph (b) of this section.

(a) Criteria. (1) The Government is the sole source of property

required to perform a contract;

(2) The property's use will result in substantial measurable cost

savings to the Government when compared to estimated costs of contract

performance without such property (consider the Government's costs to

activate property or maintain property in an active status when

determining cost savings);

(3) The Government must furnish the property to assure that items

delivered under a contract are compatible with other Government items;

(4) The property must be furnished to accomplish repairs to, or

maintenance or reconditioning of, Government furnished property or

items to be delivered under a contract and such repair, maintenance, or

reconditioning is not the contractor's responsibility under the

contract;

(5) The property must be furnished to respond to an unusual and

compelling urgency for supplies or services (see 6.302-2) or to support

contingency contracting;

(6) The Government property will be used as a standard;

(7) Equipment in the Government's possession prior to award of a

contract to be performed on real property owned or leased by the

Government may be furnished for performance of that contract subject to

the constraints in 45.201-1(b);

(8) The property will be used on a contract for scientific research

conducted by an institution of higher education or a nonprofit

organization; or

(9) Government furnished equipment or real property is needed for

the retention or operation of an essential, Government-owned

capability.

(b) Commercial items. Government owned commercial items that are

being furnished to contractors for performance of a Government contract

may be furnished for performance of follow-on

[[Page 30193]]

contracts for the identical items or substantially similar services

with the same or successor contractors until the commercial item is no

longer suitable for intended use. Repairs to such property shall be

authorized only to the extent necessary to complete current contract

performance. If the item cannot be repaired, it may be replaced with

another commercial item from existing Government-owned property. Do not

authorize a contractor to acquire a commercial item as a replacement

for irreparable Government furnished property if the replacement item

will become Government property under any Government contract. For

commercial computer software or commercial computer software

documentation, the authority of this paragraph may be exercised only

when the Government has a license in the software or documentation that

permits release or disclosure to, and use by, third parties and the

software or documentation is required to operate, maintain, or install

other Government property furnished for performance of a Government

contract.

45.201-2 Additional restrictions.

(a) Material. (1) Prior to furnishing material for which the

Government is the sole source, verify that only the type and quantity

of material required for contract performance is furnished. Such

quantity may include reasonable amounts for repairs or corrections to

work in process, scrap, or spoilage provided the Government continues

to be the only source for such material.

(2) Except as provided in 45.201-1(a)(2), (4), or (5), do not

furnish to contractors material customarily offered for sale in the

commercial marketplace.

(b) Equipment. Government-owned equipment that is not a commercial

item (see 2.201) may be furnished to contractors only as provided in

45.201-1(a)(4), (5), (7), (8), or (9).

(c) Noncommercial computer software or computer software

documentation. Do not furnish noncommercial computer software or

noncommercial computer software documentation (see 52.227-14 or, for

DoD, Defense Federal Acquisition Regulation Supplement (DFARS) 48 CFR

252.227-7014) to contractors unless the Government is the software or

documentation licensor or, prior to furnishing the software or

documentation, the Government obtains a license in the software or

documentation that permits release or disclosure to, or use by, third

parties and the intended recipient has completed any use and

nondisclosure agreement required by part 27 or (DFARS) 48 CFR part 227.

45.201-3 Documentation requirements.

Decisions to furnish commercial items, real property, or equipment

to contractors must be documented in the contract file. Contracting

officers may make decisions based upon the criteria in 45.201-1(a)(3)

through (6) and (8). Unless other approval levels are designated in

agency supplements, approval is required by--

(a) The contracting officer's first level supervisor when using the

criterion in 45.201-1(a)(2);

(b) The contracting officer's second level supervisor when using

the criteria in 45.201-1(a)(1) or (7); or

(c) The head of the contracting activity when using the criterion

in 45.201-1(a)(9).

45.201-4 Competitive advantage.

Offerors who will use Government property to perform a contract

have a price advantage relative to competitors who will acquire,

fabricate, or use their own property to perform that contract. When

evaluating offers, that advantage must be eliminated to the extent

practicable (see 15.608).

45.201-5 Solicitation and contract requirements.

When Government property will be made available for contract

performance--

(a) Competitive solicitations shall--

(1) List the available property by item name, national stock number

(if the item has a national stock number), or other appropriate

nomenclature; and, identify the quantity available;

(2) Include, or offer to provide, real property maps, drawings,

plans, or similar information in sufficient detail to enable an offeror

to prepare its offer;

(3) Separately identify property available on an ``as is'' basis

and require the successful offeror to pay the cost of transporting such

property to its facility;

(4) Separately identify property the Government must reactivate,

rehabilitate, or convert;

(5) Identify the evaluation factors that will be applied to the

price of offers that contemplate use of Government furnished property.

The factors may be specified as a dollar amount, a formula, or any

combination thereof;

(6) Identify any special requirements for security, maintenance,

liability, or property control; and

(7) Require all offerors to submit with their offers the following

information--

(i) A list or description of all Government property the offeror or

its subcontractors propose to use on a rent-free basis. The list shall

include property offered for use in the solicitation and property

already in possession of the offeror or its prospective subcontractors

under other contracts;

(ii) An identification of the contract or other instrument under

which property already in the offeror's and its prospective

subcontractors is accountable, and written permission from the

cognizant contracting officer authorizing the property's use for

performance of the proposed contract;

(iii) The rental period, rental time, and time available for use

(see 52.245-5) and offeror's estimated costs to acquire, fabricate,

lease, or rent the property if it is not furnished by the Government;

and

(iv) A statement as to whether the offeror has an approved property

control system, the date the system was last reviewed, and the name and

address of the Government's property administrator who performed the

last review.

(b) Contracts shall--

(1) List and identify (nomenclature, quantity, serial number, or

other appropriate identifier, or, for real property, maps, drawings,

plans or similar information) the Government property furnished for

performance of the contract;

(2) Separately identify property furnished ``as is'';

(3) Identify any constraints on the period for, or amount of, use;

(4) Identify any special requirements for security, maintenance,

liability, or property control applicable to a particular Government

furnished item;

(5) Identify any Government furnished property that is to be

returned directly to the contracting activity in lieu of initiating

disposal action and specify the method and point of return; and

(6) For fixed price construction contracts that contemplate

furnishing property f.o.b. railroad cars or f.o.b. truck, specify the

point of delivery and include appropriate terms and conditions if the

Government or another person will install, prepare, or test the

property.

45.201-6 Postaward requests for Government furnished property.

Except as provided in 45.201-7, do not furnish Government property

to contractors subsequent to contract award unless adequate

consideration is received. If a contractor requests the use of property

that is not accountable under your contract, do not authorize use until

the contracting officer for the contract under which the property is

accountable concurs with the proposed use. Modify each contract for

which use is authorized to identify the conditions

[[Page 30194]]

for use and the applicable consideration.

45.201-7 Repair or replacement of Government furnished property.

(a) Except for property furnished to a contractor on an ``as is''

basis, contracting officers may elect to repair or replace, direct the

contractor to repair, or direct the contractor to dispose of Government

furnished property that--

(1) Is received by the contractor in a condition not suitable for

its intended use;

(2) Routine or preventative maintenance cannot maintain in a

condition suitable for intended use; or

(3) Is lost, stolen, destroyed, or damaged and the Government has

assumed the risk of such loss, theft, destruction, or damage.

(b) Consult with appropriate technical, logistics, program office,

and property specialists, to determine whether the Government furnished

property should be replaced, the appropriate method and type of

replacement, or if the contractor should repair the property. If the

Government does not elect to repair or replace Government furnished

property that is needed for continued contract performance, the

contractor might be entitled to an equitable adjustment under the

clause at 52.245-1 or 52.245-4.

45.202 Authorizing the use of Government furnished property for

commercial purposes.

(a) This section does not apply to contracts subject to the

Armament Retooling and Manufacturing Support Act of 1992.

(b) Unless prohibited by law, contracting officers may authorize

the contractor performing a contract under which Government property is

accountable to use that property for commercial purposes on a

noninterference basis if the Government receives an equitable rental

for such use. The contractor shall be required to assume the risk of,

and reimburse the Government for, any damage to, or loss, theft, or

destruction of the property except damage resulting from wear and tear

reasonable for the period the property was authorized for commercial

use and to indemnify the Government against claims for injury to

persons or damage to the contractor's or third parties property arising

from the contractor's use or possession of the Government property for

commercial purposes.

(c) Authorization for commercial purposes must be reflected in a

contract modification and specify--

(1) The property is available ``as is'' without any representation

as to suitability for intended use;

(2) The time period during which the property may be used;

(3) Any restrictions on, or conditions of, use; and

(4) The rent or estimated rent the Government will receive.

(d) Contracts that contain the clause at 52.245-9, Use and Charges,

may be modified to replace that clause with the clause at 52.245-5,

Rental Charges for Commercial Use, if adequate consideration is

obtained.

(e) The contracting officer shall not revoke an authorization to

use Government property for commercial purposes unless the contractor

fails to comply with the requirements in 52.245-5 or the Government has

a compelling need that precludes continued availability for commercial

use.

Subpart 45.3--Government Property Management

45.301 Property control systems.

45.301-1 Preaward considerations.

(a) Contracting officers should consider whether an offeror's

property management capabilities might affect source selection and

structure appropriate evaluation criteria.

(b) When property management capabilities will be evaluated, the

cognizant property administrators should verify whether offerors have

approved property control systems and make recommendations regarding

the adequacy of offerors plans to establish an acceptable system.

45.301-2 Property control system reviews and approvals.

(a) General. (1) Contractors are responsible for their

subcontractors' compliance with the property control system

requirements in 52.245-3. A contractor's system and processes must

provide for the control of property in the possession of its

subcontractors.

(2) The periods for establishing a new system or submitting changes

to an existing system should be extended only when the contractor

demonstrates a reasonable need for an extension. When authorizing an

extension, specify the new establishment or submission date(s).

(3) The clause at 52.245-3 generally prohibits contractor personnel

who maintain property records or who have custody of property from

performing physical inventories. Property administrators may waive that

prohibition if there is no information or prior contractor experience

that suggests a waiver would adversely affect the Government's property

interests.

(b) New systems or systems not previously reviewed by the

Government. Property administrators shall review new property control

systems or existing contractor systems that have not been reviewed by a

Government-employed property administrator as soon as practicable.

(1) Promptly refer to the contracting officer a contractor's

failure to establish a property control system that satisfies the

requirements in 52.245-3.

(2) Approve and not require changes to a contractor system or

proposed system that satisfies all requirements in 52.245-3(b).

(3) Require contractors to change proposed property control systems

that do not satisfy all requirements in 52.245-3(b) only to the extent

necessary for compliance with those requirements. Notify the contractor

of the corrections required and specify the date(s) by which the

corrections must be made. If a contractor fails to make required

corrections within the time specified, issue the notice required by

paragraph (f)(4) of Alternate I to 52.245-1, (f)(4) of 52.245-4, or

(i)(3) of 52.245-6, and simultaneously notify the contracting officer.

(c) Changes necessitated by contract award. The clause at 52.245-3

requires a contractor that has a previously approved property control

system to submit to the Government's property administrator within 90

days following contract award changes to its property control system

necessitated by award of a new contract.

(1) Property administrators shall review contractor-proposed

changes promptly following receipt to assure compliance with the

contract's property control system requirements. Validate the systems'

approval if the contractor proposed changes are sufficient to assure

compliance with 52.245-3(b). Require other changes only if necessary

for compliance. Notify the contractor of the corrections required, and

specify the date(s) by which the corrections must be made.

(2) If the contractor fails to make the required corrections within

the time specified, issue the notice required by paragraph (f)(4) of

Alternate I to 52.245-1, (f)(4) of 52.245-4, or (i)(3) of 52.245-6, and

advise the contractor that its failure to correct its system or to have

a subcontractor system corrected within the time specified might result

in the contractor's assumption of liability for any damage to, or loss,

theft, or destruction of, Government property that the Government would

otherwise be liable for under those clauses.

[[Page 30195]]

Simultaneously notify the contracting officer.

(d) Corrections following property control system reviews. When a

property control system review discloses that a previously approved

system no longer satisfies any requirement of 52.245-3(b), provide a

correction notice to the contractor. Specify the corrections required

to make the contractor's or a subcontractor's system compliant and

specify the date for completing corrective action. If the contract

includes the clause at 52.245-1 with its Alternate I, 52.245-4, or

52.245-6, advise the contractor that its failure to correct its system

or to have a subcontractor system corrected within the time specified

might result in the contractor's assumption of liability for any damage

to, or loss, theft, or destruction of, Government property that the

Government would otherwise be liable for under those clauses.

(e) Withdrawing system approval. The clause at 52.245-3 requires

the administrative contracting officer's concurrence to withdraw

approval of an approved property control system. Generally, approval

should be withdrawn when a contractor fails to maintain a Government

property control system that satisfies the requirements.

45.302 Government property records and reports.

(a) Generally, it is in the Government's interests to have the

contractor generate records and reports of Government property using

the same practices the contractor uses for its own property. If the

contractor's practices generate the property records, reports, and

supporting information required by 52.245-3(e) and (f), do not require

the contractor to modify its practices. When changes are necessary,

require the contractor to make only the changes necessary to assure

compliance with 52.245-3(e). Do not require contractors to use specific

media for their records.

(b) The property records maintained by a contractor are the

Government's official property records. A contracting office may elect

to establish and maintain the Government's property records and

generate required property reports when the contracting office retains

contract administration functions and the contracting officer considers

Government record keeping and reports generation to be in the

Government's interests. Circumstances under which such record keeping

and reporting might be warranted are contracts with performance periods

less than 6 months or when Government property will be furnished for

performance of a contract to manage or operate for the Government, or

perform services entirely at, activities such as installations, bases,

or portions thereof, warehouses, libraries, stock rooms, mailrooms, or

computer centers located entirely at real property owned or leased by

the Government.

(c) The contracting office shall process property reports in

accordance with agency procedures.

45.303 Property accountability.

45.303-1 Accountability.

(a) Government furnished property is accountable generally under

the contract for which it was furnished (see 45.401-3).

(b) Contractor acquired or fabricated property to which the

Government has title under the clause at 52.245-2 or 52.216-7 is

accountable under the contract for which the property was acquired or

fabricated until the contracting officer directs a transfer of

accountability, the property is placed aboard a carrier's conveyance

(f.o.b. origin), or delivered at the specified f.o.b. destination

point.

(c) When Government property accountable under a contract, but not

deliverable to the Government under that contract, is no longer needed

for performance of the contract, the property should be entered into

the disposal process (see 45.304) except when the property is--

(1) Government furnished property identified in the contract for

return directly to the contracting activity;

(2) Government furnished property specifically and currently needed

for the performance of other Government contracts;

(3) Property to which the Government has title that is needed to

preserve or maintain an essential industrial capability; or

(4) Contractor acquired or fabricated property to which the

Government has title that will be furnished to a contractor as

Government furnished property for performance of a Government contract

other than the contract under which the property was acquired or

fabricated.

45.303-2 Transferring accountability.

Property accountability may be transferred to other contracts only

under the circumstances identified in 45.303-1(c).

(a) Price adjustment. When a property item's accountability is

transferred to a contract for performance of that contract, the price

or estimated cost and fee of the receiving contract should be equitably

reduced if the receiving contract's current price or estimated cost and

fee was established without a requirement for the Government to furnish

the property item as Government furnished property for that contract.

(b) Special tooling or special test equipment. Accountability for a

special tooling or special test equipment item to which the Government

has obtained title under the clause at 52.245-2 or 52.216-7, may be

transferred to another contract for performance of that contract

provided that the property is identified as property furnished ``as

is'' and the receiving contract's price or estimated cost and fee is

adjusted in accordance with 45.303-2(a) and property records are

adjusted in accordance with 45.303-2(d). Accountability instructions

should be included in the assumption of title notice required by

52.245-2.

(c) Contractor acquired or fabricated property (other than special

tooling or special test equipment). Accountability for property to

which the Government has obtained title under the clause at 52.216-7

may be transferred to another contract when the property is no longer

needed for performance of the contract under which the property was

acquired or fabricated provided the receiving contract's price or

estimated cost and fee is adjusted in accordance with paragraph (a) of

this section and property records are adjusted in accordance with

paragraph (d) of this section.

(d) Property records. All property accountability transfers must be

reflected in the property control records for the contract from which

accountability is transferred (the losing contract) and the contract to

which accountability is transferred (the gaining contract). When a

Government furnished property item's accountability is transferred, the

respective contracting officers must modify the list of Government

furnished property items contained in the losing and gaining contracts.

45.304 Property disposal.

45.304-1 Government furnished property to be returned to the

contracting activity.

When a contract requires the contractor to return Government

furnished property directly to the contracting activity, the

Government's property administrator should determine the property's

condition as near to the return date as practicable and promptly notify

the contracting officer if the property is not suitable for its

intended use. The contracting officer promptly shall direct the

contractor to take any necessary corrective action or, if corrective

action is not practical,

[[Page 30196]]

negotiate an equitable adjustment and direct the contractor to add the

property to an inventory disposal schedule, and promptly advise the

Government's property administrator of the action directed.

45.304-2 Disposal priorities.

The clause at 52.245-4 requires contractors to make reasonable

efforts to return contractor acquired or fabricated Government property

that is no longer needed for contract performance to the appropriate

supplier or to use the property in performance of other contracts

before including the property in an inventory disposal schedule. Plant

clearance officers shall initiate action to dispose of scheduled

property using the highest priority method appropriate for the

property. Authorized methods, listed in descending order from highest

to lowest priority, are--

(a) Re-use within the Government.

(b) Transfer of educationally useful Federal equipment to schools

and nonprofit organizations (see Executive Order 12999).

(c) Donation to other eligible donees.

(d) Sale.

(e) Donation to public bodies in lieu of abandonment.

(f) Abandonment or destruction.

45.304-3 Inventory disposal schedules.

(a) The plant clearance officer should review, accept, return for

correction, or reject the contractor's inventory disposal schedules

within 10 days following receipt. Plant clearance officers may reject a

schedule entirely or in part, or require correction of the information

contained in the schedule. Do not reject a schedule if--

(1) The property's location, quantity and condition are correctly

identified;

(2) The property is accountable under the contract for which the

schedule is submitted or, if submission follows a termination action,

the property's costs are allocable to the contract as direct costs; and

(3) The contractor, when the contract contains the clause at

52.245-4, has completed the actions required by 52.245-4(h)(1)(i) and

(ii).

(b) Accepted schedules shall be verified within 20 days following

receipt. Plant clearance officers shall require the contractor to

correct any discrepancies found during verification.

(c) Scrap identified on an inventory disposal schedule may be

disposed of upon verification of the schedule. Screening is not

required. Classified items may be disposed of following agency

screening (see 45.304-6).

(d) Contractors must obtain the plant clearance officer's approval

to remove a Government property item from an inventory disposal

schedule. Removal should be approved when the contractor has found a

buyer for a contractor acquired or fabricated item at full acquisition

cost, the contractor has found a use for such property on another

Government contract, or the contractor has justified continued use of a

Government furnished property item. Consult with appropriate program

and technical personnel to determine whether the contractor's rationale

for retaining a Government furnished property item is valid. If the

screening process (45.304-5) has not begun, correct the schedule or

return the schedule to the contractor for correction. If screening has

begun, promptly notify the activity performing the screening and

identify the items that should be removed from the screening process.

45.304-4 Scrap lists.

(a) Contractors that have Government-approved scrap procedures may

submit scrap lists in lieu of inventory disposal schedules to identify

property the contractor recommends disposing of as scrap. Review scrap

lists within 10 days following receipt. Generally, the plant clearance

officer should verify and accept scrap lists that are consistent with a

contractor's Government approved scrap procedures, correctly identify

the contracts under which the property is accountable, and correctly

identify the property's quantity and condition. Reject or require

correction of scrap lists that contain property that must be

demilitarized prior to disposal, classified items, scrap generated from

classified items, scrap that contains hazardous materials or precious

metals, or items that are dangerous to the public health, safety, or

welfare. Require contractors to submit inventory disposal schedules for

such items.

(b) Scrap identified on a scrap list may be disposed of promptly

following the plant clearance officer's verification of the list.

Provide disposition instructions to the contractor within 60 days

following receipt of an acceptable scrap list. If disposition

instructions are not provided within that period, the clauses at

52.245-1, 52.245-4, and 52.245-6 permit a contractor to dispose of

scrap identified on a scrap list.

45.304-5 Screening.

(a) Except as provided in 45.304-3(c) and 45.304-4(b), Government

property that is no longer required for performance of a particular

contract shall not be disposed of until the agency owning the property

has determined that there is no other reasonably foreseeable use for

the property within the agency, a school or community based educational

organization has not expressed an interest in an item of educationally

useful Federal equipment, and the General Services Administration (GSA)

has determined that no other Federal Agency has a use for the property.

(b) Screening periods for property listed on an inventory disposal

schedule begin upon the plant clearance officer's acceptance of the

schedule. The plant clearance officer shall determine the appropriate

screening method for excess property (see 45.304-6 for standard

screening and 45.304-7 for special screening requirements), initiate

screening, and assure accomplishment of transfer and donation. Plant

clearance officers shall not extend the times for agency screening

without the prior approval of the GSA.

45.304-6 Standard screening.

The standard screening period is 56 days.

(a) 1st through 20th day--screening by the contracting agency. The

contracting agency has 20 days to screen excess property for other use

within the agency. Plant clearance officers shall delete from the

disposal schedules any items for which other intraagency use is

identified, prepare revised schedules, and, no later than the 21st day,

submit four copies of the revised schedules and Standard Form (SF) 120,

Report of Excess Personal Property, or an electronic equivalent to the

GSA. Enter the date of the 56th day as the surplus release date and

screening completion date.

(b) 21st through 41st day--screening by all Federal agencies. (1)

GSA will honor requests for transfers of property on a ``first-come

first-served'' basis through the 41st day. The GSA regional office

shall promptly transmit to the plant clearance officer the approved

orders and shipping instructions for property to be transferred.

(2) If the plant clearance officer receives a request to transfer a

property item, he or she shall promptly request GSA approval to

withdraw the item from the inventory disposal schedule.

(c) 42nd through 56th day--GSA screening for possible donation.

During this period, GSA shall screen property not identified for

Federal re-utilization for possible donation to eligible donees.

45.304-7 Special screening requirements.

(a) Special tooling and special test equipment that does not

contain general purpose components. Screen these items for re-

utilization within the agency. Except for the Department of

[[Page 30197]]

Defense, if the agency has no further use for the tooling or test

equipment, forward the inventory disposal schedule to the GSA regional

office that serves the region in which the property is located.

(b) Special test equipment with general purpose components. (1) The

clauses at 52.245-1, 52.245-4, and 52.245-6 permit a contractor to

identify special test equipment, or general purpose components thereof,

the contractor can use in performance of other Government contracts or

to identify such equipment or components it wants to acquire from the

Government for other purposes.

(2) Complete the agency screening required by 45.304-6(a). If the

agency has no further need for the property and the contractor has not

expressed an interest in using or acquiring the property by annotating

the inventory disposal schedule, forward the inventory disposal

schedule to the GSA regional office that serves the region in which the

property is located. If the contractor has expressed an interest in

using the property on another Government contract, contact the

appropriate contracting officer for that contract. If he or she concurs

with the proposed use, transfer the property's accountability to that

contract. Deny the contractor's request if the contracting officer does

not concur with the proposed use and resume the screening process. If

the contractor has expressed an interest in acquiring the property, and

no other party has expressed an interest during agency or GSA

screening, see 45.304-10.

(c) Printing equipment. Report all excess printing equipment to the

Public Printer, Government Printing Office, North Capitol and H

Streets, NW, Washington, DC 20401, after screening within the agency

(see 44 U.S.C. 312). If the Public Printer has no requirement for the

equipment, submit the report to the General Services Administration for

further use and donation screening.

(d) Automatic data processing equipment (ADPE). Schools and

community based educational organizations shall have priority for ADPE

that is educationally useful. Dispose of ADPE that will not be

transferred to a school or community based educational organization in

accordance with agency procedures.

(e) Non-nuclear hazardous materials. Process these items in

accordance with agency procedures.

(f) Nuclear materials. (1) The possession, use, and transfer of

certain nuclear materials are subject to the regulatory controls of the

Nuclear Regulatory Commission (NRC). The materials are defined as--

(i) By-product material--any radioactive material (except special

nuclear material) yielded in or made radioactive by exposure to the

radiation incident to producing or using special nuclear material.

(ii) Source material--uranium or thorium, or any combination

thereof, in any physical or chemical form; or ores which contain by

weight one-twentieth of 1 percent (0.05 percent) or more of uranium,

thorium, or any combination thereof. Source material does not include

special nuclear material.

(iii) Special nuclear material--plutonium, uranium 233, uranium

enriched in the isotope 233 or in the isotope 235, and any other

material that the NRC determines to be special nuclear material (but

not including source material); or any material artificially enriched

by any nuclear material.

(2) Contracting activities shall screen listings of excess nuclear

material in the categories described in paragraph (b)(1) of this

section. If there are no other agency requirements for the material,

the material shall be disposed of in accordance with the NRC or

applicable state licenses, and applicable Federal and agency

regulations.

45.304-8 Waiver of screening requirements.

Agency heads or their designees may waive agency screening

requirements when it is clearly in the Government's interests to do so.

When circumstances suggest a waiver of GSA screening requirements would

be in the Government's interests, submit the agency's justification for

the waiver to the Administrator, General Services Administration, at

least 10 days prior to implementing the waiver. The waiver shall be

effective unless the GSA takes exception to the waiver request within

the 10-day period. Notify the contract administration office when

implementing a waiver.

45.304-9 Interagency property transfer costs.

Agencies whose property is transferred to other agencies shall not

be reimbursed for the property in any manner unless the circumstances

of 41 CFR 101-43.309-3 apply. The agency receiving the property shall

pay any transportation costs that are not the contractor's

responsibility and any costs to pack, crate, or otherwise prepare the

property for shipment. The contract administration office shall process

appropriate contract modifications. To accelerate plant clearance, the

receiving agency shall promptly furnish funding data and transfer or

shipping documents to the contract administration office.

45.304-10 Sale of surplus Government property.

Policy and procedures for such sales, except sales of Department of

Defense property, are contained in the Federal Property Management

Regulations (FPMR) 41 CFR part 101-45.

45.304-11 Proceeds from sales.

Proceeds of any sale are to be credited to the Treasury of the

United States as miscellaneous receipts, except where the contract or

any subcontract thereunder authorizes the proceeds to be credited to

the price or cost of the work (40 U.S.C. 485(a) and (e)).

45.304-12 U.S. Government property in foreign countries.

Sell or dispose of such property in accordance with agency

procedures (see 40 U.S.C. 511-514).

45.304-13 Destruction or abandonment.

(a) Surplus property may be destroyed or abandoned only after a

reasonable effort has been made to dispose of it by other authorized

methods. Before authorizing destruction or abandonment, the plant

clearance officer shall determine in writing that--

(1) The property has no commercial value and no value to the

Government; or

(2) The estimated cost to sell the property is greater than the

probable sale proceeds; and

(3) The property does not constitute a danger to public health,

safety, or welfare.

(b) Surplus property for which a determination has been made under

45.304-13 may be donated to public bodies in lieu of abandonment or

destruction. All costs incident to donation shall be borne by the

donee.

(c) Agencies shall not abandon hazardous Government property on a

contractor's premises without the contractor's written consent.

Subpart 45.4--Property Management Contracts

45.401 Contracting for property management.

45.401-1 General.

(a) Contracts for the storage of Government property, the operation

or management of real property owned or leased by the Government, the

operation or management of a Government activity for the Government

(e.g., warehouses, libraries, stock rooms, computer centers, etc., that

are located on real property owned or leased by the Government) or

[[Page 30198]]

the preservation of an essential industrial capability, are contracts

for services.

(b) Follow the guidelines in parts 37 and 45 to acquire such

services. Except as provided in 45.401-3, in addition to the clauses

prescribed for use with part 37, include either 52.245-1 or 52.245-4

and 52.245-3 in solicitations and contracts for such services. See

45.102 for applicability criteria and other provisions or clauses that

might be required. As required by 52.245-1 or 52.245-4, all Government

property to be furnished for performance of such contracts must be

identified in the contract. See 45.201 for restrictions applicable to

furnishing certain types of property. The contract must identify any

constraints on the property's use, special handling or maintenance

requirements, and applicable security considerations. See 45.401-3 for

property management contracts.

(c) When a contractor will be required to maintain the Government's

property, solicitations shall require offerors to propose maintenance

plans. Contracting officers should consult with cognizant property

administrators to assure that proposed maintenance plans are acceptable

and conduct negotiations with offerors in the competitive range when

necessary. At the minimum, the maintenance to be performed must be

sufficient to assure the property's suitability for intended use or,

under property management contracts, assure that property used by the

contractor is returned to the Government in the same or better

condition than the property's condition prior to contractor use, less

normal wear and tear. Include an offeror's acceptable plan, or

negotiated modification thereof, in the contract performance

requirements.

45.401-2 Contracts to preserve or maintain an essential industrial

capability.

Follow the guidelines in 45.401-1. If the contractor is authorized

to use property that is part of an essential industrial capability for

performance of--

(a) A Government contract at another location, transfer the

property's accountability to that contract.

(b) A nonfederal contract, charge an appropriate rent.

45.401-3 Property management contracts.

(a) Contracting officers may consider awarding a contract to

consolidate management of and accountability for Government-owned or -

leased real or personal property at a specified location provided the

potential property management contractor also is performing

simultaneously multiple Government supply or service contracts at the

specified location. The term ``specified location'' includes

Government-owned contractor operated activities and essential

industrial facilities maintained or operated by a contractor for the

Government. Generally, the contractor performs the property management

services required by the clauses at 52.245-3 and 52.245-6 at no direct

cost to the Government. In consideration of that performance, the

contractor is authorized to use, on a rent-free basis and without

further approval, the property accountable under the property

management contract in performance of the contracting agency's

contracts and may use such property in performance of other Government

contracts if authorized by the contracting officer. During such use,

the property remains accountable under the property management

contract.

(b) A property management contract must clearly identify the

property accountable under the contract, the specific location at which

the contractor is authorized to use the property, and include the

clauses at 52.245-6 (in lieu of the clauses at 52.245-1 or 52.245-4),

52.245-3, and any applicable clauses prescribed for use when

contracting under part 37.

(c) Charge an appropriate rental using the guidelines in 52.245-5

when property accountable under property management contracts is

authorized for commercial use.

PART 49--TERMINATION OF CONTRACTS

25. Section 49.001 is amended by revising the definition

``Termination inventory'' to read as follows:

49.001 Definitions.

* * * * *

Termination inventory includes parts, work in process, completed

work, supplies, other material produced or acquired for the work

terminated, completed or partially completed plans, drawings, or

information, property that would have been delivered to the Government

if the contract had been completed, and Government furnished property.

* * * * *

49.105 [Amended]

26. Section 49.105 is amended in the introductory text of paragraph

(b)(4) by removing ``(see subpart 45.6)''.

27. Section 49.108-3 is amended by revising paragraph (b)(1) to

read as follows:

49.108-3 Settlement procedure.

* * * * *

(b) * * *

(1) All subcontractor termination inventory be disposed of and

accounted for in accordance with part 45 or, for contracts awarded on

or after (TBD), the disposal procedures in 52.245-4; and

* * * * *

28. Section 49.108-4 is amended by revising paragraphs (a)(1)(ii)

and (b) to read as follows:

49.108-4 Authorization for subcontract settlements without approval or

ratification.

(ii) Any termination inventory included in determining the amount

of the settlement will be disposed of as directed by the prime

contractor, except that the disposition of the inventory shall not be

subject to:

(A) Review by the TCO under 49.108-3(c), or

(B) The screening requirements in 45.304; and

* * * * *

(b) Section 45.304 shall apply to disposal of completed end items

allocable to the terminated subcontract. However, these items may be

disposed of without review by the TCO under 49.108-3, and without

screening under 45.304, if the total amount (at the subcontract price)

when added to the amount of the settlement does not exceed the amount

authorized under this subsection.

* * * * *

49.202 [Amended]

29. Section 49.202 is amended in paragraph (b)(3)(iii) by removing

the word ``facilities'' and inserting ``property'' in its place.

49.204 [Amended]

30. Section 49.204 is amended in paragraph (a) by removing the

words ``materials sold that have'' and inserting in their place

``property sold that has''.

31. Section 49.206-3 is revised to read as follows:

49.206-3 Submission of inventory schedules.

Subject to the terms of the termination clause, and whenever

termination inventory is involved, the contractor shall submit complete

inventory disposal schedules, to the TCO, reflecting inventory that is

allocable to the terminated portion of the contract. The inventory

disposal schedules shall be submitted within 20 days from the effective

date of termination unless otherwise extended by the TCO based on a

written justification to support the extension. The inventory schedules

shall be prepared on Standard Form 1428 (see 45.302).

[[Page 30199]]

32. Section 49.303-2 is revised to read as follows:

49.303-2 Submission of inventory schedules.

Subject to the terms of the termination clause, and whenever

termination inventory is involved, the contractor shall submit complete

inventory disposal schedules, to the TCO, reflecting inventory that is

allocable to the terminated portion of the contract. The inventory

schedules shall be submitted within 120 days from the effective date of

termination unless otherwise extended by the TCO based on a written

justification to support the extension. The inventory disposal

schedules shall be prepared on Standard Form 1428 (see 45.302).

33. Section 49.505 is amended by revising paragraphs (a) and (c),

and the last sentence of paragraph (d) to read as follows:

49.505 Other termination clauses.

(a) Property management. The contracting officer shall insert the

clause at 52.249-11, Termination of Use--Property Management Contracts,

in property management contracts.

* * * * *

(c) Failure to perform. The contracting officer shall insert the

clause at 52.249-13, Failure to Perform, in property management

contracts, except such contracts with nonprofit educational

institutions.

(d) * * * The contracting officer shall also insert the clause in

time-and-material contracts, labor-hour contracts, and property

management contracts.

* * * * *

34. Section 49.602-2 is revised to read as follows:

49.602-2 Inventory forms.

Standard Forms 1428, Inventory Disposal Schedule, and 1429,

Inventory Disposal Schedule--Continuation Sheet, shall be used to

support settlement proposals submitted on the forms specified in

49.602-1(a), (b), and (c) (see 45.302).

PART 51--USE OF GOVERNMENT SOURCES BY CONTRACTORS

35. Section 51.106 is revised to read as follows:

51.106 Title.

(a) Title to all property acquired by the contractor under the

contracting officer's authorization shall vest in the parties as

provided in the contract.

(b) When contracting with educational institutions and the

Government Property clause at 52.245-4, Alternate I is used, agencies

may provide higher thresholds, if appropriate.

36. Section 51.107 is revised to read as follows:

51.107 Contract clause.

The contracting officer shall insert the clause at 52.251-1,

Government Supply Sources, in solicitations and contracts when the

contracting officer may authorize the contractor to acquire supplies

from a Government supply source.

51.200 [Amended]

37. Section 51.200 is amended at the end of the second sentence by

removing ``(see 45.304).''

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

38. Section 52.216-7 is amended by revising the date of the clause;

in paragraph (b)(3) by revising ``paragraph (g)'' and ``paragraph (d)''

to read ``paragraph (h)'' and ``paragraph (e)'', respectively;

redesignating paragraphs (c) through (h) as (d) through (i)

respectively; adding a new paragraph (c); and in newly designated

paragraph (i)(1) by revising ``paragraph (d)(4)'' to read ``paragraph

(e)(4)''. The revised text reads as follows:

52.216-7 Allowable Cost and Payment.

* * * * *

Allowable Cost and Payment (Date)

* * * * *

(c) Title. (1) Title to property acquired or produced by the

Contractor for performance of this contract, the costs of which are

allocable to this contract as direct costs, shall vest in the

Government. For property acquired or produced prior to execution of

this contract, vestiture occurs upon execution of the contract.

Otherwise, vestiture occurs when the property is or should have been

allocable or properly chargeable to this contract under sound and

generally accepted accounting principles and practices.

(2) Property to which the Government has obtained title solely

under this clause is not ``Government furnished property.''

* * * * *

52.216-11 [Amended]

39. Section 52.216-11 is amended in the first sentence of the

introductory paragraph of the section by removing ``or a facilities

contract.''

52.216-12 [Amended]

40. Section 52.216-12 is amended in the first sentence of the

introductory paragraph of the section by removing ``(other than a

facilities contract)''.

52.216-13 and 52.216-14 [Removed and Reserved]

41. Sections 52.216-13 and 52.216-14 are removed and reserved.

52.222-17 Labor Standards for Construction Work-Property Management

Contracts.

42. Section 52.222-17 section and clause headings are revised to

read as set forth above; and the date of the clause is revised.

43. Section 52.232-16 is amended by revising the date of the clause

and paragraphs (d), (e), and (h) of the clause to read as follows:

52.232-16 Progress Payments.

* * * * *

Progress Payments (Date)

* * * * *

(d) Title. (1) Title to property acquired or produced by the

Contractor for performance of this contract, the costs of which are

allocable to this contract as direct costs, shall vest in the

Government. For property acquired or produced prior to execution of

this contract, vestiture occurs upon execution of the contract.

Otherwise, vestiture occurs when the property is or should have been

allocable or properly chargeable to this contract under sound and

generally accepted accounting principles and practices. Except as

provided in 52.245-2, upon liquidation of all progress payments, the

Contractor shall have title to property acquired or fabricated for

this contract that is not required to be delivered to the Government

(2) Property to which the Government has obtained title solely

under this clause is not ``Government furnished property.''

(3) Except for Government furnished property, the Contractor may

sell scrap resulting from performance of this contract without

requesting the Contracting Officer's approval. The proceeds shall be

credited against the costs of performance.

(4) The Contractor shall not acquire for its own use property to

which title is vested in the Government under this clause or, except

as provided in paragraph (3) of this clause, dispose of such

property unless authorized to do so by the Contracting Officer. The

Contractor shall (i) exclude the allocable costs of the property

from the costs of contract performance, and (ii) repay to the

Government any amount of unliquidated progress payments allocable to

the property.

(e) Risk of loss. The Contractor is liable for loss, theft, or

destruction of, or damage to, property acquired or produced for

performance of this contract unless the Government has expressly

assumed such risks, taken title to the property under 52.245-2, or

accepted the property. The Contractor shall repay the Government an

amount equal to the unliquidated progress payments that are based on

costs allocable to property that is damaged, lost, stolen, or

destroyed.

* * * * *

(h) Special terms regarding default. If this contract is

terminated under the Default clause--

(1) The Contractor shall, on demand, repay to the Government the

amount of unliquidated progress payments.

(2) Upon full liquidation of progress payments, the Contractor

shall have title to

[[Page 30200]]

all property acquired or fabricated for performance of this contract

except such property required to be delivered to the Government

under the Default clause or property to which the Government has

taken title under 52.245-2.

* * * * *

52.232-21 [Removed and Reserved]

44. Section 52.232-21 is removed and reserved.

45. Section 52.232-32 is amended by revising the date of the clause

and paragraphs (f), (g), and (j) to read as follows:

52.232-32 Performance-Based Payments.

* * * * *

Performance-Based Payments (Date)

(f) Title. (1) Title to property acquired or produced by the

contractor for performance of this contract, the costs of which are

allocable to this contract as direct costs, shall vest in the

Government. For property acquired or produced prior to execution of

this contract, vestiture occurs upon execution of the contract.

Otherwise, vestiture occurs when the property is or should have been

allocable or properly chargeable to this contract under sound and

generally accepted accounting principles and practices. Except as

provided in 52.245-2, upon liquidation of all progress payments the

contractor shall have title to property acquired or fabricated for

this contract that is not required to be delivered to the

Government.

(2) Property to which the Government has obtained title solely

under this clause is not ``Government furnished property.''

(3) Except for Government furnished property, the Contractor may

sell scrap resulting from performance of this contract without

requesting the Contracting Officer's approval. The proceeds shall be

credited against the costs of performance.

(4) The Contractor shall not acquire for its own use property to

which title is vested in the Government under this clause or, except

as provided in paragraph (3) of this clause, dispose of such

property unless authorized to do so by the contracting officer. The

Contractor shall (i) exclude the allocable costs of the property

from the costs of contract performance, and (ii) repay to the

Government any amount of unliquidated progress payments allocable to

the property.

(g) Risk of loss. The Contractor is liable for loss, theft, or

destruction of, or damage to, property acquired or produced for

performance of this contract unless the Government has expressly

assumed such risks, taken title to the property under 52.245-2, or

accepted the property. The Contractor shall repay the Government an

amount equal to the unliquidated progress payments that are based on

costs allocable to property that is damaged, lost, stolen, or

destroyed.

* * * * *

(j) Special terms regarding default. If this contract is

terminated under the Default clause--

(1) The Contractor shall, on demand, repay to the Government the

amount of unliquidated progress payments.

(2) Upon full liquidation of progress payments, the Contractor

shall have title to all property acquired or fabricated for

performance of this contract except such property required to be

delivered to the Government under the Default clause or property to

which the Government has taken title under 52.245-2.

* * * * *

52.243-2 [Amended]

46. Section 52.243-2 is amended by removing Alternate IV and

renumbering Alternate V as Alternate IV of the clause.

47. Section 52.243-4 is amended by revising the date of the clause

and paragraph (a)(3) of the clause to read as follows:

52.243-4 Changes.

* * * * *

Changes (Date)

(a) * * *

(3) In the Government property or services furnished for contract

performance; or

* * * * *

52.244-2 [Amended]

47-A. Section 52.244-2 is amended by removing paragraph (a)(4) of

the clause.

48. Sections 52.245-1 through 52.245-7 are revised to read as

follows:

52.245-1 Government Furnished Property (Fixed-Price and Labor-Hour

Contracts).

As prescribed in 45.102(a), insert the following clause:

Government Furnished Property (Fixed-Price and Labor-Hour Contracts)

(Date)

(a) Definitions. The ``Government Property Control'' clause of

this contract, 52.245-3, defines certain terms used in Section

52.245. When a term defined in 52.245-3 is used in this clause, it

has the same meaning as when used in 52.245-3.

(b) Property furnished for performance of this contract. (1) The

Government furnished property identified in this contract may be

used for performance of the contract on a rent-free basis. The

Contractor shall not use such property on any other Government

contracts or for commercial purposes without the Contracting

Officer's prior approval. Unless otherwise permitted by law,

commercial use shall be on a rental basis. The terms and conditions

of the ``Rental Charges for Commercial Use'' clause of this contract

shall apply to each rental.

(2) The Contractor shall not improve or make structural

alterations to real property owned or leased by the Government and

made available for performance of this contract unless expressly

authorized to do so in writing by the Contracting Officer. Title to

such improvements or alterations shall vest in the Government if the

property is accountable under this contract or will be determined by

the terms of the contract under which the real property is

accountable.

(3) The Government retains title to Government furnished

property including Government furnished property that is

incorporated into or attached to any property it does not own.

Government furnished property does not become a fixture or lose its

identity as personal property by being attached to real property.

(4) The Government shall, when requested by the Contractor,

provide information reasonably required for the property's intended

use to the extent the Government has the right to release or

disclose the information.

(5) If the Contractor commingles Contractor acquired or

fabricated material with Government furnished material, the

provisions of paragraph (c) of this clause regarding suitability for

intended use shall not apply to the commingled Government furnished

material. Notwithstanding any other provision of this contract, the

Contractor shall be responsible for any failure to comply with

contract requirements attributable to material that was commingled.

(c) Suitability for intended use. The contract delivery or

performance dates are based upon the expectation that Government

furnished property will be suitable for its intended use, except

property furnished ``as is'' (see paragraph (d)), and delivered to

the Contractor at the times stated in the contract or, if not so

stated, in sufficient time to enable the Contractor to meet the

contract's delivery or performance dates.

(1) The Contractor shall notify the Contracting Officer promptly

following receipt of Government furnished property that is not

suitable for its intended use and take corrective action or dispose

of the property as directed by the Contracting Officer. The contract

shall be equitably adjusted in accordance with paragraph (g) of this

clause.

(2) The Contractor may request an equitable adjustment in price,

schedule, or both when Government furnished property is not

delivered to the Contractor by the required time and such untimely

delivery has affected contract performance. Any adjustment shall be

made in accordance with paragraph (g) of this clause.

(d) Property furnished as is. (1) Offerors and the Contractor

are responsible for assuring that Government property made available

on an ``as is'' basis is suitable for the offerors' or Contractor's

purposes. Such property is furnished F.O.B. at the location

specified in the solicitation or contract. The cost of transporting,

installing, modifying, repairing, or otherwise making such property

suitable for the Contractor's intended use shall be at the

Contractor's expense. Modifications to property furnished ``as is''

require the Contracting Officer's prior written approval.

(2) Special tooling or special test equipment is furnished ``as

is'' for performance of this contract if the Contractor acquired or

fabricated and the Government took title to such tooling or test

equipment under this or a prior contract.

(3) The Government makes no warranty whatsoever with respect to

property furnished ``as is'' except that the property will be in the

same condition when placed

[[Page 30201]]

at the specified F.O.B. location as when inspected by the Contractor

or, if not inspected by the Contractor, as of the last date

identified in the solicitation or contract for Contractor

inspection. The Contractor is responsible for verifying that the

property's condition has not changed during that period. If the

Contractor determines the property's condition has changed and such

change will adversely affect the Contractor, the Contractor shall

immediately notify the Contracting Officer and identify the changed

condition. If the Contracting Officer concurs that the property's

condition has changed, he or she may restore the property or

substitute other Government property at no change in contract price

(or target price or ceiling amount); permit the Contractor to

restore the property subject to an equitable adjustment; or, decline

to provide the property subject to an equitable adjustment in price,

schedule, or both. The foregoing provisions for adjustment are the

exclusive remedies available to the Contractor. The Government has

no liability for changes in the property's condition discovered

after removal from the specified F.O.B. location.

(4) Repairs to or modifications of property furnished ``as is''

do not affect the Government's title to such property.

(e) Changes in Government furnished property. (1) The

contracting Officer may increase, decrease, or substitute other

Government property for the property furnished or to be furnished

for performance of this contract or require use of Government

furnished property in lieu of Contractor property.

(2) Except as provided in paragraph (e)(4), any increase in the

amount of property furnished for performance of this contract shall

result in an equitable reduction in contract price and appropriate

adjustment of the contract delivery or performance dates.

(3) The Contractor may request an equitable adjustment in

contract price in accordance with paragraph (g) of this clause for a

decrease in or substitution for the property identified in the

contract or withdrawal of authority to use property accountable

under another contract in performance of this contract, provided

such decrease, substitution, or withdrawal increases the costs of

contract performance.

(4) If the Contracting Officer directs the Contractor to use

Government furnished property in lieu of Contractor property in

performance of this contract, any adjustment to the contract price

or terms resulting from such direction shall be made in accordance

with the ``Changes'' clause of this contract.

(f) Risk of loss. (1) Except as provided in paragraph (f)(3),

the Contractor is liable for any loss, theft, or destruction of, or

damage to, Government furnished property accountable under this

contract.

(2) Contractor responsible repairs to, or replacements of,

Government furnished property shall be accomplished at no change in

contract price (or target price or ceiling amount).

(3) The Contractor is not liable for--

(i) Government furnished property properly consumed in

performing this contract; or

(ii) Loss, theft, or destruction of, or damage to, Government

furnished property when the Contractor is providing services

performed entirely on real property owned or leased by the

Government and the Contractor does not control the use of, or access

to, the Government furnished property.

(4) Except as provided in paragraph (f)(5) of this clause, the

Contractor shall notify the Government's property administrator in

writing promptly following the loss, theft, or destruction of, or

damage to, Government furnished property. Such notice shall

identify--

(i) Lost, stolen, destroyed, or damaged Government property by

description, contract number, national stock number (if known), and

either part number or identification number;

(ii) The date a loss or theft was discovered or damage or

destruction occurred and, if known, the circumstances;

(iii) Each property item's acquisition cost;

(iv) The contracts affected;

(v) All known interests in commingled property of which the

Government property is a part; and

(vi) The insurance, if any, covering any part of or interest in

such commingled property.

(5) The Contractor is not required to provide notice of loss,

theft, or destruction of, or damage to, low value property which the

Contractor does not need for continued performance of this contract

until contract completion or termination. Such notice shall include

the contract number and each such property item's acquisition cost,

description, national stock number (if known), and either its part

number or identification number.

(6) The Contractor shall take all reasonable action to protect

damaged Government furnished property from further damage and to

physically separate such property from all other property.

(7) The Contracting Officer may replace, direct the Contractor

to repair or replace, or direct the Contractor to take other

appropriate action regarding lost, stolen, damaged, or destroyed

Government furnished property for which the Government has

specifically assumed such risks in this contract. When lost,

damaged, stolen, or destroyed Government furnished property is

replaced by the Government or the Contractor, the replacement

property shall be entered into the property control system as a

Government furnished property item. Any equitable adjustment

incident to such direction shall be determined in accordance with

paragraph (g) of this clause.

(g) Equitable adjustments. (1) Equitable adjustments shall be

the Contractor's exclusive remedy for Government actions under this

clause and shall be made in accordance with the procedures of the

Changes clause. The Government shall not be liable to suit for

breach of contract for--

(i) Any delay in delivery of Government furnished property;

(ii) Delivery of Government furnished property in a condition

not suitable for its intended use;

(iii) An increase or decrease in, or substitution of, Government

furnished property; or

(iv) Failure to repair or replace Government furnished property

when the Government is responsible for repair or replacement.

(2) An equitable adjustment for Government furnished property

that is not in a condition suitable for intended use or the

withdrawal or substitution of Government furnished property may

include an amount for the restoration and rehabilitation of the

contractor's premises caused by such condition, withdrawal, or

substitution.

(h) Maintenance Responsibilities. (1) The contractor is

responsible for the maintenance of Government furnished property

accountable under this contract, including such property stored at a

Contractor-managed site. The Contractor shall perform all

maintenance, including preventive maintenance, necessary to assure

that Government furnished property remains suitable for its intended

use unless the Contracting Officer specifically relieves the

contractor of its maintenance responsibility for a particular item

or class of items. If routine and preventive maintenance are not

sufficient to sustain a property item's suitability for intended

use, the Contractor shall notify the Contracting Officer promptly

and request direction regarding repair or replacement.

(2) The Contractor shall notify promptly the Government's

property administrator of the need for any replacement of, or major

repair or rehabilitation to, Government furnished property

discovered during its maintenance activities and shall not effect

such repair, replacement, or rehabilitation unless authorized to do

so by the Contracting Officer.

(i) Return of Government furnished property. If this contract

requires Government furnished property to be returned directly to

the Government and not entered into the property disposal process--

(1) The Contractor shall notify the Contract Administration

Office of its intent to return such property at least 10 working

days prior to return. Notices shall identify the contracts under

which the items are accountable and provide each item's name,

description, and national stock number, if known, or part number or

identification number.

(2) The property shall be returned to the Government in a

condition suitable for its intended use except--

(i) Lost, stolen, or destroyed property that the Government has

determined will not be replaced;

(ii) Damaged property that the Government has determined will

not be repaired;

(iii) Property consumed in performance of this contract;

(iv) Property attached to, incorporated into, or delivered with,

a deliverable end item; or

(v) Property furnished as is shall be returned in equal or

better condition than when furnished to the Contractor.

(j) Disposal of Government furnished property--(1) Inventory

disposal schedules. Except as provided in paragraph (i) or (j)(2),

the Contractor shall identify Government furnished property no

longer required for performance of this contract using Standard Form

1428, Inventory Disposal Schedule. Unless the plant clearance

officer has agreed to a different submission basis, or the contract

requires inventory disposal

[[Page 30202]]

schedules to be submitted electronically, the Contractor shall

prepare separate inventory disposal schedules for: special test

equipment with general purpose components; special test equipment

that does not contain general purpose components; printing

equipment; automatic data processing equipment; nonnuclear hazardous

materials; and, nuclear materials. Property with the same

description, condition code, and reporting location may be grouped

in a single line item. Special test equipment shall be described in

sufficient detail to permit an understanding of the special test

equipment's intended use. The Contractor may annotate the schedule

to identify test equipment the Contractor wishes to purchase from

the Government or general purpose components thereof the Contractor

wishes to purchase or use in the performance of other Government

contracts.

(2) Scrap lists. Contractors that have Government approved scrap

procedures may prepare scrap lists (provided such lists are

consistent with the approved scrap procedures) in lieu of inventory

disposal schedules except for scrap that--

(i) Requires demilitarization;

(ii) Is a classified item;

(iii) Is generated from classified items;

(iv) Contains hazardous materials; or

(v) Is dangerous to the public health, safety, or welfare.

(3) Corrections. If the plant clearance officer finds that

property identified on an inventory disposal schedule or scrap list

is not accountable under this contract or is not in the quantity or

condition indicated on the inventory disposal schedule or scrap

list, he or she may require the Contractor to correct the inventory

disposal schedule or scrap list, may reject such schedules or lists

at any time, or may require submission of an inventory control

schedule in lieu of a scrap list.

(4) Submission requirements. Inventory disposal schedules or

scrap lists shall be submitted to the plant clearance officer for

approval no later than--

(i) Thirty (30) days following the Contractor's determination

that a Government furnished property item is no longer required for

performance of the contract;

(ii) Sixty (60) days following completion of contract deliveries

or performance or such longer period as may be approved by the plant

clearance officer; or

(iii) One hundred twenty (120) days following contract

termination in whole or in part or such longer period as may be

approved by the Contracting Officer.

(5) Inventory Schedule Adjustments. The Contractor shall provide

the plant clearance officer at least 10 working days' advance

written notice of its intent to remove a Government furnished

property item, including an item identified as scrap, from an

approved inventory disposal schedule. Unless the plant clearance

officer objects to the intended schedule adjustment within the

notice period, the Contractor may make the adjustment upon

expiration of the notice period.

(6) Storage. The Contractor shall store the Government furnished

property identified in an inventory disposal schedule pending

receipt of disposal instructions. If the Government fails to provide

disposal instructions within 120 days following receipt of an

acceptable inventory disposal schedule, the Contractor might be

entitled to an equitable adjustment for costs incurred to store such

property on or after the 121st day following receipt of an

acceptable schedule.

(7) Disposal. Except as provided in paragraph (j)(7)(i),

Government furnished property shall not be disposed of until the

Contractor has been authorized to do so by the plant clearance

officer.

(i) If the Government does not provide disposition instructions

to the Contractor within 60 days following receipt of an acceptable

scrap list, the Contractor may dispose of the listed scrap.

(ii) The Contractor shall prepare for shipment, deliver f.o.b.

origin, or dispose of Government furnished property as directed by

the plant clearance officer. The Contractor shall remove and destroy

any markings identifying the property as Government property when

the plant clearance officer directs disposal by sale or donation,

notifies the Contractor that the Government has abandoned the

property, or directs the Contractor to scrap the property.

(iii) The net proceeds from a disposal action of scrapped

Government furnished property shall be credited to the contract

under which the Government furnished property was accountable or,

when scrapped Government furnished property is not segregable from

other scrap, to an appropriate overhead account. The Contractor

shall credit the net proceeds of other disposal actions in

accordance with instructions provided by the plant clearance

officer.

(iv) The Contracting Officer may require the Contractor to

demilitarize the property prior to shipment or disposal. Any

adjustment in contract price incident to the Contracting Officer's

direction to demilitarize Government furnished property shall be

made in accordance with paragraph (g) of this clause.

(8) Contractor removal of property. The Contractor must obtain

the plant clearance officer's approval to remove Government

furnished property from its premises prior to receipt of final

disposition instructions. If approval is granted, the Contractor

shall transport and store the property at Contractor expense. The

storage facility must be appropriate for assuring the property's

physical safety and suitability for use. Approval does not relieve

the Contractor of liability for loss, theft, or destruction of, or

damage to, such property.

(9) Subcontractor inventory disposal schedules. When the

Contractor permits a subcontractor or supplier to use at a

subcontractor or supplier managed site Government property furnished

to the Contractor for performance of this contract, the Contractor

shall require the subcontractor or supplier to submit inventory

disposal schedules or scrap lists to the Contractor in sufficient

time for the Contractor to comply with the requirements of paragraph

(j)(4) of this clause.

(k) Abandonment and restoration of contractor's premises.

(1) The Government shall not abandon Government furnished

property that is or contains a hazardous material at a Contractor-

owned location without the Contractor's written concurrence. The

Contractor may request an equitable adjustment in contract price,

target price or ceiling amount incident to such agreement.

(2) The Government, upon notice to the Contractor, may abandon

any nonhazardous Government property in place at which time all

obligations of the Government regarding such abandoned property

shall cease. The Government has no obligation to restore or

rehabilitate the Contractor's premises under any circumstances and,

except as provided in paragraphs (g)(2) and (k)(1), has no liability

for such restoration or rehabilitation.

(l) Overseas contracts. In a contract performed outside the

United States of America, its territories, or possessions, the words

``Government'' and ``Government furnished'' (wherever they appear in

this clause) shall be construed as ``United States Government'' and

``United States Government furnished,'' respectively.

(End of clause)

Alternate I (Date). As prescribed in 45.102(a), substitute the

following paragraph (f) for paragraph (f) of the basic clause:

(f) Limited risk of loss. (1) The Contractor's liability for

loss, theft, or destruction of, or damage to, Government furnished

property accountable under this contract shall be limited if the

Contractor maintains a property control system that satisfies the

requirements of the Government Property Control clause of this

contract (hereinafter referred to as an approved system).

(2) When the Contractor maintains an approved system, the

Contractor shall not be liable for loss, theft, or destruction of,

or damage to, Government property accountable under this contract

except loss, theft, destruction, or damage for which the Contractor

is expressly responsible under the terms of this contract or loss,

theft, destruction, or damage that results from--

(i) A risk expressly required to be insured under this contract

but only to the extent of the insurance required to be purchased and

maintained, or to the extent of insurance actually purchased and

maintained, whichever is greater;

(ii) A risk that is in fact covered by insurance or for which

the Contractor is otherwise reimbursed, but only to the extent of

such insurance or reimbursement; or

(iii) Willful misconduct or lack of good faith on the part of

the Contractor's managerial personnel.

(3) Following notice from the Government's property

administrator to one of the Contractor's managerial personnel that

the Contractor's or a subcontractor's property control system is not

in compliance with the requirements of the Government Property

Control clause of this contract, the Contractor's failure to correct

its system or to have a subcontractor's system corrected within the

dates specified by the Government's property administrator, or such

other mutually agreed dates, shall be considered willful misconduct

or lack of good faith on the part of the Contractor's managerial

personnel. The Contractor shall

[[Page 30203]]

be liable for any loss, theft, or destruction of, or damage to, the

Government furnished property accountable under this contract except

such loss, theft, destruction, or damage that the Contractor can

establish by clear and convincing evidence--

(i) Did not result from the Contractor's failure to maintain an

approved system; or

(ii) Occurred while an approved system was maintained by the

Contractor.

(4) Except as provided in (f)(3)(i) and (f)(3)(ii), the

Contractor shall be liable for loss, theft, or destruction of, or

damage to, Government furnished property accountable under this

contract immediately upon notice by certified mail that the

Government has withdrawn approval of the Contractor's Government

property control system.

(5) The Contractor is not liable for Government property

properly consumed in performing this contract. The Contractor shall

have no liability for loss, theft, or destruction of, or damage to

Government property furnished for performance of services entirely

on real property owned or leased by the Government when the

Contractor does not control the use of, or access to, such property.

(6) The Contractor's transfer of Government furnished property

to the possession and control of a subcontractor, does not affect

the Contractor's liability for loss, theft, or destruction of, or

damage to, that property.

(7) Except as provided in paragraph (f)(8) of this clause, the

Contractor shall notify the Government's property administrator in

writing promptly following the loss, theft, or destruction of, or

damage to, Government furnished property. Such notice shall

identify--

(i) Lost, stolen, destroyed, or damaged Government property by

description, contract number, national stock number (if known), and

either part number or identification number;

(ii) The date a loss or theft was discovered or damage or

destruction occurred and, if known, the circumstances;

(iii) Each property item's acquisition cost;

(iv) The contracts affected;

(v) All known interests in commingled property of which the

Government furnished property is a part; and

(vi) The insurance, if any, covering any part of or interest in

such commingled property.

(8) The Contractor is not required to provide notice of loss,

theft, or destruction of, or damage to, low value property which the

Contractor does not need for continued performance of this contract

until contract completion or termination. Such notice shall include

the information required by paragraph (f)(7) of this clause.

(9) The Contractor shall take all reasonable action to protect

damaged Government furnished property from further damage and to

physically separate such property from all other property.

(10) The Contractor shall repair, renovate, or take such other

action with respect to lost, stolen, damaged, or destroyed

Government furnished property as the Contracting Officer directs and

adjust the property records accordingly. When such repair,

renovation, or action is not the Contractor's responsibility under

this contract, the Contractor shall be entitled to an equitable

price adjustment, in accordance with paragraph (g) of this clause.

Contractor responsible repairs to, or replacements of, Government

furnished property shall be accomplished at no change in contract

price.

(11) The Contractor shall not include in any price to the

Government, any charge or reserve for insurance (including any self-

insurance fund or reserve) covering loss, theft, or destruction of,

or damage to, Government furnished property except to the extent the

Government might have expressly required the Contractor to carry

such insurance under another provision of this contract.

(12) If the Contractor is reimbursed or otherwise compensated

for any loss, theft, or destruction of, or damage to, Government

furnished property, the Contractor shall use the proceeds to repair,

renovate, or replace such property or equitably reimburse the

Government, as directed by the Contracting Officer and adjust the

property records accordingly.

(13) The Contractor shall do nothing to prejudice the

Government's rights to recover against third parties for any loss,

theft, or destruction of, or damage to, Government furnished

property. When requested by the Contracting Officer, the Contractor

shall, at Government expense, furnish to the Government all

reasonable assistance and cooperation (including the prosecution of

suit and the execution of instruments of assignment in favor of the

Government) in obtaining recovery.

52.245-2 Special Tooling and Special Test Equipment--Right to Title

(Fixed-Price Contracts).

As prescribed in 45.102(b), insert the following clause:

Special Tooling and Special Test Equipment--Right to Title (Fixed-Price

Contracts) (Date)

(a) Definitions. The ``Government Property Control'' clause of

this contract, 52.245-3, defines certain terms used in Section

52.245. When a term defined in 52.245-3 is used in this clause, it

has the same meaning as when used in 52.245-3.

(b) Right to title. The Government has the right to take title

to special tooling or special test equipment items that are not

required to be delivered under this contract if the costs of such

items are allocable to this contract as direct costs. That right

ends upon expiration of the time period, in paragraph (e) of this

clause. Except as provided in paragraph (f), the Government obtains

title under this clause at no change in contract price, target

price, or ceiling amount.

(c) Reports. (1) The Contractor shall submit to the Contracting

Officer a report identifying special tooling and special test

equipment to which the Government has the right to obtain title

under paragraph (b) of this clause as soon as practicable during

contract performance but not later than the earlier of--

(i) 90 days prior to completion of scheduled deliveries (other

than technical data) under this contract;

(ii) 30 days following the Contractor's determination that a

right to title tooling or test equipment item is no longer required

for contract performance.

(2) The reports shall identify, for each such tooling or test

equipment item or groups of identical items, the items or group's--

(i) Nomenclature;

(ii) Quantity;

(iii) Acquisition cost;

(iv) Contract number;

(v) Part number(s) made or tested; and

(vi) Identification number.

(d) Storage. The Contractor shall store at its expense special

tooling or special test equipment identified in a report required by

paragraph (c) of this clause until the Government notifies the

Contractor that it has taken title to a special tooling or test

equipment item or until expiration of the Government notice period.

Items shall be stored in a manner sufficient to preserve capability

and provide protection from damage. If the Government requires items

to be stored subsequent to the Government's assumption of title, the

Contractor might be entitled to a price adjustment as provided in

paragraph (f) of this clause.

(e) Assumption of title. (1) The Government must notify the

Contractor that it is taking title to a special tooling or special

test equipment item or items within 120 days, or such other period

mutually agreed upon, following receipt of a Special Tooling/Special

Test Equipment report or other written notice from the Contractor

identifying special tooling or special test equipment items that are

no longer required for performance of this contract.

(2) The Government's notice may be written or electronic, shall

identify the special tooling or special test equipment item(s), and

may, in any combination--

(i) Provide packing, packaging, marking, and shipping

instructions;

(ii) Direct the Contractor to prepare the property for storage

at the Contractor's facility or a Government facility; or

(iii) Provide instructions when accountability is to be

transferred to another contract.

(3) The Contractor's storage obligations are not diminished if

the Government notice period, or any extension thereof, extends

beyond the date contract deliveries are completed.

(f) Price adjustment. The contract price may be equitably

adjusted for costs incurred by the Contractor to store, prepare for

storage, package, pack, or mark for shipment, the special tooling or

special test equipment to which the Government has taken title. Any

adjustment in contract price shall be made in accordance with the

procedures of the ``Changes'' clause of this contract and only to

the extent the Contracting Officer's actions under paragraph (e) of

this clause required the Contractor to incur costs that it would not

have incurred under customary commercial practices.

(g) Risk of loss. The Contractor is responsible for any loss,

theft, or destruction of, or damage to, special tooling or special

test equipment to which the Government has taken title under this

clause during the period commencing upon the Government's

[[Page 30204]]

delivery of the notice required by paragraph (e) of this clause and

ending upon placement aboard a carrier's conveyance (f.o.b. origin)

or delivery at the specified f.o.b. destination point.

(h) Flow down. The Contractor shall insert this or a

substantially similar clause in all contracts and similar

instruments with its first-tier subcontractors or suppliers, other

than subcontractors or suppliers of commercial items, that will

fabricate or acquire special tooling or special test equipment for

performance of this contract.

(End of clause)

52.245-3 Government Property Control.

As prescribed in 45.102(c), insert the following clause:

Government Property Control (Date)

(a) Definitions. As used in this clause--

Contractor's managerial personnel means the Contractor's

directors, officers, and any of the Contractor's managers,

superintendents, or equivalent representatives who have supervision

or direction of all or substantially all of the contractor's--

(1) Business; or

(2) Operations at a site connected with performance of this

contract.

Equipment means items whose use is not limited to, or with only

minor modification would not be limited to, the development,

production, or maintenance of a particular item or the performance

of a particular service. The term includes, but is not limited to,

automated data processing equipment, office equipment, construction

equipment, hand tools, machine tools (other than special tooling),

test equipment (other than special test equipment or components

thereof), furniture, and vehicles.

Government property means property the Government owns or

leases.

Government-furnished property means property provided by the

Government to a Contractor for performance of a contract.

Low-value property means equipment, special tooling, or special

test equipment that has an acquisition cost of $1500 or less and is

not sensitive property.

Material means property to be consumed or expended to perform a

service or produce a deliverable end item and property incorporated

into or attached to an end item. The term includes assemblies,

components, parts, raw and processed materials, and supplies that

may be consumed in normal use in performing a contract. It does not

include equipment, real property, special test equipment, special

tooling, or unique Federal property.

Nonprofit organization means a business entity organized and

operated exclusively for charitable, scientific, or educational

purposes, the net earnings of which do not inure to the benefit of

any private shareholder or individual, that is exempt from Federal

income taxation under section 501 of the Internal Revenue Code and

does not conduct a substantial portion of its activities carrying on

propaganda or otherwise attempting to influence legislation or

participating in any political campaign on behalf of any candidate

for public office.

Personal property means property of any kind or interest in it

except real property, battleships, cruisers, aircraft carriers,

destroyers, submarines, and records of the Federal Government.

Plant clearance officer means a person appointed to perform

plant clearance functions.

Precious metals means silver, gold, platinum, palladium,

iridium, osmium, rhodium, and ruthenium.

Preventive maintenance means regularly scheduled maintenance

performed to sustain suitability for intended use and detect and

correct minor deficiencies before they result in serious

consequences.

Property means real and personal property.

Property administrator means a person appointed to perform

Government property administration.

Real property means land and rights in land, ground

improvements, utility distribution systems, and buildings and other

structures. It does not include foundations and other work necessary

for installing special tooling, special test equipment, or

equipment.

Scrap means personal property that has no value except its basic

metallic, mineral, or organic content.

Sensitive property means property potentially dangerous to the

public safety or security if stolen, lost, or misplaced, or that

must be subject to exceptional physical security, protection,

control, and accountability such as classified property, weapons,

ammunition, explosives, controlled substances, radioactive

materials, hazardous materials or wastes, or precious metals.

Special test equipment means a test unit or units designed,

fabricated, or modified to accomplish special purpose testing,

groupings of such items, general purpose items, or any combination

thereof, that are interconnected and interdependent so as to become

a new functional entity.

Special tooling means items, such as jigs, dies, fixtures,

molds, patterns, taps, gauges, or other equipment and manufacturing

aids, which are of such a specialized nature that without

substantial modification or alteration their use is limited to the

development, production, repair, or maintenance of particular

supplies or components thereof, or to the performance of particular

services.

Unique Federal property means Government-owned personal

property, or components thereof, that is specially designed to

perform or support the mission of one or more Federal agencies and

is not available to the public.

Work in process means bench stock materials, complete or

incomplete fabricated parts, subassemblies, assemblies, and similar

items that are created during production of deliverable end items or

are required to construct special tooling or special test equipment

needed to produce deliverable end items.

(b) General. (1) This clause is applicable to Government

furnished property; property stored by the Contractor at the

Government's direction including property to which the Government

has taken title under 52.245-2; and, under cost-type or time-and-

material contracts, property acquired or fabricated by a Contractor

to which the Government has obtained title under the clause at

52.216-7.

(2) The Contractor is responsible for the maintenance,

protection, and preservation of Government property in its or its

subcontractors' possession. The Contractor shall account for such

property as required by this contract.

(3) If the Contractor does not have a property control system

that is approved by the Government's property administrator, it

shall establish a system that satisfies the requirements of this

clause within 90 days following contract award (or such other

mutually agreeable period). Notwithstanding any other provision of

this contract regarding liability for loss, theft, or destruction

of, or damage to, Government property in the Contractor's or its

subcontractors' possession, the Contractor shall be liable for such

loss, theft, destruction, or damage until its system is approved by

the Government's property administrator. The Contractor shall

maintain its system during the period Government property is in its

or its subcontractors' possession.

(4) The Contractor should use its existing property control

system or a modification thereof when the existing or modified

system satisfies the requirements of this clause.

(c) Control System Requirements. The property control system

shall include written processes for--

(1) Assessing the system's efficiency and effectiveness,

recommending corrective action or general improvements, and

implementing appropriate changes;

(2) Obtaining approval of property actions from the responsible

Government representative no later than the time specified in this

contract (when such approval is required by this contract) and

appropriately documenting such approval;

(3) Inspecting property acquired by the Contractor or furnished

by the Government for performance of this contract upon receipt;

(4) Identifying Government property received by the Contractor

that was intended for other persons or discrepancies between the

type, quantity, or condition of Government furnished property

shipped to and actually received by the Contractor and initiating

corrective action;

(5) Promptly entering all Government property into the property

control system;

(6) Assuring that Government property is properly classified

(see paragraph (f)(2)(viii));

(7) Assuring Government property is used only as authorized by

the Contracting Officer;

(8) Controlling the distribution and return of pilferable

property;

(9) Scheduling and monitoring Government property maintenance to

assure timely performance and recording of all maintenance actions;

(10) Accurately recording by type and quantity Government

material consumed during contract performance;

(11) Performing, reporting, and recording all inventories

required by this contract;

(12) Identifying and reporting lost, damaged, or destroyed

government property and generating corrective action

recommendations;

(13) Maintaining special security for classified or sensitive

property commensurate with the property's security classification,

special handling requirements, or both;

[[Page 30205]]

(14) Accurately preparing and timely submitting the records and

reports required by this contract;

(15) Assuring subcontractors have adequate procedures for the

control and protection of Government property;

(16) Justifying the continued need for Government property to

perform this contract;

(17) Moving and storing Government property in a manner

commensurate with the property's handling and storage requirements;

and

(18) Disposing of Government property in accordance with the

requirements of this contract.

(d) Access. The Government shall have access, at all reasonable

times, to the premises at which any Government property is located

and to the Contractor's Government property records and supporting

information.

(e) Property control system submission, review, and approval.

(1) Except as provided in paragraph (d)(2) of this clause, offerors

shall submit their written property control systems and processes

with their offer if--

(i) The offeror does not have an existing property control

system or its existing system has not been approved by a Government

property administrator;

(ii) The offeror's property control system last was approved, or

approval validated, more than 2 years prior to the date of its

offer;

(iii) A Government property administrator has requested

corrections to the offeror's system or procedures and such

corrections have not been made; or

(iv) Approval of the system has been withdrawn.

(2) The submission requirements in paragraph (d)(1) do not apply

to offerors that have a Government property system that has been

approved or validated by the Government no more than 2 years prior

to the time for submission of offers. Such offerors are required

only to submit to the Government's property administrator, within 90

days following contract award, changes required to conform the

system with requirements in this contract. The submission date may

be extended by the Government's property administrator if he or she

determines that an extension is warranted.

(3) The Government's property administrator shall review the

Contractor's system for conformance with contract requirements and

approve or require corrections to the system and its implementing

procedures. The Contractor shall accomplish the required corrections

at no change in price or fee.

(4) The Government may review the Contractor's previously

approved system or require the Contractor to review a

subcontractor's system to assure compliance with contract

requirements. The Government's property administrator may validate

approval of, require corrections to, or with the administrative

contracting officer's concurrence, withdraw approval of the

Contractor's system or require the Contractor to have a

subcontractor's system corrected. The Contractor shall implement

corrections required by the Government's property administrator by

the date specified by the property administrator or such other date

agreed upon at no change in price or fee. The Contractor's failure

to implement corrections in a timely manner might result in the

system's approval being withdrawn.

(5) The Contractor shall make available to the Government's

property administrator all records and related information

reasonably required to verify that the Contractor's or a

subcontractor's Government property control system conforms to

contract requirements. Any disagreement as to the amount or type of

information required for such verification shall be referred to the

administrative contracting officer for resolution.

(f) Property records and supporting information--(1) General.

(i) The Contractor shall establish or maintain a property record

that is current and complete for each Government property item in

its or its subcontractors' possession. Identical items may be

consolidated in a single property record if the consolidated record

provides the information required by this clause. The Contractor

shall identify useable components permanently removed from

Government property as Government property items, enter such items

into its property control system, and establish and maintain

appropriate property records. Property records created by a

subcontractor that has an approved property system may be used in

lieu of creating new records.

(ii) Contractors that use a Material Requirements Planning,

Manufacturing Resource Planning, Material Management Accounting

System, or similar systems may use those systems to generate the

records for material items.

(iii) If the Contractor has an approved property control system,

its documents evidencing receipt and issue shall be the property

control records for Government material issued for immediate

consumption.

(iv) When the Government is responsible for the replacement of a

property item under this contract and has elected--

(A) To replace or have the Contractor replace the item, the

Contractor shall annotate appropriately the property record for the

item being replaced, close that record, and create a new property

record for the replacement item; or

(B) Not to replace or have the Contractor replace the item, the

Contractor shall close the property record for that item.

(v) The Contractor shall provide the acquisition cost for each

Government property item that was acquired or fabricated by the

Contractor during performance of this contract. Estimated costs may

be provided when the actual costs are not known.

(vi) The Government shall provide the acquisition cost for

Government furnished property within 30 days following delivery of

the property to the Contractor. The Contractor shall notify the

Government's property administrator promptly if the acquisition cost

information is not received within that period.

(vii) Property records are not required for work in process.

(2) Standard information. Each property control record shall

contain the following information--

(i) The item's name, description, property classification, and

National Stock Number (if the item has a national stock number). The

National Stock Number for property controlled by documents

evidencing receipt and issue is not required until property

disposal.

(ii) Contract number or equivalent code designation.

(iii) Quantity received or fabricated, issued, and on hand.

(iv) The date of the most recent physical inventory or other

posting reference.

(v) Acquisition cost.

(vi) Current location. (For low value property, identify the

initial location only.)

(vii) The most recent transaction date.

(viii) The property's classification. (Use only one of the

following for each property item: Land, Buildings, Other Real

Property, Equipment, Special Test Equipment, Special Tooling, Unique

Federal Property, or Material.)

(3) Additional Information--(i) Special tooling and special test

equipment records. The Contractor shall provide the information

required by paragraph (f)(2) for each general purpose test equipment

item that is a removable or reusable component of Government-owned

special test equipment if removal and reuse is economically

feasible.

(ii) Equipment records. Each record shall include the

manufacturer's name, Commercial and Government Entity (CAGE) code or

equivalent information, serial number and model or part number.

(iii) Real property records. (A) Records are not required for

portable buildings or facilities specifically acquired or

constructed for tests that will result in the destruction of such

buildings or facilities.

(B) Real property records must be itemized, indexed, and contain

a description of the property, its location, original acquisition

cost, a description of property alterations made or construction

work performed by the Contractor, including an identification of the

construction sites supporting such alterations or construction, and

separately identify the cost of such alterations or construction.

Supporting documentation shall include maps, drawings, plans,

specifications, and, if necessary, supplementary data needed to

completely describe and value the property.

(C) Costs incurred by the Government or the Contractor, to

acquire, construct, alter, or improve Government-owned or -leased

real property, including additions, expansions, extensions, or

conversions thereof, shall be added to the property's acquisition

cost if they increase the value, life, utility, capability, or

serviceability of the property.

(D) The Government's real property records shall be modified and

annotated with a statement of the pertinent facts when property is

sold, transferred, donated, destroyed, abandoned by the Government

in place, or condemned.

(iv) Records of maintenance actions. The property records for

items requiring maintenance shall contain the maintenance schedule,

the dates maintenance actions were performed, and identify any

deficiencies discovered.

(v) Scrap records. (A) The Contractor's scrap records shall

provide the--

[[Page 30206]]

(1) Contract number or equivalent code designation from which

the scrap was derived;

(2) Scrap classification by material content; and

(3) Disposition and disposition dates.

(B) When Contractor and Government-owned property of the same

stock or classification are used to produce an item or any component

thereof and property scrapped during such production cannot be

identified as Contractor or Government-owned property, the

Government property scrap records shall reflect a proportional,

equitable share of such scrap.

(vi) Property returned under warranty. The Contractor shall

establish a separate property record for each item returned for

correction under a warranty and maintain the records on a contract-

by-contract basis. The records shall identify the date received, the

contract number under which the item was returned, the corrective

action performed, and the date the item is returned to the

Government. Once a property record has been established, identical

items received for corrective action shall be added to the

established record and the information required by this paragraph

maintained for each item.

(vii) Sensitive property. Property records shall legibly and

conspicuously identify sensitive property.

(g) Reports--(1) Government Property. The Contractor shall

report all Government property accountable under this contract that

is in its or its subcontractors' possession as of September 30 of

each calendar year or upon completion of all property disposal

actions under this contract, whichever is sooner. The report shall

be prepared using SF 1422 (or an agency equivalent furnished by the

Contracting Officer) and submitted to the Government's property

administrator no later than October 31 of each calendar year.

(2) Misdirected government property. The Contractor shall submit

a written report to the Government's property administrator

immediately following receipt of Government property intended for

another person or Government property not required for performance

of a Government contract and request disposition instructions. To

the extent practical, the report shall identify the shipment's

content, intended recipient, carrier that made delivery, the

Government activity from which the shipment originated, and the

shipment's current location.

(3) Late Government Furnished Property. The Contractor shall

report to the Contracting Officer, with a concurrent copy to the

Government's property administrator, a failure to receive Government

furnished property at the time stated in the contract or, when a

time is not stated, in sufficient time to enable the Contractor to

meet the contract's delivery or performance dates. Each report shall

forward the Contractor's estimate of the extent to which such

failure has affected or might affect contract performance.

(h) Physical inventories.--(1) Periodic. Except for low value

property and work in process, the Contractor shall periodically

physically inventory all Government property in its possession. The

Contractor, with the approval of the property administrator, shall

establish the method, frequency, and procedures for such inventories

to assure the existence and location of such property are accurately

established and the records and reports required by this clause are

complete and accurate. For purposes of this clause, electronic,

optical, electro-magnetic, or similar inventory systems approved by

the Government's property administrator satisfy the requirement for

physical inventories.

(2) Contract termination or completion inventories. The

Contractor shall inventory all property furnished by the Government

or acquired or fabricated by the Contractor for performance of this

contract immediately following a notice of termination or partial

termination of this contract or upon completion of deliveries or

performance under the contract except property that is authorized

for use on a follow-on or other Government contract. Such property

does not have to be inventoried if the Contractor has notified the

property administrator that record balances have been transferred to

the receiving contract.

(3) Restriction. The Contractor personnel who perform physical

inventories shall not be the same individuals who maintain the

property records required by this contract or have custody of the

property unless authorized to do so by the property administrator.

(i) Markings--(1) Contractor acquired or fabricated property--

(i) Cost-type contracts. The Contractor shall legibly and

conspicuously mark Contractor acquired or fabricated property other

than material with the phrase ``U.S. Government Property'' (or a

similar phrase that conveys Government ownership), and a control

number that links the property to the property records maintained by

the Contractor, as soon as practicable following the Government's

assumption of title to the property.

(ii) Fixed price type contracts. This paragraph applies only to

special tooling or special test equipment to which the Government

has taken title under 52.245-2. The Contractor shall affix the

markings identified in paragraph (i)(1)(i) to such tooling or test

equipment as soon as practicable following receipt of the

Government's notice that it has taken title to a special tooling or

special test equipment item.

(2) Government furnished property. Promptly following receipt of

Government furnished property, the Contractor shall determine

whether the property bears a Government ownership marking, mark

unmarked property with the markings identified in paragraph

(i)(1)(i), and replace any control numbers affixed by others with

the Contractor's control number.

(j) Overseas contracts. In a contract performed outside the

United States of America, its territories, or possessions, the words

``Government'' and ``Government furnished'', (as used in this

clause, mean ``United States Government'' and ``United States

Government furnished,'' respectively.)

(End of clause)

Alternate I (Date) As prescribed in 45.102(c), replace

paragraphs (f) and (g) of the basic clause with the following:

(f) Property Records. The Contractor shall establish a separate

property record for each Government property item returned for

correction under a warranty and maintain the records on a contract-

by-contract basis. The records shall identify the item's name,

description, property classification, and national stock number (if

the item has a national stock number), the date received, the

contract number under which the item was returned, the corrective

action performed, and the date the item is returned to the

Government. Once a property record has been established, identical

items received for corrective action shall be added to the

established record and the information required by this paragraph

maintained for each item.

(g) Reports--(1) Misdirected government property. The Contractor

shall submit a written report to the Government's property

administrator, immediately following receipt of Government property

intended for another person or Government property not required for

performance of a Government contract and request disposition

instructions. To the extent practical, the report shall identify the

shipment's content, intended recipient, carrier that made delivery,

the government activity from which the shipment originated, and the

shipment's current location.

(2) Late Government Furnished Property. The Contractor shall

report to the Contracting Officer, with a concurrent copy to the

Government's property administrator, a failure to receive Government

furnished property at the time stated in the contract or, when a

time is not stated, in sufficient time to enable the contractor to

meet the contract's delivery or performance dates. Each report shall

forward the Contractor's estimate of the extent to which such

failure has affected or might affect contract performance.

52.245-4 Government Property (Cost Reimbursement and Time and Material

Contracts).

As prescribed in 45.102(d), insert the following clause:

Government Property (Cost Reimbursement and Time and Material

Contracts) (Date)

(a) Definitions. The ``Government Property Control'' clause of

this contract, 52.245-3, defines certain terms used in Section

52.245. When a term defined in 52.245-3 is used in this clause, it

has the same meaning as when used in 52.245-3.

(b) General. (1) Except as provided in paragraph (c) of this

clause, the Contractor shall use its own property to perform this

contract.

(2) The Contractor shall not acquire equipment or real property

for the Government unless--

(i) The equipment or real property is specified as a deliverable

end item under this contract; or

(ii) The Contractor is a nonprofit organization whose primary

purpose is the conduct of scientific research, or a nonprofit

institution of higher education, that is performing a Government

contract for basic or applied scientific research and has obtained

the Contracting Officer's approval to acquire tangible personal

property for the

[[Page 30207]]

Government prior to the acquisition of such property.

(3) The Contractor shall not use Government property, including

property furnished by the Government for performance of this

contract, on any other Government contract or for any commercial

purpose without the Contracting Officer's prior approval. Unless

otherwise permitted by law, commercial use shall be on a rental

basis. The terms and conditions of the ``Rental Charges for

Commercial Use'' clause of this contract shall apply to each rental.

(4) If the Contractor commingles Contractor acquired or

fabricated material with Government furnished material, the

provisions of paragraph (c)(3) of this clause regarding suitability

for intended use shall not apply to the commingled Governme

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