[Federal Register Volume 76, Number 64 (Monday, April 4, 2011)]
[Proposed Rules]
[Pages 18497-18504]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-7436]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 31, 32, 45, 49, 52, and 53

[FAR Case 2010-009; Docket 2010-0009; Sequence 1]
RIN 9000-AL95


Federal Acquisition Regulation; Government Property

AGENCIES:  Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Proposed rule.

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SUMMARY: DoD, GSA, and NASA are proposing to amend the Federal 
Acquisition Regulation (FAR) to clarify reporting, reutilization, and 
disposal of Government property and the contractor requirements under 
the Government property clause.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat at one of the addressees shown below on or 
before June 3, 2011. to be considered in the formation of the final 
rule.

ADDRESSES: Submit comments in response to FAR Case 2010-009 by any of 
the following methods:
    <bullet> Regulations.gov: http://www.regulations.gov. Submit 
comments via the Federal eRulemaking portal by inputting ``FAR Case 
2010-009'' under the heading ``Enter Keyword or ID'' and selecting 
``Search.'' Select the link ``Submit a Comment'' that corresponds with 
``FAR Case 2010-009.'' Follow the instructions provided at the ``Submit 
a Comment'' screen. Please include your name, company name (if any), 
and ``FAR Case 2010-009'' on your attached document.
    <bullet> Fax: (202) 501-4067.
    <bullet> Mail: General Services Administration, Regulatory 
Secretariat (MVCB), ATTN: Hada Flowers, 1275 First Street, NE., 7th 
Floor, Washington, DC 20417.
    Instructions: Please submit comments only and cite FAR Case 2010-
009, in all correspondence related to this case. All

[[Page 18498]]

comments received will be posted without change to http://www.regulations.gov, including any personal and/or business 
confidential information provided.

FOR FURTHER INFORMATION CONTACT: Ms. Jeritta Parnell, Procurement 
Analyst, at (202) 501-4082, for clarification of content. For 
information pertaining to status or publication schedules, contact the 
Regulatory Secretariat at (202) 501-4755. Please cite FAR Case 2010-
009.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD, GSA, and NASA are proposing to amend the FAR to clarify 
current FAR policy with respect to the proper disposition of contractor 
inventory. However, a number of other changes were made, aimed at 
enhancing the management of Government contract property in the hands 
of contractors. The changes are the result of questions raised by 
contractors and Government personnel, Government and industry 
exchanges, and lessons learned. In addition, some comments from the 
previous FAR Case 2008-011, published in the Federal Register at 75 FR 
38675 on July 2, 2010), that were deemed to be outside the scope of 
that case, are addressed in this case.
    The revisions include the following:
    1. Clarify that FAR part 45 and FAR 52.245-1 does not apply to 
Government property incidental to the place of performance at a 
Government site or installation. See FAR 45.000.
    2. Add new definitions for ``loss of Government property'' and 
``unit acquisition cost'' in FAR part 45 and FAR 52.245-1, delete the 
definition of ``acquisition cost,'' and move the definition of 
``surplus property'' from part 45 to part 2.
    3. Update FAR subpart 45.6 to clarify and align with the Federal 
Management Regulation; and
    4. Revise language based on comments received in response to, but 
outside the scope of, FAR Case 2008-011.

II. Executive Order 12866

    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

III. Regulatory Flexibility Act

    The proposed changes may have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act 5 U.S.C. 601, et seq., because the rule 
affects the method of managing some Government property in the hands of 
contractors, particularly scrap. However, as the rule reduces the 
burden on all businesses by removing the reporting of production scrap, 
it should have a positive effect on small businesses. An Initial 
Regulatory Flexibility Act (IRFA) analysis has been prepared and is 
summarized as follows.

    This Initial Regulatory Flexibility Analysis has been prepared 
consistent with Section 603, Title 5, of the United States Code.
    1. Description of the reasons why action by the agency is being 
considered.
    DoD, GSA, and NASA are proposing to revise FAR parts 45 and 52. 
The focus of this effort is to clarify FAR subpart 45.6, Reporting, 
Reutilization, and Disposal, and the contractor requirements under 
the clause at FAR 52.245-1.
    The revisions include technical corrections to align the FAR 
with the requirements of the Federal Management Regulation (FMR). 
For example, the new language is now consistent with current 
property reutilization priorities, abandonment and destruction 
determinations, and surplus sales policy. Moreover, the language has 
been edited for clarity and placed in proper process sequence. Also 
included is new and expanded policy language on the disposal of 
scrap.
    Notwithstanding the proposed rule's overall focus on FAR subpart 
45.6 and the associated contractor requirements under FAR 52.245-1, 
additional revisions include new language at FAR 45.104 for 
contracting officers on depositing monies received from contractors 
for property that is lost, damaged, destroyed or stolen.
    In essence, the rule does not result in new requirements on 
contractors; it clarifies existing policies and procedures. The rule 
will simplify compliance for contractors and enable consistent 
Government oversight.
    2. Succinct statement of the objectives of, and legal basis, 
for, the proposed rule.
    Title 40 U.S.C. 524, Public Buildings, Property, and Works 
requires, in part, that executive agencies account for Government 
property, determine when such property is excess, and dispose of 
excess Government property promptly. This proposed rule amends the 
FAR to revise the policies for the disposition of contractor 
inventory. The objective of this case is to substantially revise, 
clarify, and improve current policy.
    3. Description of, and, where feasible, estimate of the number 
of small entities to which the proposed rule will apply.
    It is estimated that approximately 5000 contractors have Federal 
property in their possession. DoD has approximately 3000 contractors 
with potential contract-property reporting requirements. 
Approximately 60 percent of all DoD contractors are small 
businesses. Given that property in the possession of contractors is 
overwhelmingly DoD property, it is estimated the DoD ratio of small 
business to total businesses having such property is a reasonable 
approx-imation for all Government contractors. Therefore, it is 
estimated that approximately 3000 small businesses have Government 
property in their possession.
    4. Description of projected reporting, recordkeeping, and other 
compliance requirements of the proposed rule, including an estimate 
of the classes of small entities which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report of record.
    FAR Case 2004-025 streamlined the requirements concerning 
property management in FAR part 45. FAR Case 2008-011 continued that 
philosophy. This new proposed rule seeks continuous improvement to 
property management by streamlining and clarifying the policies for 
the disposition of contractor inventory. DoD, GSA, and NASA believe 
the rule will have a positive effect on small businesses in that it 
further streamlines the process and reduces the paperwork burden.
    It should be noted that these recommended changes are consistent 
with the Office of the Under Secretary of Defense, Acquisition, 
Technology and Logistics, recent statements emphasizing the need to 
improve the productivity of the defense industry and remove 
Government impediments to efficiency.
    There are four reports currently required. These reports are 
required to assure appropriate use and disposition of contract 
property. These reports are--

SF 1423, Inventory Verification Survey.
SF 1424, Inventory Disposal Report.
SF 1428, Inventory Disposal Schedule.
SF 1429, Inventory Disposal Schedule Continuation Sheet.

    All of these forms are available online and may be submitted by 
the contractor using electronic means. It should be noted that DoD 
no longer requires the use of the SF 1428 and 1429 forms and instead 
DoD uses the web-enabled Plant Clearance Automated Reutilization and 
Reporting System (PCARRS). NASA and other Federal agency contractors 
use PCARRS when their contracts are delegated to DCMA for plant 
clearance. Use of PCARRS reduces burden on small businesses as well 
other businesses by providing an easily accessible web-based 
reporting mechanism.
    5. Identification, to the extent practicable, of all relevant 
Federal rules that may duplicate, overlap, or conflict with the 
proposed rule.
    The Federal Property Management Regulation (FPMR) and the FMR 
published by the General Services Administration provide property 
management guidance to Government personnel. Some of the 
requirements of the FMR are implemented by the FAR in regard to 
contracts awarded to Federal contractors. The FPMR and FMR do not 
duplicate, overlap, or conflict with the proposed rule.
    6. Description of any significant alternatives to the proposed 
rule which accomplish the stated objectives of applicable statues 
and which minimize any significant economic impact of the proposed 
rule on small entities.
    There are no known alternatives to this proposed rule. However, 
the proposed rule should not have a significant adverse economic 
impact on a substantial number of

[[Page 18499]]

small entities. In fact, the current impact to both large and small 
contractors will be reduced. For example, the current FAR requires 
Government approval of contractor scrap procedures prior to allowing 
the contractor to dispose of ordinary production scrap. In addition, 
the current practice of requiring contractors (without approved 
scrap procedures) to submit inventory schedules or scrap lists for 
production scrap assumes that such practice is economically or 
otherwise justified in all cases. This practice unnecessarily 
burdens small contractors that generate only small amounts of scrap.
    This proposed rule removes the requirement for Government 
approvals of contractor scrap procedures and submitting inventory 
schedules and scrap lists, thus easing the burden on large and small 
contractors alike. It should be noted that contractor procedures 
would still be required and evaluated by the agency responsible for 
contract administration, as a normal part of contract property 
administration. The new rule will also result in more consistent 
levels of Government oversight, further easing the burden on small 
entities.
    The information required by the proposed rule has been reduced 
to the minimum necessary to assure compliance with the Government's 
statutory accountability requirements.

    The Regulatory Secretariat will be submitting a copy of the IRFA to 
the Chief Counsel for Advocacy of the Small Business Administration. A 
copy of the IRFA may be obtained from the Regulatory Secretariat. DoD, 
GSA, and NASA invite comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD, GSA, and NASA will also consider comments from small entities 
concerning the existing regulations in subparts affected by this rule 
in accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 610 (FAR Case 2010-009) in 
correspondence.

IV. Paperwork Reduction Act

    The Paperwork Reduction Act (44 U.S.C. chapter 35) applies because 
the proposed rule contains information collection requirements. 
Accordingly, the Regulatory Secretariat will submit a request for 
approval of a revised information collection requirement concerning 
Government Property to the Office of Management and Budget.
    Annual Reporting Burden:
    Public reporting burden for this collection of information is 
estimated to average .32 hours per response, including the time for 
reviewing instructions, searching existing data sources, gathering and 
maintaining the data needed, and completing and reviewing the 
collection of information.
    The annual reporting burden is estimated as follows:
     Respondents: 4,875.
     Responses per respondent: 910.26.
     Total annual responses: 4,437,518.
     Preparation hours per response: .32.
     Total response burden hours: 1,420,006.

V. Request for Comments Regarding Paperwork Burden

    Submit comments, including suggestions for reducing this burden, 
not later than June 3, 2011 to: FAR Desk Officer, OMB, Room 10102, 
NEOB, Washington, DC 20503, and a copy to the General Services 
Administration, Regulatory Secretariat (MVCB), ATTN: Hada Flowers, 1275 
First Street, NE., 7th Floor, Washington, DC 20417.
    Public comments are particularly invited on: Whether this 
collection of information is necessary for the proper performance of 
functions of the FAR, and will have practical utility; whether our 
estimate of the public burden of this collection of information is 
accurate, and based on valid assumptions and methodology; ways to 
enhance the quality, utility, and clarity of the information to be 
collected; and ways in which we can minimize the burden of the 
collection of information on those who are to respond, through the use 
of appropriate technological collection techniques or other forms of 
information technology.
    Requesters may obtain a copy of the supporting statement from the 
General Services Administration, Regulatory Secretariat (MVCB), 1275 
First Street, NE., 7th Floor, Washington, DC 20417. Please cite OMB 
Control Number 9000-00XX, Government Property, in correspondence.

List of Subjects in 48 CFR Parts 2, 31, 32, 45, 49, 52, and 53

    Government procurement.

    Dated: March 24, 2011.
Millisa Gary,
Acting Director, Office of Governmentwide Acquisition Policy.

    Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 2, 31, 
32, 45, 49, 52, and 53 as set forth below:
    1. The authority citation for 48 CFR parts 2, 31, 32, 45, 49, 52, 
and 53 continues to read as follows:

    Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 42 
U.S.C. 2473(c).

PART 2--DEFINITIONS OF WORDS AND TERMS

    2. Amend section 2.101 in paragraph (b) by adding, in alphabetical 
order, the definition ``Surplus property'' to read as follows:


2.101  Definitions.

* * * * *
    (b) * * *
    Surplus property means excess personal property not required by any 
Federal agency as determined by the Administrator of the General 
Services Administration (GSA). See 41 CFR 102-36.40.
* * * * *

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES

    3. Amend section 31.205-19 by revising paragraphs (e)(2)(iv) 
introductory text, (e)(2)(iv)(A), and (e)(2)(iv)(C) to read as follows:


31.205-19  Insurance and indemnification.

* * * * *
    (e) * * *
    (2) * * *
    (iv) Costs of insurance for the risk of loss of Government property 
are allowable to the extent that--
    (A) The contractor is liable for such loss;
* * * * *
    (C) Such insurance does not cover loss of Government property that 
results from willful misconduct or lack of good faith on the part of 
any of the contractor's managerial personnel (as described in FAR 
52.245-1(h)(1)(ii)).
* * * * *

PART 32--CONTRACT FINANCING

    4. Amend section 32.503-16 by revising the first sentence of 
paragraph (a) to read as follows:


32.503-16  Risk of loss.

    (a) Under the Progress Payments clause, and except for normal 
spoilage, the contractor bears the risk of loss of Government property 
for property affected by the clause, even though title is vested in the 
Government, unless the Government has expressly assumed this risk. * * 
*
* * * * *
    5. Amend section 32.1010 by revising the first sentence of 
paragraph (a) to read as follows:


32.1010  Risk of loss.

    (a) Under the clause at 52.232-32, Performance-Based Payments, and 
except for normal spoilage, the contractor bears the risk of loss of 
Government property, even though title is vested in the Government, 
unless the Government has expressly assumed this risk. * * *
* * * * *

[[Page 18500]]

PART 45--GOVERNMENT PROPERTY

    6. Revise section 45.000 to read as follows:


45.000  Scope of part.

    (a) This part prescribes policies and procedures for providing 
Government property to contractors; contractors' management and use of 
Government property; and reporting, redistributing, and disposing of 
contractor inventory.
    (b) It does not apply to--
    (1) Government property provided under any statutory leasing 
authority, except as to non-Government use of property under 45.301(f);
    (2) Property to which the Government has acquired a lien or title 
solely because of partial, advance, progress, or performance based 
payments;
    (3) Disposal of real property;
    (4) Software and intellectual property; or
    (5) Government property that is incidental to the place of 
performance, when the contract requires contractor personnel to be 
located on a Government site or installation, and when the property 
used by the contractor within the location remains accountable to the 
Government. Items considered to be incidental to the place of 
performance include, for example, office space, desks, chairs, 
telephones, computers, and fax machines.
    7. Amend section 45.101 by--
    a. Removing the definition ``Acquisition cost'';
    b. Adding in alphabetical order the definitions ``Loss of 
Government property'', and ``Production scrap'';
    c. Removing the definition ``Surplus property'' and
    d. Adding in alphabetical order the definition ``Unit acquisition 
cost''.
    The added text reads as follows:


45.101  Definitions.

* * * * *
    Loss of Government property means unintended, unforeseen or 
accidental loss, damage, or destruction of Government property that 
reduces the Government's expected economic benefits of the property. 
Loss of Government property does not include purposeful destructive 
testing, obsolescence, normal wear and tear, or manufacturing defects. 
Loss of Government property includes, but is not limited to--
    (1) Items that cannot be found after a reasonable search;
    (2) Theft;
    (3) Damage resulting in unexpected harm to property requiring 
repair to restore the item to usable condition; or
    (4) Destruction resulting from incidents that render the item 
useless for its intended purpose or beyond economical repair.
* * * * *
    Production scrap means material left over from the normal 
production process that has only remelting or reprocessing value, e.g., 
textile and metal clippings, borings, and faulty castings and forgings.
* * * * *
    Unit acquisition cost means--
    (1) For Government-furnished property, the dollar value assigned by 
the Government and identified in the contract; and
    (2) For contractor-acquired property, the cost derived from the 
contractor's records that reflect consistently applied generally 
accepted accounting principles.
    8. Amend section 45.102 by adding paragraph (e) to read as follows:


45.102  Policy.

* * * * *
    (e) Government property, other than foundations and similar 
improvements necessary for installing special tooling, special test 
equipment, or equipment, shall not be installed or constructed on 
contractor-owned real property in such fashion as to become 
nonseverable, unless the head of the contracting activity determines 
that such installation or construction is necessary and in the 
Government's interest.
    9. Amend section 45.104 by--
    a. Revising the introductory text of paragraph (a);
    b. Revising paragraph (b); and
    c. Adding paragraphs (d) and (e).
    The revised and added text reads as follows:


45.104  Responsibility and liability for Government property.

    (a) Generally, contractors are not held liable for loss of 
Government property under the following types of contracts:
* * * * *
    (b) The contracting officer may revoke the Government's assumption 
of risk when the property administrator determines that the 
contractor's property management practices are noncompliant with 
contract requirements.
* * * * *
    (d) With respect to loss of Government property, the contracting 
officer, in consultation with the property administrator, shall 
determine--
    (1) The extent, if any, of contractor liability based upon the 
amount of damages corresponding to the associated lost property; and
    (2) The appropriate form and method of Government recovery (may 
include repair, replacement, or other restitution).
    (e) Any monies received as financial restitution shall be credited 
to the Treasury of the United States as miscellaneous receipts, unless 
otherwise authorized by statute (31 U.S.C. 3302(b)).
    10. Amend section 45.105, by revising the first sentence of the 
introductory text of paragraph (b), and by revising paragraphs (b)(1) 
and (d) to read as follows:


45.105  Contractors' property management system compliance.

* * * * *
    (b) The property administrator shall notify the contractor in 
writing when the contractor's property management system does not 
comply with contractual requirements, shall request prompt correction 
of deficiencies, and shall request from the contractor a corrective 
action plan, including a schedule for correction of the deficiencies. * 
* *
    (1) Revocation of the Government's assumption of risk for loss of 
Government property; and/or
* * * * *
    (d) When the property administrator determines that a reported case 
of loss of Government property is a risk assumed by the Government, the 
property administrator shall notify the contractor in writing that they 
are granted relief of stewardship responsibility and liability in 
accordance with FAR clause 52.245-1(f)(1)(vii). Where the property 
administrator determines that the risk of loss of Government property 
is not assumed by the Government, the property administrator shall 
request that the contracting officer hold the contractor responsible 
and liable.
    11. Amend section 45.107 by--
    a. Revising paragraph (a)(1)(i);
    b. Removing from paragraph (b) ``service contracts'' and adding 
``fixed-price service contracts'' in its place; and
    c. Removing from paragraph (d) ``acquisition cost'' and adding 
``unit acquisition cost'' in its place.
    The revised text reads as follows:


45.107  Contract clauses.

    (a)(1) * * *
    (i) All cost-reimbursement, time-and-material, and labor-hour type 
solicitations and contracts; and, when property is expected to be 
furnished for the labor-hour contracts.
* * * * *
    12. Amend section 45.201 by--
    a. Removing from paragraph (a)(1) ``tracking and/or'' and adding 
``tracking and management, and/or'' in its place;

[[Page 18501]]

    b. Removing from paragraph (a)(4) ``tracking); and'' and adding 
``tracking and management); and'' in its place; and
    c. Revising paragraph (c)(4).
    The revised text reads as follows:


45.201  Solicitation.

* * * * *
    (c) * * *
    (4) A description of the offeror's property management system and 
any customary commercial practices, voluntary consensus standards, or 
industry leading practices and standards to be used by the offeror in 
managing Government property.
* * * * *


45.202  [Amended]

    13. Amend section 45.202 by removing from the first sentence of 
paragraph (a) ``from the contractor'' and adding ``from an offeror or 
contractor'' in its place.
    14. Amend section 45.602-1 by--
    a. Removing from paragraphs (b)(2) and (b)(3) ``Require a 
contractor'' and adding ``Require the contractor'' in its place;
    b. Removing from paragraph (b)(4) ``might entitle'' and adding 
``may entitle'' in its place;
    c. Revising the introductory text of paragraph (c) and the 
introductory text of paragraph (c)(1);
    d. Removing from paragraph (c)(1)(i) ``acquisition cost'' and 
adding ``unit acquisition cost'' in its place; and
    e. Revising paragraph (c)(1)(iv).
    The revised text reads as follows:


45.602-1  Inventory disposal schedules.

* * * * *
    (c) The contractor may request the plant clearance officer's 
approval to remove the Government property from an inventory schedule.
    (1) Plant clearance officers may approve removal of Government 
property from an inventory schedule when--
* * * * *
    (iv) The contractor has requested continued use of the Government 
property, and the contracting officer has authorized its retention and 
further use.
* * * * *
    15. Amend section 45.602-2 by--
    a. Revising the introductory text and paragraph (a);
    b. Removing paragraph (b);
    c. Redesignating paragraphs (c) and (d) as paragraphs (b) and (c), 
respectively;
    d. Removing from newly redesignated paragraph (b) ``April 17, 
1996),'' and adding ``April 17, 1996, and 15 U.S.C. 3710(i);'' in its 
place;
    e. Revising newly redesignated paragraph (c);
    f. Adding new paragraphs (d) and (e).
    The revised and added text reads as follows:


45.602-2  Reutilization priorities.

    Plant clearance officers shall initiate reutilization actions for 
all property not meeting the abandonment or destruction criteria of 
45.603(b). Authorized methods, listed in descending order from highest 
to lowest priority, are--
    (a) Reuse within the owning agency;
* * * * *
    (c) Report to GSA for reuse within the Federal Government or 
donation as surplus property;
    (d) Dispose of the following property in accordance with agency 
procedures without reporting to GSA:
    (1) Property determined appropriate for abandonment or destruction 
(see FMR 102-36.305, 41 CFR 102-36.305).
    (2) Property furnished to nonappropriated fund activities property 
(see FMR 102-36.165, 41 CFR 102-36.165).
    (3) Foreign excess personal property (see FMR 102-36.380, 41 CFR 
102-36.380).
    (4) Scrap, except aircraft in scrap condition.
    (5) Perishables, defined for the purposes of this section as any 
personal property subject to spoilage or decay.
    (6) Trading stamps and bonus goods.
    (7) Hazardous waste or toxic and hazardous materials.
    (8) Controlled substances.
    (9) Property dangerous to public health and safety.
    (10) Classified items or property determined to be sensitive for 
reasons of national security; and
    (e) Dispose of nuclear materials (see 45.603-3(b)(5)) in accordance 
with the Nuclear Regulatory Commission (NRC), applicable state 
licenses, applicable Federal regulations, and agency regulations.
    16. Revise section 45.603 to read as follows:


45.603  Abandonment or destruction of personal property.

    (a) When contractor inventory is processed through the 
reutilization screening process prescribed in 45.602-2 without success, 
and provided the property has no commercial value, does not require 
demilitarization, and does not constitute a danger to public health or 
welfare, plant clearance officers or other authorized officials may 
without further approval--
    (1) Direct the contractor to destroy the property;
    (2) Abandon non-sensitive property at the contractor's or sub-
contractor's premises; or
    (3) Abandon sensitive property at the contractor's or sub-
contractor's premises, with contractor consent.
    (b) Provided a Government reviewing official at least one level 
higher than the plant clearance officer or other agency authorized 
official approves, plant clearance officers or other agency authorized 
officials may authorize the abandonment, or order the destruction of 
other contractor inventory at the contractor's or sub-contractor's 
premises, in accordance with FMR 102-36-305 through 325 and consistent 
with the following:
    (1) The property is not considered sensitive, does not require 
demilitarization, has no commercial value or reutilization, transfer or 
donation potential, and does not constitute a danger to public health 
or welfare.
    (2) The estimated cost of continued care and handling of the 
property (including advertising, storage and other costs associated 
with making the sale), exceed the estimated proceeds from its sale.
    (c) In lieu of abandonment or its authorized destruction, the plant 
clearance officer or authorized official may authorize the donation of 
property including unsold surplus property to public bodies, provided 
that the property is not sensitive property, does not require 
demilitarization, and it does not constitute a danger to public health 
or welfare. The Government will not bear any of the costs incident to 
such donations.
    (d) Unless the property qualifies for one of the exceptions under 
FMR 102-36.330 (41 CFR 102-36.330), the plant clearance officer or 
requesting official will ensure prior public notice of such actions of 
abandonment or destruction consistent with FMR 102-36.325 (41 CFR 102-
36.325).
    17. Revise the section heading of 45.604 to read as follows:


45.604  Sale of surplus personal property.

* * * * *
    18. Revise section 45.604-1 to read as follows:


45.604-1  Sales procedures.

    Surplus personal property that has completed screening in 
accordance with 45.602-3(a) shall be sold in accordance with the policy 
for the sale of surplus personal property contained in the Federal 
Management Regulation, at Part 102-38 (41 CFR part 102-38). Agencies 
may specify implementing procedures.


45.604-2  [Removed]

    19. Remove section 45.604-2.

[[Page 18502]]

45.604-3 and 45.604-4  [Redesignated as 45.604-2 and 45.604-3]

    20A. Redesignate sections 45.604-3 and 45.604-4 as sections 45.604-
2 and 45.604-3, respectively.
    20B. Revise the newly redesignated section 45.604-2 to read as 
follows:


45.604-2  Use of GSA sponsored sales centers.

    Agencies may use sales center services. Use of such centers for 
sale of surplus property is authorized when in the best interest of the 
Government, consistent with contract terms and conditions.
    21. Add section 45.604-4 to read as follows:


45.604-4  Sale of property pursuant to the exchange/sale authority.

    Agencies should consider the sale of property pursuant to the 
exchange/sale authority in FMR 102-39 (41 CFR part 102-39) when 
agencies are acquiring or plan to acquire similar products and other 
requirements of the authority are satisfied.
    22. Revise section 45.605 to read as follows:


45.605  Inventory disposal reports.

    The plant clearance officer shall promptly prepare an SF 1424, 
Inventory Disposal Report, following disposition of the property 
identified on an inventory disposal schedule and the crediting of any 
related proceeds. The report shall identify any lost or otherwise 
unaccounted for property and any changes in quantity or value of the 
property made by the contractor after submission of the initial 
inventory disposal schedule. The report shall be provided to the 
administrative contracting officer or, for termination inventory, to 
the termination contracting officer, with a copy to the property 
administrator.
    23. Revise section 45.606-1 to read as follows:


45.606-1  Contractor scrap procedures.

    (a) The property administrator should ensure that contractor scrap 
disposal processes, methods and practices allow for effective, 
efficient and proper disposition, and are properly documented in the 
contractor's property management procedures.
    (b) The property administrator should determine the extent to which 
separate disposal processing or physical segregation for different 
scrap types is or may be required as early as possible, preferably 
during the solicitation phase. Such scrap may require physical 
segregation, unique disposal processing or separate plant clearance 
reporting. For example, the scope of work may create scrap--
    (1) Consisting of sensitive items;
    (2) Containing hazardous materials or wastes;
    (3) Contaminated with hazardous materials or wastes;
    (4) That is classified or otherwise controlled;
    (5) Containing precious or strategic metals; or
    (6) That is dangerous to public health or safety.
    (c) Absent contract terms and conditions to the contrary, the 
Government may abandon parts removed and replaced from property as a 
result of normal maintenance actions, or removed from property as a 
result of the repair, maintenance, overhaul, or modification process.


45.606-2 and 45.606-3  [Removed]

    24. Remove sections 45.606-2 and 45.606-3.

PART 49--TERMINATION OF CONTRACTS


49.204  [Amended]

    25. Amend section 49.204 by removing from paragraph (b) 
``destroyed, lost, stolen, or'' and adding ``lost or'' in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    26. Amend section 52.232-16 by revising the date of the clause, and 
the last sentence of paragraph (e) to read as follows:


52.232-16  Progress Payments.

* * * * *

Progress Payments (Date)

* * * * *
    (e) * * * The Contractor shall repay the Government an amount 
equal to the unliquidated progress payments that are based on costs 
allocable to property that is lost (see 45.101).
* * * * *
    27. Amend section 52.232-32 by revising the date of the clause, and 
the last sentence of paragraph (g) to read as follows:


52.232-32  Performance-Based Payments.

* * * * *

Performance-Based Payments (Date)

* * * * *
    (g) * * * If any property is lost (see 45.101), the basis of 
payment (the events or performance criteria) to which the property 
is related shall be deemed to be not in compliance with the terms of 
the contract and not payable (if the property is part of or needed 
for performance), and the Contractor shall refund the related 
performance-based payments in accordance with paragraph (d) of this 
clause.
* * * * *
    28. Amend section 52.245-1 by--
    a. Revising the date of the clause;
    b. Removing the definition ``Acquisition cost'' from paragraph (a);
    c. Adding, in alphabetical order, the definitions, ``Loss of 
Government property'', and ``Production scrap'' to paragraph (a);
    d. Removing the definition ``Surplus property'' from paragraph (a);
    e. Adding, in alphabetical order, the definition ``Unit acquisition 
cost'' to paragraph (a);
    f. Revising paragraph (b)(1);
    g. Removing from paragraph (b)(2) ``, stolen, damaged, or 
destroyed'';
    h. Adding paragraph (b)(4);
    i. Removing from paragraph (f)(1)(ii) ``property (document the 
receipt)'' and adding ``property and document the receipt'' in its 
place;
    j. Revising paragraphs (f)(1)(iii)(A)(1), (f)(1)(iii)(A)(10), 
(f)(1)(v)(A), (f)(1)(vi), and (f)(1)(vii);
    k. Removing from paragraph (f)(1)(x) ``loss, theft, damage, or 
destruction'' and adding ``loss of Government property'' in its place;
    l. Removing from paragraph (f)(2) ``acquisitions'' and adding 
``acquisitions, loss of Government property,'' in its place;
    m. Removing paragraph (f)(3);
    n. Removing from paragraph (h)(1) introductory text ``loss, theft, 
damage or destruction to the'' and adding ``loss of'' in its place;
    o. Revising paragraph (h)(1)(ii), (h)(1)(iii), (h)(2), and (h)(3);
    p. Redesignating paragraph (h)(4) as paragraph (h)(5);
    q. Adding new paragraph (h)(4);
    r. Adding the words ``or authorizing official'' before the period 
at the end of the introductory text of paragraph (j);
    s. Removing paragraph (j)(1);
    t. Redesignating paragraphs (j)(2) through (j)(10) as paragraphs 
(j)(1) through (j)(9), respectively;
    u. Revising newly redesignated paragraphs (j)(1)(i), (j)(1)(ii), 
the introductory text of paragraph (j)(2)(i), (j)(2)(i)(A), (j)(2)(ii), 
and (j)(2)(iii), (j)(2)(iv)(C), and (j)(3);
    v. Removing from the first sentence of the newly redesignated 
paragraph (j)(6)(ii) the word ``Government'';
    w. Removing the newly redesignated paragraph (j)(7)(i);
    x. Further redesignating newly redesignated paragraphs (j)(7)(ii) 
and (j)(7)(iii) as (j)(7)(i) and (j)(7)(ii), respectively;
    y. Removing from the newly redesignated paragraph (j)(9) 
``paragraph

[[Page 18503]]

(j)(4)'' and adding ``paragraph (j)(3)'' in its place;
    z. Removing from paragraphs (k)(1) and (k)(2) ``Government 
property'', respectively, and adding ``property'' in its place;
    aa. Redesignating paragraph (k)(3) as paragraph (k)(4); and adding 
a new paragraph (k)(3);
    bb. Removing from Alternate I ``(Aug 2010)'' and adding ``(Date)'' 
in its place; and removing from paragraph (h)(1) of Alternate I ``loss, 
theft, damage, or destruction,'' and adding ``loss'' in its place; and
    cc. Removing from Alternate II ``(June 2007)'' and adding 
``(Date)'' in its place; and removing from the first and second 
sentences of paragraph (e)(3) of Alternate II ``having an'' and adding 
``having a unit'' in its place (two times).
    The added and revised text reads as follows:


52.245-1  Government Property.

* * * * *

Government Property (Date)

    (a) * * *
    Loss of Government property means unintended, unforeseen or 
accidental loss, damage or destruction to Government property that 
reduces the Government's expected economic benefits of the property. 
Loss of Government property does not include purposeful destructive 
testing, obsolescence, normal wear and tear or manufacturing 
defects. Loss of Government property includes, but is not limited 
to--
    (1) Items that cannot be found after a reasonable search;
    (2) Theft;
    (3) Damage resulting in unexpected harm to property requiring 
repair to restore the item to usable condition; or
    (4) Destruction resulting from incidents that render the item 
useless for its intended purpose or beyond economical repair.
* * * * *
    Production scrap means material left over from the normal 
production process that has only remelting or reprocessing value, 
e.g., textile and metal clippings, borings, and faulty castings and 
forgings.
* * * * *
    Unit acquisition cost means--(1) For Government-furnished 
property, the dollar value assigned by the Government and identified 
in the contract; and
    (2) For contractor-acquired property, the cost derived from the 
contractor's records that reflect consistently applied generally 
accepted accounting principles.
* * * * *
    (b) * * *
    (1) The Contractor shall have a system to manage (control, use, 
preserve, protect, repair and maintain) Government property in its 
possession. The system shall be adequate to satisfy the requirements 
of this clause. In doing so, the Contractor shall initiate and 
maintain the processes, systems, procedures, records, and 
methodologies necessary for effective control of Government 
property. Prior to implementation, the Contractor shall disclose to 
the Property Administrator any significant changes to their property 
management system. The Contractor may employ customary commercial 
practices, voluntary consensus standards and/or industry-leading 
practices and standards that provide effective Government property 
management that are necessary and appropriate for the performance of 
this contract (except where inconsistent with law or regulation).
* * * * *
    (4) The Contractor shall establish and maintain procedures 
necessary to assess its property management system effectiveness, 
and shall perform periodic internal reviews and audits. Significant 
findings and/or results of such reviews and audits pertaining to 
Government property shall be made available to the Property 
Administrator.
* * * * *
    (f) * * *
    (1) * * *
    (iii) * * *
    (A) * * *
    (1) The name, part number and description, National Stock Number 
(if needed for additional item identification tracking and/or 
disposition), and other data elements as required in accordance with 
the terms and conditions of the contract.
* * * * *
    (10) Date placed in service (if required in accordance with the 
terms and conditions of the contract).
* * * * *
    (v) * * *
    (A) The Contractor shall award subcontracts that clearly 
identify items to be provided or for fabricated items, the extent of 
any restrictions or limitations. The Contractor shall ensure 
appropriate flow down of contract terms and conditions (e.g., extent 
of liability for loss of Government property.
* * * * *
    (vi) Reports. The Contractor shall have a process to create and 
provide reports of discrepancies, loss of Government property, 
physical inventory results, audits and self-assessments, corrective 
actions, and other property related reports as directed by the 
Contracting Officer.
    (vii) Relief of stewardship responsibility and liability. The 
contractor shall have a process to enable the prompt recognition, 
investigation, disclosure and reporting of loss of Government 
property, including losses that occur at subcontractor or alternate 
site locations.
    (A) This process shall include the corrective actions necessary 
to prevent recurrence.
    (B) Unless otherwise directed by the Property Administrator, the 
Contractor shall report, upon recognition of loss of Government 
property, all such incidents of property loss, investigate and 
promptly furnish to the property administrator a written narrative 
of all incidents of such property loss as soon as the facts become 
known or when requested by the Government. Such reports shall, at a 
minimum, contain the following information:
    (1) Date of incident (if known).
    (2) The data elements required under paragraph (f)(1)(iii)(A) of 
this clause.
    (3) Quantity.
    (4) Accountable contract number.
    (5) A statement indicating current or future need.
    (6) Unit acquisition cost, or if applicable, estimated sales 
proceeds, estimated repair or replacement costs.
    (7) All known interests in commingled material of which includes 
Government material.
    (8) Cause and corrective action taken or to be taken to prevent 
recurrence.
    (9) A statement that the Government will receive any 
reimbursement covering the loss of Government property, in the event 
the Contractor was or will be reimbursed or compensated.
    (10) Copies of all supporting documentation.
    (11) Last known location.
    (12) A statement that the property did or did not contain 
sensitive, hazardous or toxic material, and if so, that the 
appropriate agencies were notified.
    (C) Unless the contract provides otherwise, the Contractor shall 
be relieved of stewardship responsibility and liability for property 
when-
    (1) Such property is consumed or expended, reasonably and 
properly, or otherwise accounted for, in the performance of the 
contract, including reasonable inventory adjustments of material as 
determined by the Property Administrator;
    (2) Property Administrator grants relief of responsibility and 
liability for loss of Government property;
    (3) Property is delivered or shipped from the Contractor's 
plant, under Government instructions, except when shipment is to a 
subcontractor or other location of the Contractor; or
    (4) Property is disposed of in accordance with paragraphs (j) 
and (k) of this clause.
* * * * *
    (h) * * *
    (1) * * *
    (ii) Loss of Government property that is the result of willful 
misconduct or lack of good faith on the part of the Contractor's 
managerial personnel.
    (iii) The Contracting Officer has, in writing, revoked the 
Government's assumption of risk for loss of Government property due 
to a determination under paragraph (g) of this clause that the 
Contractor's property management practices are inadequate, and/or 
present an undue risk to the Government, and the Contractor failed 
to take timely corrective action. If the Contractor can establish by 
clear and convincing evidence that the loss of Government property 
occurred while the Contractor had adequate property management 
practices or the loss did not result from the Contractor's failure 
to maintain adequate property management practices, the Contractor 
shall not be held liable.
    (2) The Contractor shall take all reasonable actions necessary 
to protect the property from further loss. The Contractor shall

[[Page 18504]]

separate the damaged and undamaged property, place all the affected 
property in the best possible order, and take such other action as 
the Property Administrator directs.
    (3) The Contractor shall do nothing to prejudice the 
Government's rights to recover against third parties for any loss of 
Government property.
    (4) The Contractor shall reimburse the Government for loss of 
Government property, to the extent that the Contractor is 
financially liable for such loss, as directed by the Contracting 
Officer.
* * * * *
    (j) * * *
    (1) * * *
    (i) If the Contractor determines that the property has the 
potential to fulfill requirements under other contracts, the 
Contractor, in consultation with the Property Administrator, shall 
request that the Contracting Officer transfer the property to the 
contract in question, or provide authorization for use, as 
appropriate. In lieu of transferring the property, the Contracting 
Officer may authorize the Contractor to credit the costs of 
Contractor-acquired property (material only) to the losing contract, 
and debit the gaining contract with the corresponding cost, when 
such material is needed for use on another contract. Property no 
longer needed shall be considered contractor inventory.
    (ii) For any remaining Contractor-acquired property, the 
Contractor may purchase the property at the unit acquisition cost if 
desired or make reasonable efforts to return unused property to the 
appropriate supplier at fair market value (less, if applicable, a 
reasonable restocking fee that is consistent with the supplier's 
customary practices.)
    (2) Inventory disposal schedules. (i) Provided the property was 
not reutilized, transferred, or otherwise disposed of under 
paragraph (j)(1) of this clause the Contractor, as directed by the 
Plant Clearance Officer shall use Standard Form 1428, Inventory 
Disposal Schedule or electronic equivalent, to identify and report--
    (A) Government-furnished property that is no longer required for 
performance of this contract;
* * * * *
    (ii) The Contractor may annotate inventory disposal schedules to 
identify property the Contractor wishes to purchase from the 
Government, in the event that the property is offered for sale.
    (iii) Separate inventory disposal schedules are required for 
aircraft in any condition, flight safety critical aircraft parts, 
and other items as directed by the Plant Clearance Officer.
    (iv) * * *
    (C) For precious metals in raw or bulk form, the type of metal 
and estimated weight.
* * * * *
    (3) Submission requirements. (i) The Contractor shall submit 
inventory disposal schedules to the Plant Clearance Officer no later 
than--
    (A) 30 days following the Contractor's determination that a 
property item is no longer required for performance of this 
contract;
    (B) 60 days, or such longer period as may be approved by the 
Plant Clearance Officer, following completion of contract deliveries 
or performance; or
    (C) 120 days, or such longer period as may be approved by the 
Termination Contracting Officer, following contract termination in 
whole or in part.
    (ii) Unless the Plant Clearance Officer determines otherwise, 
the Contractor need not identify or report production scrap on 
inventory disposal schedules, and may process and dispose of 
production scrap in accordance with its own internal scrap 
procedures. The processing and disposal of other types of 
Government-owned scrap will be conducted in accordance with the 
terms and conditions of the contract or Plant Clearance Officer 
direction, as appropriate.
* * * * *
    (k) * * *
    (3) Absent contract terms and conditions to the contrary, the 
Government may abandon parts removed and replaced from property as a 
result of normal maintenance actions, or removed from property as a 
result of the repair, maintenance, overhaul, or modification 
process.
* * * * *
    29. Amend section 52.245-2 by revising the date of the clause, and 
paragraph (b) to read as follows:


52.245-2  Government Property Installation Operation Services.

* * * * *

Government Property Installation Operation Services (Date)

* * * * *
    (b) The Government bears no responsibility for repair or 
replacement of any lost Government property. If any or all of the 
Government property is lost, or becomes no longer usable, the 
Contractor shall be responsible for replacement of the property at 
Contractor expense. The Contractor shall have title to all 
replacement property and shall continue to be responsible for 
contract performance.
* * * * *
    30. Amend section 52.249-2 by revising the date of the clause, and 
paragraph (h) to read as follows:


52.249-2  Termination for Convenience of the Government (Fixed-Price).

* * * * *

Termination for Convenience of the Government (Fixed-Price) (Date)

* * * * *
    (h) Except for normal spoilage, and except to the extent that 
the Government expressly assumed the risk of loss, the Contracting 
Officer shall exclude from the amounts payable to the Contractor 
under paragraph (g) of this clause, the fair value, as determined by 
the Contracting Officer, for the loss of the Government property.
* * * * *
    31. Amend section 52.249-3 by revising the date of the clause, and 
paragraph (h) to read as follows:


52.249-3  Termination for Convenience of the Government (Dismantling, 
Demolition, or Removal of Improvements).

* * * * *

Termination for Convenience of the Government (Dismantling, Demolition, 
or Removal of Improvements) (Date)

* * * * *
    (h) Except for normal spoilage, and except to the extent that 
the Government expressly assumed the risk of loss, the Contracting 
Officer shall exclude from the amounts payable to the Contractor 
under paragraph (g) of this clause, the fair value, as determined by 
the Contracting Officer, for the loss of the Government property.
* * * * *
    32. Revise section 52.251-1 to read as follows:


52.251-1  Government Supply Sources.

    As prescribed in 51.107, insert the following clause:

Government Supply Sources (Date)

    The Contracting Officer may issue the Contractor an 
authorization to use Government supply sources in the performance of 
this contract. Title to all property acquired by the Contractor 
under such an authorization shall vest in the Government. The 
provisions of the clause entitled ``Government Property,'' at 
52.245-1, shall apply to all property acquired under such 
authorization.


(End of clause)

PART 53--FORMS

    33. Amend section 53.245 by revising paragraph (c) to read as 
follows:


53.245  Government property.

* * * * *
    (c) SF 1423 (Rev. 5/2004), Inventory Verification Survey. (See 
45.602-1(b)(1).)
* * * * *
[FR Doc. 2011-7436 Filed 4-1-11; 8:45 am]
BILLING CODE 6820-EP-P