54008 Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules

For information regarding proper

filing procedures for comments, see 47

CFR 1.415 and 1.420.

List of Subjects in 47 CFR Part 73

Radio broadcasting.

Federal Communications Commission.

John A. Karousos,

Chief, Allocations Branch, Policy and Rules

Division, Mass Media Bureau.

[FR Doc. 97–27515 Filed 10–16–97; 8:45 am]

BILLING CODE 6712–01–F

DEPARTMENT OF DEFENSE

48 CFR Parts 216, 245, and 252

[DFARS Case 97–D027]

Defense Federal Acquisition

Regulation Supplement; Title to

Government Property

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for

comments.

SUMMARY: The Under Secretary of

Defense, Acquisition and Technology,

has requested the Director, Defense

Procurement, to obtain public comment

on Government property management

policy changes intended to reduce the

amount of Government-owned tooling

and equipment in the possession of DoD

contractors. This proposed rule solicits

those comments and is structured as a

deviation from the Federal Acquisition

Regulation (FAR) Part 45 proposed rule

on Government property (FAR Case 95–

013) that was published in the Federal

Register on June 2, 1997 (62 FR 30186).

This proposed DFARS rule will be

amended at a later date to incorporate

changes resulting from public comments

on the FAR Part 45 proposed rule.

DATES: Comments on the proposed rule

should be submitted in writing to the

address shown below on or before

December 16, 1997 to be considered in

the formulation of the final rule.

ADDRESSES: Interested parties should

submit written comments to: Director,

Defense Procurement, Deputy Director,

Major Policy Initiatives, Attention: Ms.

Angelena Moy, Room 3C128, 3060

Defense Pentagon, Washington, DC

20301–3060. Please cite DFARS Case

97–D027 in all correspondence related

to this proposed rule. Address E-mail

(Internet) comments to

Moyac@acq.osd.mil.

FOR FURTHER INFORMATION CONTACT:

Ms. Angelena Moy by phone at (703)

695–1097/8, by fax at (703) 695–7569, or

at the E-mail address provided above.

Please cite DFARS Case 97–D027.

SUPPLEMENTARY INFORMATION:

A. Background

The value of Government-owned

equipment and tooling in the possession

of DoD contractors increased

substantially during the past decade

although long-standing acquisition

policy generally requires contractors to

furnish the property needed to perform

Government contracts. An Integrated

Process Team, led by the Office of the

Under Secretary of Defense, Industrial

Affairs and Installations, has made

recommendations intended to reverse

this trend and reduce the amount of

Government property in the possession

of DoD contractors. These

recommendations are:

1. Under cost-reimbursement

contracts, DoD should cease taking title

automatically to contractor acquired or

fabricated equipment and tooling. DoD

should have the right to take title to all

special tooling and special test

equipment for which costs are allocated

to DoD contracts as direct costs, and

items of equipment having an

acquisition cost in excess of the DoD

internal property accountability

threshold (currently $2,500), the costs of

which are allocated as direct costs to

DoD contracts. This recommendation

will reduce contract performance costs

by removing low value equipment items

from the property control, management,

and disposal requirements in FAR Part

45. To implement this recommendation,

language creating a deviation to the

proposed FAR Part 45 rule appears in

this proposed DFARS rule at 252.216–

7002(c) and 252.245–7002(b)(2).

2. When a contractor that acquired or

fabricated equipment, special tooling, or

special test equipment to which DoD

has taken title needs that equipment,

special tooling, or special test

equipment to perform follow-on

contracts for the same items, DoD

should furnish the equipment, special

tooling, or special test equipment items

to the contractor on an ‘‘as is’’ basis. To

implement this recommendation,

language creating a deviation to the

proposed FAR Part 45 rule appears in

this proposed DFARS rule at 252.245–

7001(d)(2).

3. Property no longer needed for

performance of a particular contract

should be disposed of immediately if

not needed for future procurements and

placed under funded storage contracts if

the future need is not within 60 days

following the date the contractor

identifies the property as no longer

needed. This recommendation is

intended to expedite property disposal

and assure that contractors are paid for

storing Government property. To

implement this recommendation,

language creating a deviation to the

proposed FAR Part 45 rule appears in

this proposed DFARS rule at 245.101–

71.

B. Regulatory Flexibility Act

This proposed 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 the rule further reduces the

economic impact on small entities from

the estimated impact contained in the

proposed rule under FAR Case 95–013,

FAR Part 45, Government Property

Rewrite, by reducing the administrative

burden on contractors through

reduction of the amount of Government

property in the possession of

contractors. The impact is not

considered significant because the rule

applies only to those small entities that

request Government property to perform

a contract or create Government

property during contract performance,

and contract prices compensate such

contractors for their Government

property management activities. An

initial regulatory flexibility analysis has,

therefore, has not been performed.

Comments are invited from small

businesses and other interested parties.

Comments from small entities

concerning the affected DFARS subparts

also will be considered in accordance

with 5 U.S.C. 610. Such comments

should be submitted separately and

should cite DFARS Case 97–D027 in

correspondence.

C. Paperwork Reduction Act

This proposed rule reduces the

amount of property that will become

Government property under costreimbursement contracts. Therefore, the

paperwork burden approved under

Office of Management and Budget

Clearance No. 9000–0151 for the

proposed FAR rule published at 62 FR

30186 on June 2, 1997, is expected to be

reduced.

List of Subjects in 48 CFR Parts 216,

245, and 252

Government procurement.

Michele P. Peterson,

Executive Editor, Defense Acquisition

Regulations Council.

There, 48 CFR Parts 216, 245, and 252

are proposed to be amended as follows:

1. The authority citation for 48 CFR

Parts 216, 245, and 252 continues to

read as follows:

Auhority: 41 U.S.C. 421 and 48 CFR

Chapter 1.
Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules 54009

PART 216—TYPES OF CONTRACTS

2. Section 216.307 is added to read as

follows:

216.307 Contract clauses.

(a)(1) Use the clause at 252.216–7002,

allowable Cost and Payment, instead of

the clause at FAR 52.216—7, Allowable

Cost and Payment, in all costreimbursement contracts.

(2) Use the clause at 252.216–7002

with its Alternate I if the contract is a

construction contract that contains the

clause at FAR 52.232–27, Prompt

Payment for Construction Contracts.

PART 245—GOVERNMENT PROPERTY

3. Section 245.101, 245.101–70, and

245.101–71 are added to read as follows:

245.101 Policy.

(d) Contractors are expected to have

the means to perform DoD contracts.

Furnish property to contractors only

under the circumstances described in

FAR 45.201 and only for performance of

a specific contract or contracts.

245.101–70 Equipment, special tooling,

and special test equipment.

Items of equipment, special tooling, or

special test equipment that otherwise

may be furnished to contractors under

FAR 45.201 shall be furnished on an ‘‘as

is’’ basis to the contractor that acquired

or fabricated the items when that

contractor needs the items for

performance of follow-on contracts and

the Government took title to the items

under 252.245–7002, Right to Title—

Equipment, Special Tooling, and

Special Test Equipment.

245.101–71 Disposal and storage.

Immediately dispose of Government

furnished property that a contractor has

identified as no longer needed for

contract performance except when there

is a contractual requirement to furnish

that property as Government furnished

property under a follow-on contract.

Contract for the property’s storage when

the property owner has a known future

need for the property, a follow-on

contract(s) has not been awarded, and

the property will not be used within 60

days of the date upon which the

contractor identified the property as no

longer needed for contract performance.

4. Section 245.102 is added to read as

follows:

245.102 Contract clauses.

(a)(1) Use the clause at 252.245–7001,

Government Furnished Property,

instead of the clause at FAR 52.245–1,

Government Furnished Property (FixedPrice and Labor-Hour Contracts), in all

solicitations and contracts for supplies,

services, or research and development if

the Government anticipates furnishing

property for performance of the

contract.

(2) Use the clause at 252.245–7001

with its Alternate I in fixed-price

competitive contracts or competitive

labor-hour contracts.

(b)(i) Use the clause at 252.245–7002,

Right to Title—Equipment, special

Tooling, and Special Test Equipment,

instead of the clause at FAR 52.245–2,

Special Tooling and Special Test

Equipment—Right to Title (Fixed-Price

Contracts), in all solications and

contracts.

(ii) Use the clause at 252.245–7002

with its Alternate I in costreimbursement or time-and-materials

solicitations and contracts for basic or a

applied research to be conducted by

nonprofit organizations whose primary

purpose is the conduct of scientific

research on nonprofit in stitutions of

higher education (see FAR 35.014).

(c)(i) Use the clause at 252.245–7003,

Government Property Control, instead of

the clause at FAR 52.245–3,

Government Property Control, in all

solicitations and contracts that include

the clause at 252.245–7001.

(ii) Use the clause at 252.245–7003

with its Alternate I when the

Government will maintain the

Government’s official property records

(see FAR 45.302(b)).

(d) Use the clause at 252.245–7001,

Government Furnished Property,

instead of the clause at FAR 52.245–4,

Government Property (CostReimbursement and Time-and-Material

Contracts), in all solicitations and

contracts for supplies, services, or

research and development if the

Government anticipates furnishing

property for performance of the

contract.

245.505–14 [Removed]

5. Section 245.505–14 is removed.

PART 252—SOLICITATION

PROVISIONS AND CONTRACT

CLAUSES

6. Section 252.216–7002 is added to

read as follows:

252.216–7002 Allowable Cost and

Payment.

As prescribed in 216.307(a)(1), used

the following clause:

Allowable Cost and Payment (XXX 19XX)

(a) Invoicing. The Government shall make

payments to the Contractor when requested

as work progresses, but (except for small

business concerns) not more often than once

every 2 weeks, in amounts determined to be

allowable by the Contracting Officer in

accordance with Subpart 31.2 of the Federal

Acquisition Regulation (FAR) in effect on the

date of this contract and the terms of this

contract. The Contractor may submit to an

authorized representative of the Contracting

Officer, in such form and reasonable detail as

the representative may require, an invoice or

voucher supported by a statement of the

claimed allowable cost for performing this

contract.

(b) Reimbursing costs.

(1) For the purpose of reimbursing

allowable costs (except as provided in

paragraph (b)(2) of this clause, with respect

to pension, deferred profit sharing, and

employee stock ownership plan

contributions), the term ‘‘costs’’ includes

only—

(i) Those recorded costs that, at the time of

the request for reimbursement, the Contractor

has paid by cash, check, or other form of

actual payment for items or services

purchased directly for the contract;

(ii) When the Contractor is not delinquent

in paying costs of contract performance in

the ordinary course of business, costs

incurred, but not necessarily paid, for—

(A) Materials issued from the Contractor’s

inventory and placed in the production

process for use on the contract;

(B) Direct labor;

(C) Direct travel;

(D) Other direct in-house costs; and

(E) Properly allocable and allowable

indirect costs, as shown in the records

maintained by the Contractor for purposes of

obtaining reimbursement under Government

contracts; and

(iii) The amount of progress and other

payments that have been paid by cash, check,

or other form of payment to the Contractor’s

subcontractors under similar cost standards.

(2) Contractor contributions to any pension

or other post-retirement benefit, profitsharing, or employee stock ownership plan

funds that are paid quarterly or more often

may be included in indirect costs for

payment purposes; provided, that the

Contractor pays the contribution to the fund

within 30 days after the close of the period

covered. Payments made 30 days or more

after the close of a period shall not be

included until the Contractor actually makes

the payment. Accrued costs for such

contributions that are paid less often than

quarterly shall be excluded from indirect

costs for payment purposes until the

Contractor actually makes the payment.

(3) Notwithstanding the audit and

adjustment of invoices or vouchers under

paragraph (h) of this clause, allowable

indirect costs under this contract shall be

obtained by applying indirect cost rates

established in accordance with paragraph (e)

of this clause.

(4) Any statements in specifications or

other documents incorporated in this

contract by reference designating

performance of services or furnishing of

materials at the Contractor’s expense or at no

cost to the Government shall be disregarded

for purposes of cost reimbursement under

this clause.

(c) Title.

(1) Title to property acquired or fabricated

by the Contractor for performance of this
54010 Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules

contract, the costs of which are allocable to

this contract as direct costs, shall vest in the

Government. For property acquired or

produced prior to execution of this contract,

vestiture occurs upon execution of the

contract. Otherwise, vestiture occurs when

the property is or should have been allocable

or properly chargeable to this contract under

sound and generally accepted accounting

principles and practices. Except as provided

in the Right to Title—Equipment, Special

Tooling, and Special Test Equipment clause

of the contract, upon completion of deliveries

under a contract for supplies or upon

completion of effort required under a

contract for services, the Contractor shall

have title to all property acquired or

fabricated for this contract that is not

required to be delivered to the Government.

(2) Property to which the Government has

obtained title under this clause is not

‘‘Government furnished property.’’

(d) Small business concerns. A small

business concern may be paid more often

than every 2 weeks and may invoice and be

paid for recorded costs for items or services

purchased directly for the contract, even

though the concern has not yet paid for those

items or services.

(e) Final indirect cost rates.

(1) Final annual indirect cost rates and the

appropriate bases shall be established in

accordance with Subpart 42.7 of the FAR in

effect for the period covered by the indirect

cost rate proposal.

(2) The Contractor shall, within 90 days

after the expiration of each of its fiscal years,

or by a later date approved by the Contracting

Officer, submit to the cognizant Contracting

Officer responsible for negotiating its final

indirect cost rates and, if required by agency

procedures, to the cognizant audit activity,

proposed final indirect cost rates for that

period and supporting cost data specifying

the contract and/or subcontract to which the

rates apply. The proposed rates shall be

based on the Contractor’s actual cost

experience for that period. The appropriate

Government representative and the

Contractor shall establish the final indirect

cost rates as promptly as practical after

receipt of the Contractor’s proposal.

(3) The Contractor and the appropriate

Government representative shall execute a

written understanding setting forth the final

indirect cost rates. The understanding shall

specify (i) the agreed-upon final annual

indirect cost rates, (ii) the bases to which the

rates apply, (iii) the periods for which the

rates apply, (iv) any specific indirect cost

items treated as direct costs in the settlement,

and (v) the affected contract and/or

subcontract, identifying any with advance

agreements or special terms and the

applicable rates. The understanding shall not

change any monetary ceiling, contract

obligation, or specific cost allowance or

disallowance provided for in this contract.

The understanding is incorporated into this

contract upon execution.

(4) Within 120 days after settlement of the

final indirect cost rates covering the year in

which this contract is physically complete

(or longer, if approved in writing by the

Contracting Officer), the Contractor shall

submit a completion invoice or voucher to

reflect the settled amounts and rates.

(5) Failure by the parties to agree on a final

annual indirect cost rate shall be a dispute

within the meaning of the Disputes clause of

this contract.

(f) Billing rates. Until final annual indirect

cost rates are established for any period, the

Government shall reimburse the Contractor at

billing rates established by the Contracting

Officer or by an authorized representative

(the cognizant auditor), subject to adjustment

when the final rates are established. These

billing rates—(1) Shall be the anticipated

final rates; and (2) May be prospectively or

retroactively revised by mutual agreement, at

either party’s request, to prevent substantial

overpayment or underpayment.

(g) Quick-closeout procedures. Quickcloseout procedures are applicable when the

conditions in FAR 42.708(a) are satisfied.

(h) Audit. At any time or times before final

payment, the Contracting Officer may have

the Contractor’s invoices or vouchers and

statements of cost audited. Any payment may

be reduced by amounts found by the

Contracting Officer not to constitute

allowable costs or adjusted for prior

overpayments or underpayments.

(i) Final payment.

(1) Upon approval of a completion invoice

or voucher submitted by the Contractor in

accordance with paragraph (e)(4) of this

clause, and upon the Contractor’s compliance

with all terms of this contract, the

Government shall promptly pay any balance

of allowable costs and that part of the fee (if

any) not previously paid.

(2) The Contractor shall pay to the

Government any refunds, rebates, credits, or

other amounts (including interest, if any)

accruing to or received by the Contractor or

any assignee under this contract, to the

extent that those amounts are properly

allocable to costs for which the Contractor

has been reimbursed by the Government.

Reasonable expenses incurred by the

Contractor for securing refunds, rebates,

credits, or other amounts shall be allowable

costs if approved by the Contracting Officer.

Before final payment under this contract, the

Contractor and each assignee whose

assignment is in effect at the time of final

payment shall execute and deliver—

(i) An assignment to the Government, in

form and substance satisfactory to the

Contracting Officer, of refunds, rebates,

credits, or other amounts (including interest,

if any) properly allocable to costs for which

the Contractor has been reimbursed by the

Government under this contract; and

(ii) A release discharging the Government,

its officers, agents, and employees from all

liabilities, obligations, and claims arising out

of or under this contract, except—

(A) Specified claims stated in exact

amounts, or in estimated amounts when the

exact amounts are not known;

(B) Claims (including reasonable incidental

expenses) based upon liabilities of the

Contractor to third parties arising out of the

performance of this contract; provided, that

the claims are not known to the Contractor

on the date of the execution of the release,

and that the Contractor gives notice of the

claims in writing to the Contracting Officer

within 6 years following the release date or

notice of final payment date, whichever is

earlier; and

(C) Claims for reimbursement of costs,

including reasonable incidental expenses,

incurred by the Contractor under the patent

clauses of this contract, excluding, however,

any expenses arising from the Contractor’s

indemnification of the Government against

patent liability.

(End of clause)

ALTERNATE I (XXX 19XX). As prescribed

in 216.307(a)(2), substitute the following

paragraph (b)(1)(iii) for paragraph (b)(1)(iii) of

the basic clause:

(iii) The amount of progress and other

payments to the Contractor’s subcontractors

that either have been paid, or that the

Contractor is required to pay pursuant to the

Prompt Payment for Construction Contracts

clause of this contract. Payments shall be

made by cash, check, or other form of

payment to the Contractor’s subcontractors

under similar cost standards.

7. Section 252.245–7001 is revised to

read as follows:

252.245–7001 Government Furnished

Property.

As prescribed in 245.102(a) (1) and

(d), use the following clause:

Government Furnished Property (XXX 19XX)

(a) Definitions.

The terms defined in the Right to Title—

Equipment, Special Tooling, and Special Test

Equipment clause of this contract have the

same meaning in this clause.

(b) Property furnished for performance of

this contract.

(1) The Government furnished property

identified in this contract may be used for

performance of the contract on a rent-free

basis. The Contractor shall not use such

property on any other Government contracts

or for commercial purposes without the

Contracting Officer’s prior approval. Unless

otherwise permitted by law, commercial use

shall be on a rental basis. The terms and

conditions of the Rental Charges for

Commercial Use clause of this contract shall

apply to each rental.

(2) The Contractor shall not improve or

make structural alterations to real property

owned or leased by the Government and

made available for performance of this

contract unless expressly authorized to do so

in writing by the Contracting Officer. Title to

such improvements or alterations shall vest

in the Government if the property is

accountable under this contract or will be

determined by the terms of the contract

under which the real property is accountable.

(3) The Government retains title to

Government furnished property including

Government furnished property that is

incorporated into or attached to any property

it does not own. Government furnished

property does not become a fixture or lose its

identity as personal property by being

attached to real property.

(4) The Government shall, when requested

by the Contractor, provide information

reasonably required for the property’s

intended use to the extent the Government

has the right to release or disclose the

information.

(5) If the Contractor commingles Contractor

acquired or fabricated material with
Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules 54011

Government furnished material, the

provisions of paragraph (c) of this clause

regarding suitability for intended use shall

not apply to the commingled Government

furnished material. Notwithstanding any

other provision of this contract, the

Contractor shall be responsible for any failure

to comply with contract requirements

attributable to material that was commingled.

(c) Suitability for intended use.

The contract delivery or performance dates

are based upon the expectation that

Government furnished property will be

suitable for its intended use, except property

furnished ‘‘as is’’ (see paragraph (d) of this

clause), and delivered to the Contractor at the

times stated in the contract or, if not so

stated, in sufficient time to enable the

Contractor to meet the contract’s delivery or

performance dates.

(1) The Contractor shall notify the

Contracting Officer promptly following

receipt of Government furnished property

that is not suitable for its intended use and

take corrective action or dispose of the

property as directed by the Contracting

Officer. The contract shall be equitably

adjusted in accordance with paragraph (g) of

this clause.

(2) The Contractor may request an

equitable adjustment when Government

furnished property is not delivered to the

Contractor by the required time and such

untimely delivery has affected contract

performance. Any equitable adjustment shall

be made in accordance with paragraph (g) of

this clause.

(d) Property furnished as is.

(1) Offerors and the Contractor are

responsible for assuring that Government

property made available on an ‘‘as is’’ basis

is suitable for the offerors’ or Contractor’s

purposes. Such property is furnished f.o.b. at

the location specified in the solicitation or

contract. Any cost incurred by the Contractor

to transport, install, modify, repair, or

otherwise make such property suitable for

the Contractor’s intended use shall not result

in an increase in price or fee. Modifications

to property furnished ‘‘as is’’ require the

Contracting Officer’s prior written approval.

(2) Equipment, special tooling, or special

test equipment is furnished ‘‘as is’’ for

performance of this contract if the Contractor

acquired or fabricated, and the Government

took title to, such items under this or a prior

contract.

(3) The Government makes no warranty

whatsoever with respect to property

furnished ‘‘as is’’ except that the property

will be in the same condition when placed

at the specified f.o.b. location as when

inspected by the Contractor or, if not

inspected by the Contractor, as of the last

date identified in the solicitation or contract

for Contractor inspection. The Contractor is

responsible for verifying that the property’s

condition has not changed during that

period. If the Contractor determines the

property’s condition has changed and such

change will adversely affect the Contractor,

the Contractor shall immediately notify the

Contracting Officer and identify the changed

condition. If the Contracting Officer concurs

that the property’s condition has changed,

the Contracting Officer may restore the

property or substitute other Government

property at no change in price or fee; permit

the Contractor to restore the property subject

to an equitable adjustment; or decline to

furnish the property subject to an equitable

adjustment. The foregoing provisions for

adjustment are the exclusive remedies

available to the Contractor. The Government

has no liability for changes in the property’s

condition discovered after removal from the

specified f.o.b. location.

(4) Repairs to or modifications of property

furnished ‘‘as is’’ do not affect the

Government’s title to such property.

(e) Changes in Government furnished

property.

(1) The Contracting Officer may increase,

decrease, or substitute other Government

property for the property furnished or to be

furnished for performance of this contract or

require use of Government furnished

property in lieu of Contractor property.

(2) Except as provided in paragraph (e)(4)

of this clause, any increase in the amount of

property furnished for performance of this

contract shall result in an equitable reduction

in price or fee, and an appropriate

adjustment of the contract delivery or

performance dates.

(3) The Contractor may request an

equitable adjustment in accordance with

paragraph (g) of this clause for a decrease in

or substitution for the property identified in

the contract or withdrawal of authority to use

property accountable under another contract

in performance of this contract, provided

such decrease, substitution, or withdrawal

increases the costs of contract performance.

(4) If the Contracting Officer directs the

Contractor to use Government furnished

property in lieu of Contractor property in

performance of this contract, any adjustment

to the contract shall be made in accordance

with the Changes clause of this contract.

(f) Limited risk of loss.

(1) The Contractor’s liability for loss, theft,

or destruction of, or damage to, Government

furnished property accountable under this

contract shall be limited if the Contractor

maintains a property control system that

satisfies the requirements of the Government

Property Control clause of this contract

(hereinafter referred to as an approved

system).

(2) When the Contractor maintains an

approved system, the Contractor shall not be

liable for loss, theft, or destruction of, or

damage to, Government property accountable

under this contract except loss, theft,

destruction, or damage for which the

Contractor is expressly responsible under the

terms of this contract or loss, theft,

destruction, or damage that results from—

(i) A risk expressly required to be insured

under this contract but only to the extent of

the insurance required to be purchased and

maintained, or to the extent of insurance

actually purchased and maintained,

whichever is greater;

(ii) A risk that is in fact covered by

insurance or for which the Contractor is

otherwise reimbursed, but only to the extent

of such insurance or reimbursement; or

(iii) Willful misconduct or lack of good

faith on the part of the Contractor’s

managerial personnel.

(3) Following notice from the

Government’s property administrator to one

of the Contractor’s managerial personnel that

the Contractor’s or a subcontractor’s property

control system is not in compliance with the

requirements of the Government Property

Control clause of this contract, the

Contractor’s failure to correct its system or to

have a subcontractor’s system corrected

within the dates specified by the

Government’s property administrator, or

such other mutually agreed dates, shall be

considered willful misconduct or lack of

good faith on the part of the Contractor’s

managerial personnel. The Contractor shall

be liable for any loss, theft, or destruction of,

or damage to, the Government furnished

property accountable under this contract

except such loss, theft, destruction, or

damage that the Contractor can establish by

clear and convincing evidence—

(i) Did not result from the Contractor’s

failure to maintain an approved system; or

(ii) Occurred while an approved system

was maintained by the Contractor.

(4) Except as provided in paragraphs (f)(3)

(i) and (ii) of this clause, the Contractor shall

be liable for loss, theft, or destruction of, or

damage to, Government furnished property

accountable under this contract immediately

upon notice by certified mail that the

Government has withdrawn approval of the

Contractor’s property control system.

(5) The Contractor is not liable for

Government furnished property properly

consumed in performing this contract. The

Contractor shall have no liability for loss,

theft, or destruction of, or damage to,

Government property furnished for

performance of services entirely on real

property owned or leased by the Government

when the Contractor does not control the use

of, or access to, such property.

(6) The Contractor’s transfer of Government

furnished property to the possession and

control of a subcontractor, does not affect the

Contractor’s liability for loss, theft, or

destruction of, or damage to, that property.

(7) Except as provided in paragraph (f)(8)

of this clause, the Contractor shall notify the

Government’s property administrator in

writing promptly following the loss, theft, or

destruction of, or damage to, Government

furnished property. Such notice shall

identify—

(i) Lost, stolen, destroyed, or damaged

Government property by description,

contract number, national stock number (if

known), and either part number or

identification number;

(ii) The date a loss or theft was discovered

or damage or destruction occurred and, if

known, the circumstances;

(iii) Each property item’s acquisition cost;

(iv) The contracts affected;

(v) All known interests in commingled

property of which Government furnished

property is a part; and

(vi) The insurance, if any, covering any

part of or interest in such commingled

property.

(8) The Contractor is not required to

provide notice of loss, theft, or destruction of,

or damage to, low value property that the

Contractor does not need for continued

performance of this contract until contract
54012 Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules

completion or termination. Such notice shall

include the information required by

paragraph (f)(7) of this clause.

(9) The Contractor shall take all reasonable

action to protect damaged Government

furnished property from further damage and

to physically separate such property from all

other property.

(10) The Contractor shall repair, renovate,

or take such other action with respect to lost,

stolen, damaged, or destroyed Government

furnished property as the Contracting Officer

directs and adjust the property records

accordingly. When such repair, renovation,

or action is not the Contractor’s

responsibility under this contract, the

Contractor shall be entitled to an equitable

adjustment in accordance with paragraph (g)

of this clause. Contractor-responsible repairs

to, or replacement of, Government furnished

property shall be accomplished at no change

price or fee.

(11) The Contractor shall not include in the

price or fee of this contract any charge or

reserve for insurance (including any selfinsurance fund or reserve) covering loss,

theft, or destruction of, or damage to,

Government furnished property except to the

extent the Government might have expressly

required the Contractor to carry such

insurance under another provision of this

contract.

(12) If the Contractor is reimbursed or

otherwise compensated for any loss, theft, or

destruction of, or damage to, Government

furnished property, the Contractor shall use

the proceeds to repair, renovate, or replace

such property or equitably reimburse the

Government, as directed by the Contracting

Officer, and adjust the property records

accordingly.

(13) The Contractor shall do nothing to

prejudice the Government’s rights to recover

against third parties for any loss, theft, or

destruction of, or damage to, Government

furnished property. When requested by the

Contracting Officer, the Contractor shall, at

Government expense, furnish to the

Government all reasonable assistance and

cooperation (including the prosecution of

suit and the execution of instruments of

assignment in favor of the Government) in

obtaining recovery.

(g) Equitable adjustments. (1) Equitable

adjustments shall be the Contractor’s

exclusive remedy for Government actions

under this clause and shall be made in

accordance with the procedures of the

Changes clause of this contract. The

Government shall not be liable to suit for

breach of contract for—

(i) Any delay in delivery of Government

furnished property;

(ii) Delivery of Government furnished

property in a condition not suitable for its

intended use;

(iii) An increase or decrease in, or

substitution of, Government furnished

property; or

(iv) Failure to repair or replace

Government furnished property when the

Government is responsible for repair or

replacement.

(2) An equitable adjustment for

Government furnished property that is not in

a condition suitable for intended use or the

withdrawal or substitution of Government

furnished property may include an amount

for the restoration and rehabilitation of the

Contractor’s premises caused by such

condition, withdrawal, or substitution.

(h) Maintenance responsibilities. (1) The

Contractor is responsible for the maintenance

of Government furnished property

accountable under this contract, including

such property stored at a Contractor managed

site. The Contractor shall perform all

maintenance, including preventive

maintenance, necessary to assure that

Government furnished property remains

suitable for its intended use unless the

Contracting Officer specifically relieves the

Contractor of its maintenance responsibility

for a particular item or class of items. If

routine and preventive maintenance are not

sufficient to sustain a property item’s

suitability for intended use, the Contractor

shall notify the Contracting Officer promptly

and request direction regarding repair or

replacement.

(2) The Contractor shall notify promptly

the Government’s property administrator of

the need for any replacement of, or major

repair or rehabilitation to, Government

furnished property discovered during its

maintenance activities and shall not effect

such repair, replacement, or rehabilitation

unless authorized to do so by the Contracting

Officer.

(i) Return of Government furnished

property. If this contract requires

Government furnished property to be

returned directly to the Government and not

entered into the property disposal process—

(1) The Contractor shall notify the Contract

Administration Office of its intent to return

such property at least 10 working days prior

to return. Notices shall identify the contracts

under which the items are accountable and

provide each item’s name, description, and

national stock number, if known, or part

number or identification number.

(2) The property shall be returned to the

Government in a condition suitable for its

intended use except—

(i) Lost, stolen, or destroyed property that

the Government has determined will not be

replaced;

(ii) Damaged property that the Government

has determined will not be repaired;

(iii) Property consumed in performance of

this contract;

(iv) Property attached to, incorporated into,

or delivered with, a deliverable end item; or

(v) Property furnished ‘‘as is’’ shall be

returned in equal or better condition than

when furnished to the Contractor.

(j) Disposal of Government furnished

property.—(1) Inventory disposal schedules.

Except as provided in paragraph (i) or (j)(2)

of this clause, the Contractor shall identify

Government furnished property no longer

required for performance of this contract

using Standard Form 1428, Inventory

Disposal Schedule. Unless the plant

clearance officer has agreed to a different

submission basis, or the contract requires

inventory disposal schedules to be submitted

electronically, the Contractor shall prepare

separate inventory disposal schedules for:

special test equipment with general purpose

components; special test equipment that does

not contain general purpose components;

printing equipment; automatic data

processing equipment; nonnuclear hazardous

materials; and nuclear materials. Property

with the same description, condition code,

and reporting location may be grouped in a

single line item. Special test equipment shall

be described in sufficient detail to permit an

understanding of the special test equipment’s

intended use. The Contractor may annotate

the schedule to identify test equipment the

Contractor wishes to purchase from the

Government or general purpose components

thereof the Contractor wishes to purchase or

use in the performance of other Government

contracts.

(2) Scrap Lists. Contractors that have

Government approved scrap procedures may

prepare scrap lists (provided such lists are

consistent with the approved scrap

procedures) in lieu of inventory disposal

schedules except for scrap that—

(i) Requires demilitarization;

(ii) Is a classified item;

(iii) Is generated from classified items;

(iv) Contains hazardous materials; or

(v) Is dangerous to the public health,

safety, or welfare.

(3) Corrections. If the plant clearance

officer finds that property identified on an

inventory disposal schedule or scrap list is

not accountable under this contract or is not

in the quantity or condition indicated on the

inventory disposal schedule or scrap list, the

plant clearance officer may require the

Contractor to correct the inventory disposal

schedule or scrap list, may reject such

schedules or lists at any time, or may require

submission of an inventory control schedule

in lieu of a scrap list.

(4) Submission requirements. Inventory

disposal schedules or scrap lists shall be

submitted to the plant clearance officer for

approval no later than—

(i) 30 days following the Contractor’s

determination that a Government furnished

property item is no longer required for

performance of the contract;

(ii) 60 days following completion of

contract deliveries or performance or such

longer period as may be approved by the

plant clearance officer; or

(iii) 120 days following contract

termination in whole or in part or such

longer period as may be approved by the

Contracting Officer.

(5) Inventory schedule adjustments. The

Contractor shall provide the plant clearance

officer at least 10 working days advance

written notice of its intent to remove a

Government furnished property item,

including an item identified as scrap, from an

approved inventory disposal schedule.

Unless the plant clearance officer objects to

the intended schedule adjustment within the

notice period, the Contractor may make the

adjustment upon expiration of the notice

period.

(6) Storage. The Contractor shall store the

Government furnished property identified in

an inventory disposal schedule pending

receipt of disposal instructions. If the

Government fails to provide disposal

instructions within 120 days following

receipt of an acceptable inventory disposal

schedule, the Contractor might be entitled to
Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules 54013

an equitable adjustment for costs incurred to

store such property on or after the 121st day

following receipt of an acceptable schedule.

(7) Disposal. Except as provided in

paragraph (j)(7)(i) of this clause, Government

furnished property shall not be disposed of

until the Contractor has been authorized to

do so by the plant clearance officer.

(i) If the Government does not provide

disposition instructions to the Contractor

within 60 days following receipt of an

acceptable scrap list, the Contractor may

dispose of the listed scrap.

(ii) The Contractor shall prepare for

shipment, deliver f.o.b. origin, or dispose of

Government furnished property as directed

by the plant clearance officer. The Contractor

shall remove and destroy any markings

identifying the property as Government

property when the plant clearance officer

directs disposal by sale or donation, notifies

the Contractor that the Government has

abandoned the property, or directs the

Contractor to scrap the property.

(iii) The net proceeds from a disposal

action of scrapped Government furnished

property shall be credited to the contract

under which the Government furnished

property was accountable or, when scrapped

Government furnished property cannot be

segregated from other scrap, to an

appropriate overhead account. The

Contractor shall credit the net proceeds or

other disposal actions in accordance with

instructions provided by the plant clearance

officer.

(iv) The Contracting Officer may require

the Contractor to demilitarize the property

prior to shipment or disposal. Any

adjustment in contract price incident to the

Contracting Officer’s direction to demilitarize

Government furnished property shall be

made in accordance with paragraph (g) of

this clause.

(8) Contractor removal of property. The

Contractor must obtain the plant clearance

officer’s approval to remove Government

furnished property from its premises prior to

receipt of final disposition instructions. If

approval is granted, the Contractor shall

transport and store the property at no change

in price or fee. The storage facility must be

appropriate for assuring the property’s

physical safety and suitability for use.

Approval does not relieve the Contractor of

liability for loss, theft, or destruction of, or

damage to, such property.

(9) Subcontractor inventory disposal

schedules. When the Contractor permits a

subcontractor or supplier to use, at a

subcontractor or supplier managed site,

Government property furnished to the

Contractor for performance of this contract,

the Contractor shall require the subcontractor

or supplier to submit inventory disposal

schedules or scrap lists to the Contractor in

sufficient time for the Contractor to comply

with the requirements of paragraph (j)(4) of

this clause.

(k) Abandonment and restoration of

Contractor’s premises. (1) The Government

shall not abandon Government furnished

property that is or contains a hazardous

material at a Contractor-owned location

without the Contractor’s written concurrence.

The Contractor may request an equitable

adjustment incident to such agreement.

(2) The Government, upon notice to the

Contractor, may abandon any nonhazardous

Government property in place at which time

all obligations of the Government regarding

such abandoned property shall cease. The

Government has no obligation to restore or

rehabilitate the Contractor’s premises under

any circumstances and, except as provided in

paragraphs (g)(2) and (k)(1) of this clause, has

no liability for such restoration or

rehabilitation.

(l) Overseas contracts. In a contract

performed outside the United States, its

territories, or possessions, the words

‘‘Government’’ and ‘‘Government furnished,’’

as used in this clause, mean ‘‘United States

Government’’ and ‘‘United States

Government furnished,’’ respectively.

(End of clause)

Alternate I (XXX 19XX). As prescribed in

245.102(a)(2), substitute the following

paragraph (f) for paragraph (f) of the basic

clause:

(f) Risk of loss.

(1) Except as provided in paragraph (f)(3)

of this clause, the Contractor is liable for any

loss, theft, or destruction of, or damage to,

Government furnished property accountable

under this contract.

(2) Contractor-responsible repairs to, or

replacements of, Government furnished

property shall be accomplished at no change

in price or fee.

(3) The Contractor is not liable for—

(i) Government furnished property

properly consumed in performing this

contract; or

(ii) Loss, theft, or destruction of, or damage

to, Government furnished property when the

Contractor is providing services performed

entirely on real property owned or leased by

the Government and the Contractor does not

control the use of, or access to, the

Government furnished property.

(4) Except as provided in paragraph (f)(5)

of this clause, the Contractor shall notify the

Government’s property administrator in

writing promptly following the loss, theft, or

destruction of, or damage to, Government

furnished property. Such notice shall

identify—

(i) Lost, stolen, destroyed, or damaged

Government property by description,

contract number, national stock number (if

known), and either part number or

identification number;

(ii) The date a loss or theft was discovered

or damage or destruction occurred and, if

known, the circumstances;

(iii) Each property item’s acquisition cost;

(iv) The contracts affected;

(v) All known interests in commingled

property of which the Government property

is a part; and

(vi) The insurance, if any, covering any

part of or interest in such commingled

property.

(5) The Contractor is not required to

provide notice of loss, theft, or destruction of,

or damage to, low value property that the

Contractor does not need for continued

performance of this contract until contract

completion or termination. Such notice shall

include the contract number and each such

property item’s acquisition cost, description,

national stock number (if known), and either

its part number or identification number.

(6) The Contractor shall take all reasonable

action to protect damaged Government

furnished property from further damage and

to physically separate such property from all

other property.

(7) The Contracting Officer may replace,

direct the Contractor to repair or replace, or

direct the Contractor to take other

appropriate action regarding lost, stolen,

damaged, or destroyed Government

furnished property for which the

Government has specifically assumed such

risks in this contract. When lost, damaged,

stolen, or destroyed Government furnished

property is replaced by the Government or

the Contractor, the replacement property

shall be entered into the property control

system as a Government furnished property

item. Any equitable adjustment incident to

such direction shall be determined in

accordance with paragraph (g) of this clause.

8. Section 252.245–7002 is added to

read as follows:

252.245–7002 Right to Title—Equipment,

Special Tooling, and Special Test

Equipment.

As prescribed in 245.102(b)(i), use the

following clause:

Right to Title—Equipment, Special Tooling,

and Special Test Equipment (XXX 19XX)

(a) Definitions.

As used in this clause—

‘‘Contractor’s managerial personnel’’

means the Contractor’s directors, officers,

and any of the Contractor’s managers,

superintendents, or equivalent

representatives who have supervision or

direction of all or substantially all of the

Contractor’s business; or operations at a site

connected with performance of this contract.

‘‘Equipment’’ means items whose use is

not limited to, or with only minor

modification would be limited to, the

development, production, or maintenance of

a particular item or the performance of a

particular service. The term includes, but is

not limited to, automatic data processing

equipment, office equipment, construction

equipment, hand tools, machine tools (other

than special tooling), test equipment (other

than special test equipment or components

thereof), furniture, and vehicles.

‘‘Government property’’ means property

the Government owns or leases.

‘‘Government furnished property’’ means

property provided by the Government to a

contractor for performance of a contract.

‘‘Low value property’’ means equipment,

special tooling, or special test equipment that

has an acquisition cost of $2,500 or less and

is not sensitive property.

‘‘Material’’ means property to be consumed

or expended to perform a service or produce

a deliverable end item and property

incorporated into or attached to an end item.

The term includes assemblies, components,

parts, raw and processed materials, and

supplies that may be consumed in normal

use in performing a contract. It does not

include equipment, real property, special test

equipment, special tooling, or unique Federal

property.

‘‘Nonprofit organization’’ means a business

entity organized and operated exclusively for
54014 Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules

charitable, scientific, or educational

purposes, the net earnings of which do not

inure to the benefit of any private

shareholder or individual, that is exempt

from Federal income taxation under section

501 of the Internal Revenue Code and does

not conduct a substantial portion of its

activities carrying on propaganda or

otherwise attempting to influence legislation

or participating in any political campaign on

behalf of any candidate for public office.

‘‘Personal property’’ means property of any

kind or interest in it except real property,

battleships, cruisers, aircraft carriers,

destroyers, submarines, and records of the

Government.

‘‘Plant clearance officer’’ means a person

appointed to perform plant clearance

functions.

‘‘Precious metals’’ means silver, gold,

platinum, palladium, iridium, osmium,

rhodium, and ruthenium.

‘‘Preventive maintenance’’ means regularly

scheduled maintenance performed to sustain

suitability for intended use and detect and

correct minor deficiencies before they result

in serious consequences.

‘‘Property’’ means real and personal

property.

‘‘Property administrator’’ means a person

appointed to perform Government property

administration.

‘‘Real property’’ means land and rights in

land, ground improvements, utility

distribution systems, and buildings and other

structures. It does not include foundations

and other work necessary for installing

special tooling, special test equipment, or

equipment.

‘‘Scrap’’ means personal property that has

no value except its basic metallic, mineral, or

organic content.

‘‘Sensitive property’’ means property

potentially dangerous to the public safety or

security if stolen, lost, or misplaced, or that

must be subject to exceptional physical

security, protection, control, and

accountability such as classified property,

weapons, ammunition, explosives, controlled

substances, radioactive materials, hazardous

materials or wastes, or precious metals.

‘‘Special test equipment’’ means a test unit

or units designed, fabricated, or modified to

accomplish special purpose testing,

groupings of such items, that are

interconnected and interdependent so as to

become a new functional entity.,

‘‘Special tooling’’ means items, such as

jigs, dies, fixtures, molds, patterns, taps,

gauges, or other equipment and

manufacturing aids, that are of such a

specialized nature that without substantial

modification or alteration their use is limited

to the development, production, repair, or

maintenance of particular supplies or

components thereof, or to the performance of

particular services.

‘‘Unique Federal property’’ means

Government owned personal property, or

components thereof, that is specially

designed to perform or support the mission

of one or more Federal agencies and is not

available to the public.

‘‘Work in process’’ means bench stock

materials, complete or incomplete fabricated

parts, subassemblies, assemblies, and similar

items that are created during production of

deliverable end items or are required to

construct special tooling or special test

equipment needed to produce deliverable

end items.

(b) Right to title.—(1) Fixed-price contracts.

The Government has the right, at no change

in contract price, to take title to each special

tooling or special test equipment item

acquired or fabricated by the Contractor that

is not required to be delivered under this

contract if the item’s cost is allocable to this

contract as a direct cost.

(2) Cost-reimbursement contracts. The

Government has the right, at no change in

cost or fee, to take title to each—

(i) Special tooling or special test equipment

item acquired or fabricated by the Contractor

that is not required to be delivered under this

contract if the item’s cost is allocable to this

contract as a direct cost.

(ii) Item of equipment acquired or

fabricated by the Contractor that is not

required to be delivered under this contract

if the item’s cost is greater than $2,500 and

is allocable to this contract as a direct cost.

(3) Expiration. The Government’s rights in

paragraphs (b)(1) and (b)(2) of this clause end

upon expiration of the time period in

paragraph (e) of this clause.

(c) Reports. (1) The Contractor shall submit

to the Contracting Officer a report identifying

right to title items as soon as practicable

during contract performance but not later

than the earlier of—

(i) 90 days prior to completion of

scheduled deliveries (other than technical

data) under this contract; or

(ii) 30 days following the Contractor’s

determination that a right to title item is no

longer required for contract performance.

For each right to title item or groups of

identical items, the reports shall identify the

item’s or group’s—

(i) Nomenclature;

(ii) Quantity;

(iii) Acquisition cost;

(iv) Contract number;

(v) Part number(s) made or tested; and

(vi) Identification number.

(d) Storage. The Contractor shall store each

right to title item identified in a report

required by paragraph (c) of this clause at no

increase in fee or price. The Contractor’s

storage obligations for a right to title item end

when the Government notifies the Contractor

that it has taken title to that item or upon

expiration of the Government notice period.

Items shall be stored in a manner sufficient

to preserve capability and provide protection

from damage. If the Government requires

items to be stored subsequent to the

Government’s assumption of title, the

Contractor might be entitled to an equitable

adjustment as provided in paragraph (g) of

this clause.

(e) Assumption of title. (1) The

Government must notify the Contractor that

it is taking title to an item or items within

120 days, or such other period mutually

agreed upon, following receipt of a report

required by paragraph (c) of this clause or

other written notice from the Contractor

identifying the item or items as no longer

required for performance of this contract.

(2) The Government’s notice shall be in

writing, shall identify the item(s), and may,

in any combination—

(i) Provide packing, packaging, marking,

and shipping instructions;

(ii) Direct the Contractor to prepare the

property for storage at the Contractor’s

facility or a Government facility; or

(iii) Provide instructions when

accountability is to be transferred to another

contract.

(3) The Contractor’s storage obligations are

not diminished if the Government notice

period, or any extension thereof, extends

beyond the date contract deliveries are

completed.

(f) Marking. The Contractor shall legibly

and conspicuously mark property to which

the Government has taken title under this

contract with the phrase ‘‘U.S. Government

Property’’ (or a similar phrase that conveys

Government ownership), as soon as

practicable following the Government’s

assumption of title.

(g) Price adjustment. The cost and fee of a

cost-reimbursement contract or the price of a

fixed-price contract may be equitably

adjusted for costs incurred by the Contractor

to store, prepare for storage, package, pack,

or mark for shipment, the equipment, special

tooling, or special test equipment to which

the Government has taken title. Any

adjustment shall be made in accordance with

the procedures of the Changes clause of this

contract and only to the extent the

Contracting Officer’s actions under paragraph

(e) of this clause required the Contractor to

incur costs that it would not have incurred

under customary commercial practices.

(h) Risk of loss. The Contractor is

responsible for any loss, theft, or destruction

of, or damage to, right to title items during

the period commencing upon the

Government’s delivery of the notice required

by paragraph (e) of this clause and ending

upon placement aboard a carrier’s

conveyance (f.o.b. origin) or delivery at the

specified f.o.b. destination point.

(i) Flow down. The Contractor shall insert

this or a substantially similar clause in all

contracts and similar instruments with its

first-tier subcontractors or suppliers, other

than subcontractors or suppliers of

commercial items, that will fabricate or

acquire equipment, special tooling, or special

test equipment for performance of this

contract.

(End of clause)

ALTERNATE I (XXX 19XX). As prescribed

in 245.102(b)(ii), substitute the following

paragraph (b) for paragraph (b) of the basic

clause:

(b) Right to title—(1) General. The

Government has the right, at no change in

cost or fee, to take title to each—

(i) Special tooling or special test equipment

item acquired or fabricated by the Contractor

that is not required to be delivered under this

contract if the item’s cost is allocable to this

contract as a direct cost.

(ii) Item of equipment acquired or

fabricated by the Contractor that is not

required to be delivered under this contract

if the item’s cost is greater than $2,500 and

is allocable to this contract as a direct cost.

(2) Expiration. Except as provided in

paragraph (b)(3) of this clause, the
Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules 54015

Government’s rights in paragraphs (b)(1)(i)

and (b)(1)(ii) of this clause end upon

expiration of the time period in paragraph (e)

of this clause.

(3) Relinquishment of rights. Prior to

purchasing equipment, special tooling, or

special test equipment with Government

funds provided for the conduct of basic or

applied research, nonprofit organizations

whose primary purpose is the conduct of

scientific research or nonprofit institutions of

higher education (see FAR 35.014) may

request the Contracting Officer to relinquish

the Government’s right to take title of such

items. If the Contracting Officer agrees, prior

to purchase, the Contractor shall have title to

each such item having an acquisition cost

less than $5,000. The Contractor shall furnish

the Contracting Officer a list of all purchased

property to which the Government has

relinquished right to title within 10 days

following the end of the calendar quarter

during which the Contractor receives the

property. The Contractor agrees that it will

not allocate depreciation or amortization

costs for such property to any existing or

future Government contract and such

property may be used by the Government or

its subcontractors without charge in

performance of any Government contract or

subcontract thereunder. As a condition for

the Government’s relinquishing its rights to

title under this clause, the Contractor, by

signing this contract, agrees that—

No person in the United States shall, on

the ground of race, color, or national origin,

be excluded from participation in, be denied

the benefits of, or be otherwise subjected to

discrimination (42 U.S.C. 2000d) under this

contemplated financial assistance (title to

equipment, special tooling or special test

equipment).

9. Section 252.245–7003 is added to

read as follows:

252.245–7003 Government Property

Control.

As prescribed in 245.102(c)(i), use the

following clause:

Government Property Control (XXX 19XX)

(a) Definitions. The terms defined in the

Right to Title—Equipment, Special Tooling,

and Special Test Equipment clause of this

contract have the same meaning in this

clause.

(b) General. (1) This clause is applicable to

Government furnished property and

Government property stored by the

Contractor at the Government’s direction

including property to which the Government

has taken title under the Right to Title—

Equipment, Special Tooling, and Special Test

Equipment clause of this contract. It does not

apply to property in which title is vested in

the Government solely as a result of the

financing provisions of this contract.

(2) The Contractor is responsible for the

maintenance, protection, and preservation of

Government property in its or its

subcontractors’ possession. The Contractor

shall account for such property as required

by this contract.

(3) If the Contractor does not have a

property control system that is approved by

the Government’s property administrator, it

shall establish a system that satisfies the

requirements of this clause within 90 days

following contract award (or such other

mutually agreeable period). Notwithstanding

any other provision of this contract regarding

liability for loss, theft, or destruction of, or

damage to, Government property in the

Contractor’s or its subcontractors’ possession,

the Contractor shall be liable for such loss,

theft, destruction, or damage until its system

is approved by the Government’s property

administrator. The Contractor shall maintain

its system during the period Government

property is in its or its subcontractors’

possession.

(4) The Contractor should use its existing

property control system or a modification

thereof when the existing or modified system

satisfies the requirements of this clause.

(c) Control system requirements. The

property control system shall include written

processes for—

(1) Assessing the system’s efficiency and

effectiveness, recommending corrective

action or general improvements, and

implementing appropriate changes;

(2) Obtaining approval of property actions

from the responsible Government

representative no later than the time

specified in this contract (when such

approval is required by this contract) and

appropriately documenting such approval;

(3) Inspecting property acquired by the

Contractor or furnished by the Government

for performance of this contract upon receipt;

(4) Identifying Government property

received by the Contractor that was intended

for other persons or discrepancies between

the type, quantity, or condition of

Government furnished property shipped to

and actually received by the Contractor and

initiating corrective action;

(5) Promptly entering all Government

property into the property control system;

(6) Ensuring that Government property is

properly classified (see paragraph (f)(2)(viii)

of this clause);

(7) Ensuring that Government property’s

used only as authorized by the Contracting

Officer;

(8) Controlling the distribution and return

of pilferable property;

(9) Scheduling and monitoring

Government property maintenance to ensure

timely performance and recording of all

maintenance actions;

(10) Accurately recording by type and

quantity Government furnished material

consumed during contract performance;

(11) Performing, reporting, and recording

all inventories required by this contract;

(12) Identifying and reporting lost,

damaged, or destroyed Government property

and generating corrective action

recommendations;

(13) Maintaining special security for

classified or sensitive property

commensurate with the property’s security

classification, special handling requirements,

or both;

(14) Accurately preparing and timely

submitting the records and reports required

by this contract;

(15) Ensuring the subcontractors have

adequate procedures for the control and

protection of Government property;

(16) Justifying the continued need for

Government property to perform this

contract;

(17) Moving and storing Government

property in a manner commensurate with the

property’s handling and storage

requirements; and

(18) Disposing of Government property in

accordance with the requirements of this

contract.

(d) Access. The Government shall have

access, at all reasonable times, to the

premises at which any Government property

is located and to the Contractor’s

Government property records and supporting

information.

(e) Property control system submission,

review, and approval. (1) Except as provided

in paragraph (e)(2) of this clause, offerors

shall submit their written property control

systems and processes with their offer if—

(i) The offeror does not have an existing

property control system or its existing system

has not been approved by a Government

property administrator;

(ii) The offeror’s property control system

last was approved, or approval validated,

more than 2 years prior to the date of its

offer;

(iii) A Government property administrator

has requested corrections to the offeror’s

system or procedures and such corrections

have not been made; or

(iv) Approval of the system has been

withdrawn.

(2) The submission requirements in

paragraph (e)(1) of this clause do not apply

to offerors that have a Government property

system that has been approved or validated

by the Government no more than 2 years

prior to the time for submission offers. Such

offerors are required only to submit to the

Government’s property administrator, within

90 days following contract award, changes

required to conform the system with

requirements in this contract. The

submission date may be extended by the

Government’s property administrator if the

property administrator determines that an

extension is warranted.

(3) The Government’s property

administrator shall review the Contractor’s

system for conformance with contract

requirements and approve or require

corrections to the system and its

implementing procedures. The Contractor

shall accomplish the required corrections at

no change in price or fee.

(4) The Government may review the

Contractor’s previously approved system or

require the Contractor to review a

subcontractor’s system to assure compliance

with contract requirements. The

Government’s property administrator may

validate approval of, require corrections to,

or with the Administrative Contracting

Officer’s concurrence, withdraw approval of

the Contractor’s system or require the

Contractor to have a subcontractor’s system

corrected. The Contractor shall implement

corrections required by the Government’s

property administrator by the date specified

by the property administrator or such other

date agreed upon at no change in price or fee.

The Contractor’s failure to implement

corrections in a timely manner might result

in the system’s approval being withdrawn.
54016 Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules

(5) The Contractor shall make available to

the Government’s property administrator all

records and related information reasonably

required to verify that the Contractor’s or a

subcontractor’s property control system

conforms to contract requirements. Any

disagreement as to the amount or type of

information required for such verification

shall be referred to the Administrative

Contracting Officer for resolution.

(f) Property records and supporting

information—(1) General. (i) The Contractor

shall establish or maintain a property record

that is current and complete for each

Government property item in its or its

subcontractors’ possession. Identical items

may be consolidated in a single property

record if the consolidated record provides the

information required by this clause. The

Contractor shall identify useable components

permanently removed from Government

property as Governmental property items,

enter such items into its property control

system, and establish and maintain

appropriate property records. Property

records created by a subcontractor that has an

approved property system may be used in

lieu of creating new records.

(ii) If the Contractor has an approved

property control system, its documents

evidencing receipt and issue shall be the

property control records for Government

material issued for immediate consumption.

(iii) When the Government is responsible

for the replacement of a property item under

this contract and has elected—

(A) To replace or have the Contractor

replace the item, the Contractor shall

annotate appropriately the property record

for the item being replaced, close that record,

and create a new property record for the

replacement item; or

(B) Not to replace or have the Contractor

replace the item, the Contractor shall close

the property record for that item.

(iv) The Government shall provide the

acquisition cost for Government furnished

property within 30 days following delivery of

the property to the Contractor. The

Contractor shall notify the Government’s

property administrator promptly if the

acquisition cost information is not received

within the period.

(v) Property records are not required for

work in process.

(2) Standard information. Each property

control record shall contain the following

information.

(i) The item’s name, description, and

national stock number (if the item has a

national stock number). The national stock

number for property controlled by

documents evidencing that receipt and issue

is not required until property disposal.

(ii) Contract number or equivalent code

designation.

(iii) Quantity received, issued, and on

hand.

(iv) The date of the most recent physical

inventory or other posting reference.

(v) Acquisition cost.

(vi) Current location (for low value

property, identify the initial location only).

(vii) The most recent transaction date.

(viii) The property’s classification. (Use

only one of the following for each property

item: Land, Buildings, Other Real Property,

Equipment, Special Test Equipment, Special

Tooling, Unique Federal Property, or

Material.)

(3) Additional information—(i) Special test

equipment records. The Contractor shall

provide the information required by

paragraph (f)(2) of this clause for each general

purpose test equipment item that is a

removable or reusable component or

Government owned special test equipment it

removal and reuse is economically feasible.

(ii) Equipment records. Each record shall

include the manufacturer’s name,

Commercial and Government Entity (CAGE)

code or equivalent information, serial

number, and model or part number.

(iii) Real property records. (A) Records are

not required for portable buildings or

facilities specifically acquired or constructed

for tests that will result in the destruction of

such buildings or facilities.

(B) Real property records must be itemized,

indexed, and contain a description of the

property, its location, original acquisition

cost, a description of property alterations

made or construction work performed by the

Contractor including an identification of the

construction sites supporting such alterations

or construction, and separately identify the

cost of such alterations or construction.

Supporting documentation shall include

maps, drawings, plans, specifications, and, if

necessary, supplementary data needed to

completely describe and value the property.

(C) Costs incurred by the Government or

the Contractor, to acquire, construct, alter, or

improve Government owned or leased real

property, including additions, expansions,

extensions, conversions, shall be added to

the property’s acquisition cost if they

increase the value, life, utility, capability, or

serviceability of the property.

(D) The real property records shall be

modified and annotated with a statement of

the pertinent facts when property is sold,

transferred, donated, destroyed, abandoned

by the Government in place, or condemned.

(iv) Records of maintenance actions. The

property records for items requiring

maintenance shall contain the maintenance

schedule, the dates maintenance actions were

performed, and identify and deficiencies

discovered.

(v) Scrap records. (A) The scrap records

shall provide the—

(1) Contract number or equivalent code

designation from which the scrap was

derived;

(2) Scrap classification by material content;

and

(3) Disposition and disposition dates.

(B) When Contractor and Government

owned property of the same stock or

classification are used to produce an item or

any component thereof and property

scrapped during such production cannot be

identified as Contractor or Government

owned property, the Government property

scrap records shall reflect a proportional,

equitable share of such scrap.

(vi) Property returned under warranty. The

Contractor shall establish a separate property

record for each item returned for correction

under a warranty and maintain the records

on a contract-by-contract basis. The records

shall identify the date received, the contract

number under which the item was returned,

the corrective action performed, and the date

the item is returned to the Government. Once

a property record has been established,

identical items received for corrective action

shall be added to the established record and

the information required by this paragraph

maintained for each item.

(vii) Sensitive property. Property records

shall legibly and conspicuously identify

sensitive property.

(g) Reports—(1) Government property. The

Contractor shall report all Government

property accountable under this contract that

is in its or its subcontractors’ possession as

of September 30 of each calendar year or

upon completion of all property disposal

actions under this contract, whichever is

sooner. The report shall be prepared using

Standard Form 1422, U.S. Government

Property in the Custody of Contractors (or an

agency equivalent furnished by the

Contracting Officer), and submitted to the

Government’s property administrator no later

than October 31 of each calendar year.

(2) Misdirected Government property. The

Contractor shall submit a written report to

the Government’s property administrator

immediately following receipt of Government

property intended for another person or

Government property not required for

performance of a Government contract and

request disposition instructions. To the

extent practical, the report shall identify the

shipment’s content, the intended recipient,

the carrier that made delivery, the

Government activity from which the

shipment originated, and the shipment’s

current location.

(3) Late Government furnished property.

The Contractor shall report to the Contracting

Officer, with a concurrent copy to the

Government’s property administrator, a

failure to receive Government furnished

property at the time stated in the contract or,

when a time is not stated, in sufficient time

to enable the Contractor to meet the

contract’s delivery or performance dates.

Each report shall forward the Contractor’s

estimate of the extent to which such failure

has affected or might affect contract

performance.

(h) Physical inventories.—(1) Periodic.

Except for low value property and work in

process, the Contractor shall periodically

physically inventory all Government

property in its possession. The Contractor,

with the approval of the property

administrator, shall establish the method,

frequency, and procedures for such

inventories to ensure that the existence and

location of such property are accurately

established and the records and reports

required by this clause are complete and

accurate. For purposes of this clause,

electronic, optical, electro-magnetic, or

similar inventory systems approved by the

Government’s property administrator satisfy

the requirement for physical inventories.

(2) Contract termination or completion

inventories. The Contractor shall inventory

all property furnished by the Government

and all property to which the Government

has taken title under this contract

immediately following a notice of
Federal Register / Vol. 62, No. 201 / Friday, October 17, 1997 / Proposed Rules 54017

termination or partial termination of this

contract or upon completion of deliveries or

performance under the contract except

property that is authorized for use on a

follow-on or other Government contract.

Such property does not have to be

inventoried if the Contractor has notified the

property administrator that record balances

have been transferred to the receiving

contract.

(3) Restriction. The Contractor personnel

who perform physical inventories shall not

be the same individuals who maintain the

property records required by this contract or

have custody of the property unless

authorized to do so by the property

administrator.

(i) Markings. Promptly following receipt of

Government furnished property, the

Contractor shall determine whether the

property bears a Government ownership

marking, legibly and conspicuously mark

unmarked property with the phrase ‘‘U.S.

Government Property’’ (or a similar phrase

that conveys Government ownership), and

replace any control numbers affixed by

others with the Contractor’s control number.

(j) Overseas contracts. In a contract

performed outside the United States, its

territories, or possessions, the words

‘‘Government’’ and ‘‘Government furnished,’’

as used in this clause, mean ‘‘United States

Government’’ and ‘‘United States

Government furnished,’’ respectively.

(End of clause)

ALTERNATE I (XXX 19XX) As prescribed

in 245.102(c)(ii), substitute the following

paragraphs (f) and (g) for paragraphs (f) and

(g) of the basic clause:

(f) Property records. The Contractor shall

establish a separate property record for each

Government property item returned for

correction under a warranty and maintain the

records on a contract-by-contract basis. The

records shall identify the item’s name,

description, property classification, and

national stock number (if the item has a

national stock number), the date received, the

contract number under which the item was

returned, the corrective action performed,

and the date the item is returned to the

Government. Once a property record has

been established, identical items received for

corrective action shall be added to the

established record and the information

required by this paragraph maintained for

each item.

(g) Reports.—(1) Misdirected Government

property. The Contractor shall submit a

written report to the Government’s property

administrator immediately following receipt

of Government property intended for another

person or Government property not required

for performance of a Government contract

and request disposition instructions. To the

extent practical, the report shall identify the

shipment’s content, the intended recipient,

the carrier that made delivery, the

Government activity from which the

shipment originated, and the shipment’s

current location.

(2) Late Government furnished property.

The Contractor shall report to the Contracting

Officer, with a concurrent copy to the

Government’s property administrator, a

failure to receive Government furnished

property at the time stated in the contract or,

when a time is not stated, in sufficient time

to enable the Contractor to meet the

contract’s delivery or performance dates.

Each report shall forward the Contractor’s

estimate of the extent to which such failure

has affected or might affect contract

performance.

[FR Doc. 97–27438 Filed 10–16–97; 8:45 am]

BILLING CODE 5000–04–M

DEPARTMENT OF DEFENSE

48 CFR Part 252

[DFARS Case 97–D029]

Defense Federal Acquisition

Regulation Supplement; Reporting of

Contract Performance Outside the

United States

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for

comments.

SUMMARY: The Director of Defense

Procurement is proposing to amend the

Defense Federal Acquisition Regulation

Supplement (DFARS) to raise the

threshold for reporting contract

performance outside the United States

from $25,000 to the simplified

acquisition threshold, under contracts

exceeding $500,000.

DATES: Comment date: Comments on the

proposed rule should be submitted in

writing to the address shown below on

or before December 16, 1997, to be

considered in the formulation of the

final rule.

ADDRESSES: Interested parties should

submit written comments to: Defense

Acquisition Regulations Council, Attn:

Ms. Amy Williams, PDUSD (A&T) DP

(DAR), IMD 3D139, 3062 Defense

Pentagon, Washington, DC 20301–3062.

Telefax number (703) 602–0350.

E-mail comments submitted over the

Internet should be addressed to:

dfars@acq.osd.mil

Please cite DFARS Case 97–D029 in

all correspondence related to this issue.

E-mail comments should cite DFARS

Case 97–D029 in the subject line.

FOR FURTHER INFORMATION CONTACT: Ms.

Amy Williams, (703) 602–0131.

SUPPLEMENTARY INFORMATION:

A. Background

The clause at DFARS 252.225–7026,

Reporting of Contract Performance

Outside the United States, presently

requires a contractor to submit a report

to the Deputy Director of Defense

Procurement (Foreign Contracting)

under a contract exceeding $500,000,

when any part that exceeds $25,000 will

be performed outside the United States,

unless a foreign place of performance is

the principal place of performance and

was indicated as such in the offer for the

contract. This rule proposes to increase

the $25,000 threshold to the simplified

acquisition threshold ($100,000). In

addition, the rule proposes to increase

the threshold for incorporation of the

clause in first-tier subcontracts from

$100,000 to $500,000. These

amendments are expected to reduce

information collection requirements by

approximately 40 percent.

B. Regulatory Flexibility Act

The proposed 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.

Annually, approximately 55 contractors

submit a total of approximately 1400

reports of contract performance outside

the United States. Reporting varies from

1 to 50 reports per contractor. Most of

the contractors that submit the reports

are not small businesses, and the report

is not excessively time-consuming. An

initial regulatory flexibility analysis has

therefore not been performed.

Comments are invited from small

businesses and other interested parties.

Comments from small entities

concerning the affected DFARS subpart

also will be considered in accordance

with 5 U.S.C. 610. Such comments

should be submitted separately and

should cite DFARS Case 97–D029 in

correspondence.

C. Paperwork Reduction Act

The rule will result in a reduction of

paperwork burden on contractors. The

clause at DFARS 252.225–7026

presently has an approved annual

information collection requirement of

900 hours under Office of Management

and Budget Clearance Number 0704–

0229. Based on a review of 1995 and

1996 data, it is estimated that the

amendments in this rule will reduce

annual information collection

requirements by approximately 360

hours.

List of Subjects in 48 CFR Part 252

Government procurement.

Michele P. Peterson,

Executive Editor, Defense Acquisition

Regulations Council.

Therefore, 48 CFR part 252 is

proposed to be amended as follows:

1. The authority citation for 48 CFR

Part 252 continues to read as follows:

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

Chapter 1.