Source: https://www.federalregister.gov/documents/2012/03/02/2012-4499/federal-acquisition-regulation-government-property
Timestamp: 2019-09-18 22:19:35
Document Index: 712523504

Matched Legal Cases: ['art 45', 'art 45', 'art 45', 'art 1', 'art 1', 'art 45', 'art 2', 'art 16', 'art 45']

12937-12947 (11 pages)
Docket 2010-0009, Sequence 1
https://www.federalregister.gov/d/2012-4499 https://www.federalregister.gov/d/2012-4499
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.
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.
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.”
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.
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 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 low-value items until contract termination.
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 industry-leading 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.
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.
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 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.
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.
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.
Comment: One respondent suggested revising the definition of “production scrap,” changing the term to “material scrap,” and including scrap from non-production 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.
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.
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” 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 “non-sensitive.”
Response: The applicability of this paragraph is clear without the addition.
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.
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:
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.
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:
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:
26. Remove sections 45.606-2 and 45.606-3.
27. Amend section 49.204 by removing from paragraph (b) “destroyed, lost, stolen, or” and adding “lost or” in its place.
28. Amend section 51.106 by removing from paragraph (b) “having an” and adding “having a unit” in its place.
29. Amend section 52.232-16 by revising the date of the clause, and the last sentence of paragraph (e) to read as follows:
31. Amend section 52.245-1 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”.
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)(
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
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 “(
aa. Removing from Alternate II “(
(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.
(3) Title under Cost-Reimbursement or Time-and-Material Contracts or Cost-Reimbursable 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.
(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.
(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—
32. Amend section 52.245-2 by revising the date of the clause and paragraph (b) to read as follows:
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.
34. Amend section 52.249-2 by revising the date of the clause and paragraph (h) to read as follows:
35. Amend section 52.249-3 by revising the date of the clause and paragraph (h) to read as follows:
36. Revise section 52.251-1 to read as follows:
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.
37. Amend section 53.245 by revising paragraph (c) to read as follows:
[FR Doc. 2012-4499 Filed 3-1-12; 8:45 am]