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[Federal Register Volume 76, Number 22 (Wednesday, February 2, 2011)]
[Rules and Regulations]
[Pages 6006-6008]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2044]

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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 245 and 252

[DFARS Case 2008-D049]
RIN 0750-AG64

Defense Federal Acquisition Regulation Supplement; Reporting of 
Government Property Lost, Stolen, Damaged, or Destroyed

AGENCY: Defense Acquisition Regulations System; Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to require contractors to 
report loss of Government property to the Defense Contract Management 
Agency (DCMA) eTools application.

DATES: Effective Date: February 2, 2011.

FOR FURTHER INFORMATION CONTACT: Ms. Clare Zebrowski, 703-602-0289.

[[Page 6007]]

SUPPLEMENTARY INFORMATION: 

I. Background

    This final rule provides a clause at DFARS 252.245-7002, Reporting 
Loss of Government Property, that requires DoD contractors to report 
the loss, theft, damage, and destruction of Government property to the 
DCMA eTools application. The final rule changes--
     DFARS 245.102(4), Policy, to make editorial changes to 
remove subparagraphs that unnecessarily duplicate language contained in 
the clause at 252.245-7002, Reporting Loss of Government Property. This 
paragraph has been redesignated as 245.102(5).
     DFARS 245.107(2), Contract clauses, to correct the 
prescription for use of the clause at 252.245-7002, Reporting Loss of 
Government Property, by removing the reference to FAR 52.245-2, 
Government Property Installation Operation Services. This paragraph has 
been redesignated as 245.107(c).
     Clause 252.245-7002, Reporting Loss of Government 
Property, to--
    [cir] Revise the clause title;
    [cir] Change the defined term ``acquisition cost'' to ``unit 
acquisition cost'' and expand the definition to include contractor-
acquired property;
    [cir] Revise the definition for ``Government property'' to state 
that the term is defined in the clause at FAR 52.245-1, Government 
Property;
    [cir] Add a new definition for ``loss of Government property'';
    [cir] Revise the paragraph (b) title and (b)(1) to accommodate the 
new definition of ``Loss of Government property''.
    [cir] Revise paragraph (b)(1) to add the word ``unit'' to reflect 
that reporting value shall be at ``unit acquisition cost,'' and to 
provide an updated Web page for accessing the eTools application;
     Revise paragraph (b)(3) to make editorial and format 
changes;
     Revise paragraph (b)(4) to make editorial changes and to 
delete reference to two specific property clauses and instead state 
that the reporting requirements do not change any other liability or 
other reporting requirement that may exist under the contract.

II. Discussion and Analysis

    Three respondents submitted four comments on the proposed rule, 
which was published at 75 FR 22729 on April 30, 2010. Comments were due 
June 29, 2010. A discussion of the comments received follows:

A. Clause Prescription

    Comment: One respondent recommended revising paragraph 245.107(2) 
to remove the reference to FAR 52.245-2, Government Property 
Installation Operation Services, as the loss of property reporting 
requirement stems directly from FAR 52.245-1 and not from 52.245-2.
    DoD Response: DoD has revised the language accordingly.

B. Definition of ``Government Property''

    Comment: One respondent recommended that the definition of 
``Government property'' in the proposed clause should make clear that 
it includes all property acquired by the contractor through indirect 
cost accounts.
    DoD Response: The recommendation is outside the scope of the rule. 
The rule does not seek to alter or modify the definition of Government 
property as prescribed in the Federal Acquisition Regulations (FAR 
52.245-1). However, in order to clarify the Government property 
definition, DoD has replaced the definition of ``Government property'' 
in the clause with a reference to the definition of ``Government 
property'' in FAR 52.245-1.

C. Use of Term ``Losses''

    Comment: One respondent recommended modifying the clause language 
in paragraph (b) to replace the term ``lost, stolen, damaged, or 
destroyed'' with ``losses'' to maintain simplicity and consistency.
    DoD Response: A new definition for ``loss of Government property'' 
has been added to the clause at 252.245-7002, Reporting Loss of 
Government Property.

D. Definition of ``Estimated Harm''/``Acquisition Cost''

    Comment: One respondent recommended adding a new definition of 
``estimated harm'' to the proposed clause at 252.245-70XX and stated 
that estimated harm should consider other factors such as residual 
value, replacement cost, and care and handling cost. The respondent 
stated that the estimated harm should be expressed as a numeric value, 
and that providing only the acquisition cost without providing 
estimated harm to the Government is misleading and may result in poor 
decisions. According to the respondent, industry experience has proven 
that there typically is minimal or no harm to the Government and, even 
though the Government is self insured, replacement of lost items rarely 
occurs.
    Similarly, a respondent stated the need to address the materiality 
of the loss and that without this information, decision makers may be 
misled and losses may be overstated. Further, according to the 
respondent, the rule should then explain how to compensate the 
Government for losses when the ``indirect costs used to buy the 
property'' have been partially allocated to Government contracts and 
partially allocated to commercial work or firm-fixed-price contracts.
    DoD Response: These recommen da tions are outside the scope of the 
rule. The clause seeks only to require the electronic reporting of data 
pertaining to Government property losses. It does not require reporting 
of the estimated harm or materiality of such losses to the Government.
    However, in order to clarify the reporting value, the clause 
definition of ``acquisition cost'' has been revised to a definition of 
``unit acquisition cost.'' The new definition clarifies that for 
Government-furnished property, the unit acquisition cost is the dollar 
value assigned by the Government and identified in the contract; and 
adds the method for determining the reporting value for contractor-
acquired property. The revised definition is more comprehensive and 
clarifies the property values to be reported.
    The final rule also revises paragraph (b)(4) of the clause to 
remove the references to 52.245-1 and 52.245-2, since the contract may 
contain other liability or other reporting requirements. This change 
clarifies that the new clause does not impact any other contractual 
reporting or liability requirements.

III. Executive Order 12866

    This rule was not subject to Office of Management and Budget review 
under Executive Order 12866, dated September 30, 1993. This rule is not 
a major rule under 5 U.S.C. 804.

IV. Regulatory Flexibility Act

    DoD has prepared a final regulatory flexibility analysis consistent 
with 5 U.S.C. 604. A copy of the analysis may be obtained from the 
individual specified herein. The analysis is summarized as follows:
    The objective of this rule is to provide DoD with a single 
repository for reporting loss of Government property to improve 
accountability and control of DoD assets and contractor oversight.
    None of the comments from the three respondents was in response to 
the initial regulatory flexibility analysis. Therefore, there is no 
change to the rule in this regard.
    The rule applies to DoD contractors provided with Government 
property. The clause at 252.245-7002, Reporting Loss of Government 
Property, requires the contractor to use the Defense Contract 
Management Agency eTools software application for reporting loss of

[[Page 6008]]

Government property. The eTools software can be accessed from the DCMA 
homepage External Web Access Management application at http://www.dcma.mil/aboutetools.cfm.
    Unless otherwise provided for in the contract, these requirements 
do not apply to normal and reasonable inventory adjustments, i.e., 
losses of low-risk consumable material such as common hardware, as 
agreed to by the contractor and the Government property administrator. 
Such losses are typically a product of normal process variation. The 
contractor shall ensure that its property management system provides 
adequate management control measures, e.g., statistical process 
controls, as a means of managing such variation.
    Reporting requirements apply to losses of Government property 
outside normal process variation, e.g., because of--
    (1) Theft;
    (2) Inadequate storage;
    (3) Inadequate security; or
    (4) ``Acts of God.''
    This rule is not expected 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 any start-up 
costs that contractors will incur to comply with the rule are expected 
to be minimal. The rule is expected to have a positive or beneficial 
impact on small entities by making available a Government-provided 
software application to use for reporting purposes. The rule does not 
duplicate, overlap, or conflict with any other Federal rules.

V. Paperwork Reduction Act

    This final rule does not significantly increase the information 
collection requirements set forth under FAR 52.245-1(f)(vi), approved 
by the Office of Management and Budget under OMB clearance number 9000-
0075. The rule will have a minimal impact on contractors, as such 
reporting is already common practice and is on an exception basis, 
i.e., only when reportable property is lost. There were no comments 
received on the proposed rule concerning information collection.

List of Subjects in 48 CFR Parts 245 and 252

    Government procurement.

Ynette R. Shelkin,
Editor, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 245 and 252 are amended as follows:

0
1. The authority citation for 48 CFR parts 245 and 252 continues to 
read as follows:

    Authority: 41 U.S.C. 421 and 48 CFR chapter 1.

PART 245--GOVERNMENT PROPERTY

245.102  Policy.

0
2. Section 245.102 is amended by adding paragraph (5) to read as 
follows:
* * * * *
    (5) Reporting loss of Government property. The Defense Contract 
Management Agency (DCMA) eTools software application is the DoD data 
repository for reporting loss of Government property in the possession 
of contractors. The requirements and procedures for reporting loss of 
Government property to eTools are set forth in the clause at 252.245-
7002, Reporting Loss of Government Property, prescribed at 245.107.

0
3. Section 245.107 is amended by adding paragraph (c) to read as 
follows:

245.107  Contract clauses.

* * * * *
    (c) Use the clause at 252.245-7002, Reporting Loss of Government 
Property, in solicitations and contracts that contain the clause at FAR 
52.245-1, Government Property.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

0
4. Add section 252.245-7002 to read as follows:

252.245-7002  Reporting Loss of Government Property.

    As prescribed in 245.107(c), use the following clause:

REPORTING LOSS OF GOVERNMENT PROPERTY (FEB 2011)

    (a) Definitions. As used in this clause--
    Government property is defined in the clause at FAR 52.245-1, 
Government Property.
    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.
    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 
acceptable accounting principles.
    (b) Reporting loss of Government property. (1) The Contractor 
shall use the Defense Contract Management Agency (DCMA) eTools 
software application for reporting loss of Government property. 
Reporting value shall be at unit acquisition cost. The eTools ``LTDD 
of Government Property'' toolset can be accessed from the DCMA home 
page External Web Access Management application at http://www.dcma.mil/aboutetools.cfm.
    (2) Unless otherwise provided for in this contract, the 
requirements of paragraph (b)(1) of this clause do not apply to 
normal and reasonable inventory adjustments, i.e., losses of low-
risk consumable material such as common hardware, as agreed to by 
the Contractor and the Government Property Administrator. Such 
losses are typically a product of normal process variation. The 
Contractor shall ensure that its property management system provides 
adequate management control measures, e.g., statistical process 
controls, as a means of managing such variation.
    (3) The Contractor shall report losses of Government property 
outside normal process variation, e.g., losses due to--
    (i) Theft;
    (ii) Inadequate storage;
    (iii) Lack of physical security; or
    (iv) ``Acts of God.''
    (4) This reporting requirement does not change any liability 
provisions or other reporting requirements that may exist under this 
contract.

(End of clause)

[FR Doc. 2011-2044 Filed 2-1-11; 8:45 am]
BILLING CODE 5001-08-P
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