[Federal Register Volume 60, Number 58 (Monday, March 27, 1995)]
[Proposed Rules]
[Pages 15740-15742]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-7340]



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DEPARTMENT OF DEFENSE

48 CFR Part 45 and 52


Federal Acquisition Regulation; Government Property Class 
Deviation

AGENCY: Department of Defense.

ACTION: Notice of proposed class deviation.

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SUMMARY: The Department of Defense (DoD) is proposing a class deviation 
from the Federal Acquisition Regulation (FAR) record keeping and 
physical inventory requirements for Special Tooling, Special Test 
Equipment and Plant Equipment with an acquisition cost of $1,500 or 
less. The proposed class deviation will apply to defense contractors, 
holding them accountable for such property, but relieving them of he 
requirement to track it, while revisions to the FAR are being drafted.

DATES: Comments on the proposed class deviation should be submitted in 
writing at the address shown below on or before may 26, 1995 to be 
considered in the formulation of the final class deviation.

ADDRESSES: Interested parties should submit written comments to: Mrs. 
Linda W. Neilson, DAR Council, Attn: IMD 3D139, PDUSD(A&T)DP/DAR, 3062 
Defense Pentagon, Washington DC 20301-3062. FAX (703) 602-0350.

FOR FURTHER INFORMATION CONTACT:
Ms. Angelena Moy, telephone (703) 604-5385.

SUPPLEMENTARY INFORMATION: 

A. Background

    On September 16, 1994, (59 FR 47583) the Director of Defense 
Procurement, Department of Defense, announced an initiative to rewrite 
FAR part 45, Government Property, to make it easier to understand and 
to minimize the burdens imposed on contractors and the government. The 
Director of Defense Procurement is providing a forum for an exchange of 
ideas and information with government and industry personnel by holding 
public meetings, soliciting public comments, and publishing notices of 
the public meetings in the Federal Register. Interested parties were 
invited to provide written suggestions or comments in the notice of 
public hearing dated September 16, 1994 (59 FR 47583). Twenty-two 
commentors provided approximately 500 comments, including a 
recommendation that relief from the FAR tracking requirements for 
government property under $1,500 would reduce administrative burdens 
and provide cost savings.
    In order to capture any savings quickly, DoD is proposing a class 
deviation from current FAR record keeping and physical inventory 
requirements for Special Tooling, Special Test Equipment and Plant 
Equipment with an acquisition cost of $1,500 or less. The proposed 
class deviation was included as a discussion topic at the public 
meeting held on January 24, 1995 (60 FR 2370). DoD proposes to deviate 
from certain FAR requirements as follows:
Part 45--Government Property

45.101 Definitions.

    <bullet> Deviation authorizes the use of two additional 
definitions:
    ``Low Value Property,'' as used in this part, means Government 
property in the classes of special tooling, special test equipment, and 
plant equipment with an acquisition cost of $1,500 or less. 
Specifically excluded from this definition are agency-peculiar 
property, material, real property, and sensitive property.
    ``Sensitive Property,'' as used in this part, means Government 
property for which the theft, loss, or misplacement could be 
potentially dangerous to the public health or safety, or which must be 
subject to exceptional physical security, protection, control, 
maintenance, or accountability, including, but not limited to, 
hazardous property, precious metals, arms, ammunition, explosives, and 
classified property.

45.504 Contractor's liability.

    <bullet> Deviation authorizes contractors to report loss, damage, 
or destruction of items of low value property at contract termination 
or completion instead of when the facts become known.
45.505 Records and reports of Government property.

    <bullet> Deviation authorizes the exemption of low value property 
from the requirement of 45.505(g) for contractor property control 
systems to contain a system or technique to locate any item of 
Government property within a reasonable period of time. As a result, 
periodic physical inventories need not be performed for low value 
property.

45.505-1 Basic information.

    <bullet> Deviation excludes low value property from the present 
requirement for contractors to maintain current location for each item 
of government property. Contractor's property control records for each 
item of low value property in the contractor's possession must provide 
the basic information listed in FAR paragraphs 45.505-1 (a)(1) through 
(a)(7). However, contractors will not be required to update changes in 
location of each item of low value property which occur after 
establishment of the official government property record. This 
exemption does not apply to ``sensitive property.''

45.508 hysical inventories.

    <bullet> With the exception of inventories conducted upon 
termination or completion, the deviation authorizes an exemption for 
low value property from the requirements of FAR 45.508 for contractors 
to periodically physically inventory all Government property (except 
materials issued from stock for manufacturing, research, design, or 
other services required by the contract) in their possession or control 
and to cause subcontractors to do likewise. In addition, the deviation 
requires a contractor whose property control system is disapproved to 
perform a physical inventory and report all loss, damage, or 
destruction of Government property prior to system reapproval.
Part 52--Solicitation Provisions and Contract Clauses

52.245-2 Government Property (Fixed-Price Contracts) (DEC 1989).

    <bullet> Deviation authorizes the substitution of the following 
paragraph (c)(2) for paragraph (c)(2) of the basic clause. The 
substitute paragraph (c)(2) makes it clear that title to items of 
[[Page 15741]] Government property lost, damaged, or destroyed and 
replaced under the risk of loss provisions of the clause, vests in the 
Government:
    (c)(2) All Government-furnished property, property acquired by the 
Contractor, or all property replaced by the Contractor under the risk 
of loss provisions of this clause, title to which vests in the 
Government under this paragraph (collectively referred to as 
``Government property''), are subject to the provisions of this clause. 
However, special tooling accountable to this contract is subject to the 
provisions of the Special Tooling clause and is not subject to the 
provisions of this clause. 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.

52.245-2 Government Property (Fixed Price Contracts) (Alternate I) (APR 
1984).

    <bullet> Deviation authorizes substitution of ``Limited risk of 
loss'' for the title of paragraph (g), and substitution of the 
following subparagraph (g)(2), which requires contractors to assume the 
risk of, and be responsible for, any loss, damage, or destruction of 
low value property, with the exception of reasonable wear and tear:
    (g)(2) The Contractor assumes the risk of and shall be responsible 
for, any loss or destruction of, or damage to low value property upon 
its delivery to the Contractor or upon passage of title to the 
Government under paragraph (c) of this clause. However, the Contractor 
is not responsible for reasonable wear and tear of low value property 
or for low value property properly consumed in performing this 
contract. With respect to all other Government property, the Contractor 
shall not be liable for loss or destruction of, or damage to, the 
Government property provided under this contract (or, if an educational 
or nonprofit organization, for expenses incidental to such loss, 
destruction, or damage), except as provided in subparagraphs (3) and 
(4) below.
    <bullet> Deviation authorizes substitution of the following 
subparagraph (g)(6), which allows contractors to report loss, damage, 
or destruction of items of low value property at contract termination 
or completion:
    (g)(6) Upon loss or destruction of, or damage to, Government 
property provided under this contract, (with the exception of low value 
property for which loss, damage, or destruction is reported at contract 
termination or completion), the Contractor shall so notify the 
Contracting Officer and shall communicate with the loss and salvage 
organization, if any, designated by the Contracting Officer. With the 
assistance of any such organization, the Contractor shall take all 
reasonable action to protect the Government property from further 
damage, separate the damaged and undamaged Government property, put all 
the affected Government property in the best possible order, and 
furnish to the Contracting Officer as statement of--
    (i) The lost, destroyed, or damaged Government property;
    (ii) The time and origin of the loss, destruction, or damage;
    (iii) All known interests in commingled property of which the 
Government property is a part; and
    (iv) The insurance, if any, covering any part of or interest in 
such commingled property.
    <bullet> Deviation authorizes substitution of the following 
subparagraph (g)(8), which makes the cost of insurance due to 
assumption of risk of loss for low value property an allowable cost 
pursuant to FAR 31.205-19:
    (g)(8) The Contractor represents that it is not including in the 
price and agrees it will not hereafter include in any price to the 
Government any charge or reserve for insurance (including any self-
insurance fund or reserve) covering loss or destruction of, or damage 
to, Government property, except:
    (i) to the extent that the Government may have expressly required 
the Contractor to carry such insurance under another provision of this 
contract; or
    (ii) low value property.

52.245-5 Government Property (Cost-Reimbursement, Time-and-Material, or 
Labor-Hour Contracts) (JAN 1986).

    <bullet> Deviation authorizes substitution of the following 
paragraphs (c)(2) and (c)(3), which clarify that title to items of 
government property lost, damaged, or destroyed and replaced under the 
risk of loss provisions of the clause vests in the government:
    (c)(2) 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 or for which the Contractor is responsible to 
replace under the risk of loss provisions of this clause shall pass to 
and vest in the Government upon the vendor's delivery of such property.
    (c)(3) Title to all other property, the cost of which is 
reimbursable to the Contractor, or for which the Contractor is 
responsible to replace under the risk of loss provisions of this clause 
shall pass to and vest in the Government upon--
    (i) Issuance of the property for use in contract performance;
    (ii) Commencement of processing of the property for use in contract 
performance; or
    (iii) Reimbursement of the cost of the property by the Government, 
whichever occurs first.
    <bullet> Deviation authorizes substitution of ``Risk of loss'' for 
the title of paragraph (g), and substitution of the following 
subparagraph (g)(1), which requires contractors to assume the risk of, 
and be responsible for, any loss, damage, or destruction of low value 
property, with the exception of reasonable wear and tear:
    (g) (1) The Contractor assumes the risk of, shall be responsible 
for, and shall not be entitled to reimbursement as an allowable cost 
for any loss or destruction of, or damage to low value property upon 
its delivery to the contractor or upon passage of title to the 
Government under paragraph (c) of this clause. However, the contractor 
is not responsible for reasonable wear and tear of low value property 
or for low value property properly consumed in performing this 
contract. With respect to all other Government property, the Contractor 
shall not be liable for loss or destruction of, or damage to, the 
Government property provided under this Contract or for expenses 
incidental to such loss, destruction, or damage, except as provided in 
subparagraphs (2) and (3) below.
    <bullet> Deviation authorizes substitution of the following 
subparagraph (g)(5), which allows contractors to report loss, damage, 
or destruction of items of low value property at contract termination 
or completion:
    (g)(5) Upon loss or destruction of, or damage to, Government 
property provided under this contract, with the exception of low value 
property for which loss, damage, or destruction is reported at contract 
termination or completion, the Contractor shall so notify the 
Contracting Officer and shall communicate with the loss and salvage 
organization, if any, designated by the Contracting Officer. With the 
assistance of any such organization, the Contractor shall take all 
reasonable action to protect the Government property from further 
damage, separate the damaged and undamaged Government property, put all 
the affected Government property in the best possible order, and 
furnish to the Contracting Officer a statement of--
    (i) The lost, destroyed, or damaged Government 
property; [[Page 15742]] 
    (ii) The time and origin of the loss, destruction, or damage;
    (iii) All known interests in commingled property of which the 
Government property is a part; and
    (iv) The insurance, if any, covering any part of or interest in 
such commingled property.
    <bullet> Deviation authorizes substitution of the following 
subparagraph (g)(7), which makes the cost of insurance due to DoD 
contractors' assumption of risk of loss for low value property an 
allowable cost pursuant to FAR 31.205-19:
    (g)(7) The Contractor shall not be reimbursed for, and shall not 
include as an item of overhead, the cost of insurance or of any reserve 
covering risk of loss or destruction of, or damage to, Government 
property, except:
    (i) to the extent that the Government may have expressly required 
the Contractor to carry such insurance under another provision of this 
contract; or
    (ii) low value property.

52.245-7 Government Property (Consolidated Facilities) (APR 1984).

    <bullet> Deviation authorizes substitution of the following 
subparagraphs (d)(2) and (d)(4), which clarify that title to items of 
Government property lost, damaged, or destroyed, and replaced under the 
risk of loss provisions of this clause vests in the Government:
    (d)(2) Title to all facilities and components shall pass to and 
vest in the Government upon delivery by the vendor of all such items 
purchased by the Contractor for which it is entitled to be reimbursed 
as a direct item of cost under this contract or for which the 
Contractor is responsible to replace under the risk of loss provisions 
specified in the clause at FAR 52.245-8, Liability for the Facilities.
    (d)(4) Title to other property, the cost of which is reimbursable 
to the Contractor under this contract or for which the Contractor is 
responsible to replace under the risk of loss provisions specified in 
the clause at FAR 52.245-8, Liability for the Facilities, shall pass to 
and vest in the Government upon----
    (i) Issuance of the property for use in performing this contract;
    (ii) Commencement of processing or use of the property in 
performing this contract; or
    (iii) Reimbursement of the cost of the property by the Government, 
whichever occurs first.

52.245-8 Liability for the Facilities (APR 1984).

    <bullet> Deviation authorizes substitution of the following 
paragraph (b), which requires contractors to assume risk of, and be 
responsible for, any loss, damage, or destruction of low value 
property, except for reasonable wear and tear:
    (b) The Contractor assumes the risk of, shall be responsible for, 
and shall not be entitled to reimbursement as an allowable cost for any 
loss or destruction of, or damage to low value property upon its 
delivery to the contractor or upon passage of title to the Government 
as specified in the clause at FAR 52.245-7, Government Property 
(Consolidated Facilities), FAR 52.245-10, Government Property 
(Facilities Acquisition) or FAR 52.245-11, Government Property 
(Facilities Use). However, the Contractor is not responsible for 
reasonable wear and tear of low value property or for low value 
property properly consumed in performing this contract. With respect to 
all other Government property, the Contractor shall not be liable for 
any loss or destruction of, or damage to, the facilities, or for 
expenses incidental to such loss, destruction, or damage, except as 
provided in this clause.
    <bullet> Deviation authorizes substitution of the following 
paragraph (f), which makes the cost of insurance due to assumption of 
risk of loss for low value property an allowable cost pursuant to FAR 
31.205-19:
    (f) Unless expressly directed in writing by the Contracting 
Officer, the Contractor shall not include in the price or cost under 
any contract with the Government the cost of insurance (including self-
insurance) against any form of loss, destruction, or damage to the 
facilities. However, the Contractor may include the price or cost of 
such insurance against any form of loss, destruction, or damage to low 
value property. Any insurance required under this clause shall be in 
such form, in such amounts, for such periods of time, and with such 
insurers (including the Contractor as self-insurer in appropriate 
circumstances) as the Contracting Officer shall require or approve. 
Such insurance shall provide for 30 days advance notice to the 
Contracting Officer, in the event of cancellation or material change in 
the policy coverage on the part of the insurer. A certificate of 
insurance or a certified copy of such insurance shall be deposited 
promptly with the Contracting Officer. The Contractor shall, not less 
than 30 days before the expiration of such insurance, deliver to the 
Contracting Officer a certificate of insurance or a certified copy of 
each renewal policy. The insurance shall be in the name of the United 
States of America (Agency Name), the Contractor, and such other 
interested parties as the Contracting Officer shall approve, and shall 
contain a loss payable clause reading substantially as follows: Any 
loss under this policy shall be adjusted with (Contractor) and the 
proceeds, at the direction of the Government, shall be paid to 
(Contractor). Proceeds not paid to (Contractor) shall be paid to the 
office designated by the Contracting Officer.
    <bullet> Deviation authorizes substitution of the following 
introductory text for paragraph (g), which allows contractors to report 
loss, damage, or destruction of items of low value property only at 
contract termination or completion:
    (g) With the exception of low value property for which the loss, 
damage, or destruction is required to be reported at contract 
termination or completion, when there is any loss or destruction of, or 
damage to, the facilities----

52.245-11 Government Property (Facilities Use) (APR 1984).

    <bullet> Deviation authorizes insertion of the following new 
subparagraph (c)(2), which clarifies that title to items of Government 
property lost, damaged, or destroyed, and replaced under the risk of 
loss provisions of this clause vests in the Government. The deviation 
also authorizes substitution of the numbering of the existing 
subparagraphs (c)(2), (c)(3), and (c)(4) as (c)(3), (c)(4), and (c)(5), 
respectively:
    (c)(2) Title to facilities for which the Contractor is responsible 
to replace under the risk of loss provisions specified in the clause at 
FAR 52.245-8, Liability for the Facilities, shall pass to and vest in 
the Government upon the vendor's delivery of such facilities. Title to 
all other facilities for which the Contractor is responsible to replace 
under the risk of loss provisions specified in the clause at FAR 
52.245-8 shall pass to an vest in the Government upon----
    (i) Issuance of the property for use in contract performance;
    (ii) Commencement of processing of the property for use in contract 
performance; or
    (iii) Reimbursement of the cost of the property by the Government, 
whichever occurs first.

List of Subjects in 48 CFR Parts 45 and 52

    Government procurement.
Claudia L. Naugle,
Executive Editor, Defense Acquisition Regulations Council.
[FR Doc. 95-7340 Filed 3-24-95; 8:45 am]
BILLING CODE 5000-04-M