[Federal Register Volume 61, Number 174 (Friday, September 6, 1996)]
[Rules and Regulations]
[Pages 47082-47086]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-22372]


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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Parts 1845, 1852 and 1853


Revision to NASA FAR Supplement Coverage on Government Property

AGENCY: Office of Procurement, Contract Management Division, National 
Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: This is a final rule amending the NASA FAR Supplement to 
incorporate changes pertaining to government property reporting by 
contractors. The intent of this rule is to improve the completeness, 
accuracy and timeliness of the reporting process.

EFFECTIVE DATE: September 6, 1996.

FOR FURTHER INFORMATION CONTACT: Larry G. Pendleton, (202) 358-0487.

SUPPLEMENTARY INFORMATION:

Background

    Recent experience at NASA in preparing and auditing annual 
financial statements as required by the Chief Financial Officer's (CFO) 
Act has led to the need for changes in the contract property reporting 
process to improve the completeness, accuracy and timeliness of 
information received. NASA does not maintain detailed records of 
government property in the possession of contractors. Pursuant to the 
Federal Acquisition regulation (FAR) 45.505 the contractor's property 
control records constitute the Government's official property records. 
All NASA contracts, under which the contractor is accountable for 
government property, are required to contain a provision that specifies 
the annual submission of a report containing summary financial and 
property information on the property in the contractor's custody. 
Therefore, when agency requirements for financial/property management 
information change, they must be implemented by NASA contractors in 
possession of government property. In formulating the rule, NASA 
objectives have been to streamline the report to obtain only 
information necessary to report on and conduct oversight of contractor 
held property, and to generally minimize the impact on reporting 
entities.

Summary of Substantive Comments

    One comment objected to the inclusion of data on costs for 
construction-in-progress and work-in-process on the grounds that such 
requirements are inappropriate in a property reporting system, and that 
the information is not currently available from contractor property 
records. This data is necessary for NASA to comply with Office of 
Management and Budget (OMB) guidance on the form and content of federal 
agency financial statements, and with the forthcoming accounting 
standard on property, plant, and equipment to be issued by the Federal 
Accounting Standards Advisory Board (FASAB). NASA Form (NF) 1018 is a 
financial report about government property in the possession of 
contractors. Therefore, contractors may be required to extract 
financial information from other contractor record systems instead of 
exclusive reliance on existing property systems for needed information. 
The commenter acknowledged that the required information is available 
from other contractor records. In addition, contractors are required by 
FAR 45.505(b) to provide financial accounts

[[Page 47083]]

in their property control systems for government-owned property in 
their possession or control. The order of property classification 
accounts on NF 1018 has been changed as suggested by public comment to 
group real property accounts together.
    Another comment objected to NF 1018 Item 19, Type of Deletion as 
requiring major property record system changes in order to furnish this 
level of detail. This category is new in name only, currently being 
categorized as Disposals on the present form. Detailed lists of 
information about these disposals are now required to be maintained by 
contractors in the event they are needed by NASA organizations. 
Replacing Disposals with Type of Deletion will generate no new 
information requirements for contractors, and will make reporting more 
complete, accurate, and comparable among contractors by standardizing 
the way in which deletion types are provided to the government. 
However, as recommended by the commenter, the types of deletions have 
been rearranged, two types have been combined, and three have been 
deleted since they are part of the plant clearance process.
    There was objection in one comment to a proposed requirement that 
property shipped to others remain on the shipping contractor's 
accountable records until evidence of receipt is obtained from the 
consignee. The comment pointed out that receiving contractors do not 
normally acknowledge receipt, and that issues of liability, taxable 
location, and new suspense systems were raised by the proposed 
requirement. While NASA does not agree that all of the issues raised by 
the comment are valid, there are acknowledged difficulties in tracking 
items assigned to a carrier for shipment. The objective sought by the 
proposed arrangement is clear and consistent accountability for 
government property at all times. Based upon the concerns expressed in 
the comment, the final rule will be changed to provide that property in 
transit during the month of September of each year shall be reported by 
the shipping contractor, unless confirmation of receipt at destination 
has been obtained.
    Objection was made in another comment to the revised contract 
clause that provides for possible withholding of payment on invoices 
when required property reports are not submitted when due. Prompt 
receipt of these reports is critical to NASA's ability to prepare 
annual financial reports, obtain audit review, and publish them when 
due as required by law. Submission of property reports when required is 
a contractual obligation resulting from a specific provision in each 
affected contract with which contractors have agreed by executing the 
contract. However, in response to the concerns expressed in the 
comment, the final rule limits possible withholding to a total of 
$25,000 or 5 percent of the amount of the contract, whichever is less. 
In addition, explanatory language has been added to the prescription 
for the clause making clear the importance of timely report submission 
and encouraging efforts to obtain reports by the due date rather than 
using the withholding authority.
    Another comment noted that there is an effort underway to develop a 
standard, government-wide property report and recommends that NASA 
delay consideration of this rule pending the results of that effort. 
Alternatively, the commenter recommends a public hearing to address its 
comments. NASA is represented on the interagency group that is 
rewriting FAR Part 45, and the subgroup considering a government 
standard form. It is not known when these groups will complete their 
work and revise the relevant regulations. The revisions contained in 
the proposed rule must be made without further delay to allow NASA to 
fulfill its financial management obligations. Public comment on the 
proposed rule was received from only one organization. Due to this low 
level of expressed interest, a public hearing will not be scheduled.

Procedural Requirements

Review Under the Regulatory Flexibility Act

    This rule was reviewed under the Regulatory Flexibility Act of 
1980. The rule revises the former regulation by simplifying and 
reducing reporting requirements, the costs of which are in any case 
reimbursed by the Government. NASA certifies that the rule will not 
have a significant economic impact on a substantial number of small 
entities.

Review Under the Paperwork Reduction Act

    Under 5 CFR 1320.5(b)(2)(i), NASA is required to inform potential 
persons who are to respond to the collection of information that such 
persons are not required to respond to the collection of information 
unless it displays a currently valid OMB control number. Under 5 CFR 
1320.5(b)(2)(ii)(C), this paragraph meets that display requirement by 
providing the following statement: Information collection associated 
with this rule has been approved under OMB Control Number(s) 2700-0017 
with an expiration date of 12/31/98. This information collection, as 
revised, represents a reduction in the estimated paperwork burden to 
respondents from the present reporting requirements. The reporting 
format has been reduced from 4 pages to 2, and has been streamlined to 
facilitate preparation and to clarify reporting requirements. 
Completion of the information collection merely requires contractors to 
transcribe data from existing contractor records onto the report.

List of Subjects in 48 CFR Parts 1845, 1852 and 1853

    Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.

    Accordingly, 48 CFR Parts 1845, 1852, and 1853 are amended as 
follows:
    1. The authority citation for 48 CFR Parts 1845, 1852, and 1853 
continues to read as follows:

    Authority: 42 U.S.C. 2473(c)(1).

PART 1845--GOVERNMENT PROPERTY

    2. Section 1845.102-70(a)(3) is revised to read as follows:


1845.102-70  Procedures.

    (a) * * *
    (3) Requirement that additional facilities that the offeror 
requests to be provided by the Government be described and identified 
by classification such as ``Land'', ``Buildings'', and ``Equipment'' 
(see subpart 1845.71); and
* * * * *


1845.106-70  [Amended]

    3. In section 1845.106-70, paragraph (d) is revised to read as 
follows, paragraph (i) is removed and paragraphs (j) and (k) are 
redesignated as paragraphs (i) and (j):


1845.106-70  NASA contract clauses and solicitation provision.

* * * * *
    (d)(1) The contracting officer shall insert the clause at 1852.245-
73, Financial Reporting of NASA Property in the Custody of Contractors, 
in all cost reimbursement contracts. It shall be included in all other 
types of contracts when it is known at the time of award that property 
will be provided to the contractor or that the contractor will acquire 
property, title to which will vest in the Government prior to delivery 
of the contract products. Where all

[[Page 47084]]

property to be provided is subject to the clause at 1852.245-71, 
Installation-Provided Government Property (see paragraph (b) of this 
section), the clause at 1852.245-73 is not required. Where the clause 
is not included in contracts at the time of award, if Government 
property is subsequently provided to a contractor, or the contractor is 
authorized to acquire property to which the Government takes title, the 
clause shall be included in the contract at that time.
    (2) Paragraph (c) of the clause at 1852.245-73 permits the 
contracting officer to withhold payments, up to a specified dollar 
limit, in the event a contractor fails to submit the annual NF 1018 by 
the due date. This provision reflects the importance to NASA of 
receiving this financial data on time. Upon receipt, the information is 
entered into the NASA accounting system and is used in the preparation 
of agency annual financial statements. Therefore, timely receipt of 
contractor held property financial data is essential to the process. A 
concerted effort should be made to obtain NF 1018 reports by the due 
date before resorting to the payment withholding alternative.
* * * * *


1845.301  [Amended]

    4. In section 1845.301, the definition heading ``Space property'' 
is revised to read ``Agency-peculiar property''.


1845.407  [Amended]

    5. In section 1845.407, the section heading ``Non-Government use of 
plant equipment'' is revised to read ``Non-Government use of 
equipment''.
    6. In the introductory text to section 1845.407, the phrase ``plant 
equipment'' is revised to read ``equipment''.
    7. In paragraphs (a) (1) and (b) to section 1845.407, the phrase 
``plant equipment'' is revised to read ``equipment''.


1845.501  [Amended]

    8. In section 1845.501, in the definition of ``Space property'', 
the heading ``Space property'' is revised to read ``Agency-peculiar 
property'', the phrase ``property peculiar to NASA'' is revised to read 
``property unique to NASA'', and the last sentence is removed.
    9. In section 1845.501, in the definition ``Centrally reportable 
equipment (CRE)'', the phrase ``space property'' is revised to read 
``agency-peculiar property''


1845.502-1  [Amended]

    10. In section 1845.502-1, the title of the NASA Form 1018 ``Report 
of Government-Owned/Contractor-Held Property'' is revised to read 
``NASA Property in the Custody of Contractors''.


1845.502-71  [Amended]

    11. In paragraph (e) to section 1845.502-71, the heading ``Space 
Property'' is revised to read ``Agency-peculiar property''.
    12. Section 1845.505-14 is revised to read as follows:


1845.505-14  Reports of Government property.

    When required by the contract, the contractor shall submit a report 
of NASA Property in the Custody of Contractors, NASA Form 1018, in 
accordance with the instructions on the form, in subpart 1845.71, and 
the contract clause at 1852.245-73. Contractor property control systems 
shall distinguish between Government furnished and contractor acquired 
property classification shown in FAR 45.505-14(a) (1) through (5).


1845.7101  [Amended]

    13. In 1845.7101 the last sentence is removed and the following 
three sentences are added to read as follows:
    * * * This report provides information for NASA financial 
statements and property management; accuracy and timeliness of the 
report are, therefore, very important. Contractors shall retain 
documents which support the data reported on NF 1018 in accordance with 
FAR subpart 4.7, Contractor Records Retention. Classifications of 
property, related costs to be reported, and reporting requirements are 
set forth in this subpart.
    14. Sections 1845.7101-1, 1845.7101-2, 1845.7101-3, 1845.7101-4 and 
1845.7101-5 are revised to read as follows:


1845.7101-1  Property classification.

    (a) Contractors shall report costs in the classifications required 
on NF 1018, as described in this section. For Land, Buildings, Other 
Structures and Facilities, and Leasehold Improvements, contractors 
shall report the amount for all items with a unit cost of $5,000 or 
more and useful life of 2 years or more. For Plant Equipment, Special 
Tooling, Special Test Equipment and Agency-Peculiar Property, 
Contractors shall separately report--
    (1) The amount for all items with a unit cost of $5,000 or more and 
a useful life of 2 years or more, and
    (2) All times under $5,000, regardless of useful life.
    (b) Contractors shall report the amount for all Materials, 
regardless of unit cost.
    (c) Land. Includes costs of land, improvements to land, and 
associated costs incidental to acquiring and preparing land for use, 
for example; appraisal fees, clearing costs, drainage, grading, 
landscaping, plats and surveys, removal and relocation of the property 
of others as part of a land purchase, removal or destruction of 
structures or facilities purchased but not used, and legal expenses.
    (d) Buildings. Includes costs of buildings, improvements to 
buildings, and fixed equipment required for the operation of a building 
which is permanently attached to and a part of the building and cannot 
be removed without cutting into the walls, ceilings, or floors. 
Examples of fixed equipment required for the functioning of a building 
include plumbing, heating and lighting equipment, elevators, central 
air conditioning systems, and built-in safes and vaults.
    (e) Other structures and facilities. Includes costs of acquisitions 
and improvements of structures and facilities other than buildings; for 
example, airfield pavements, harbor and port facilities, power 
production facilities and distribution systems, reclamation and 
irrigation facilities, flood control and navigation aids, utility 
systems (heating, sewage, water and electrical) when they serve several 
buildings or structures, communication systems, traffic aids, roads and 
bridges, railroads, monuments and memorials, and nonstructural 
improvements, such as sidewalks, parking areas, and fences.
    (f) Leasehold improvements. Includes costs of improvements to 
leased buildings, structures, and facilities, as well as easements and 
right-of-way, where NASA is the lessee or the cost is charged to a NASA 
contract.
    (g) Equipment. Includes costs of commercially available personal 
property for use in manufacturing supplies, performing services, or any 
general or administrative purpose; for example, machine tools, 
furniture, vehicles, computers, accessory or auxiliary items, and test 
equipment.
    (h) Construction in progress. Includes costs for work in process 
for the construction of Buildings, Other Structures and Facilities, and 
Leasehold Improvements to which NASA has title.
    (i) Special tooling. Includes costs of equipment and manufacturing 
aids (and components and replacements of these items) that are of such 
a specialized nature that, without substantial modification or 
alteration, their use is limited to the development or production of 
particular supplies or parts, or to the performance of particular 
services. Examples include jigs, dies,

[[Page 47085]]

fixtures, molds, patterns, taps and gauges.
    (j) Special test equipment. Includes costs of equipment used to 
accomplish special purpose testing in performing a contract, and items 
or assemblies of equipment.
    (k) Material. Includes costs of NASA owned property held in 
inventory that may become a part of an end item or be expended in 
performing a contract. Examples include raw and processed material, 
parts, assemblies, small tools and supplies. Does not include material 
that is part of work in process.
    (l) Agency-peculiar property. Includes actual or estimated costs of 
completed items, systems and subsystems, spare parts and components 
unique to NASA aeronautical and space programs. Examples include 
aircraft, engines, satellites, instruments, rockets, prototypes and 
mock-ups. The amount of property, title to which vests in the 
Government as a result of progress payments to fixed price 
subcontractors, shall be included to reflect the pro rata cost of 
undelivered agency-peculiar property.
    (m) Contract work-in-process. Includes the costs of all work-in-
process and excludes the costs of completed items reported in other 
categories.


1845.7101-2   Transfers of property.

    The procedures in this section apply to all types of transfers. 
Only Government installations may furnish Government property to a 
contractor. Therefore, procurement, property, and financial 
organizations at NASA Centers must effect all transfers of 
accountability, although physical shipment and receipt of property may 
be made directly by contractors. Such transfers include shipments 
between contractors of the same installation, contractors of different 
installations, a contractor of one installation to another 
installation, an installation to a contractor of another installation, 
and a contractor to another Government agency or its contractor. So 
that NASA may properly control and account for transfers, they shall be 
adequately documented. The procedures described in this section shall 
be followed in all cases, to provide an administrative and audit trail, 
even if property is physically shipped directly from one contractor to 
another. Property shipped between September 1 and September 30, 
inclusively, shall be reported by the shipping contractor, regardless 
of the method of shipment, unless written evidence of receipt at 
destination has been received. Property provided under fixed price 
repair contracts remains accountable to the cognizant NASA Center and 
is not reportable on NF 1018; property provided for repair under a 
cost-reimbursement contract, however, is accountable to the contractor 
and reportable on NF 1018.
    (a) Approval and notification. The contractor must obtain the 
approval of the contracting officer or designee for transfers of 
property before shipment. Each shipping document must contain contract 
numbers, shipping references, property classifications in which the 
items are recorded, unit prices, and any other appropriate identifying 
or descriptive data. Unit prices shall be obtained from records 
maintained pursuant to FAR part 45 and part 1845 of this chapter. 
Shipping contractors shall furnish a copy of the shipping document to 
the cognizant property administrator. Shipping and receiving 
contractors shall promptly notify the financial management office of 
the NASA Center responsible for their respective contracts when 
accountability for Government property is transferred to, or received 
from, other contracts, contractors, NASA Centers or Government 
agencies. Copies of shipping or receiving documents will suffice as 
notification in most instances.
    (b) Reclassification. If property is transferred to another 
contract or contractor, the receiving contractor shall record the 
property in the same property classification and amount appearing on 
the shipping document. For example, when a contractor receives an item 
from another contractor that is identified on the shipping document as 
equipment, but that the recipient intends to incorporate into special 
test equipment, the recipient shall first record the item in the 
equipment account and subsequently reclassify it as special test 
equipment. Reclassification of equipment, special tooling, special test 
equipment, or agency-peculiar property requires prior approval of the 
contracting officer or a designee.
    (c) Incomplete documentation. If contractors receive transfer 
documents having insufficient detail to properly record the transfer 
(e.g., omission of property classification, unit prices, etc.) they 
shall request the omitted data directly from the shipping contractor or 
through the property administrator as provided in FAR 45.505-2.


1845.7101-3  Computing costs of fabricated special tooling, special 
test equipment, agency-peculiar property and contract work in process.

    (a) Costs shall be computed in accordance with accepted accounting 
principles, be reasonably accurate, and be the product of any one or a 
combination of, the following:
    (1) Abstracts of cost data from contractor property or financial 
records.
    (2) Computations based on engineering and financial data.
    (3) Estimates based on NASA Form 533 reports.
    (4) Formula procedures (e.g., using a 50 percent factor for work in 
process items, on the basis of updated Standard Form 1411 estimates or 
the contractor's approved estimating and pricing system).
    (5) Other approved methods.
    (b) Contractors shall report costs using records that are part of 
the prescribed property or financial control system as provided in this 
section. Fabrication costs shall be based on approved systems or 
procedures and shall include all direct and indirect costs of 
fabricating Government property.
    (c) The contractor shall redetermine the costs of items returned 
for modification or rehabilitation.
    (d) The computation of work in process shall include the costs of 
associated systems, subsystems, and spare parts and components 
furnished or acquired and charged to work in process pending 
incorporation into a finished item. These types of items make up what 
is sometimes called production inventory and include programmed extra 
units to cover replacement during the fabrication process (production 
spares). Also included are deliverable items on which the contractor or 
a subcontractor has begun work, and materials that have been issued 
from inventory.


1845.7101-4  Type of deletion.

    Contractors shall report the types of deletions from contract 
property records as described in this section.
    (a) Adjusted. Changes in the deletion amounts, if any, that result 
from mathematical errors in the previous report.
    (b) Lost, damaged or destroyed. Deletion amounts as a result of 
relief from responsibility under FAR 45.503 granted during the 
reporting period.
    (c) Transferred in place. Deletion amounts that result from a 
transfer of property to a follow-on contract with the same contractor.
    (d) Transferred to center accountability. Deletion amounts that 
result from transfer of accountability to the NASA Center responsible 
for the contract, whether or not the items are physically moved.
    (e) Transferred to another NASA Center. Deletion amounts caused by 
transfer of accountability to NASA Center other than the one 
responsible for the contract, whether or not the items are physically 
moved.

[[Page 47086]]

    (f) Transferred to another Government agency. Deletion amounts that 
result from transfer of property to another Government agency.
    (g) Purchased at cost/returned for credit. Deletion amounts due to 
contractor purchase or retention of contractor acquired property as 
provided in FAR 45.605-1; or to contractor returns to suppliers under 
FAR 45.605-2.
    (h) Disposal through plant clearance process. Deletions other than 
transfers; i.e., donations to eligible recipients, sold at less than 
cost, or abandoned/directed destruction.


1845.7101-5  Contractor's privileged financial and business 
information.

    If a transfer of property between contractors will involve 
disclosing costs of a proprietary nature, the contractor shall furnish 
unit prices only on those copies of the shipping documents that are 
sent to the shipping and receiving NASA installations. Transfer of the 
property to the receiving contractor shall be on a no-cost basis.


1845.7101-6  [Redesignated]


1845.7101-7, 1845.7101-8, 1845.7101-9  [Removed]

    15.-16. Sections 1845.7101-7, 1845.7101-8, and 1845.7101-9 are 
removed.


1845.7101-10  [Redesignated]

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    17.-18. Section 1852.245-73 is revised to read as follows:


1852.245-73  Financial reporting of NASA property in the custody of 
contractors.

    As prescribed in 1845.106-70(d), insert the following clause:

Financial Reporting of NASA Property in the Custody of Contractors

Sept. 1996

    (a) The Contractor shall submit annually a NASA Form (NF) 1018, 
NASA Property in the Custody of Contractors, in accordance with 
1845.505-14, the instructions on the form, and subpart 1845.71. 
Subcontractor use of NF 1018 is not required by this clause; 
however, the contractor shall include data on property in the 
possession of subcontractors in the annual NF 1018.
    (b) If administration of this contract has been delegated to the 
Department of Defense, the original of NASA Form 1018 shall be 
submitted to the NASA installation Financial Management Officer and 
three copies shall be sent concurrently through the DOD Property 
Administrator to the NASA office identified below. If the contract 
is administered to NASA, the original of NF 1018 shall be submitted 
to the installation Financial Management Officer, and three copies 
shall be sent concurrently to the following NASA office:

(Insert the address and office code of the organization within the 
cognizant NASA installation.)

    (c) The annual reporting period shall be from October 1 of each 
year through September 30 of the following year. The report shall be 
submitted in time to be received by October 31. The information 
contained in these reports is entered into the NASA accounting 
system to reflect current asset values for agency financial 
statement purposes. Therefore, it is essential that required reports 
be received no later than October 31. The Contracting Officer may, 
in the Government's interest, withhold payment until a reserve not 
exceeding $25,000 or 5 percent of the amount of the contract, 
whichever is less, has been set aside, if the Contractor fails to 
submit annual NF 1018 reports when due. Such reserve shall be 
withheld until the Contracting Officer has determined that the 
required reports have been received by the Government. The 
withholding of any amount or the subsequent payment thereof shall 
not be construed as a waiver of any Government right.
    (d) A final report is required within 30 days after disposition 
of all property subject to reporting when the contract performance 
period is complete.

(End of clause)


1852.245-78   [Removed]

    19. Section 1852.245-78 is removed.

PART 1853--FORMS

    20. Section 1853.245(a) is revised to read as follows:


1853.245   Property (NASA Form 1018, Department of Defense Form 1342, 
and Department of Defense Form 1419).

    (a) NASA Form 1018, NASA Property in the Custody of Contractors. 
NASA Form 1018, prescribed at 1845.505-14, shall be used by contractors 
for reporting Government-owned property.
* * * * *
[FR Doc. 96-22372 Filed 9-5-96; 8:45 am]
BILLING CODE 7510-01-M