[Federal Register Volume 74, Number 150 (Thursday, August 6, 2009)]
[Proposed Rules]
[Pages 39262-39268]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18799]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 2, 4, 15, 32, 42, 45, and 52

[FAR Case 2008-011; Docket 2009-0029; Sequence 1]
RIN 9000-AL41


Federal Acquisition Regulation; FAR Case 2008-011; Government 
Property

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

ACTION: Proposed rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) are proposing to amend the 
Federal Acquisition Regulation (FAR) to revise coverage in regard to 
Government property and its associated clauses. These changes are to 
add clarity and correction to the previous FAR rule for Part 45, 
Government Property, published under Federal Acquisition Circular 2005-
17, FAR case 2004-025.

DATES: Interested parties should submit written comments to the 
Regulatory Secretariat on or before October 5, 2009 to be considered in 
the formulation of a final rule.

ADDRESSES: Submit comments identified by FAR case 2008-011 by any of 
the following methods:
    <bullet> Regulations.gov: http://www.regulations.gov.
    Submit comments via the Federal eRulemaking portal by inputting 
``FAR Case 2008-011'' under the heading ``Comment or Submission''. 
Select the link ``Send a Comment or Submission'' that corresponds with 
FAR Case 2008-011. Follow the instructions provided to complete the 
``Public Comment and Submission Form''. Please include your name, 
company name (if any), and ``FAR Case 2008-011'' on your attached 
document.
    <bullet> Fax: 202-501-4067.
    <bullet> Mail: General Services Administration, Regulatory 
Secretariat (VPR), 1800 F Street, NW., Room 4041, ATTN: Hada Flowers, 
Washington, DC 20405.
    Instructions: Please submit comments only and cite FAR case 2008-
011 in all correspondence related to this case. All 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 A. 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 2008-
011.

SUPPLEMENTARY INFORMATION:

A. Background

    The Civilian Agency Acquisition Council and the Defense Acquisition 
Regulations Council revised Federal Acquisition Regulation (FAR) 
contract property management requirements as a final rule under Federal 
Acquisition Circular 2005-17 (72 FR 27364, May 15, 2007). The new 
regulation amended, updated and revised the FAR Part 45, Government 
Property, and associated clauses related to the management and 
disposition of Government property in

[[Page 39263]]

the possession of contractors. The final rule replaced outmoded 
regulations that were essentially unchanged for many years.
    After publication of the final rule in May 2007, DoD received 
feedback on the FAR revisions. An Ad Hoc team comprised of members from 
DoD, GSA, and the Defense Contract Management Agency (DCMA) was formed 
to review comments from industry, academia and Government sources. As a 
result of the Ad Hoc team recommendations, FAR case 2008-011 was 
established to address the recommendations.
    The proposed changes include the following:
    (1) 2.101 Definitions.
    The definitions of ``plant clearance officer'' and ``special 
tooling'' were clarified.
    (2) 4.705-3 Acquisition and supply records.
    Paragraph (h) ``Property records'' was added to the list of 
acquisition and supply records.
    (3) 15.404-4 Profit.
    Language was added to FAR 15.404-4(a)(3) as follows-- ``Unless the 
contractor acquired property is a deliverable under the contract, no 
profit or fee shall be permitted on the cost of the property.''
    (4) 42.302(a)(30) Contract administration functions.
    (A) In paragraph (iii), ``approve use'' was changed to ``evaluate 
the use.''
    (B) Paragraph (v) was deleted in its entirety and replaced with 
``modify contracts to reflect addition of Government furnished property 
and ensure appropriate consideration.''
    (5) 45.101 Definitions.
    (A) The definitions of ``cannibalize,'' ``equipment,'' ``Government 
furnished property,'' ``Government property,'' ``material,'' and ``real 
property'' were clarified.
    (B) The definition of ``property records'' was added.
    (C) The definition of ``plant equipment'' was deleted in its 
entirety.
    (6) 45.102(d) Policy.
    Language was added to paragraph (d) to the effect that property 
furnished under contracts for maintenance and modification as well as 
property furnished for repair or overhaul are exceptions from the 
requirements of FAR 45.102(b).
    (7) 45.104 Responsibility and liability for Government property, 
and 45.105 Contractors' property management system compliance.
    All references to ``loss, damage, destruction, or theft'' are 
changed to ``loss, theft, damage, or destruction.''
    (8) 45.201 Solicitation.
    (A) Paragraph (a)(4), the term ``unique-item identifier'' was 
changed to ``item unique identifier.''
    (B) Paragraph (d) was revised to delete ``when use of property on 
more than one contract is anticipated.''
    (9) 45.402 Title to contractor-acquired property.
    The first sentence of this subsection is deleted and the second 
sentence is modified to include that ``title vests in the Government 
for all property ...''
    (10) 45.502 Subcontractor and alternate prime contractor locations.
    (A) Paragraph (a) was revised to delete existing language and 
replace with new language to make clear the need for prime contractor 
approval when support property administration at subcontractor 
locations is necessary.
    (B) Paragraph (b) was edited to state that the prime property 
administrator shall ``advise the prime contractor of the results of 
property management reviews, including deficiencies found with the 
subcontractor's property management system.''
    (C) Paragraph (c) was added.
    (D) Section title has been changed.
    (11) 45.602-3(b) Screening.
    Paragraph (b)(3) is revised to correct the address for the Public 
Printer.
    (12) 45.604-3 Sale of surplus personal property.
    (A) The reference to CFR Part 101-45 is changed to CFR Part 102-38.
    (B) Section title has been changed.
    (13) 45.606-1 Contractor with an approved scrap procedure.
    Paragraph (b) was reformatted to separate categories of property 
requiring preparation of an inventory disposal schedule into a new 
paragraph (c). Language was added for ``all aircraft regardless of 
condition'' and ``flight safety critical aircraft parts.'' In addition, 
scrap was revised to include ``economically beneficial to recover'' 
precious metals.
    (14) 52.232-16, Progress Payments, and 52.232-32, Performance Based 
Payments.
    (A) The clause at 52.232-16(d)(2)(ii) and the clause at 52.232-
32(f)(2)(ii) are revised to delete the language ``under any other 
clause of this contract.'' This language is no longer necessary.
    (B) The clause at 52.232-16(d)(3) and the clause at 52.232-32(f)(3) 
are revised to delete the language ``or special tooling.'' This 
language is no longer necessary.
    (15) Loss, Damage, Theft, or Destruction.
    All references to ``loss, damage, destruction, or theft'' are 
changed to ``loss, theft, damage, or destruction'' in the coverage in 
32.503-16(a) and 32.1010(a) and the clauses at 52.232-16, 52.232-32 and 
52.245-1.
    (16) Clauses.


Sec.  52.245-1  Government Property.

     (A) Definitions at 52.245-1(a) are changed to be consistent with 
the definitions in FAR 45.101.
     (B) In paragraph (b)(2), ``sale (as surplus property), or other'' 
disposition was added.
     (C) Paragraph (c) was reformatted and information regarding 
modifications or alterations of Government property was added to 
clarify that modifications or alterations must be reasonable and 
necessary due to the scope of work under this contract or its terms and 
conditions, required for normal maintenance, or otherwise authorized by 
the contracting officer. In addition, language was added to clarify 
when cannibalization occurs.
     (D) Paragraph (e)(2)(ii) was revised to clarify title under fixed 
price contracts.
     (E) The term ``material'' was changed to ``property'' in 
paragraphs (e)(2)(iii) and (f)(1)(i).
     (F) Paragraphs (f)(1)(iii)(A)(4) and (f)(1)(vi)(B)(4) ``Unique-
item'' identifier was revised to ``Item unique'' identifier.
     (H) Paragraph (f)(1)(viii)(B), references to ``property'' were 
changed to ``material.''
     (I) Paragraph (g), Systems analysis, was revised to reflect the 
coverage in FAR 45.502 that provides for support property 
administration for subcontractors and prime contractor alternate 
locations.
     (J) Paragraph (i) deleted the language ``the right to an equitable 
adjustment shall be the Contractor's exclusive remedy.''
     (K) Paragraph (j)(1)(i)(B) was reformatted into paragraphs (B) and 
(C) to separate categories of property requiring preparation of an 
inventory disposal schedule. Language was added for ``all aircraft 
regardless of condition'' and ``flight safety critical aircraft 
parts.'' In addition, scrap was revised to include ``economically 
beneficial to recover'' precious metals.
     (L) Paragraph (j)(3)(iii)(E), the phrase ``in raw or bulk form'' 
was added.
     (M) Paragraph (j)(3)(iv) was revised to add a list of items for 
which additional descriptive information is required during 
disposition.
     (N) Paragraph (j)(3)(v) was revised to delete the language 
``describe the property in sufficient detail to permit an understanding 
of its intended use.''
     (O) Paragraph (j)(3)(vi) was added.
     (P) Paragraph (j)(7)(ii) was revised to change ``facility'' to 
``area.''
     (Q) Paragraph (j)(8)(ii) was revised to add ``unless otherwise 
directed by the contracting officer or by the plant clearance officer 
the Contractor shall

[[Page 39264]]

remove and destroy any Government affixed markings...''
     (R) Alternate I, 52.245-1, paragraph (h)(1) and 52.245-2 (b) were 
revised to change the reference from ``loss, damage, destruction, or 
theft'' to ``loss, theft, damage, or destruction.''


52.245-9  Use and Charges.

    The clause at 52.245-9 was revised to delete definitions contained 
in 52.245-1 and to include language that definitions applicable to this 
contract are provided in the clause at 52.245-1. 52.245-9 may only be 
used when 52.245-1 is included in the contract.


52.251-1  Government Supply Sources.

    The clause at 52.251-1 was revised to update the reference to the 
clause at 52.245-1.
    This is not a significant regulatory action and, therefore, was not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

B. Regulatory Flexibility Act

    The Councils do not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because the rule does not impose any additional requirements on small 
businesses. The rule does not affect the method of managing Government 
property. The rule merely clarifies and corrects the previous FAR rule.
    An Initial Regulatory Flexibility Analysis has, therefore, not been 
performed. We invite comments from small businesses and other 
interested parties. The Councils will consider comments from small 
entities concerning the affected FAR Parts 2, 4, 15, 42, 45, and 52 in 
accordance with 5 U.S.C. 610. Interested parties must submit such 
comments separately and should cite 5 U.S.C. 601, et seq. (FAR case 
2008-011), in correspondence.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the proposed 
changes to the FAR do not impose information collection requirements 
that require the approval of the Office of Management and Budget under 
44 U.S.C. Chapter 35, et seq.

List of Subjects in 48 CFR Parts 2, 4, 15, 32, 42, 45, and 52

    Government procurement.

    Dated: July 30, 2009.
Al Matera,
Director, Office of Acquisition Policy.

0
Therefore, DoD, GSA, and NASA propose amending 48 CFR parts 2, 4, 15, 
32, 42, 45, and 52 as set forth below:
    1. The authority citation for 48 CFR parts 2, 4, 15, 32, 42, 45, 
and 52 continues to read as follows:

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

PART 2--DEFINITIONS OF WORDS AND TERMS


2.101  [Amended]

    2. Amend section 2.101, in paragraph (b)(2), by removing from the 
definition ``Plant clearance officer'' the words ``contractor-operator 
plants, and Federal installations'' and adding ``contractor-operator 
plants, Federal installations and Federal and non-Federal industrial 
operations'', in its place; and removing from the definition ``Special 
tooling'' the words ``test equipment, and'' and adding ``tooling, and'' 
in its place.

PART 4--ADMINISTRATIVE MATTERS

    3. Amend section 4.705-3 by adding paragraph (h) to read as 
follows:


4.705-3  Acquisition and supply records.

* * * * *
    (h) Property records (see 45.101 and 52.245-1): Retain 4 years.

PART 15--CONTRACTING BY NEGOTIATION

    4. Amend section 15.404-4 by adding a sentence to the end of 
paragraph (a)(3) to read as follows:


15.404-4  Profit.

    (a) * * *
    (3) * * * Unless the contractor acquired property is a deliverable 
under the contract, no profit or fee shall be permitted on the cost of 
the property.
* * * * *

PART 32--CONTRACT FINANCING


32.503-16  [Amended]

    5. Amend section 32.503-16 by removing from paragraph (a) ``loss, 
theft, destruction, or damage to'' and adding ``lost, stolen, damaged, 
or destroyed'' in its place.


32.1010   [Amended]

    6. Amend section 32.1010 by removing from paragraph (a) ``loss, 
theft, destruction, or damage to'' and adding ``lost, stolen, damaged, 
or destroyed'' in its place.

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES

    7. Amend section 42.302 by revising paragraphs (a)(30)(iii) and 
(a)(30)(v) to read as follows:


42.302   Contract administration functions.

    (a) * * *
    (30) * * *
    (iii) Evaluate the use of Government property on a non-interference 
basis in accordance with the clause at 52.245-9, Use and Charges;
* * * * *
     (v) Modify contracts to reflect addition of Government furnished 
property and ensure appropriate consideration.
* * * * *

PART 45--GOVERNMENT PROPERTY

    8. Amend section 45.101 by--
    a. Revising the definitions ``Cannibalize'', ``Equipment'', 
``Government-furnished property'', and ``Government property'';
    b. Removing from the definition ``Material'' the words ``test 
equipment'' and adding ``test equipment or real property'' in its 
place;
    c. Removing the definition ``Plant equipment'';
    d. Adding the definition ``Property records''; and
    e. Revising the definition ``Real property.
    The revised and added text reads as follows:


45.101  Definitions.

* * * * *
    Cannibalize means to remove parts from equipment, special tooling 
or special test equipment in order to install them on other property.
* * * * *
    Equipment means a tangible item that is functionally complete for 
its intended purpose, durable, nonexpendable, and needed for the 
performance of a contract. Equipment is not intended for sale, and does 
not ordinarily lose its identity or become a component part of another 
article when put into use. Equipment does not include material or real 
property.
    Government-furnished property means property in the possession of, 
or directly acquired by, the Government and subsequently furnished to 
the contractor for performance of a contract. Government-furnished 
property includes spares and property furnished for repair, 
maintenance, overhaul, or modification.
    Government property means all property owned or leased by the

[[Page 39265]]

Government. Government property includes both Government-furnished 
property and contractor-acquired property. Government property includes 
material, equipment, special tooling, special test equipment, and real 
property. Government property does not include intellectual property, 
and software.
* * * * *
    Property records means the records created and maintained by the 
contractor in support of its stewardship responsibilities for the 
management of Government property.
* * * * *
    Real property. See Federal Management Regulation 102-71.20 (41 CFR 
102-71.20.)
* * * * *
    9. Amend section 45.102 by revising paragraph (d) to read as 
follows:


45.102  Policy.

* * * * *
    (d) Exception. Property provided under contracts for repair, 
maintenance, overhaul, or modification is not subject to the 
requirements of paragraph (b) of this section.
    10. Amend section 45.104 by revising the introductory text of 
paragraph (a) to read as follows:


45.104  Responsibility and liability for Government property.

    (a) Generally, contractors are not held liable for loss, theft, 
damage, or destruction of Government property under the following types 
of contracts:
* * * * *
    11. Amend section 45.105 by revising paragraph (b)(1); and removing 
from paragraph (d) ``damage, destruction, or theft'' and adding 
``theft, damage, or destruction'' in its place. The revised text reads 
as follows:


45.105  Contractors' property management system compliance.

* * * * *
    (b) * * *
    (1) Revocation of the Government's assumption of risk for loss, 
theft, damage, or destruction; and/or
* * * * *


45.201  [Amended]

    12. Amend section 45.201 by removing from paragraph (a)(4) 
``Unique-item'' and adding ``Item unique'' in its place; and removing 
from paragraph (d) ``When use of property on more than one contract is 
anticipated, any'' and adding ``Any'' in its place.
    13. Amend section 45.402 by revising paragraph (a) to read as 
follows:


45.402  Title to contractor-acquired property.

    (a) Title vests in the Government for all property acquired or 
fabricated by the Contractor in accordance with the financing 
provisions or other specific requirements for passage of title in the 
contract. Under fixed price type contracts, in the absence of financing 
provisions or other specific requirements for passage of title in the 
contract, the Contractor retains title to all property acquired by the 
Contractor for use on the contract, except for property identified as a 
deliverable end item. If a deliverable item is to be retained by the 
Contractor for use after inspection and acceptance by the Government, 
it shall be made accountable to the contract through a contract 
modification listing the item as Government-furnished property.
* * * * *
    14. Revise section 45.502 to read as follows:


45.502   Subcontractor and alternate prime contractor locations.

    (a) To ensure subcontractor compliance with Government property 
administration requirements, and with prime contractor consent, the 
property administrator assigned to the prime contract may request 
support property administration from another contract administration 
office. If the prime contractor does not provide consent to support 
property administration at subcontractor locations, the property 
administrator shall refer the matter to the contracting officer for 
resolution.
    (b) The prime property administrator shall accept the findings of 
the delegated support property administrator and advise the prime 
contractor of the results of property management reviews, including 
deficiencies found with the subcontractor's property management system.
    (c) Prime contractor consent is not required for support 
delegations involving prime contractor alternate locations.


45.602-3  [Amended]

    15. Amend section 45.602-3 by removing from paragraph (b)(3) 
``North Capitol and H Streets'' and adding ``732 North Capitol Street'' 
in its place.
    16. Revise section 45.604-3 to read as follows:


45.604-3  Sale of surplus personal property.

    Policy for the sale of surplus personal property is contained in 
the Federal Management Regulations, at Part 102-38 (41 CFR Part 102-
38). Agencies may specify implementing procedures.
    17. Amend section 45.606-1 by revising paragraph (b) and adding 
paragraph (c) to read as follows:


45.606-1  Contractor with an approved scrap procedure.

* * * * *
    (b) For scrap from other than production or testing, the contractor 
may prepare scrap lists in lieu of inventory disposal schedules 
(provided such lists are consistent with the approved scrap 
procedures).
    (c) Inventory disposal schedules shall be submitted for all 
aircraft regardless of condition, flight safety critical aircraft 
parts, and scrap that--
    (1) Requires demilitarization;
    (2) Is a classified item;
    (3) Is generated from classified items;
    (4) Contains hazardous materials or hazardous wastes;
    (5) Contains precious metals that are economically beneficial to 
recover; or
    (6) Is dangerous to the public health, safety, or welfare.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


52.232-16  [Amended]

    18. Amend section 52.232-16 by--
    a. Removing from the clause heading ``(JUL 2009)'' and adding 
``(DATE)'' in its place;
    b. Removing from paragraph (d)(2)(ii) ``under any other clause of 
this contract'';
    c. Removing from paragraph (d)(3) ``or special tooling''; and
    d. Removing from paragraph (e) ``is damaged, lost, stolen, or'' and 
adding ``is lost, stolen, damaged, or'' in its place.


52.232-32  [Amended]

    19. Amend section 52.232-32 by--
    a. Removing from the clause heading ``(JAN 2008)'' and adding 
``(DATE)'' in its place;
    b. Removing from paragraph (f)(2)(ii) ``under any other clause of 
this contract'';
    c. Removing from paragraph (f)(3) ``or special tooling''; and
    d. Removing from paragraph (g) ``is damaged, lost, stolen, or'' and 
adding ``is lost, stolen, damaged, or'' in its place.
    20. Amend section 52.245-1 by--
    a. Revising the date of the clause;
    b. In paragraph (a) by--
    1. Revising the definition ``Cannibalize'';
    2. Removing from the definition ``Equipment'' the word ``asset'' 
and adding the word ``item'' in its place; and adding a sentence to the 
end of the definition;

[[Page 39266]]

    3. Adding a sentence to the end of the definition ``Government-
furnished property'';
    4. Adding a sentence to the end of the definition ``Government 
property'';
    5. Adding the words ``or real property'' to the end of the 
definition ``Material'';
    6. Removing the definition ``Plant equipment'';
    7. Adding, in alphabetical order, the definition ``Property 
records''; and
    8. Revising the definition ``Real property'';
    c. Revising the first sentence of paragraph (b)(2), (c), and 
(e)(2)(ii);
    d. Removing from paragraphs (e)(2)(iii) and (f)(1)(i) the word 
``material'' and adding the word ``property'' wherever it occurs (8 
times);
    e. Removing from paragraph (f)(1)(iii)(A)(4) the word ``Unique-
item'' and adding the words ``Item unique'' in its place;
    f. Revising paragraph (f)(1)(v)(A), introductory text of paragraph 
(f)(1)(vi), paragraphs (f)(1)(vi)(A), (f)(1)(vi)(B)(4), 
(f)(1)(vi)(B)(10), (f)(1)(vii)(A), (f)(1)(viii)(B), (f)(1)(x), (g), 
introductory text of paragraph (h)(1), the first sentence of paragraph 
(h)(1)(ii), (h)(1)(iii), the first sentence of paragraph (h)(2), 
paragraph (h)(3), the second sentence of paragraph (i), and paragraph 
(j)(1)(i)(B);
    h. Add paragraph (j)(1)(i)(C);
    i. Revise paragraphs (j)(3)(iii)(E), and (j)(3)(iv);
    g. Add paragraphs (j)(3)(v), and (j)(3)(vi);
    j. Remove from paragraph (j)(7)(ii) the word ``facility'' and add 
the word ``area'' in its place;
    k. Revise paragraph (j)(8)(ii);
    l. In Alternate I, revise the date of the alternate, and the first 
sentence of paragraph (h)(1).
    The added and revised text reads as follows:


52.245-1  Government Property.

* * * * *

GOVERNMENT PROPERTY (DATE)

    (a) * * *
* * * * *
    Cannibalize means to remove parts from equipment, special tooling 
or special test equipment in order to install them on other property.
* * * * *
    Equipment * * * Equipment does not include material or real 
property.
    Government-furnished property * * * Government-furnished property 
includes spares and property furnished for repair, maintenance, 
overhaul, or modification.
    Government property * * * Government property includes material, 
equipment, special tooling, special test equipment, and real property. 
Government property does not include intellectual property, and 
software.
* * * * *
    Property records means the records created and maintained by the 
contractor in support of its stewardship responsibilities for the 
management of Government property.
* * * * *
    Real property. See Federal Management Regulation 102-71.20 (41 CFR 
102-71.20).
* * * * *
    (b) * * *
    (2) The Contractor's responsibility extends from the initial 
acquisition and receipt of property, through stewardship, custody, and 
use until formally relieved of responsibility by authorized means, 
including delivery, consumption, expending, sale (as surplus property), 
or other disposition, or via a completed investigation, evaluation, and 
final determination for lost, stolen, damaged, or destroyed property. * 
* *
* * * * *
    (c) Use of Government property. (1) The Contractor shall use 
Government property, either furnished or acquired under this contract, 
only for performing this contract, unless otherwise provided for in 
this contract or approved by the Contracting Officer.
    (2) Modifications or alterations of Government property are 
prohibited, unless they are--
    (i) Reasonable and necessary due to the scope of work under this 
contract or its terms and conditions;
    (ii) Required for normal maintenance; or
    (iii) Otherwise authorized by the Contracting Officer.
    (3) The Contractor shall not cannibalize Government property unless 
otherwise provided for in this contract or approved by the Contracting 
Officer.
* * * * *
    (e) * * *
    (2) * * *
    (ii) Title vests in the Government for all property acquired or 
fabricated by the Contractor in accordance with the financing 
provisions or other specific requirements for passage of title in the 
contract. Under fixed price type contracts, in the absence of financing 
provisions or other specific requirements for passage of title in the 
contract, the Contractor retains title to all property acquired by the 
Contractor for use on the contract, except for property identified as a 
deliverable end item. If a deliverable item is to be retained by the 
Contractor for use after inspection and acceptance by the Government, 
it shall be made accountable to the contract through a contract 
modification listing the item as Government-furnished property.
* * * * *
    (f) * * *
    (1) * * *
    (v) * * *
    (A) The Contractor shall award subcontracts that clearly identify 
assets to be provided and shall ensure appropriate flow down of 
contract terms and conditions (e.g., extent of liability for loss, 
theft, damage, or destruction of Government property).
* * * * *
    (vi) Reports. The Contractor shall have a process to create and 
provide reports of discrepancies; loss, theft, damage, or destruction; 
physical inventory results; audits and self-assessments; corrective 
actions; and other property related reports as directed by the 
Contracting Officer.
    (A) Loss, theft, damage, or destruction. Unless otherwise directed 
by the Property Administrator, the Contractor shall investigate and 
promptly furnish a written narrative of all incidents of loss, theft, 
damage, or destruction to the property administrator as soon as the 
facts become known or when requested by the Government.
    (B) * * *
    (4) Item unique Item Identifier (if available).
* * * * *
    (10) A statement that the Government will receive any reimbursement 
covering the loss, theft, damage, or destruction in the event the 
Contractor was or will be reimbursed or compensated.
* * * * *
    (vii) * * *
    (A) Consumed or expended, reasonably and properly, or otherwise 
accounted for, in the performance of the contract, including reasonable 
inventory adjustments of material as determined by the Property 
Administrator; or a Property Administrator granted relief of 
responsibility for loss, theft, damage, or destruction of Government 
property;
* * * * *
    (viii) * * *
    (B) Unless otherwise authorized in this contract or by the Property 
Administrator the Contractor shall not commingle Government material 
with material not owned by the Government.
* * * * *
    (x) Property closeout. The Contractor shall promptly perform and 
report to the Property Administrator contract

[[Page 39267]]

property closeout, to include reporting, investigating and securing 
closure of all loss, theft, damage, or destruction cases; physically 
inventorying all property upon termination or completion of this 
contract; and disposing of items at the time they are determined to be 
excess to contractual needs.
* * * * *
    (g) Systems analysis. (1) The Government shall have access to the 
Contractor's premises and all Government property, at reasonable times, 
for the purposes of reviewing, inspecting and evaluating the 
Contractor's property management plan, systems, procedures, records, 
and supporting documentation that pertains to Government property. This 
access includes all site locations and, with the Contractor's consent, 
all subcontractor premises.
    (2) Records of Government property shall be readily available to 
authorized Government personnel and shall be appropriately safeguarded.
    (3) Should it be determined by the Government that the Contractor's 
(or subcontractor's) property management practices are inadequate or 
not acceptable for the effective management and control of Government 
property under this contract, or present an undue risk to the 
Government, the Contractor shall immediately take all necessary 
corrective actions as directed by the Property Administrator.
* * * * *
    (h) * * *
    (1) Unless otherwise provided for in the contract, the Contractor 
shall not be liable for loss, theft, damage, or destruction to the 
Government property furnished or acquired under this contract, except 
when any one of the following applies--
* * * * *
    (ii) The loss, theft, damage, or destruction is the result of 
willful misconduct or lack of good faith on the part of the 
Contractor's managerial personnel. * * *
    (iii) The Contracting Officer has, in writing, revoked the 
Government's assumption of risk for loss, theft, damage, or 
destruction, due to a determination under paragraph (g) of this clause 
that the Contractor's property management practices are inadequate, 
and/or present an undue risk to the Government, and the Contractor 
failed to take timely corrective action. If the Contractor can 
establish by clear and convincing evidence that the loss, theft, 
damage, or destruction of Government property occurred while the 
Contractor had adequate property management practices or the loss, 
theft, damage, or destruction of Government property did not result 
from the Contractor's failure to maintain adequate property management 
practices, the Contractor shall not be held liable.
    (2) The Contractor shall take all reasonable actions necessary to 
protect the Government property from further loss, theft, damage, or 
destruction. * * *
    (3) The Contractor shall do nothing to prejudice the Government's 
rights to recover against third parties for any loss, theft, damage, or 
destruction of Government property.
* * * * *
    (i) Equitable adjustment. * * * However, the Government shall not 
be liable for breach of contract for the following:
* * * * *
    (j) * * *
    (1) * * *
    (i) * * *
    (B) For scrap from other than production or testing the Contractor 
may prepare scrap lists in lieu of inventory disposal schedules 
(provided such lists are consistent with the approved scrap 
procedures.)
    (C) Inventory disposal schedules shall be submitted for all 
aircraft regardless of condition, flight safety critical aircraft 
parts, and scrap that--
    (1) Requires demilitarization;
    (2) Is a classified item;
    (3) Is generated from classified items;
    (4) Contains hazardous materials or hazardous wastes;
    (5) Contains precious metals that are economically beneficial to 
recover; or
    (6) Is dangerous to the public health, safety, or welfare.
* * * * *
    (3) * * *
    (iii) * * *
    (E) Precious metals in raw or bulk form;
* * * * *
    (iv) The Contractor shall provide the information required by 
52.245-1(f)(1)(iii) along with the following:
    (A) For special tooling and special test equipment, identify each 
part number with which the item is used.
    (B) For work-in-progress, the estimated percentage of completion.
    (C) For precious metals, the type of metal and estimated weight.
    (D) For hazardous material or property contaminated with hazardous 
material, the type of hazardous material.
    (E) For metals in mill product form, the form, shape, treatment, 
hardness, temper, specification (commercial or Government) and 
dimensions (thickness, width and length.)
    (F) Any additional information that may facilitate understanding of 
the property's intended use.
    (v) Property with the same description, condition code, and 
reporting location may be grouped in a single line item.
    (vi) Scrap should be reported by ``lot'' along with metal content, 
estimated weight and estimated value.
* * * * *
    (8) * * *
    (ii) The Contractor shall prepare for shipment, deliver f.o.b. 
origin, or dispose of Contractor inventory as directed by the Plant 
Clearance Officer. Unless otherwise directed by the Contracting Officer 
or by the Plant Clearance Officer, the Contractor shall remove and 
destroy any Government affixed markings identifying the property as 
U.S. Government-owned property prior to its disposal.
* * * * *
    Alternate I (Date). * * *
    (h)(1) The Contractor assumes the risk of, and shall be 
responsible for, any loss, theft, damage, or destruction of 
Government property upon its delivery to the Contractor as 
Government-furnished property. * * *
* * * * *
    20. Amend section 52.245-2 by revising the date of the clause, and 
the first two sentences of paragraph (b) to read as follows:


52.245-2  Government Property Installation Operation Services.

* * * * *

GOVERNMENT PROPERTY INSTALLATION OPERATION SERVICES (DATE)

* * * * *
    (b) The Government bears no responsibility for repair or 
replacement of any loss, theft, damage, or destruction of Government 
property. If any or all of the Government property is lost, stolen, 
damaged, or destroyed or becomes no longer usable, the Contractor shall 
be responsible for replacement of the property at Contractor expense. * 
* *
* * * * *
    21. Amend section 52.245-9 by revising the date of the clause, and 
the introductory text of paragraph (a); and removing the definitions 
``Acquisition cost'', ``Government property'', ``Plant equipment'', and 
``Real property''. The revised text reads as follows:


52.245-9  Use and Charges.

* * * * *

USE AND CHARGES (DATE)

    (a) Definitions. Definitions applicable to this contract are 
provided in the clause at 52.245-1, Government

[[Page 39268]]

Property. Additional definitions as used in this clause include:
* * * * *
    23. Amend section 52.251-1 by revising the date of the clause, and 
the last sentence of the clause to read as follows:


52.251-1  Government Supply Sources.

* * * * *

GOVERNMENT SUPPLY SOURCES (DATE)

    * * * The provisions of the clause entitled ``Government 
Property,'' at 52.245-1, shall apply to all property acquired under 
such authorization.
    (End of clause)
[FR Doc. E9-18799 Filed 8-5-09; 8:45 am]
BILLING CODE 6820-EP-S