Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 12937 

word ‘‘Aruba,’’ and adding the words 

‘‘Armenia, Aruba,’’ in its place. 

52.225–11 Buy American Act— 

Construction Materials Under Trade 

Agreements. 

* * * * * 

BUY AMERICAN ACT— 

CONSTRUCTION MATERIALS UNDER 

TRADE AGREEMENTS APR 2012 

* * * * * 

■ 11. Amend section 52.225–23 by 

revising the date of the clause to read as 

set forth below; and in paragraph (a) 

removing from paragraph (1) of the 

definition ‘‘Designated country’’ and 

paragraph (1) of the definition 

‘‘Recovery Act designated country’’ the 

word ‘‘(Aruba,’’ and adding the words 

‘‘(Armenia, Aruba,’’ in its place. 

52.225–23 Required Use of American Iron, 

Steel, and Manufactured Goods—Buy 

American Act—Construction Materials 

Under Trade Agreements. 

* * * * * 

REQUIRED USE OF AMERICAN IRON, 

STEEL, AND MANUFACTURED 

GOODS—BUY AMERICAN ACT— 

CONSTRUCTION MATERIALS UNDER 

TRADE AGREEMENTS APR 2012 

* * * * * 

[FR Doc. 2012–4495 Filed 3–1–12; 8:45 am] 

BILLING CODE 6820–EP–P 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Parts 2, 31, 32, 45, 49, 51, 52, 

and 53 

[FAC 2005–56; FAR Case 2010–009; Item 

VII; Docket 2010–0009, Sequence 1] 

RIN 9000–AL95 

Federal Acquisition Regulation; 

Government Property 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Final rule. 

SUMMARY: DoD, GSA, and NASA are 

issuing a final rule amending the 

Federal Acquisition Regulation (FAR) to 

clarify reporting, reutilization, and 

disposal of Government property. 

DATES: Effective Date: April 2, 2012. 

FOR FURTHER INFORMATION CONTACT: Mr. 

Curtis E. Glover, Sr., Procurement 

Analyst, at 202–501–1448 for 

clarification of content. For information 

pertaining to status or publication 

schedules, contact the Regulatory 

Secretariat at 202–501–4755. Please cite 

FAC 2005–56, FAR Case 2010–009. 

SUPPLEMENTARY INFORMATION: 

I. Background 

DoD, GSA, and NASA published a 

proposed rule in the Federal Register at 

76 FR 18497 on April 4, 2011. Eight 

respondents submitted comments on the 

proposed rule. The comments received 

were grouped by topic area. 

II. Discussion and Analysis 

The Civilian Agency Acquisition 

Council and the Defense Acquisition 

Regulations Council (the Councils) 

reviewed the comments in the 

development of the final rule. A 

discussion of the comments and the 

changes made to the rule as a result of 

those comments are provided as 

follows: 

A. Summary of Significant Changes 

1. A definition of ‘‘surplus property’’ 

is added at FAR 2.101 to apply 

throughout the FAR. 

2. Terminology used is updated and 

used consistently throughout the FAR, 

e.g., ‘‘loss of Government property’’ is 

defined at FAR 45.101, and ‘‘loss’’ is 

used consistently in lieu of ‘‘loss, 

damage, destruction, or theft.’’ 

3. Clarified, and distinguished among, 

the responsibilities and authorities of 

the contracting officer, property 

administrator, plant clearance officer, 

and contractor. 

4. Reorganized and clarified 

procedures and responsibilities for 

Government property disposal (see FAR 

subpart 45.6). 

5. Reorganized, clarified, and updated 

the Government property clause at FAR 

52.245–1 to conform with revisions to 

FAR part 45. 

B. Government Responsibilities 

Comments: A respondent 

recommended a number of revisions to 

the Government responsibilities, 

primarily those in FAR subpart 45.6, 

Reporting, Reutilization, and Disposal. 

The respondent recommended revising 

FAR 45.606–1(a) to require that the 

property administrator work in 

coordination with the plant clearance 

officer to ensure that contractor scrap 

disposal processes are effective and 

properly documented. Another 

recommendation was to revert to the 

current regulation’s use of ‘‘should’’ in 

lieu of ‘‘may’’ at FAR 45.602–1(c)(1) in 

order to ensure the Government’s 

agreement before Government property 

is removed from a contractor’s inventory 

schedule. The respondent 

recommended modifying FAR 45.606– 

1(b) to require that any deviation from 

the contractor’s standard property plan 

and processes be identified as early as 

possible in the procurement process. 

Response: The first two 

recommendations are adopted in this 

final rule. The final recommendation is 

not adopted because the Property 

Administrator can make that 

determination at any time. 

Comments: The same respondent 

recommended a number of other 

revisions to the Government 

responsibilities, also primarily in FAR 

subpart 45.6, Reporting, Reutilization, 

and Disposal. The respondent proposed 

to revise FAR 45.600, Scope of subpart 

(which was not included in the 

proposed rule) to allow for either the 

contracting officer or the plant clearance 

officer to perform plant clearance officer 

duties. The respondent recommended 

removing the proposed rule’s 

requirement, at FAR 45.603(b), for the 

plant clearance officer to obtain 

approval at one level higher than the 

contracting officer before allowing the 

abandonment of sensitive property that 

does not require demilitarization. The 

respondent requested the addition of 

more examples of items considered to 

be incidental to the place of 

performance (see FAR 45.000). 

Response: The above 

recommendations are not incorporated 

into the final rule because (1) 

contracting officers generally rely on the 

Government property expertise of plant 

clearance officers, (2) additional review 

and approval requirements can provide 

a broader perspective, and (3) too often, 

lists of examples are treated 

inappropriately as exhaustive lists. 

C. Contractor Property Management 

Systems 

Comments: Two respondents 

recommended revisions to FAR subpart 

45.1, General. One recommendation was 

to revise FAR 45.105(b) to prevent the 

Government from notifying a contractor 

of deficiencies in its property 

management system unless the 

deficiencies were ‘‘material.’’ The other 

recommendation was to modify FAR 

45.104(b) to add the following: ‘‘When 

determining noncompliance, FAR part 1 

concepts apply, e.g., risk management, 

materiality, best value, and benefits of 

changes must justify their cost’’. 

Response: FAR part 1 is always 

applicable to all parts of the FAR. There 

is no need to repeat the statement in 

FAR part 45. ‘‘Materiality’’ is not 

defined in FAR part 2. If the 

Government determines that 

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deficiencies in a contractor’s property 

management system are significant 

enough to warrant a correction letter, 

then the contractor should treat those 

deficiencies as material. 

Comments: A number of respondents 

proposed changes to the clause at FAR 

52.245–1 that were associated with 

contractors’ property management 

systems. These included the following: 

• FAR 52.245–1(b)(1): Add ‘‘internal 

controls,’’ ‘‘efficient,’’ and ‘‘a new;’’ and 

delete ‘‘except where inconsistent with 

law or regulation.’’ 

• FAR 52.245–1(b)(4): Change 

‘‘property’’ to ‘‘asset.’’ 

• FAR 52.245–1(f)(1)(iii)(A): 

Substitute ‘‘as appropriate to the 

circumstances’’ in place of ‘‘auditable.’’ 

• FAR 52.245–1(f)(1)(iii)(A)(1): Do not 

use ‘‘description;’’ instead, retain 

‘‘manufacturer and model number (if 

applicable) for Equipment, ST, and 

STE.’’ 

• FAR 52.245–1(f)(1)(v)(A): Change 

‘‘assets’’ to ‘‘items’’ and revise to read 

‘‘shall have a process to manage 

Government property in the possession 

of subcontractors including 

identification and reporting of 

reportable items, as required in the 

contract as Government furnished or 

contractor acquired items.’’ 

• FAR 52.245–1(f)(1)(vii)(C)(1): 

Clarify what is included in ‘‘consumed’’ 

and that the property administrator is 

the official determining the 

reasonableness of adjustments. 

• FAR 52.245–1(g): Change 

‘‘analysis’’ to ‘‘audit.’’ 

• FAR 52.245–1(j): Delete, at FAR 

52.245–1(j)(1)(i), ‘‘in consultation with 

the Property Administrator,’’ and retain 

existing language at (j)(2). Add ‘‘in 

accordance with agency procedures if 

included in the contract.’’ 

• FAR 52.245–1(j): Delete (j)(3)(i)(B) 

and replace it with (j)(3)(i)(C). Revise 

the time allotted for contractor 

submission from ‘‘30 days’’ to ‘‘60 days 

or such other time frame agreed to by 

the PLCO.’’ 

• FAR 52.245–1: Add a dollar 

threshold for the contractor’s reporting 

and tracking, i.e., ‘‘* * * property in 

excess of $5,000 or in accordance with 

risk levels in voluntary consensus 

standards or industry leading 

practices.’’ The respondent suggested 

allowing contractors to defer any 

reporting of certain low-risk or lowvalue items until contract termination. 

Response: 

• FAR 52.245–1(b)(1): Two of the 

recommended additions to FAR 52.245– 

1(b)(1) are incorporated into the final 

rule because they better explain the 

Government’s requirements for the 

contractor’s property management 

system. However, ‘‘a new’’ was not 

added because of the associated element 

related to ‘‘time.’’ The phrase ‘‘except 

where inconsistent with law or 

regulation’’ is not deleted because 

contractors are never authorized to 

employ commercial practices, voluntary 

consensus standards, or industryleading practices if the former do not 

comply with law or regulation. 

• FAR 52.245–1(b)(4): The term 

‘‘property’’ is retained to maintain 

consistency in terminology. 

• FAR 52.245–1(f)(1)(iii)(A) and 

(A)(1): The Councils did not revise 

‘‘auditable’’ to ‘‘as appropriate for the 

circumstances’’ because the proposed 

change is too vague and does not 

provide an understandable or consistent 

standard. The final rule does not revert 

back to the use of ‘‘manufacturer and 

model number * * *’’ because this is a 

reasonable number of data elements at 

the Federal level. 

• FAR 52.245–1(f)(1)(v)(A): Applying 

the same principle as is used at the 

beginning of this response results in 

revising ‘‘assets’’ to ‘‘items’’ at FAR 

52.245–1(f)(1)(v)(A). The language 

regarding the management of 

Government property in subcontractors’ 

possession is not added to paragraph 

(f)(1)(v)(A) because it would be 

redundant to the requirement already at 

FAR 52.245–1(f)(1)(v)(B). 

• FAR 52.245–1(f)(1)(vii)(C)(1): It is 

not necessary to revise FAR 52.245– 

1(f)(1)(vii)(C)(1) because the text already 

clearly designates the property 

administrator as the deciding official, 

and the use of the term ‘‘consumed’’ is 

clear in the context of (C)(1) (‘‘Such 

property is consumed or expended, 

reasonably and properly, or otherwise 

accounted for, in the performance of the 

contract, including reasonable inventory 

adjustments of material as determined 

by the Property Administrator’’). 

• FAR 52.245–1(g): ‘‘Analysis,’’ not 

‘‘audit,’’ is the proper term. 

• FAR 52.245–1(j): Paragraph (j) of 

the clause addresses contractor 

inventory disposal. The lead-in to 

paragraph (j) makes all contractor 

inventory disposal decisions subject to 

the authorization of the plant clearance 

officer; therefore, it is unnecessary to 

restate the qualifier in subordinate 

paragraphs of paragraph (j). Paragraph 

(j)(2) of the clause addresses inventory 

disposal schedules. The existing text 

had elicited many questions over time, 

so a revision was determined necessary 

to provide additional clarity; reverting 

to the current paragraph (j)(2) would be 

a step backward. 

The authority to revise a contractor’s 

use and receipt system for Government 

material (see FAR 52.245–1(f)(1)(iii)(B)) 

‘‘in accordance with agency procedures 

* * *’’ is not included in the final rule 

because it would result in 

inconsistencies in treatment and 

problems when more than one 

Government agency had authorized the 

use of Government property in a single 

contractor facility. 

• FAR 52.245–1(j): Effectively, the 

request to delete 52.245–1(j)(3)(i)(B) and 

replace it with (C) of the same paragraph 

would eliminate a 60-day period for 

submission of the contractor’s inventory 

disposal schedule and replace it with a 

120-day submission schedule. Allowing 

an extra two months for the contractor’s 

submission is unnecessary if the 

contractor has an acceptable property 

management system. For the same 

reasons, the extension of the submission 

period from 30 days to 60 days is not 

made. 

• FAR 52.245–1: The final 

recommendation would have 

established a dollar threshold and 

allowed contractors to defer any 

reporting of low-dollar items during 

contract performance. However, the 

Government property management 

principles have departed from the use of 

dollar thresholds and recognized that 

some low-dollar items may be sensitive 

and require closer management. 

D. Disposal 

Comment: One respondent 

recommended adding, at FAR 45.201, a 

requirement that the solicitation 

indicate how the contractor’s property 

management system plan would be 

utilized for disposal. 

Response: FAR 45.201(c)(4) requires 

that the solicitation include a 

description of the offeror’s property 

management system, plan, and practices 

and standards used by the offeror in 

managing Government property. In 

addition, the clause at 52.245–1, 

Government Property, which is required 

to be included in solicitations, 

thoroughly addresses the Government’s 

uses of contractors’ property 

management systems. 

Comment: One respondent suggested 

that any additional instructions to 

offerors on management of Government 

property, currently allowed only in the 

statement of work, could also be 

included in a special provision of the 

contract. 

Response: The allowance for 

including this information in a special 

provision is added at FAR 45.201(d). 

Comment: One respondent suggested 

that it was not clear at FAR 52.245– 

1(j)(1)(i) that, in disposing of certain 

property, the contractor is limited to 

transferring the property to another 

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Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 12939 

Government contract, as opposed to any 

contract. 

Response: The referenced section of 

the clause is revised to add 

‘‘Government’’ in front of ‘‘contract’’ in 

two places. 

Comment: One respondent suggested 

adding ‘‘with contractor’s consent’’ at 

FAR 45.603(a)(2). 

Response: The proposed change 

would require the Government to obtain 

the contractor’s consent prior to 

abandoning non-sensitive property at 

the contractor’s or subcontractor’s 

premises. In order to minimize 

administrative burden, contractor 

consent is required only prior to 

abandoning sensitive property. 

Comment: One respondent suggested 

revising FAR 45.604–1 to differentiate 

between formal and informal sales and 

‘‘scrap’’ sales. 

Response: The recommended change 

would require the creation of additional 

definitions. Any such distinctions are 

more appropriately located in the 

contractor’s property management 

procedures. 

Comment: One respondent suggested 

revising FAR 45.606–1(c) to ensure that 

the disposition of scrap items is 

addressed in the contractor’s standard 

scrap processes and procedures. 

Response: The decision on whether to 

abandon scrap (the subject of FAR 

45.606–1) is a Government decision; it 

is not a subject to be included in the 

contractor’s scrap procedures. 

E. Exceptions and applicability 

Comment: One respondent suggested 

that FAR 45.102(b) be clarified to 

demonstrate when cost-reimbursement 

contracts are used. 

Response: There is no need to revise 

FAR 45.102, Policy, because that section 

addresses the circumstances under 

which it is appropriate to provide 

property to contractors. The limitations 

and requirements for contract types, 

e.g., cost-reimbursement contracts, are 

found in FAR part 16 and are not related 

to whether Government property is 

provided. 

Comment: The proposed rule 

included a new paragraph FAR 

45.102(e) that would prohibit the 

installation, with certain exceptions, of 

Government property in such fashion as 

to become nonseverable, ‘‘unless the 

head of the contracting activity 

determines that such installation or 

construction is necessary and in the 

Government’s interest.’’ One respondent 

recommended deleting the exception 

and creating a flat prohibition. 

Response: Because there are instances 

when nonseverable installation of 

Government property may be 

appropriate, a flat prohibition is not 

adopted. The bar to nonseverable 

installation of Government property is 

set sufficiently high, requiring the head 

of the contracting activity to make a 

determination to waive the requirement, 

that it is unlikely to become a common 

occurrence. 

F. Crediting Monies Received 

Comment: One respondent suggested 

adding a paragraph on crediting 

disposal proceeds to the clause at FAR 

52.245–1, as follows: ‘‘Disposal 

proceeds. If the contractor’s practice is 

to comingle scrap from a variety of 

contract sources and ownership, the 

Contractor may credit net scrap 

proceeds to a contractor overhead 

account.’’ 

Response: FAR 45.604–3 (formerly 

45.604–4), Proceeds from sales of 

surplus property, requires that such 

monies be credited to the U.S. Treasury 

as miscellaneous receipts. Deposit of 

sales proceeds is already covered under 

FAR 45.604–3. No further regulatory 

amplification is needed. 

Comment: Three respondents 

suggested various ways of crediting 

financial restitution to the contract, not 

back to the Treasury, as is required at 

FAR 45.104(e). 

Response: With few statutory 

exceptions, monies received for the use 

of the United States, from whatever 

source, must be paid into the U.S. 

Treasury without deduction. The statute 

is the authoritative source. 

G. Definitions 

Comment: One respondent suggested 

revising the definition of ‘‘production 

scrap,’’ changing the term to ‘‘material 

scrap,’’ and including scrap from nonproduction activities in the definition at 

FAR 45.101 and 52.245–1(a). 

Response: The term ‘‘production 

scrap’’ is the recognized and consistent 

term used throughout the FAR, but the 

additional text is added to clarify what 

is included in the term. 

Comment: Two respondents suggested 

changing the term ‘‘unit acquisition 

cost’’ to ‘‘item acquisition cost’’ at FAR 

45.101 and 52.245–1(a). One of these 

respondents also suggested adding ‘‘fair 

value at the time of loss’’ to the 

definition. 

Response: The Councils prefer the 

term ‘‘unit acquisition cost’’ versus 

‘‘item acquisition cost.’’ The unit 

acquisition cost, provided by the 

Government, is the actual cost at the 

time of purchase and is the proper 

measure of value. 

Comments: Four recommendations 

were received for revising the definition 

of ‘‘loss of Government property.’’ Two 

of these suggested adding ‘‘in the 

possession of a contractor under terms 

of a contract’’ to the definition. Another 

recommended adding ‘‘material’’ prior 

to ‘‘harm’’ to denote that damage should 

not include ordinary repairs due to 

normal wear and tear. A third 

recommendation was to add 

‘‘occurrences such as’’ to the definition 

in order to make it consistent with 

Defense Federal Acquisition Regulation 

Supplement 252.245–7002. 

Response: The first change is not 

made as it would be superfluous; i.e., 

the entire FAR part 45 refers to 

Government Property in contractor’s 

possession. ‘‘Material’’ is not added to 

the definition because the definition 

already excludes normal wear and tear. 

The phrase ‘‘occurrences such as’’ is 

added to the definition for additional 

clarity. 

Comment: One respondent suggested 

adding a definition for ‘‘repair, 

maintenance, and overhaul scrap’’ at 

FAR 45.606–1. 

Response: The essence of the 

proposed definition is included in the 

authority given to the contracting officer 

at FAR 45.603. There is no need to 

include a separate definition. 

H. Contractor Use of Government 

Supply Sources 

Comment: One respondent 

recommended revising the second 

sentence of the clause at FAR 52.251– 

1, Government Supply Sources, to state 

that title to such purchases vested in the 

Government ‘‘except when the 

transaction is based upon a cash sale to 

the Contractor.’’ 

Response: There is no need to make 

distinctions in title vesting in this 

clause as long as the clause contains the 

phrase ‘‘unless otherwise specified in 

the contract.’’ Every contract must 

contain a payment clause, and it is the 

payment clause that determines when, 

and with whom, title vests. 

I. Editorial Comments 

The editorial comments are grouped 

by the FAR section they address. 

Comments on FAR 45.104(d): This 

paragraph addresses contractor liability 

and the appropriate form of restitution 

once a loss of property has been 

established. One respondent 

recommended changing ‘‘lost property’’ 

to ‘‘property loss,’’ and another 

respondent suggested adding ‘‘fair 

value’’ and replacing ‘‘restitution’’ with 

‘‘compensation.’’ 

Response: The final rule uses 

‘‘property loss’’ in lieu of ‘‘lost 

property.’’ The other recommendations 

are not incorporated in the final rule 

because (1) substituting ‘‘compensation’’ 

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12940 Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 

for ‘‘restitution’’ does not add clarity, 

and (2) the use of ‘‘fair value’’ would 

introduce a new concept of valuation. 

Comments on FAR 45.105: Three 

comments were received on this section. 

One recommended substituting 

‘‘liability’’ for ‘‘and liability;’’ another 

suggested deleting either ‘‘and’’ or ‘‘or’’ 

in paragraph (b)(1); and a third 

recommended adding ‘‘under the 

Government property clause’’ in 

paragraph (d). 

Response: These edits are not 

incorporated in the final rule because 

they do not further clarify the coverage. 

Comments on FAR 45.201: One 

respondent suggested deleting either 

‘‘and’’ or ‘‘or’’ at FAR 45.201(a)(1). 

Another respondent suggested adding 

the contractor’s property management 

‘‘plan’’ to the list at FAR 45.201(c)(4), 

because the plan depicts the standard 

way a contractor does business. 

Response: The final rule incorporates 

the recommended revisions because 

they increase clarity. 

Comment on FAR 45.202: A 

respondent suggested that the rules for 

evaluating offers when one offeror 

possessed Government property, and 

other offerors did not, would be 

improved by adding the phrase ‘‘using 

the FAR 52.245–9 Rental Calculation 

process’’ in this section. 

Response: FAR 45.202(a) is revised to 

read ‘‘a rental equivalent evaluation 

factor as specified in FAR 52.245–9.’’ 

Comment on FAR 45.602: One 

respondent suggested changing ‘‘may 

entitle’’ to ‘‘entitles’’ at FAR 45.602– 

1(b)(4). 

Response: This change, had it been 

incorporated in the final rule, would 

have been a policy change that 

effectively gave a contractor an absolute 

entitlement to an equitable adjustment if 

the Government did not provide timely 

disposition instructions. Contracting 

officers require discretion and flexibility 

in determining whether an equitable 

adjustment is warranted. 

Comments on FAR 45.603: One 

respondent recommended relocating 

FAR 45.603(c) to 45.603(a)(1). A 

respondent recommended inserting 

‘‘recipients’’ at FAR 45.603(c), and 

another respondent suggested adding 

‘‘as applicable’’ to FAR 45.603(b). 

Response: None of the 

recommendations is incorporated into 

the final rule. The Councils elected not 

to relocate FAR 45.603(c) because it 

would distort the proper sequence of 

events. ‘‘Recipient’s’’ was not added to 

paragraph (c) because the Government 

will not bear any of the costs incident 

to such donations, regardless of who 

incurred them. ‘‘As applicable’’ is not 

added to paragraph (b) because review 

at a level higher than the plant clearance 

officer is required in cases of other 

contractor inventory. 

Comment on FAR 45.606: One 

respondent suggested inserting ‘‘in 

coordination with the plant clearance 

officer’’ at FAR 45.606(a). 

Response: The revision is 

incorporated in the final rule. 

Comments on FAR 52.245–1(b): 

Several editorial revisions were 

recommended for this paragraph. One 

respondent suggested revising FAR 

52.245–1(b)(4) by adding ‘‘surveillance, 

self-assessments, or’’ and deleting ‘‘and’’ 

in ‘‘and/or.’’ 

Response: The final rule incorporates 

these edits, such that the contractor 

must perform periodic internal reviews, 

surveillances, self assessments, or 

audits. 

Comments on FAR 52.245–1(f)(1)(vii): 

Five editorial recommendations were 

proposed for this paragraph of the 

Government Property clause, which 

addresses ‘‘Relief of stewardship 

responsibilities.’’ One recommendation 

was to revise 52.245–1(f)(1)(vii)(A) from 

‘‘necessary’’ corrective actions to ‘‘any 

necessary,’’ and another was to delete 

‘‘all’’ at paragraph 52.245– 

1(f)(1)(vii)(B)(10). Other 

recommendations were to amend 

paragraph 52.245–1(f)(1)(vii)(B)(8) to 

add ‘‘and preventive actions,’’ change 

‘‘reimbursement’’ to ‘‘compensation,’’ 

insert ‘‘export controlled’’ and ‘‘and 

authorities’’ and delete ‘‘if so,’’ and 

amend paragraph 52.245– 

1(f)(1)(vii)(C)(3) so as not to 

unnecessarily limit the contractor’s 

discretion to dispose of property in 

accordance with other paragraphs of the 

Government Property clause. 

Response: The first two 

recommendations are not incorporated 

in the final rule because they would 

have introduced ambiguity and 

unintentionally introduced a lower 

standard. The next two 

recommendations starting at ‘‘other 

recommendations’’ are incorporated in 

the final rule. The last recommendation 

is not incorporated in the final rule 

because the proposed language does not 

limit the contractor’s discretion. 

Comments on FAR 52.245–1(h): One 

respondent suggested deleting ‘‘and/or’’ 

at paragraph (h)(1). A respondent 

suggested that paragraph (h)(3) should 

be revised to be more consistent with 

the policy intent. Another respondent 

recommended changing ‘‘directed’’ to 

‘‘determined’’ at paragraph (h)(4). 

Response: Paragraph (h)(1) is not 

changed because the intent is clear— 

either one or the other or both is 

acceptable. Paragraph (h)(3) is not 

revised because it is consistent with the 

policy. Paragraph (h)(4) was revised to 

adopt ‘‘determined’’ as a more 

consistent use of terminology. 

Comment on FAR 52.245–1(k): One 

respondent recommended adding ‘‘nonsensitive.’’ 

Response: The applicability of this 

paragraph is clear without the addition. 

J. Out of Scope 

Comment: One respondent suggested 

that small businesses should use 

Systems Applications Products to track 

scrap material as large businesses do. 

Response: The Government does not 

recommend any particular commercial 

product. 

III. Executive Orders 12866 and 13563 

Executive Orders (E.O.s) 12866 and 

13563 direct agencies to assess all costs 

and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). E.O. 13563 emphasizes the 

importance of quantifying both costs 

and benefits, of reducing costs, of 

harmonizing rules, and of promoting 

flexibility. This is a significant 

regulatory action and, therefore, was 

subject to review under section 6(b) of 

E.O. 12866, Regulatory Planning and 

Review, dated September 30, 1993. This 

rule is not a major rule under 5 U.S.C. 

804. 

IV. Regulatory Flexibility Act 

DoD, GSA, and NASA prepared a 

Final Regulatory Flexibility Analysis 

(FRFA) consistent with the Regulatory 

Flexibility Act, 5 U.S.C. 601, et seq. The 

FRFA is summarized as follows: 

DoD, GSA, and NASA are revising FAR 

parts 45 and 52. The focus of this effort is to 

clarify FAR subpart 45.6, Reporting, 

Reutilization, and Disposal, and the 

contractor requirements under the clause at 

FAR 52.245–1, Government Property. 

The revisions include technical corrections 

to align the FAR with the requirements of the 

Federal Management Regulation. Also 

included is new and expanded policy 

language on the disposal of scrap, new 

language for contracting officers and contract 

specialists on depositing of monies received 

from contractors for property that is lost, 

damaged, destroyed, or stolen, and new 

language prohibiting personal property from 

being installed or constructed on contractorowned real property in such fashion as to 

become nonseverable. 

DoD, GSA, and NASA published a 

proposed rule at 76 FR 18497 on April 4, 

2011. The rule does not place new 

requirements on contractors; rather, it 

clarifies existing policies and procedures and 

should simplify compliance for contractors 

and enable consistent Government oversight. 

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Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 12941 

No comments were received on the initial 

regulatory flexibility analysis in the proposed 

rule. 

Approximately 5,000 contractors have 

Federal property in their possession. DoD has 

approximately 3,000 contractors with 

potential contract-property reporting 

requirements. Approximately 60 percent of 

all DoD contractors are small businesses. 

Given that property in the possession of 

contractors is over-whelmingly DoD 

property, it is estimated the DoD ratio of 

small businesses to total businesses having 

such property is a reasonable approximation 

for all Government contractors. Therefore, 

approximately 3,000 small businesses have 

Government property in their possession. 

FAR Case 2004–025 streamlined the 

requirements concerning property 

management in FAR part 45. FAR Case 2008– 

011 continued that philosophy. This final 

rule provides continuous improvement to 

property management by streamlining and 

clarifying the policies for the disposition of 

contractor inventory. 

It should be noted that these recommended 

changes are consistent with the Office of the 

Under Secretary of Defense, Acquisition, 

Technology and Logistics, recent statements 

emphasizing the need to improve the 

productivity of the defense industry and 

remove Government impediments to 

efficiency. 

There are four reports currently required to 

assure appropriate use and disposition of 

contract property (SF 1423, Inventory 

Verification Survey; SF 1424, Inventory 

Disposal Report; SF 1428, Inventory Disposal 

Schedule; and SF 1429, Inventory Disposal 

Schedule Continuation Sheet). All of these 

forms are available online and may be 

submitted by the contractor using electronic 

means. It should be noted that DoD no longer 

requires the use of the SF 1428 and 1429 

forms and instead uses the Web-enabled 

Plant Clearance Automated Reutilization and 

Reporting System (PCARRS). NASA and 

other Federal agency contractors use 

PCARRS when their contracts are delegated 

to Defense Contract Management Agency 

(DCMA) for plant clearance. Use of PCARRS 

reduces burdens on small businesses as well 

as other businesses by providing an easily 

accessible Web-based reporting mechanism. 

This rule does not duplicate, overlap, or 

conflict with any other Federal rules. 

There are no known alternatives that 

would meet the objectives of this rule. 

However, this rule is not expected to have a 

significant economic impact on a substantial 

number of small entities. In fact, the current 

impact to both large and small contractors 

will be reduced. For example, the current 

FAR requires Government approval of 

contractor scrap procedures prior to allowing 

the contractor to dispose of ordinary 

production scrap. In addition, the current 

practice of requiring contractors (without 

approved scrap procedures) to submit 

inventory schedules or scrap lists for 

production scrap assumes that such practice 

is in all cases economically or otherwise 

justified. This practice unnecessarily burdens 

small contractors that generate only small 

amounts of scrap. 

The final rule removes the requirement for 

Government approvals of contractor scrap 

procedures and submission of inventory 

schedules and scrap lists, thus easing the 

burden on large and small contractors alike. 

It should be noted that contractor procedures 

would still be required and evaluated by the 

agency responsible for contract 

administration, as a normal part of contract 

property administration. The new rule will 

also result in more consistent levels of 

Government oversight, further easing the 

burden on small entities. 

The collection of information required by 

this rule has been reduced to the minimum 

necessary to assure compliance with the 

Government’s statutory accountability 

requirements. 

Interested parties may obtain a copy 

of the FRFA from the Regulatory 

Secretariat. The Regulatory Secretariat 

has submitted a copy of the Final 

Regulatory Flexibility Analysis (FRFA) 

to the Chief Counsel for Advocacy of the 

Small Business Administration. 

V. Paperwork Reduction Act 

The Paperwork Reduction Act (44 

U.S.C. chapter 35) applies. The rule 

contains information collection 

requirements. OMB has cleared this 

information collection requirement 

under OMB Control Number 9000–0075, 

titled: Government Property. 

List of Subjects in 48 CFR Parts 2, 31, 

32, 45, 49, 51, 52, and 53 

Government procurement. 

Dated: February 21, 2012. 

Laura Auletta, 

Director, Office of Governmentwide 

Acquisition Policy, Office of Acquisition 

Policy, Office of Governmentwide Policy. 

Therefore, DoD, GSA, and NASA 

amend 48 CFR parts 2, 31, 32, 45, 49, 

51, 52, and 53 as set forth below: 

■ 1. The authority citation for 48 CFR 

parts 2, 31, 32, 45, 49, 51, 52, and 53 

continues to read as follows: 

Authority: 40 U.S.C. 121(c); 10 U.S.C. 

chapter 137; and 42 U.S.C. 2473(c). 

PART 2—DEFINITIONS OF WORDS 

AND TERMS 

■ 2. Amend section 2.101 in paragraph 

(b) by adding, in alphabetical order, the 

definition ‘‘Surplus property’’ to read as 

follows: 

2.101 Definitions. 

* * * * * 

(b) * * * 

Surplus property means excess 

personal property not required by any 

Federal agency as determined by the 

Administrator of the General Services 

Administration (GSA). (See 41 CFR 

102–36.40). 

* * * * * 

PART 31—CONTRACT COST 

PRINCIPLES AND PROCEDURES 

■ 3. Amend section 31.205–19 by 

revising paragraphs (e)(2)(iv) 

introductory text, (e)(2)(iv)(A), and 

(e)(2)(iv)(C) to read as follows: 

31.205–19 Insurance and indemnification. 

* * * * * 

(e) * * * 

(2) * * * 

(iv) Costs of insurance for the risk of 

loss of Government property are 

allowable to the extent that— 

(A) The contractor is liable for such 

loss; 

* * * * * 

(C) Such insurance does not cover 

loss of Government property that results 

from willful misconduct or lack of good 

faith on the part of any of the 

contractor’s managerial personnel (as 

described in FAR 52.245–1 (h)(1)(ii)). 

* * * * * 

PART 32—CONTRACT FINANCING 

■ 4. Amend section 32.503–16 by 

revising the first sentence of paragraph 

(a) to read as follows: 

32.503–16 Risk of loss. 

(a) Under the Progress Payments 

clause, and except for normal spoilage, 

the contractor bears the risk of loss for 

Government property under the clause, 

even though title is vested in the 

Government, unless the Government has 

expressly assumed this risk. * * * 

* * * * * 

■ 5. Amend section 32.1010 by revising 

the first sentence of paragraph (a) to 

read as follows: 

32.1010 Risk of loss. 

(a) Under the clause at 52.232–32, 

Performance-Based Payments, and 

except for normal spoilage, the 

contractor bears the risk of loss for 

Government property, even though title 

is vested in the Government, unless the 

Government has expressly assumed this 

risk. * * * 

* * * * * 

PART 45—GOVERNMENT PROPERTY 

■ 6. Revise section 45.000 to read as 

follows: 

45.000 Scope of part. 

(a) This part prescribes policies and 

procedures for providing Government 

property to contractors; contractors’ 

management and use of Government 

property; and reporting, redistributing, 

and disposing of contractor inventory. 

(b) It does not apply to— 

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12942 Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 

(1) Government property provided 

under any statutory leasing authority, 

except as to non-Government use of 

property under 45.301(f); 

(2) Property to which the Government 

has acquired a lien or title solely 

because of partial, advance, progress, or 

performance based payments; 

(3) Disposal of real property; 

(4) Software and intellectual property; 

or 

(5) Government property that is 

incidental to the place of performance, 

when the contract requires contractor 

personnel to be located on a 

Government site or installation, and 

when the property used by the 

contractor within the location remains 

accountable to the Government. Items 

considered to be incidental to the place 

of performance include, for example, 

office space, desks, chairs, telephones, 

computers, and fax machines. 

■ 7. Amend section 45.101 by— 

■ a. Removing the definition 

‘‘Acquisition cost’’; 

■ b. Adding, in alphabetical order, the 

definitions ‘‘Loss of Government 

property’’ and ‘‘Production scrap’’; 

■ c. Removing the definition ‘‘Surplus 

property’’; and 

■ d. Adding, in alphabetical order, the 

definition ‘‘Unit acquisition cost’’. The 

added text reads as follows: 

45.101 Definitions. 

* * * * * 

Loss of Government property means 

unintended, unforeseen or accidental 

loss, damage, or destruction of 

Government property that reduces the 

Government’s expected economic 

benefits of the property. Loss of 

Government property does not include 

occurrences such as purposeful 

destructive testing, obsolescence, 

normal wear and tear, or manufacturing 

defects. Loss of Government property 

includes, but is not limited to— 

(1) Items that cannot be found after a 

reasonable search; 

(2) Theft; 

(3) Damage resulting in unexpected 

harm to property requiring repair to 

restore the item to usable condition; or 

(4) Destruction resulting from 

incidents that render the item useless 

for its intended purpose or beyond 

economical repair. 

* * * * * 

Production scrap means unusable 

material resulting from production, 

engineering, operations and 

maintenance, repair, and research and 

development contract activities. 

Production scrap may have value when 

re-melted or reprocessed, e.g., textile 

and metal clippings, borings, and faulty 

castings and forgings. 

* * * * * 

Unit acquisition cost means— 

(1) For Government-furnished 

property, the dollar value assigned by 

the Government and identified in the 

contract; and 

(2) For contractor-acquired property, 

the cost derived from the contractor’s 

records that reflect consistently applied 

generally accepted accounting 

principles. 

■ 8. Amend section 45.102 by adding 

paragraph (e) to read as follows: 

45.102 Policy. 

* * * * * 

(e) Government property, other than 

foundations and similar improvements 

necessary for installing special tooling, 

special test equipment, or equipment, 

shall not be installed or constructed on 

contractor-owned real property in such 

fashion as to become nonseverable, 

unless the head of the contracting 

activity determines that such 

installation or construction is necessary 

and in the Government’s interest. 

■ 9. Amend section 45.104 by— 

■ a. Revising the introductory text of 

paragraph (a); 

■ b. Revising paragraph (b); and 

■ c. Adding paragraphs (d) and (e). 

The revised and added text reads as 

follows: 

45.104 Responsibility and liability for 

Government property. 

(a) Generally, contractors are not held 

liable for loss of Government property 

under the following types of contracts: 

* * * * * 

(b) The contracting officer may revoke 

the Government’s assumption of risk 

when the property administrator 

determines that the contractor’s 

property management practices are 

noncompliant with contract 

requirements. 

* * * * * 

(d) With respect to loss of 

Government property, the contracting 

officer, in consultation with the 

property administrator, shall 

determine— 

(1) The extent, if any, of contractor 

liability based upon the amount of 

damages corresponding to the 

associated property loss; and 

(2) The appropriate form and method 

of Government recovery (may include 

repair, replacement, or other 

restitution). 

(e) Any monies received as financial 

restitution shall be credited to the 

Treasury of the United States as 

miscellaneous receipts, unless 

otherwise authorized by statute (31 

U.S.C. 3302(b)). 

■ 10. Amend section 45.105, by revising 

the first sentence of the introductory 

text of paragraph (b), and paragraphs 

(b)(1) and (d) to read as follows: 

45.105 Contractor’s property management 

system compliance. 

* * * * * 

(b) The property administrator shall 

notify the contractor in writing when 

the contractor’s property management 

system does not comply with 

contractual requirements, shall request 

prompt correction of deficiencies, and 

shall request from the contractor a 

corrective action plan, including a 

schedule for correction of the 

deficiencies. * * * 

(1) Revocation of the Government’s 

assumption of risk for loss of 

Government property; and/or 

* * * * * 

(d) When the property administrator 

determines that a reported case of loss 

of Government property is a risk 

assumed by the Government, the 

property administrator shall notify the 

contractor in writing that it is granted 

relief of stewardship responsibility and 

liability in accordance with 52.245– 

1(f)(1)(vii). Where the property 

administrator determines that the risk of 

loss of Government property is not 

assumed by the Government, the 

property administrator shall request that 

the contracting officer hold the 

contractor responsible and liable. 

■ 11. Amend section 45.107 by— 

■ a. Revising paragraph (a)(1)(i); 

■ b. Removing from paragraph (b) 

‘‘service contracts’’ and adding ‘‘fixedprice service contracts’’ in its place; and 

■ c. Removing from paragraph (d) 

‘‘acquisition cost’’ and adding ‘‘unit 

acquisition cost’’ in its place. 

The revised text reads as follows: 

45.107 Contract clauses. 

(a)(1) * * * 

(i) All cost-reimbursement and timeand-material type solicitations and 

contracts, and labor-hour solicitations 

when property is expected to be 

furnished for the labor-hour contracts. 

* * * * * 

■ 12. Amend section 45.201 by— 

■ a. Removing from paragraph (a)(1) 

‘‘tracking and/or’’ and adding ‘‘tracking 

and management, and’’ in its place; 

■ b. Removing from paragraph (a)(4) 

‘‘tracking); and’’ and adding ‘‘tracking 

and management); and’’ in its place; 

■ c. Revising paragraph (c)(4); and 

■ d. Removing from paragraph (d) 

‘‘providing property.’’ and adding 

‘‘providing property or in a special 

provision.’’ in its place. 

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Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 12943 

The revised text reads as follows: 

45.201 Solicitation. 

* * * * * 

(c) * * * 

(4) A description of the offeror’s 

property management system, plan, and 

any customary commercial practices, 

voluntary consensus standards, or 

industry-leading practices and 

standards to be used by the offeror in 

managing Government property. 

* * * * * 

■ 13. Amend section 45.202 by revising 

paragraph (a) to read as follows: 

45.202 Evaluation procedures. 

(a) The contracting officer shall 

consider any potentially unfair 

competitive advantage that may result 

from an offeror or contractor possessing 

Government property. This shall be 

done by adjusting the offers by 

applying, for evaluation purposes only, 

a rental equivalent evaluation factor as 

specified in FAR 52.245–9. 

* * * * * 

■ 14. Amend section 45.602–1 by— 

■ a. Removing from paragraphs (b)(2) 

and (b)(3) ‘‘Require a contractor’’ and 

adding ‘‘Require the contractor’’ in its 

place; 

■ b. Removing from paragraph (b)(4) 

‘‘might entitle’’ and adding ‘‘may 

entitle’’ in its place; 

■ c. Revising the introductory text of 

paragraph (c) and the introductory text 

of paragraph (c)(1); 

■ d. Removing from paragraph (c)(1)(i) 

‘‘acquisition cost’’ and adding ‘‘unit 

acquisition cost’’ in its place; and 

■ e. Revising paragraph (c)(1)(iv). 

The revised text reads as follows: 

45.602–1 Inventory disposal schedules. 

* * * * * 

(c) The contractor may request the 

plant clearance officer’s approval to 

remove the Government property from 

an inventory schedule. 

(1) Plant clearance officers should 

approve removal of Government 

property from an inventory schedule 

when— 

* * * * * 

(iv) The contractor has requested 

continued use of the Government 

property, and the contracting officer has 

authorized its retention and further use. 

* * * * * 

■ 15. Revise section 45.602–2 to read as 

follows: 

45.602–2 Reutilization priorities. 

Plant clearance officers shall initiate 

reutilization actions for all property not 

meeting the abandonment or destruction 

criteria of 45.603(b). Authorized 

methods, listed in descending order 

from highest to lowest priority, are— 

(a) Reuse within the owning agency; 

(b) Transfer of educationally useful 

equipment to schools and nonprofit 

organizations (see Executive Order 

12999, Educational Technology: 

Ensuring Opportunity For All Children 

In The Next Century, April 17, 1996, 

and 15 U.S.C. 3710(i)); 

(c) Report to GSA for reuse within the 

Federal Government or donation as 

surplus property; 

(d) Dispose of the following property 

in accordance with agency procedures 

without reporting to GSA: 

(1) Property determined appropriate 

for abandonment or destruction (see 

Federal Management Regulation (FMR) 

102–36.305, 41 CFR 102–36.305). 

(2) Property furnished to 

nonappropriated fund activities (see 

FMR 102–36.165, 41 CFR 102–36.165). 

(3) Foreign excess personal property 

(see FMR 102–36.380, 41 CFR 102– 

36.380). 

(4) Scrap, except aircraft in scrap 

condition. 

(5) Perishables, defined for the 

purposes of this section as any personal 

property subject to spoilage or decay. 

(6) Trading stamps and bonus goods. 

(7) Hazardous waste or toxic and 

hazardous materials. 

(8) Controlled substances. 

(9) Property dangerous to public 

health and safety. 

(10) Classified items or property 

determined to be sensitive for reasons of 

national security; and 

(e) Dispose of nuclear materials (see 

45.603–3(b)(5)) in accordance with the 

Nuclear Regulatory Commission, 

applicable state licenses, applicable 

Federal regulations, and agency 

regulations. 

■ 16. Revise section 45.603 to read as 

follows: 

45.603 Abandonment or destruction of 

personal property. 

(a) When contractor inventory is 

processed through the reutilization 

screening process prescribed in 45.602– 

2 without success, and provided the 

property has no commercial value, does 

not require demilitarization, and does 

not constitute a danger to public health 

or welfare, plant clearance officers or 

other authorized officials may without 

further approval— 

(1) Direct the contractor to destroy the 

property; 

(2) Abandon non-sensitive property at 

the contractor’s or subcontractor’s 

premises; or 

(3) Abandon sensitive property at the 

contractor’s or subcontractor’s premises, 

with contractor consent. 

(b) Provided a Government reviewing 

official at least one level higher than the 

plant clearance officer or other agency 

authorized official approves, plant 

clearance officers or other agency 

authorized officials may authorize the 

abandonment, or order the destruction 

of other contractor inventory at the 

contractor’s or subcontractor’s premises, 

in accordance with FMR 102–36.305 

through 325 (41 CFR 102–36.305–325) 

and consistent with the following: 

(1) The property is not considered 

sensitive, does not require 

demilitarization, has no commercial 

value or reutilization, transfer or 

donation potential, and does not 

constitute a danger to public health or 

welfare. 

(2) The estimated cost of continued 

care and handling of the property 

(including advertising, storage and other 

costs associated with making the sale), 

exceed the estimated proceeds from its 

sale. 

(c) In lieu of abandonment or its 

authorized destruction, the plant 

clearance officer or authorized official 

may authorize the donation of property 

including unsold surplus property to 

public bodies, provided that the 

property is not sensitive property, does 

not require demilitarization, and it does 

not constitute a danger to public health 

or welfare. The Government will not 

bear any of the costs incident to such 

donations. 

(d) Unless the property qualifies for 

one of the exceptions under FMR 102– 

36.330 (41 CFR 102–36.330), the plant 

clearance officer or requesting official 

will ensure prior public notice of such 

actions of abandonment or destruction 

consistent with FMR 102–36.325 (41 

CFR 102–36.325). 

■ 17. Revise the section heading of 

45.604 to read as follows: 

45.604 Sale of surplus personal property. 

* * * * * 

■ 18. Revise section 45.604–1 to read as 

follows: 

45.604–1 Sales procedures. 

Surplus personal property that has 

completed screening in accordance with 

45.602–3(a) shall be sold in accordance 

with the policy for the sale of surplus 

personal property contained in the 

Federal Management Regulation, at part 

102–38 (41 CFR part 102–38). Agencies 

may specify implementing procedures. 

45.604–2 [Removed] 

■ 19. Remove section 45.604–2. 

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12944 Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 

45.604–3 and 45.604–4 [Redesignated as 

45.604–2 and 45.604–3] 

■ 20. Redesignate sections 45.604–3 and 

45.604–4 as sections 45.604–2 and 

45.604–3, respectively. 

■ 21. Revise the newly redesignated 

section 45.604–2 to read as follows: 

45.604–2 Use of GSA sponsored sales 

centers. 

Agencies may use sales center 

services. Use of such centers for sale of 

surplus property is authorized when in 

the best interest of the Government, 

consistent with contract terms and 

conditions. 

■ 22. Add section 45.604–4 to read as 

follows: 

45.604–4 Sale of property pursuant to the 

exchange/sale authority. 

Agencies should consider the sale of 

property pursuant to the exchange/sale 

authority in FMR 102–39 (41 CFR part 

102–39) when agencies are acquiring or 

plan to acquire similar products and 

other requirements of the authority are 

satisfied. 

■ 23. Revise section 45.605 to read as 

follows: 

45.605 Inventory disposal reports. 

The plant clearance officer shall 

promptly prepare an SF 1424, Inventory 

Disposal Report, following disposition 

of the property identified on an 

inventory disposal schedule and the 

crediting of any related proceeds. The 

report shall identify any lost or 

otherwise unaccounted for property and 

any changes in quantity or value of the 

property made by the contractor after 

submission of the initial inventory 

disposal schedule. The report shall be 

provided to the administrative 

contracting officer or, for termination 

inventory, to the termination 

contracting officer, with a copy to the 

property administrator. 

45.606 [Removed] 

■ 24. Remove section 45.606. 

■ 25. Redesignate section 45.606–1 as 

section 45.606; and revise the newly 

designated section 45.606 to read as 

follows: 

45.606 Contractor scrap procedures. 

(a) The property administrator should, 

in coordination with the plant clearance 

officer, ensure that contractor scrap 

disposal processes, methods, and 

practices allow for effective, efficient, 

and proper disposition and are properly 

documented in the contractor’s property 

management procedures. 

(b) The property administrator should 

determine the extent to which separate 

disposal processing or physical 

segregation for different scrap types is or 

may be required. Such scrap may 

require physical segregation, unique 

disposal processing, or separate plant 

clearance reporting. For example, the 

scope of work may create scrap— 

(1) Consisting of sensitive items; 

(2) Containing hazardous materials or 

wastes; 

(3) Contaminated with hazardous 

materials or wastes; 

(4) That is classified or otherwise 

controlled; 

(5) Containing precious or strategic 

metals; or 

(6) That is dangerous to public health 

or safety. 

(c) Absent contract terms and 

conditions to the contrary, the 

Government may abandon parts 

removed and replaced from property as 

a result of normal maintenance actions 

or removed from property as a result of 

the repair, maintenance, overhaul, or 

modification process. 

45.606–2 and 45.606–3 [Removed] 

■ 26. Remove sections 45.606–2 and 

45.606–3. 

PART 49—TERMINATION OF 

CONTRACTS 

49.204 [Amended] 

■ 27. Amend section 49.204 by 

removing from paragraph (b) 

‘‘destroyed, lost, stolen, or’’ and adding 

‘‘lost or’’ in its place. 

PART 51—USE OF GOVERNMENT 

SOURCES BY CONTRACTORS 

51.106 [Amended] 

■ 28. Amend section 51.106 by 

removing from paragraph (b) ‘‘having 

an’’ and adding ‘‘having a unit’’ in its 

place. 

PART 52—SOLICITATION PROVISIONS 

AND CONTRACT CLAUSES 

■ 29. Amend section 52.232–16 by 

revising the date of the clause, and the 

last sentence of paragraph (e) to read as 

follows: 

52.232–16 Progress Payments. 

* * * * * 

PROGRESS PAYMENTS (APR 2012) 

* * * * * 

(e) * * * The Contractor shall repay the 

Government an amount equal to the 

unliquidated progress payments that are 

based on costs allocable to property that is 

lost (see 45.101). 

* * * * * 

■ 30. Amend section 52.232–32 by 

revising the date of the clause, and the 

last sentence of paragraph (g) to read as 

follows: 

52.232–32 Performance-Based Payments. 

* * * * * 

PERFORMANCE-BASED PAYMENTS 

(APR 2012) 

* * * * * 

(g) * * * If any property is lost (see 

45.101), the basis of payment (the events or 

performance criteria) to which the property 

is related shall be deemed to be not in 

compliance with the terms of the contract 

and not payable (if the property is part of or 

needed for performance), and the Contractor 

shall refund the related performance-based 

payments in accordance with paragraph (d) 

of this clause. 

* * * * * 

■ 31. Amend section 52.245–1 by— 

■ a. Revising the date of the clause; 

■ b. In paragraph (a) by— 

■ i. Removing the definition 

‘‘Acquisition cost’’; 

■ ii. Adding, in alphabetical order, the 

definitions, ‘‘Loss of Government 

property’’, and ‘‘Production scrap; 

■ iii. Removing the definition ‘‘Surplus 

property’’; and 

■ iv. Adding, in alphabetical order, the 

definition ‘‘Unit acquisition cost’’. 

■ c. Revising paragraph (b)(1); 

■ d. Removing from paragraph (b)(2) ‘‘, 

stolen, damaged, or destroyed’’; 

■ e. Adding paragraph (b)(4); 

■ f. Revising paragraph (e); 

■ g. Removing from the introductory 

text of paragraph (f)(1)(ii) ‘‘property 

(document the receipt)’’ and adding 

‘‘property and document the receipt’’ in 

its place; 

■ h. Revising paragraphs (f)(1)(iii)(A)(1), 

(f)(1)(iii)(A)(10), (f)(1)(v)(A), (f)(1)(vi), 

and (f)(1)(vii); 

■ i. Removing from paragraph (f)(1)(x) 

‘‘loss, theft, damage, or destruction’’ and 

adding ‘‘loss of Government property’’ 

in its place; 

■ j. Removing from paragraph (f)(2) 

‘‘acquisitions and dispositions of’’ and 

adding ‘‘acquisitions, loss of 

Government property, and disposition 

of’’ in its place; 

■ k. Removing paragraph (f)(3); 

■ l. Removing from the introductory text 

of paragraph (h)(1) ‘‘loss, theft, damage 

or destruction to the’’ and adding ‘‘loss 

of’’ in its place; 

■ m. Revising paragraphs (h)(1)(ii), 

(h)(1)(iii), (h)(2), and (h)(3); 

■ n. Redesignating paragraph (h)(4) as 

paragraph (h)(5); 

■ o. Adding a new paragraph (h)(4); 

■ p. Adding the words ‘‘or authorizing 

official’’ to the end of the introductory 

text of paragraph (j); 

■ q. Removing paragraph (j)(1); 

■ r. Redesignating paragraphs (j)(2) 

through (j)(10) as paragraphs (j)(1) 

through (j)(9), respectively; 

■ s. Revising the newly redesignated 

paragraph (j)(1), the introductory text of 

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Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 12945 

paragraph (j)(2)(i), (j)(2)(i)(A), (j)(2)(ii), 

(j)(2)(iii), (j)(2)(iv)(C), and (j)(3); 

■ t. Removing from the first sentence of 

the newly redesignated paragraph 

(j)(6)(ii) the words ‘‘Government 

property’’ and adding ‘‘property’’ in its 

place; 

■ u. Removing the newly redesignated 

paragraph (j)(7)(i); 

■ v. Further redesignating newly 

redesignated paragraphs (j)(7)(ii) and 

(j)(7)(iii) as (j)(7)(i) and (j)(7)(ii), 

respectively; 

■ w. Removing from the newly 

redesignated paragraph (j)(9) ‘‘paragraph 

(j)(4)’’ and adding ‘‘paragraph (j)(3)’’ in 

its place; 

■ x. Removing from paragraphs (k)(1) 

and (k)(2) ‘‘Government property’’, and 

adding ‘‘property’’ in its place; 

■ y. Redesignating paragraph (k)(3) as 

paragraph (k)(4); and adding a new 

paragraph (k)(3); 

■ z. Removing from Alternate I ‘‘(AUG 

2010)’’ and adding ’’(APR 2012)’’ in its 

place; and removing from paragraph 

(h)(1) of Alternate I ‘‘loss, theft, damage, 

or destruction’’ and adding ‘‘loss’’ in its 

place; and 

■ aa. Removing from Alternate II ‘‘(JUN 

2007)’’ and adding ’’(APR 2012)’’ in its 

place; and removing from the first and 

second sentences of paragraph (e)(3) of 

Alternate II ‘‘having an’’ and adding 

‘‘having a unit’’ in its place (two times). 

The added and revised text reads as 

follows: 

52.245–1 Government Property. 

* * * * * 

GOVERNMENT PROPERTY (APR 2012) 

(a) * * * 

Loss of Government property means 

unintended, unforeseen or accidental loss, 

damage or destruction to Government 

property that reduces the Government’s 

expected economic benefits of the property. 

Loss of Government property does not 

include purposeful destructive testing, 

obsolescence, normal wear and tear or 

manufacturing defects. Loss of Government 

property includes, but is not limited to— 

(1) Items that cannot be found after a 

reasonable search; 

(2) Theft; 

(3) Damage resulting in unexpected harm 

to property requiring repair to restore the 

item to usable condition; or 

(4) Destruction resulting from incidents 

that render the item useless for its intended 

purpose or beyond economical repair. 

* * * * * 

Production scrap means unusable material 

resulting from production, engineering, 

operations and maintenance, repair, and 

research and development contract activities. 

Production scrap may have value when remelted or reprocessed, e.g., textile and metal 

clippings, borings, and faulty castings and 

forgings. 

* * * * * 

Unit acquisition cost means— 

(1) For Government-furnished property, the 

dollar value assigned by the Government and 

identified in the contract; and 

(2) For contractor-acquired property, the 

cost derived from the Contractor’s records 

that reflect consistently applied generally 

accepted accounting principles. 

* * * * * 

(b) * * * 

(1) The Contractor shall have a system of 

internal controls to manage (control, use, 

preserve, protect, repair, and maintain) 

Government property in its possession. The 

system shall be adequate to satisfy the 

requirements of this clause. In doing so, the 

Contractor shall initiate and maintain the 

processes, systems, procedures, records, and 

methodologies necessary for effective and 

efficient control of Government property. The 

Contractor shall disclose any significant 

changes to its property management system 

to the Property Administrator prior to 

implementation of the changes. The 

Contractor may employ customary 

commercial practices, voluntary consensus 

standards, or industry-leading practices and 

standards that provide effective and efficient 

Government property management that are 

necessary and appropriate for the 

performance of this contract (except where 

inconsistent with law or regulation). 

* * * * * 

(4) The Contractor shall establish and 

maintain procedures necessary to assess its 

property management system effectiveness 

and shall perform periodic internal reviews, 

surveillances, self assessments, or audits. 

Significant findings or results of such 

reviews and audits pertaining to Government 

property shall be made available to the 

Property Administrator. 

* * * * * 

(e) Title to Government property. (1) All 

Government-furnished property and all 

property acquired by the Contractor, title to 

which vests in the Government under this 

paragraph (collectively referred to as 

‘‘Government property’’), is subject to the 

provisions of this clause. The Government 

shall retain title to all Government-furnished 

property. Title to Government property shall 

not be affected by its incorporation into or 

attachment to any property not owned by the 

Government, nor shall Government property 

become a fixture or lose its identity as 

personal property by being attached to any 

real property. 

(2) Title vests in the Government for all 

property acquired or fabricated by the 

Contractor in accordance with the financing 

provisions or other specific requirements for 

passage of title in the contract. Under fixed 

price type contracts, in the absence of 

financing provisions or other specific 

requirements for passage of title in the 

contract, the Contractor retains title to all 

property acquired by the Contractor for use 

on the contract, except for property identified 

as a deliverable end item. If a deliverable 

item is to be retained by the Contractor for 

use after inspection and acceptance by the 

Government, it shall be made accountable to 

the contract through a contract modification 

listing the item as Government-furnished 

property. 

(3) Title under Cost-Reimbursement or 

Time-and-Material Contracts or CostReimbursable contract line items under 

Fixed-Price contracts. (i) Title to all property 

purchased by the Contractor for which the 

Contractor is entitled to be reimbursed as a 

direct item of cost under this contract shall 

pass to and vest in the Government upon the 

vendor’s delivery of such property. 

(ii) Title to all other property, the cost of 

which is reimbursable to the Contractor, shall 

pass to and vest in the Government upon— 

(A) Issuance of the property for use in 

contract performance; 

(B) Commencement of processing of the 

property for use in contract performance; or 

(C) Reimbursement of the cost of the 

property by the Government, whichever 

occurs first. 

(f) * * * 

(1) * * * 

(iii) * * * 

(A) * * * 

(1) The name, part number and 

description, National Stock Number (if 

needed for additional item identification 

tracking and/or disposition), and other data 

elements as necessary and required in 

accordance with the terms and conditions of 

the contract. 

* * * * * 

(10) Date placed in service (if required in 

accordance with the terms and conditions of 

the contract). 

* * * * * 

(v) * * * 

(A) The Contractor shall award 

subcontracts that clearly identify items to be 

provided and the extent of any restrictions or 

limitations on their use. The Contractor shall 

ensure appropriate flow down of contract 

terms and conditions (e.g., extent of liability 

for loss of Government property. 

* * * * * 

(vi) Reports. The Contractor shall have a 

process to create and provide reports of 

discrepancies, loss of Government property, 

physical inventory results, audits and selfassessments, corrective actions, and other 

property-related reports as directed by the 

Contracting Officer. 

(vii) Relief of stewardship responsibility 

and liability. The Contractor shall have a 

process to enable the prompt recognition, 

investigation, disclosure and reporting of loss 

of Government property, including losses 

that occur at subcontractor or alternate site 

locations. 

(A) This process shall include the 

corrective actions necessary to prevent 

recurrence. 

(B) Unless otherwise directed by the 

Property Administrator, the Contractor shall 

investigate and report to the Government all 

incidents of property loss as soon as the facts 

become known. Such reports shall, at a 

minimum, contain the following information: 

(1) Date of incident (if known). 

(2) The data elements required under 

paragraph (f)(1)(iii)(A) of this clause. 

(3) Quantity. 

(4) Accountable contract number. 

(5) A statement indicating current or future 

need. 

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(6) Unit acquisition cost, or if applicable, 

estimated sales proceeds, estimated repair or 

replacement costs. 

(7) All known interests in commingled 

material of which includes Government 

material. 

(8) Cause and corrective action taken or to 

be taken to prevent recurrence. 

(9) A statement that the Government will 

receive compensation covering the loss of 

Government property, in the event the 

Contractor was or will be reimbursed or 

compensated. 

(10) Copies of all supporting 

documentation. 

(11) Last known location. 

(12) A statement that the property did or 

did not contain sensitive, export controlled, 

hazardous, or toxic material, and that the 

appropriate agencies and authorities were 

notified. 

(C) Unless the contract provides otherwise, 

the Contractor shall be relieved of 

stewardship responsibility and liability for 

property when— 

(1) Such property is consumed or 

expended, reasonably and properly, or 

otherwise accounted for, in the performance 

of the contract, including reasonable 

inventory adjustments of material as 

determined by the Property Administrator; 

(2) Property Administrator grants relief of 

responsibility and liability for loss of 

Government property; 

(3) Property is delivered or shipped from 

the Contractor’s plant, under Government 

instructions, except when shipment is to a 

subcontractor or other location of the 

Contractor; or 

(4) Property is disposed of in accordance 

with paragraphs (j) and (k) of this clause. 

* * * * * 

(h) * * * 

(1) * * * 

(ii) Loss of Government property that is the 

result of willful misconduct or lack of good 

faith on the part of the Contractor’s 

managerial personnel. 

(iii) The Contracting Officer has, in writing, 

revoked the Government’s assumption of risk 

for loss of Government property due to a 

determination under paragraph (g) of this 

clause that the Contractor’s property 

management practices are inadequate, and/or 

present an undue risk to the Government, 

and the Contractor failed to take timely 

corrective action. If the Contractor can 

establish by clear and convincing evidence 

that the loss of Government property 

occurred while the Contractor had adequate 

property management practices or the loss 

did not result from the Contractor’s failure to 

maintain adequate property management 

practices, the Contractor shall not be held 

liable. 

(2) The Contractor shall take all reasonable 

actions necessary to protect the property 

from further loss. The Contractor shall 

separate the damaged and undamaged 

property, place all the affected property in 

the best possible order, and take such other 

action as the Property Administrator directs. 

(3) The Contractor shall do nothing to 

prejudice the Government’s rights to recover 

against third parties for any loss of 

Government property. 

(4) The Contractor shall reimburse the 

Government for loss of Government property, 

to the extent that the Contractor is financially 

liable for such loss, as directed by the 

Contracting Officer. 

* * * * * 

(j) * * * 

(1) Predisposal requirements. (i) If the 

Contractor determines that the property has 

the potential to fulfill requirements under 

other contracts, the Contractor, in 

consultation with the Property 

Administrator, shall request that the 

Contracting Officer transfer the property to 

the contract in question, or provide 

authorization for use, as appropriate. In lieu 

of transferring the property, the Contracting 

Officer may authorize the Contractor to credit 

the costs of Contractor-acquired property 

(material only) to the losing contract, and 

debit the gaining contract with the 

corresponding cost, when such material is 

needed for use on another contract. Property 

no longer needed shall be considered 

contractor inventory. 

(ii) For any remaining Contractor-acquired 

property, the Contractor may purchase the 

property at the unit acquisition cost if 

desired or make reasonable efforts to return 

unused property to the appropriate supplier 

at fair market value (less, if applicable, a 

reasonable restocking fee that is consistent 

with the supplier’s customary practices.) 

(2) Inventory disposal schedules. (i) Absent 

separate contract terms and conditions for 

property disposition, and provided the 

property was not reutilized, transferred, or 

otherwise disposed of, the Contractor, as 

directed by the Plant Clearance Officer or 

authorizing official, shall use Standard Form 

1428, Inventory Disposal Schedule or 

electronic equivalent, to identify and 

report— 

(A) Government-furnished property that is 

no longer required for performance of this 

contract; 

* * * * * 

(ii) The Contractor may annotate inventory 

disposal schedules to identify property the 

Contractor wishes to purchase from the 

Government, in the event that the property is 

offered for sale. 

(iii) Separate inventory disposal schedules 

are required for aircraft in any condition, 

flight safety critical aircraft parts, and other 

items as directed by the Plant Clearance 

Officer. 

(iv) * * * 

(C) For precious metals in raw or bulk 

form, the type of metal and estimated weight. 

* * * * * 

(3) Submission requirements. (i) The 

Contractor shall submit inventory disposal 

schedules to the Plant Clearance Officer no 

later than— 

(A) 30 days following the Contractor’s 

determination that a property item is no 

longer required for performance of this 

contract; 

(B) 60 days, or such longer period as may 

be approved by the Plant Clearance Officer, 

following completion of contract deliveries 

or performance; or 

(C) 120 days, or such longer period as may 

be approved by the Termination Contracting 

Officer, following contract termination in 

whole or in part. 

(ii) Unless the Plant Clearance Officer 

determines otherwise, the Contractor need 

not identify or report production scrap on 

inventory disposal schedules, and may 

process and dispose of production scrap in 

accordance with its own internal scrap 

procedures. The processing and disposal of 

other types of Government-owned scrap will 

be conducted in accordance with the terms 

and conditions of the contract or Plant 

Clearance Officer direction, as appropriate. 

* * * * * 

(k) * * * 

(3) Absent contract terms and conditions to 

the contrary, the Government may abandon 

parts removed and replaced from property as 

a result of normal maintenance actions, or 

removed from property as a result of the 

repair, maintenance, overhaul, or 

modification process. 

* * * * * 

■ 32. Amend section 52.245–2 by 

revising the date of the clause and 

paragraph (b) to read as follows: 

52.245–2 Government Property Installation 

Operation Services. 

* * * * * 

GOVERNMENT PROPERTY 

INSTALLATION OPERATION 

SERVICES (APR 2012) 

* * * * * 

(b) The Government bears no responsibility 

for repair or replacement of any lost 

Government property. If any or all of the 

Government property is lost or becomes no 

longer usable, the Contractor shall be 

responsible for replacement of the property at 

Contractor expense. The Contractor shall 

have title to all replacement property and 

shall continue to be responsible for contract 

performance. 

* * * * * 

■ 33. Amend section 52.245–9 by 

revising the date of the clause; and 

removing from paragraph (e)(2) ‘‘The 

rental charge is’’ and adding ‘‘The 

hourly rental charge is’’ in its place. 

52.245–9 Use and Charges. 

* * * * * 

USE AND CHARGES (APR 2012) 

* * * * * 

■ 34. Amend section 52.249–2 by 

revising the date of the clause and 

paragraph (h) to read as follows: 

52.249–2 Termination for Convenience of 

the Government (Fixed-Price). 

* * * * * 

TERMINATION FOR CONVENIENCE 

OF THE GOVERNMENT (FIXEDPRICE) (APR 2012) 

* * * * * 

(h) Except for normal spoilage, and except 

to the extent that the Government expressly 

assumed the risk of loss, the Contracting 

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Federal Register / Vol. 77, No. 42 / Friday, March 2, 2012 / Rules and Regulations 12947 

Officer shall exclude from the amounts 

payable to the Contractor under paragraph (g) 

of this clause, the fair value as determined by 

the Contracting Officer, for the loss of the 

Government property. 

* * * * * 

■ 35. Amend section 52.249–3 by 

revising the date of the clause and 

paragraph (h) to read as follows: 

52.249–3 Termination for Convenience of 

the Government (Dismantling, Demolition, 

or Removal of Improvements). 

* * * * * 

TERMINATION FOR CONVENIENCE 

OF THE GOVERNMENT 

(DISMANTLING, DEMOLITION, OR 

REMOVAL OF IMPROVEMENTS) (APR 

2012) 

* * * * * 

(h) Except for normal spoilage, and except 

to the extent that the Government expressly 

assumed the risk of loss, the Contracting 

Officer shall exclude from the amounts 

payable to the Contractor under paragraph (g) 

of this clause, the fair value, as determined 

by the Contracting Officer, for the loss of the 

Government property. 

* * * * * 

■ 36. Revise section 52.251–1 to read as 

follows: 

52.251–1 Government Supply Sources. 

As prescribed in 51.107, insert the 

following clause: 

GOVERNMENT SUPPLY SOURCES 

(APR 2012) 

The Contracting Officer may issue the 

Contractor an authorization to use 

Government supply sources in the 

performance of this contract. Title to all 

property acquired by the Contractor under 

such an authorization shall vest in the 

Government unless otherwise specified in 

the contract. The provisions of the clause at 

FAR 52.245–1, Government Property, apply 

to all property acquired under such 

authorization. 

(End of clause) 

PART 53—FORMS 

■ 37. Amend section 53.245 by revising 

paragraph (c) to read as follows: 

53.245 Government property. 

* * * * * 

(c) SF 1423 (Rev. 5/04), Inventory 

Verification Survey. (See 45.602– 

1(b)(1).) 

* * * * * 

[FR Doc. 2012–4499 Filed 3–1–12; 8:45 am] 

BILLING CODE 6820–EP–P 

DEPARTMENT OF DEFENSE 

GENERAL SERVICES 

ADMINISTRATION 

NATIONAL AERONAUTICS AND 

SPACE ADMINISTRATION 

48 CFR Chapter 1 

[Docket FAR 2011–0081, Sequence 1] 

Federal Acquisition Regulation; 

Federal Acquisition Circular 2005–56; 

Small Entity Compliance Guide 

AGENCIES: Department of Defense (DoD), 

General Services Administration (GSA), 

and National Aeronautics and Space 

Administration (NASA). 

ACTION: Small Entity Compliance Guide. 

SUMMARY: This document is issued 

under the joint authority of DOD, GSA, 

and NASA. This Small Entity 

Compliance Guide has been prepared in 

accordance with section 212 of the 

Small Business Regulatory Enforcement 

Fairness Act of 1996. It consists of a 

summary of the rule appearing in 

Federal Acquisition Circular (FAC) 

2005–56, which amends the Federal 

Acquisition Regulation (FAR). An 

asterisk (*) next to a rule indicates that 

a regulatory flexibility analysis has been 

prepared. Interested parties may obtain 

further information regarding this rule 

by referring to FAC 2005–56, which 

precedes this document. These 

documents are also available via the 

Internet at http://www.regulations.gov. 

DATES: March 2, 2012. 

FOR FURTHER INFORMATION CONTACT: For 

clarification of content, contact the 

analyst whose name appears in the table 

below. Please cite FAC 2005–56 and the 

FAR case number. For information 

pertaining to status or publication 

schedules, contact the Regulatory 

Secretariat at 202–501–4755. 

LIST OF RULES IN FAC 2005–56 

Item Subject FAR 

Case Analyst 

*I ................................... Women-Owned Small Business (WOSB) Program ........................................................................ 2010–015 Morgan. 

II .................................... Proper Use and Management of Cost-Reimbursement Contracts ................................................. 2008–030 Clark. 

III ................................... Requirements for Acquisitions Pursuant to Multiple-Award Contracts ........................................... 2007–012 Clark. 

*IV ................................. Socioeconomic Program Parity ....................................................................................................... 2011–004 Morgan. 

V ................................... Trade Agreements Thresholds ....................................................................................................... 2012–002 Davis. 

VI .................................. New Designated Country (Armenia) and Other Trade Agreements Updates ................................ 2011–030 Davis. 

*VII ................................ Government Property ...................................................................................................................... 2010–009 Glover. 

VIII ................................ Technical Amendments.

SUPPLEMENTARY INFORMATION: 

Summaries for each FAR rule follow. 

For the actual revisions and/or 

amendments made by these FAR cases, 

refer to the specific item numbers and 

subject set forth in the documents 

following these item summaries. FAC 

2005–56 amends the FAR as specified 

below: 

Item I—Women-Owned Small Business 

(WOSB) Program (FAR Case 2010–015) 

This rule adopts as final, with 

changes, an interim rule published in 

the Federal Register at 76 FR 18304 on 

April 1, 2011, which provides a tool to 

assist Federal agencies in achieving the 

5 percent statutory goal for contracting 

with women-owned small businesses. 

This case is based on the Small Business 

Administration’s (SBA) regulations 

establishing the Women-Owned Small 

Business (WOSB) Program, authorized 

under section 8(m) of the Small 

Business Act (15 U.S.C. 637(m)). 

Agencies may restrict competition to 

Economically Disadvantaged WomenOwned Small Business (EDWOSB) 

concerns, for contracts assigned a North 

American Industry Classification 

Systems (NAICS) code in an industry in 

which SBA has determined that WOSBs 

are underrepresented in Federal 

procurement. For NAICS code 

industries where WOSBs are not just 

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