[Federal Register Volume 62, Number 201 (Friday, October 17, 1997)]
[Proposed Rules]
[Pages 54008-54017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-27438]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF DEFENSE

48 CFR Parts 216, 245, and 252

[DFARS Case 97-D027]


Defense Federal Acquisition Regulation Supplement; Title to 
Government Property

AGENCY: Department of Defense (DoD).

ACTION: Proposed rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: The Under Secretary of Defense, Acquisition and Technology, 
has requested the Director, Defense Procurement, to obtain public 
comment on Government property management policy changes intended to 
reduce the amount of Government-owned tooling and equipment in the 
possession of DoD contractors. This proposed rule solicits those 
comments and is structured as a deviation from the Federal Acquisition 
Regulation (FAR) Part 45 proposed rule on Government property (FAR Case 
95-013) that was published in the Federal Register on June 2, 1997 (62 
FR 30186). This proposed DFARS rule will be amended at a later date to 
incorporate changes resulting from public comments on the FAR Part 45 
proposed rule.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before December 16, 1997 to be considered 
in the formulation of the final rule.

ADDRESSES: Interested parties should submit written comments to: 
Director, Defense Procurement, Deputy Director, Major Policy 
Initiatives, Attention: Ms. Angelena Moy, Room 3C128, 3060 Defense 
Pentagon, Washington, DC 20301-3060. Please cite DFARS Case 97-D027 in 
all correspondence related to this proposed rule. Address E-mail 
(Internet) comments to M[email protected].

FOR FURTHER INFORMATION CONTACT:
Ms. Angelena Moy by phone at (703) 695-1097/8, by fax at (703) 695-
7569, or at the E-mail address provided above. Please cite DFARS Case 
97-D027.

SUPPLEMENTARY INFORMATION:

A. Background

    The value of Government-owned equipment and tooling in the 
possession of DoD contractors increased substantially during the past 
decade although long-standing acquisition policy generally requires 
contractors to furnish the property needed to perform Government 
contracts. An Integrated Process Team, led by the Office of the Under 
Secretary of Defense, Industrial Affairs and Installations, has made 
recommendations intended to reverse this trend and reduce the amount of 
Government property in the possession of DoD contractors. These 
recommendations are:
    1. Under cost-reimbursement contracts, DoD should cease taking 
title automatically to contractor acquired or fabricated equipment and 
tooling. DoD should have the right to take title to all special tooling 
and special test equipment for which costs are allocated to DoD 
contracts as direct costs, and items of equipment having an acquisition 
cost in excess of the DoD internal property accountability threshold 
(currently $2,500), the costs of which are allocated as direct costs to 
DoD contracts. This recommendation will reduce contract performance 
costs by removing low value equipment items from the property control, 
management, and disposal requirements in FAR Part 45. To implement this 
recommendation, language creating a deviation to the proposed FAR Part 
45 rule appears in this proposed DFARS rule at 252.216-7002(c) and 
252.245-7002(b)(2).
    2. When a contractor that acquired or fabricated equipment, special 
tooling, or special test equipment to which DoD has taken title needs 
that equipment, special tooling, or special test equipment to perform 
follow-on contracts for the same items, DoD should furnish the 
equipment, special tooling, or special test equipment items to the 
contractor on an ``as is'' basis. To implement this recommendation, 
language creating a deviation to the proposed FAR Part 45 rule appears 
in this proposed DFARS rule at 252.245-7001(d)(2).
    3. Property no longer needed for performance of a particular 
contract should be disposed of immediately if not needed for future 
procurements and placed under funded storage contracts if the future 
need is not within 60 days following the date the contractor identifies 
the property as no longer needed. This recommendation is intended to 
expedite property disposal and assure that contractors are paid for 
storing Government property. To implement this recommendation, language 
creating a deviation to the proposed FAR Part 45 rule appears in this 
proposed DFARS rule at 245.101-71.

B. Regulatory Flexibility Act

    This proposed rule is not expected to have a significant economic 
impact on a substantial number of small entities within the meaning of 
the Regulatory Flexibility Act 5 U.S.C. 601, et seq., because the rule 
further reduces the economic impact on small entities from the 
estimated impact contained in the proposed rule under FAR Case 95-013, 
FAR Part 45, Government Property Rewrite, by reducing the 
administrative burden on contractors through reduction of the amount of 
Government property in the possession of contractors. The impact is not 
considered significant because the rule applies only to those small 
entities that request Government property to perform a contract or 
create Government property during contract performance, and contract 
prices compensate such contractors for their Government property 
management activities. An initial regulatory flexibility analysis has, 
therefore, has not been performed. Comments are invited from small 
businesses and other interested parties. Comments from small entities 
concerning the affected DFARS subparts also will be considered in 
accordance with 5 U.S.C. 610. Such comments should be submitted 
separately and should cite DFARS Case 97-D027 in correspondence.

C. Paperwork Reduction Act

    This proposed rule reduces the amount of property that will become 
Government property under cost-reimbursement contracts. Therefore, the 
paperwork burden approved under Office of Management and Budget 
Clearance No. 9000-0151 for the proposed FAR rule published at 62 FR 
30186 on June 2, 1997, is expected to be reduced.

List of Subjects in 48 CFR Parts 216, 245, and 252

    Government procurement.
Michele P. Peterson,
Executive Editor, Defense Acquisition Regulations Council.

    There, 48 CFR Parts 216, 245, and 252 are proposed to be amended as 
follows:
    1. The authority citation for 48 CFR Parts 216, 245, and 252 
continues to read as follows:

    Auhority: 41 U.S.C. 421 and 48 CFR Chapter 1.

[[Page 54009]]

PART 216--TYPES OF CONTRACTS

    2. Section 216.307 is added to read as follows:


216.307  Contract clauses.

    (a)(1) Use the clause at 252.216-7002, allowable Cost and Payment, 
instead of the clause at FAR 52.216--7, Allowable Cost and Payment, in 
all cost-reimbursement contracts.
    (2) Use the clause at 252.216-7002 with its Alternate I if the 
contract is a construction contract that contains the clause at FAR 
52.232-27, Prompt Payment for Construction Contracts.

PART 245--GOVERNMENT PROPERTY

    3. Section 245.101, 245.101-70, and 245.101-71 are added to read as 
follows:


245.101  Policy.

    (d) Contractors are expected to have the means to perform DoD 
contracts. Furnish property to contractors only under the circumstances 
described in FAR 45.201 and only for performance of a specific contract 
or contracts.


245.101-70  Equipment, special tooling, and special test equipment.

    Items of equipment, special tooling, or special test equipment that 
otherwise may be furnished to contractors under FAR 45.201 shall be 
furnished on an ``as is'' basis to the contractor that acquired or 
fabricated the items when that contractor needs the items for 
performance of follow-on contracts and the Government took title to the 
items under 252.245-7002, Right to Title--Equipment, Special Tooling, 
and Special Test Equipment.


245.101-71  Disposal and storage.

    Immediately dispose of Government furnished property that a 
contractor has identified as no longer needed for contract performance 
except when there is a contractual requirement to furnish that property 
as Government furnished property under a follow-on contract. Contract 
for the property's storage when the property owner has a known future 
need for the property, a follow-on contract(s) has not been awarded, 
and the property will not be used within 60 days of the date upon which 
the contractor identified the property as no longer needed for contract 
performance.
    4. Section 245.102 is added to read as follows:


245.102  Contract clauses.

    (a)(1) Use the clause at 252.245-7001, Government Furnished 
Property, instead of the clause at FAR 52.245-1, Government Furnished 
Property (Fixed-Price and Labor-Hour Contracts), in all solicitations 
and contracts for supplies, services, or research and development if 
the Government anticipates furnishing property for performance of the 
contract.
    (2) Use the clause at 252.245-7001 with its Alternate I in fixed-
price competitive contracts or competitive labor-hour contracts.
    (b)(i) Use the clause at 252.245-7002, Right to Title--Equipment, 
special Tooling, and Special Test Equipment, instead of the clause at 
FAR 52.245-2, Special Tooling and Special Test Equipment--Right to 
Title (Fixed-Price Contracts), in all solications and contracts.
    (ii) Use the clause at 252.245-7002 with its Alternate I in cost-
reimbursement or time-and-materials solicitations and contracts for 
basic or a applied research to be conducted by nonprofit organizations 
whose primary purpose is the conduct of scientific research on 
nonprofit in stitutions of higher education (see FAR 35.014).
    (c)(i) Use the clause at 252.245-7003, Government Property Control, 
instead of the clause at FAR 52.245-3, Government Property Control, in 
all solicitations and contracts that include the clause at 252.245-
7001.
    (ii) Use the clause at 252.245-7003 with its Alternate I when the 
Government will maintain the Government's official property records 
(see FAR 45.302(b)).
    (d) Use the clause at 252.245-7001, Government Furnished Property, 
instead of the clause at FAR 52.245-4, Government Property (Cost-
Reimbursement and Time-and-Material Contracts), in all solicitations 
and contracts for supplies, services, or research and development if 
the Government anticipates furnishing property for performance of the 
contract.


245.505-14  [Removed]

    5. Section 245.505-14 is removed.

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    6. Section 252.216-7002 is added to read as follows:


252.216-7002  Allowable Cost and Payment.

    As prescribed in 216.307(a)(1), used the following clause:

Allowable Cost and Payment (XXX 19XX)

    (a) Invoicing. The Government shall make payments to the 
Contractor when requested as work progresses, but (except for small 
business concerns) not more often than once every 2 weeks, in 
amounts determined to be allowable by the Contracting Officer in 
accordance with Subpart 31.2 of the Federal Acquisition Regulation 
(FAR) in effect on the date of this contract and the terms of this 
contract. The Contractor may submit to an authorized representative 
of the Contracting Officer, in such form and reasonable detail as 
the representative may require, an invoice or voucher supported by a 
statement of the claimed allowable cost for performing this 
contract.
    (b) Reimbursing costs.
    (1) For the purpose of reimbursing allowable costs (except as 
provided in paragraph (b)(2) of this clause, with respect to 
pension, deferred profit sharing, and employee stock ownership plan 
contributions), the term ``costs'' includes only--
    (i) Those recorded costs that, at the time of the request for 
reimbursement, the Contractor has paid by cash, check, or other form 
of actual payment for items or services purchased directly for the 
contract;
    (ii) When the Contractor is not delinquent in paying costs of 
contract performance in the ordinary course of business, costs 
incurred, but not necessarily paid, for--
    (A) Materials issued from the Contractor's inventory and placed 
in the production process for use on the contract;
    (B) Direct labor;
    (C) Direct travel;
    (D) Other direct in-house costs; and
    (E) Properly allocable and allowable indirect costs, as shown in 
the records maintained by the Contractor for purposes of obtaining 
reimbursement under Government contracts; and
    (iii) The amount of progress and other payments that have been 
paid by cash, check, or other form of payment to the Contractor's 
subcontractors under similar cost standards.
    (2) Contractor contributions to any pension or other post-
retirement benefit, profit-sharing, or employee stock ownership plan 
funds that are paid quarterly or more often may be included in 
indirect costs for payment purposes; provided, that the Contractor 
pays the contribution to the fund within 30 days after the close of 
the period covered. Payments made 30 days or more after the close of 
a period shall not be included until the Contractor actually makes 
the payment. Accrued costs for such contributions that are paid less 
often than quarterly shall be excluded from indirect costs for 
payment purposes until the Contractor actually makes the payment.
    (3) Notwithstanding the audit and adjustment of invoices or 
vouchers under paragraph (h) of this clause, allowable indirect 
costs under this contract shall be obtained by applying indirect 
cost rates established in accordance with paragraph (e) of this 
clause.
    (4) Any statements in specifications or other documents 
incorporated in this contract by reference designating performance 
of services or furnishing of materials at the Contractor's expense 
or at no cost to the Government shall be disregarded for purposes of 
cost reimbursement under this clause.
    (c) Title.
    (1) Title to property acquired or fabricated by the Contractor 
for performance of this

[[Page 54010]]

contract, the costs of which are allocable to this contract as 
direct costs, shall vest in the Government. For property acquired or 
produced prior to execution of this contract, vestiture occurs upon 
execution of the contract. Otherwise, vestiture occurs when the 
property is or should have been allocable or properly chargeable to 
this contract under sound and generally accepted accounting 
principles and practices. Except as provided in the Right to Title--
Equipment, Special Tooling, and Special Test Equipment clause of the 
contract, upon completion of deliveries under a contract for 
supplies or upon completion of effort required under a contract for 
services, the Contractor shall have title to all property acquired 
or fabricated for this contract that is not required to be delivered 
to the Government.
    (2) Property to which the Government has obtained title under 
this clause is not ``Government furnished property.''
    (d) Small business concerns. A small business concern may be 
paid more often than every 2 weeks and may invoice and be paid for 
recorded costs for items or services purchased directly for the 
contract, even though the concern has not yet paid for those items 
or services.
    (e) Final indirect cost rates.
    (1) Final annual indirect cost rates and the appropriate bases 
shall be established in accordance with Subpart 42.7 of the FAR in 
effect for the period covered by the indirect cost rate proposal.
    (2) The Contractor shall, within 90 days after the expiration of 
each of its fiscal years, or by a later date approved by the 
Contracting Officer, submit to the cognizant Contracting Officer 
responsible for negotiating its final indirect cost rates and, if 
required by agency procedures, to the cognizant audit activity, 
proposed final indirect cost rates for that period and supporting 
cost data specifying the contract and/or subcontract to which the 
rates apply. The proposed rates shall be based on the Contractor's 
actual cost experience for that period. The appropriate Government 
representative and the Contractor shall establish the final indirect 
cost rates as promptly as practical after receipt of the 
Contractor's proposal.
    (3) The Contractor and the appropriate Government representative 
shall execute a written understanding setting forth the final 
indirect cost rates. The understanding shall specify (i) the agreed-
upon final annual indirect cost rates, (ii) the bases to which the 
rates apply, (iii) the periods for which the rates apply, (iv) any 
specific indirect cost items treated as direct costs in the 
settlement, and (v) the affected contract and/or subcontract, 
identifying any with advance agreements or special terms and the 
applicable rates. The understanding shall not change any monetary 
ceiling, contract obligation, or specific cost allowance or 
disallowance provided for in this contract. The understanding is 
incorporated into this contract upon execution.
    (4) Within 120 days after settlement of the final indirect cost 
rates covering the year in which this contract is physically 
complete (or longer, if approved in writing by the Contracting 
Officer), the Contractor shall submit a completion invoice or 
voucher to reflect the settled amounts and rates.
    (5) Failure by the parties to agree on a final annual indirect 
cost rate shall be a dispute within the meaning of the Disputes 
clause of this contract.
    (f) Billing rates. Until final annual indirect cost rates are 
established for any period, the Government shall reimburse the 
Contractor at billing rates established by the Contracting Officer 
or by an authorized representative (the cognizant auditor), subject 
to adjustment when the final rates are established. These billing 
rates--(1) Shall be the anticipated final rates; and (2) May be 
prospectively or retroactively revised by mutual agreement, at 
either party's request, to prevent substantial overpayment or 
underpayment.
    (g) Quick-closeout procedures. Quick-closeout procedures are 
applicable when the conditions in FAR 42.708(a) are satisfied.
    (h) Audit. At any time or times before final payment, the 
Contracting Officer may have the Contractor's invoices or vouchers 
and statements of cost audited. Any payment may be reduced by 
amounts found by the Contracting Officer not to constitute allowable 
costs or adjusted for prior overpayments or underpayments.
    (i) Final payment.
    (1) Upon approval of a completion invoice or voucher submitted 
by the Contractor in accordance with paragraph (e)(4) of this 
clause, and upon the Contractor's compliance with all terms of this 
contract, the Government shall promptly pay any balance of allowable 
costs and that part of the fee (if any) not previously paid.
    (2) The Contractor shall pay to the Government any refunds, 
rebates, credits, or other amounts (including interest, if any) 
accruing to or received by the Contractor or any assignee under this 
contract, to the extent that those amounts are properly allocable to 
costs for which the Contractor has been reimbursed by the 
Government. Reasonable expenses incurred by the Contractor for 
securing refunds, rebates, credits, or other amounts shall be 
allowable costs if approved by the Contracting Officer. Before final 
payment under this contract, the Contractor and each assignee whose 
assignment is in effect at the time of final payment shall execute 
and deliver--
    (i) An assignment to the Government, in form and substance 
satisfactory to the Contracting Officer, of refunds, rebates, 
credits, or other amounts (including interest, if any) properly 
allocable to costs for which the Contractor has been reimbursed by 
the Government under this contract; and
    (ii) A release discharging the Government, its officers, agents, 
and employees from all liabilities, obligations, and claims arising 
out of or under this contract, except--
    (A) Specified claims stated in exact amounts, or in estimated 
amounts when the exact amounts are not known;
    (B) Claims (including reasonable incidental expenses) based upon 
liabilities of the Contractor to third parties arising out of the 
performance of this contract; provided, that the claims are not 
known to the Contractor on the date of the execution of the release, 
and that the Contractor gives notice of the claims in writing to the 
Contracting Officer within 6 years following the release date or 
notice of final payment date, whichever is earlier; and
    (C) Claims for reimbursement of costs, including reasonable 
incidental expenses, incurred by the Contractor under the patent 
clauses of this contract, excluding, however, any expenses arising 
from the Contractor's indemnification of the Government against 
patent liability.
(End of clause)

    ALTERNATE I (XXX 19XX). As prescribed in 216.307(a)(2), 
substitute the following paragraph (b)(1)(iii) for paragraph 
(b)(1)(iii) of the basic clause:
    (iii) The amount of progress and other payments to the 
Contractor's subcontractors that either have been paid, or that the 
Contractor is required to pay pursuant to the Prompt Payment for 
Construction Contracts clause of this contract. Payments shall be 
made by cash, check, or other form of payment to the Contractor's 
subcontractors under similar cost standards.

    7. Section 252.245-7001 is revised to read as follows:


252.245-7001  Government Furnished Property.

    As prescribed in 245.102(a) (1) and (d), use the following clause:

Government Furnished Property (XXX 19XX)

    (a) Definitions.
    The terms defined in the Right to Title--Equipment, Special 
Tooling, and Special Test Equipment clause of this contract have the 
same meaning in this clause.
    (b) Property furnished for performance of this contract.
    (1) The Government furnished property identified in this 
contract may be used for performance of the contract on a rent-free 
basis. The Contractor shall not use such property on any other 
Government contracts or for commercial purposes without the 
Contracting Officer's prior approval. Unless otherwise permitted by 
law, commercial use shall be on a rental basis. The terms and 
conditions of the Rental Charges for Commercial Use clause of this 
contract shall apply to each rental.
    (2) The Contractor shall not improve or make structural 
alterations to real property owned or leased by the Government and 
made available for performance of this contract unless expressly 
authorized to do so in writing by the Contracting Officer. Title to 
such improvements or alterations shall vest in the Government if the 
property is accountable under this contract or will be determined by 
the terms of the contract under which the real property is 
accountable.
    (3) The Government retains title to Government furnished 
property including Government furnished property that is 
incorporated into or attached to any property it does not own. 
Government furnished property does not become a fixture or lose its 
identity as personal property by being attached to real property.
    (4) The Government shall, when requested by the Contractor, 
provide information reasonably required for the property's intended 
use to the extent the Government has the right to release or 
disclose the information.
    (5) If the Contractor commingles Contractor acquired or 
fabricated material with

[[Page 54011]]

Government furnished material, the provisions of paragraph (c) of 
this clause regarding suitability for intended use shall not apply 
to the commingled Government furnished material. Notwithstanding any 
other provision of this contract, the Contractor shall be 
responsible for any failure to comply with contract requirements 
attributable to material that was commingled.
    (c) Suitability for intended use.
    The contract delivery or performance dates are based upon the 
expectation that Government furnished property will be suitable for 
its intended use, except property furnished ``as is'' (see paragraph 
(d) of this clause), and delivered to the Contractor at the times 
stated in the contract or, if not so stated, in sufficient time to 
enable the Contractor to meet the contract's delivery or performance 
dates.
    (1) The Contractor shall notify the Contracting Officer promptly 
following receipt of Government furnished property that is not 
suitable for its intended use and take corrective action or dispose 
of the property as directed by the Contracting Officer. The contract 
shall be equitably adjusted in accordance with paragraph (g) of this 
clause.
    (2) The Contractor may request an equitable adjustment when 
Government furnished property is not delivered to the Contractor by 
the required time and such untimely delivery has affected contract 
performance. Any equitable adjustment shall be made in accordance 
with paragraph (g) of this clause.
    (d) Property furnished as is.
    (1) Offerors and the Contractor are responsible for assuring 
that Government property made available on an ``as is'' basis is 
suitable for the offerors' or Contractor's purposes. Such property 
is furnished f.o.b. at the location specified in the solicitation or 
contract. Any cost incurred by the Contractor to transport, install, 
modify, repair, or otherwise make such property suitable for the 
Contractor's intended use shall not result in an increase in price 
or fee. Modifications to property furnished ``as is'' require the 
Contracting Officer's prior written approval.
    (2) Equipment, special tooling, or special test equipment is 
furnished ``as is'' for performance of this contract if the 
Contractor acquired or fabricated, and the Government took title to, 
such items under this or a prior contract.
    (3) The Government makes no warranty whatsoever with respect to 
property furnished ``as is'' except that the property will be in the 
same condition when placed at the specified f.o.b. location as when 
inspected by the Contractor or, if not inspected by the Contractor, 
as of the last date identified in the solicitation or contract for 
Contractor inspection. The Contractor is responsible for verifying 
that the property's condition has not changed during that period. If 
the Contractor determines the property's condition has changed and 
such change will adversely affect the Contractor, the Contractor 
shall immediately notify the Contracting Officer and identify the 
changed condition. If the Contracting Officer concurs that the 
property's condition has changed, the Contracting Officer may 
restore the property or substitute other Government property at no 
change in price or fee; permit the Contractor to restore the 
property subject to an equitable adjustment; or decline to furnish 
the property subject to an equitable adjustment. The foregoing 
provisions for adjustment are the exclusive remedies available to 
the Contractor. The Government has no liability for changes in the 
property's condition discovered after removal from the specified 
f.o.b. location.
    (4) Repairs to or modifications of property furnished ``as is'' 
do not affect the Government's title to such property.
    (e) Changes in Government furnished property.
    (1) The Contracting Officer may increase, decrease, or 
substitute other Government property for the property furnished or 
to be furnished for performance of this contract or require use of 
Government furnished property in lieu of Contractor property.
    (2) Except as provided in paragraph (e)(4) of this clause, any 
increase in the amount of property furnished for performance of this 
contract shall result in an equitable reduction in price or fee, and 
an appropriate adjustment of the contract delivery or performance 
dates.
    (3) The Contractor may request an equitable adjustment in 
accordance with paragraph (g) of this clause for a decrease in or 
substitution for the property identified in the contract or 
withdrawal of authority to use property accountable under another 
contract in performance of this contract, provided such decrease, 
substitution, or withdrawal increases the costs of contract 
performance.
    (4) If the Contracting Officer directs the Contractor to use 
Government furnished property in lieu of Contractor property in 
performance of this contract, any adjustment to the contract shall 
be made in accordance with the Changes clause of this contract.
    (f) Limited risk of loss.
    (1) The Contractor's liability for loss, theft, or destruction 
of, or damage to, Government furnished property accountable under 
this contract shall be limited if the Contractor maintains a 
property control system that satisfies the requirements of the 
Government Property Control clause of this contract (hereinafter 
referred to as an approved system).
    (2) When the Contractor maintains an approved system, the 
Contractor shall not be liable for loss, theft, or destruction of, 
or damage to, Government property accountable under this contract 
except loss, theft, destruction, or damage for which the Contractor 
is expressly responsible under the terms of this contract or loss, 
theft, destruction, or damage that results from--
    (i) A risk expressly required to be insured under this contract 
but only to the extent of the insurance required to be purchased and 
maintained, or to the extent of insurance actually purchased and 
maintained, whichever is greater;
    (ii) A risk that is in fact covered by insurance or for which 
the Contractor is otherwise reimbursed, but only to the extent of 
such insurance or reimbursement; or
    (iii) Willful misconduct or lack of good faith on the part of 
the Contractor's managerial personnel.
    (3) Following notice from the Government's property 
administrator to one of the Contractor's managerial personnel that 
the Contractor's or a subcontractor's property control system is not 
in compliance with the requirements of the Government Property 
Control clause of this contract, the Contractor's failure to correct 
its system or to have a subcontractor's system corrected within the 
dates specified by the Government's property administrator, or such 
other mutually agreed dates, shall be considered willful misconduct 
or lack of good faith on the part of the Contractor's managerial 
personnel. The Contractor shall be liable for any loss, theft, or 
destruction of, or damage to, the Government furnished property 
accountable under this contract except such loss, theft, 
destruction, or damage that the Contractor can establish by clear 
and convincing evidence--
    (i) Did not result from the Contractor's failure to maintain an 
approved system; or
    (ii) Occurred while an approved system was maintained by the 
Contractor.
    (4) Except as provided in paragraphs (f)(3) (i) and (ii) of this 
clause, the Contractor shall be liable for loss, theft, or 
destruction of, or damage to, Government furnished property 
accountable under this contract immediately upon notice by certified 
mail that the Government has withdrawn approval of the Contractor's 
property control system.
    (5) The Contractor is not liable for Government furnished 
property properly consumed in performing this contract. The 
Contractor shall have no liability for loss, theft, or destruction 
of, or damage to, Government property furnished for performance of 
services entirely on real property owned or leased by the Government 
when the Contractor does not control the use of, or access to, such 
property.
    (6) The Contractor's transfer of Government furnished property 
to the possession and control of a subcontractor, does not affect 
the Contractor's liability for loss, theft, or destruction of, or 
damage to, that property.
    (7) Except as provided in paragraph (f)(8) of this clause, the 
Contractor shall notify the Government's property administrator in 
writing promptly following the loss, theft, or destruction of, or 
damage to, Government furnished property. Such notice shall 
identify--
    (i) Lost, stolen, destroyed, or damaged Government property by 
description, contract number, national stock number (if known), and 
either part number or identification number;
    (ii) The date a loss or theft was discovered or damage or 
destruction occurred and, if known, the circumstances;
    (iii) Each property item's acquisition cost;
    (iv) The contracts affected;
    (v) All known interests in commingled property of which 
Government furnished property is a part; and
    (vi) The insurance, if any, covering any part of or interest in 
such commingled property.
    (8) The Contractor is not required to provide notice of loss, 
theft, or destruction of, or damage to, low value property that the 
Contractor does not need for continued performance of this contract 
until contract

[[Page 54012]]

completion or termination. Such notice shall include the information 
required by paragraph (f)(7) of this clause.
    (9) The Contractor shall take all reasonable action to protect 
damaged Government furnished property from further damage and to 
physically separate such property from all other property.
    (10) The Contractor shall repair, renovate, or take such other 
action with respect to lost, stolen, damaged, or destroyed 
Government furnished property as the Contracting Officer directs and 
adjust the property records accordingly. When such repair, 
renovation, or action is not the Contractor's responsibility under 
this contract, the Contractor shall be entitled to an equitable 
adjustment in accordance with paragraph (g) of this clause. 
Contractor-responsible repairs to, or replacement of, Government 
furnished property shall be accomplished at no change price or fee.
    (11) The Contractor shall not include in the price or fee of 
this contract any charge or reserve for insurance (including any 
self-insurance fund or reserve) covering loss, theft, or destruction 
of, or damage to, Government furnished property except to the extent 
the Government might have expressly required the Contractor to carry 
such insurance under another provision of this contract.
    (12) If the Contractor is reimbursed or otherwise compensated 
for any loss, theft, or destruction of, or damage to, Government 
furnished property, the Contractor shall use the proceeds to repair, 
renovate, or replace such property or equitably reimburse the 
Government, as directed by the Contracting Officer, and adjust the 
property records accordingly.
    (13) The Contractor shall do nothing to prejudice the 
Government's rights to recover against third parties for any loss, 
theft, or destruction of, or damage to, Government furnished 
property. When requested by the Contracting Officer, the Contractor 
shall, at Government expense, furnish to the Government all 
reasonable assistance and cooperation (including the prosecution of 
suit and the execution of instruments of assignment in favor of the 
Government) in obtaining recovery.
    (g) Equitable adjustments. (1) Equitable adjustments shall be 
the Contractor's exclusive remedy for Government actions under this 
clause and shall be made in accordance with the procedures of the 
Changes clause of this contract. The Government shall not be liable 
to suit for breach of contract for--
    (i) Any delay in delivery of Government furnished property;
    (ii) Delivery of Government furnished property in a condition 
not suitable for its intended use;
    (iii) An increase or decrease in, or substitution of, Government 
furnished property; or
    (iv) Failure to repair or replace Government furnished property 
when the Government is responsible for repair or replacement.
    (2) An equitable adjustment for Government furnished property 
that is not in a condition suitable for intended use or the 
withdrawal or substitution of Government furnished property may 
include an amount for the restoration and rehabilitation of the 
Contractor's premises caused by such condition, withdrawal, or 
substitution.
    (h) Maintenance responsibilities. (1) The Contractor is 
responsible for the maintenance of Government furnished property 
accountable under this contract, including such property stored at a 
Contractor managed site. The Contractor shall perform all 
maintenance, including preventive maintenance, necessary to assure 
that Government furnished property remains suitable for its intended 
use unless the Contracting Officer specifically relieves the 
Contractor of its maintenance responsibility for a particular item 
or class of items. If routine and preventive maintenance are not 
sufficient to sustain a property item's suitability for intended 
use, the Contractor shall notify the Contracting Officer promptly 
and request direction regarding repair or replacement.
    (2) The Contractor shall notify promptly the Government's 
property administrator of the need for any replacement of, or major 
repair or rehabilitation to, Government furnished property 
discovered during its maintenance activities and shall not effect 
such repair, replacement, or rehabilitation unless authorized to do 
so by the Contracting Officer.
    (i) Return of Government furnished property. If this contract 
requires Government furnished property to be returned directly to 
the Government and not entered into the property disposal process--
    (1) The Contractor shall notify the Contract Administration 
Office of its intent to return such property at least 10 working 
days prior to return. Notices shall identify the contracts under 
which the items are accountable and provide each item's name, 
description, and national stock number, if known, or part number or 
identification number.
    (2) The property shall be returned to the Government in a 
condition suitable for its intended use except--
    (i) Lost, stolen, or destroyed property that the Government has 
determined will not be replaced;
    (ii) Damaged property that the Government has determined will 
not be repaired;
    (iii) Property consumed in performance of this contract;
    (iv) Property attached to, incorporated into, or delivered with, 
a deliverable end item; or
    (v) Property furnished ``as is'' shall be returned in equal or 
better condition than when furnished to the Contractor.
    (j) Disposal of Government furnished property.--(1) Inventory 
disposal schedules. Except as provided in paragraph (i) or (j)(2) of 
this clause, the Contractor shall identify Government furnished 
property no longer required for performance of this contract using 
Standard Form 1428, Inventory Disposal Schedule. Unless the plant 
clearance officer has agreed to a different submission basis, or the 
contract requires inventory disposal schedules to be submitted 
electronically, the Contractor shall prepare separate inventory 
disposal schedules for: special test equipment with general purpose 
components; special test equipment that does not contain general 
purpose components; printing equipment; automatic data processing 
equipment; nonnuclear hazardous materials; and nuclear materials. 
Property with the same description, condition code, and reporting 
location may be grouped in a single line item. Special test 
equipment shall be described in sufficient detail to permit an 
understanding of the special test equipment's intended use. The 
Contractor may annotate the schedule to identify test equipment the 
Contractor wishes to purchase from the Government or general purpose 
components thereof the Contractor wishes to purchase or use in the 
performance of other Government contracts.
    (2) Scrap Lists. Contractors that have Government approved scrap 
procedures may prepare scrap lists (provided such lists are 
consistent with the approved scrap procedures) in lieu of inventory 
disposal schedules except for scrap that--
    (i) Requires demilitarization;
    (ii) Is a classified item;
    (iii) Is generated from classified items;
    (iv) Contains hazardous materials; or
    (v) Is dangerous to the public health, safety, or welfare.
    (3) Corrections. If the plant clearance officer finds that 
property identified on an inventory disposal schedule or scrap list 
is not accountable under this contract or is not in the quantity or 
condition indicated on the inventory disposal schedule or scrap 
list, the plant clearance officer may require the Contractor to 
correct the inventory disposal schedule or scrap list, may reject 
such schedules or lists at any time, or may require submission of an 
inventory control schedule in lieu of a scrap list.
    (4) Submission requirements. Inventory disposal schedules or 
scrap lists shall be submitted to the plant clearance officer for 
approval no later than--
    (i) 30 days following the Contractor's determination that a 
Government furnished property item is no longer required for 
performance of the contract;
    (ii) 60 days following completion of contract deliveries or 
performance or such longer period as may be approved by the plant 
clearance officer; or
    (iii) 120 days following contract termination in whole or in 
part or such longer period as may be approved by the Contracting 
Officer.
    (5) Inventory schedule adjustments. The Contractor shall provide 
the plant clearance officer at least 10 working days advance written 
notice of its intent to remove a Government furnished property item, 
including an item identified as scrap, from an approved inventory 
disposal schedule. Unless the plant clearance officer objects to the 
intended schedule adjustment within the notice period, the 
Contractor may make the adjustment upon expiration of the notice 
period.
    (6) Storage. The Contractor shall store the Government furnished 
property identified in an inventory disposal schedule pending 
receipt of disposal instructions. If the Government fails to provide 
disposal instructions within 120 days following receipt of an 
acceptable inventory disposal schedule, the Contractor might be 
entitled to

[[Page 54013]]

an equitable adjustment for costs incurred to store such property on 
or after the 121st day following receipt of an acceptable schedule.
    (7) Disposal. Except as provided in paragraph (j)(7)(i) of this 
clause, Government furnished property shall not be disposed of until 
the Contractor has been authorized to do so by the plant clearance 
officer.
    (i) If the Government does not provide disposition instructions 
to the Contractor within 60 days following receipt of an acceptable 
scrap list, the Contractor may dispose of the listed scrap.
    (ii) The Contractor shall prepare for shipment, deliver f.o.b. 
origin, or dispose of Government furnished property as directed by 
the plant clearance officer. The Contractor shall remove and destroy 
any markings identifying the property as Government property when 
the plant clearance officer directs disposal by sale or donation, 
notifies the Contractor that the Government has abandoned the 
property, or directs the Contractor to scrap the property.
    (iii) The net proceeds from a disposal action of scrapped 
Government furnished property shall be credited to the contract 
under which the Government furnished property was accountable or, 
when scrapped Government furnished property cannot be segregated 
from other scrap, to an appropriate overhead account. The Contractor 
shall credit the net proceeds or other disposal actions in 
accordance with instructions provided by the plant clearance 
officer.
    (iv) The Contracting Officer may require the Contractor to 
demilitarize the property prior to shipment or disposal. Any 
adjustment in contract price incident to the Contracting Officer's 
direction to demilitarize Government furnished property shall be 
made in accordance with paragraph (g) of this clause.
    (8) Contractor removal of property. The Contractor must obtain 
the plant clearance officer's approval to remove Government 
furnished property from its premises prior to receipt of final 
disposition instructions. If approval is granted, the Contractor 
shall transport and store the property at no change in price or fee. 
The storage facility must be appropriate for assuring the property's 
physical safety and suitability for use. Approval does not relieve 
the Contractor of liability for loss, theft, or destruction of, or 
damage to, such property.
    (9) Subcontractor inventory disposal schedules. When the 
Contractor permits a subcontractor or supplier to use, at a 
subcontractor or supplier managed site, Government property 
furnished to the Contractor for performance of this contract, the 
Contractor shall require the subcontractor or supplier to submit 
inventory disposal schedules or scrap lists to the Contractor in 
sufficient time for the Contractor to comply with the requirements 
of paragraph (j)(4) of this clause.
    (k) Abandonment and restoration of Contractor's premises. (1) 
The Government shall not abandon Government furnished property that 
is or contains a hazardous material at a Contractor-owned location 
without the Contractor's written concurrence. The Contractor may 
request an equitable adjustment incident to such agreement.
    (2) The Government, upon notice to the Contractor, may abandon 
any nonhazardous Government property in place at which time all 
obligations of the Government regarding such abandoned property 
shall cease. The Government has no obligation to restore or 
rehabilitate the Contractor's premises under any circumstances and, 
except as provided in paragraphs (g)(2) and (k)(1) of this clause, 
has no liability for such restoration or rehabilitation.
    (l) Overseas contracts. In a contract performed outside the 
United States, its territories, or possessions, the words 
``Government'' and ``Government furnished,'' as used in this clause, 
mean ``United States Government'' and ``United States Government 
furnished,'' respectively.

(End of clause)

    Alternate I (XXX 19XX). As prescribed in 245.102(a)(2), 
substitute the following paragraph (f) for paragraph (f) of the 
basic clause:
    (f) Risk of loss.
    (1) Except as provided in paragraph (f)(3) of this clause, the 
Contractor is liable for any loss, theft, or destruction of, or 
damage to, Government furnished property accountable under this 
contract.
    (2) Contractor-responsible repairs to, or replacements of, 
Government furnished property shall be accomplished at no change in 
price or fee.
    (3) The Contractor is not liable for--
    (i) Government furnished property properly consumed in 
performing this contract; or
    (ii) Loss, theft, or destruction of, or damage to, Government 
furnished property when the Contractor is providing services 
performed entirely on real property owned or leased by the 
Government and the Contractor does not control the use of, or access 
to, the Government furnished property.
    (4) Except as provided in paragraph (f)(5) of this clause, the 
Contractor shall notify the Government's property administrator in 
writing promptly following the loss, theft, or destruction of, or 
damage to, Government furnished property. Such notice shall 
identify--
    (i) Lost, stolen, destroyed, or damaged Government property by 
description, contract number, national stock number (if known), and 
either part number or identification number;
    (ii) The date a loss or theft was discovered or damage or 
destruction occurred and, if known, the circumstances;
    (iii) Each property item's acquisition cost;
    (iv) The contracts affected;
    (v) All known interests in commingled property of which the 
Government property is a part; and
    (vi) The insurance, if any, covering any part of or interest in 
such commingled property.
    (5) The Contractor is not required to provide notice of loss, 
theft, or destruction of, or damage to, low value property that the 
Contractor does not need for continued performance of this contract 
until contract completion or termination. Such notice shall include 
the contract number and each such property item's acquisition cost, 
description, national stock number (if known), and either its part 
number or identification number.
    (6) The Contractor shall take all reasonable action to protect 
damaged Government furnished property from further damage and to 
physically separate such property from all other property.
    (7) The Contracting Officer may replace, direct the Contractor 
to repair or replace, or direct the Contractor to take other 
appropriate action regarding lost, stolen, damaged, or destroyed 
Government furnished property for which the Government has 
specifically assumed such risks in this contract. When lost, 
damaged, stolen, or destroyed Government furnished property is 
replaced by the Government or the Contractor, the replacement 
property shall be entered into the property control system as a 
Government furnished property item. Any equitable adjustment 
incident to such direction shall be determined in accordance with 
paragraph (g) of this clause.

    8. Section 252.245-7002 is added to read as follows:


252.245-7002  Right to Title--Equipment, Special Tooling, and Special 
Test Equipment.

    As prescribed in 245.102(b)(i), use the following clause:

Right to Title--Equipment, Special Tooling, and Special Test Equipment 
(XXX 19XX)

    (a) Definitions.
    As used in this clause--
    ``Contractor's managerial personnel'' means the Contractor's 
directors, officers, and any of the Contractor's managers, 
superintendents, or equivalent representatives who have supervision 
or direction of all or substantially all of the Contractor's 
business; or operations at a site connected with performance of this 
contract.
    ``Equipment'' means items whose use is not limited to, or with 
only minor modification would be limited to, the development, 
production, or maintenance of a particular item or the performance 
of a particular service. The term includes, but is not limited to, 
automatic data processing equipment, office equipment, construction 
equipment, hand tools, machine tools (other than special tooling), 
test equipment (other than special test equipment or components 
thereof), furniture, and vehicles.
    ``Government property'' means property the Government owns or 
leases.
    ``Government furnished property'' means property provided by the 
Government to a contractor for performance of a contract.
    ``Low value property'' means equipment, special tooling, or 
special test equipment that has an acquisition cost of $2,500 or 
less and is not sensitive property.
    ``Material'' means property to be consumed or expended to 
perform a service or produce a deliverable end item and property 
incorporated into or attached to an end item. The term includes 
assemblies, components, parts, raw and processed materials, and 
supplies that may be consumed in normal use in performing a 
contract. It does not include equipment, real property, special test 
equipment, special tooling, or unique Federal property.
    ``Nonprofit organization'' means a business entity organized and 
operated exclusively for

[[Page 54014]]

charitable, scientific, or educational purposes, the net earnings of 
which do not inure to the benefit of any private shareholder or 
individual, that is exempt from Federal income taxation under 
section 501 of the Internal Revenue Code and does not conduct a 
substantial portion of its activities carrying on propaganda or 
otherwise attempting to influence legislation or participating in 
any political campaign on behalf of any candidate for public office.
    ``Personal property'' means property of any kind or interest in 
it except real property, battleships, cruisers, aircraft carriers, 
destroyers, submarines, and records of the Government.
    ``Plant clearance officer'' means a person appointed to perform 
plant clearance functions.
    ``Precious metals'' means silver, gold, platinum, palladium, 
iridium, osmium, rhodium, and ruthenium.
    ``Preventive maintenance'' means regularly scheduled maintenance 
performed to sustain suitability for intended use and detect and 
correct minor deficiencies before they result in serious 
consequences.
    ``Property'' means real and personal property.
    ``Property administrator'' means a person appointed to perform 
Government property administration.
    ``Real property'' means land and rights in land, ground 
improvements, utility distribution systems, and buildings and other 
structures. It does not include foundations and other work necessary 
for installing special tooling, special test equipment, or 
equipment.
    ``Scrap'' means personal property that has no value except its 
basic metallic, mineral, or organic content.
    ``Sensitive property'' means property potentially dangerous to 
the public safety or security if stolen, lost, or misplaced, or that 
must be subject to exceptional physical security, protection, 
control, and accountability such as classified property, weapons, 
ammunition, explosives, controlled substances, radioactive 
materials, hazardous materials or wastes, or precious metals.
    ``Special test equipment'' means a test unit or units designed, 
fabricated, or modified to accomplish special purpose testing, 
groupings of such items, that are interconnected and interdependent 
so as to become a new functional entity.,
    ``Special tooling'' means items, such as jigs, dies, fixtures, 
molds, patterns, taps, gauges, or other equipment and manufacturing 
aids, that are of such a specialized nature that without substantial 
modification or alteration their use is limited to the development, 
production, repair, or maintenance of particular supplies or 
components thereof, or to the performance of particular services.
    ``Unique Federal property'' means Government owned personal 
property, or components thereof, that is specially designed to 
perform or support the mission of one or more Federal agencies and 
is not available to the public.
    ``Work in process'' means bench stock materials, complete or 
incomplete fabricated parts, subassemblies, assemblies, and similar 
items that are created during production of deliverable end items or 
are required to construct special tooling or special test equipment 
needed to produce deliverable end items.
    (b) Right to title.--(1) Fixed-price contracts. The Government 
has the right, at no change in contract price, to take title to each 
special tooling or special test equipment item acquired or 
fabricated by the Contractor that is not required to be delivered 
under this contract if the item's cost is allocable to this contract 
as a direct cost.
    (2) Cost-reimbursement contracts. The Government has the right, 
at no change in cost or fee, to take title to each--
    (i) Special tooling or special test equipment item acquired or 
fabricated by the Contractor that is not required to be delivered 
under this contract if the item's cost is allocable to this contract 
as a direct cost.
    (ii) Item of equipment acquired or fabricated by the Contractor 
that is not required to be delivered under this contract if the 
item's cost is greater than $2,500 and is allocable to this contract 
as a direct cost.
    (3) Expiration. The Government's rights in paragraphs (b)(1) and 
(b)(2) of this clause end upon expiration of the time period in 
paragraph (e) of this clause.
    (c) Reports. (1) The Contractor shall submit to the Contracting 
Officer a report identifying right to title items as soon as 
practicable during contract performance but not later than the 
earlier of--
    (i) 90 days prior to completion of scheduled deliveries (other 
than technical data) under this contract; or
    (ii) 30 days following the Contractor's determination that a 
right to title item is no longer required for contract performance.
    For each right to title item or groups of identical items, the 
reports shall identify the item's or group's--
    (i) Nomenclature;
    (ii) Quantity;
    (iii) Acquisition cost;
    (iv) Contract number;
    (v) Part number(s) made or tested; and
    (vi) Identification number.
    (d) Storage. The Contractor shall store each right to title item 
identified in a report required by paragraph (c) of this clause at 
no increase in fee or price. The Contractor's storage obligations 
for a right to title item end when the Government notifies the 
Contractor that it has taken title to that item or upon expiration 
of the Government notice period. Items shall be stored in a manner 
sufficient to preserve capability and provide protection from 
damage. If the Government requires items to be stored subsequent to 
the Government's assumption of title, the Contractor might be 
entitled to an equitable adjustment as provided in paragraph (g) of 
this clause.
    (e) Assumption of title. (1) The Government must notify the 
Contractor that it is taking title to an item or items within 120 
days, or such other period mutually agreed upon, following receipt 
of a report required by paragraph (c) of this clause or other 
written notice from the Contractor identifying the item or items as 
no longer required for performance of this contract.
    (2) The Government's notice shall be in writing, shall identify 
the item(s), and may, in any combination--
    (i) Provide packing, packaging, marking, and shipping 
instructions;
    (ii) Direct the Contractor to prepare the property for storage 
at the Contractor's facility or a Government facility; or
    (iii) Provide instructions when accountability is to be 
transferred to another contract.
    (3) The Contractor's storage obligations are not diminished if 
the Government notice period, or any extension thereof, extends 
beyond the date contract deliveries are completed.
    (f) Marking. The Contractor shall legibly and conspicuously mark 
property to which the Government has taken title under this contract 
with the phrase ``U.S. Government Property'' (or a similar phrase 
that conveys Government ownership), as soon as practicable following 
the Government's assumption of title.
    (g) Price adjustment. The cost and fee of a cost-reimbursement 
contract or the price of a fixed-price contract may be equitably 
adjusted for costs incurred by the Contractor to store, prepare for 
storage, package, pack, or mark for shipment, the equipment, special 
tooling, or special test equipment to which the Government has taken 
title. Any adjustment shall be made in accordance with the 
procedures of the Changes clause of this contract and only to the 
extent the Contracting Officer's actions under paragraph (e) of this 
clause required the Contractor to incur costs that it would not have 
incurred under customary commercial practices.
    (h) Risk of loss. The Contractor is responsible for any loss, 
theft, or destruction of, or damage to, right to title items during 
the period commencing upon the Government's delivery of the notice 
required by paragraph (e) of this clause and ending upon placement 
aboard a carrier's conveyance (f.o.b. origin) or delivery at the 
specified f.o.b. destination point.
    (i) Flow down. The Contractor shall insert this or a 
substantially similar clause in all contracts and similar 
instruments with its first-tier subcontractors or suppliers, other 
than subcontractors or suppliers of commercial items, that will 
fabricate or acquire equipment, special tooling, or special test 
equipment for performance of this contract.

(End of clause)

    ALTERNATE I (XXX 19XX). As prescribed in 245.102(b)(ii), 
substitute the following paragraph (b) for paragraph (b) of the 
basic clause:
    (b) Right to title--(1) General. The Government has the right, 
at no change in cost or fee, to take title to each--
    (i) Special tooling or special test equipment item acquired or 
fabricated by the Contractor that is not required to be delivered 
under this contract if the item's cost is allocable to this contract 
as a direct cost.
    (ii) Item of equipment acquired or fabricated by the Contractor 
that is not required to be delivered under this contract if the 
item's cost is greater than $2,500 and is allocable to this contract 
as a direct cost.
    (2) Expiration. Except as provided in paragraph (b)(3) of this 
clause, the

[[Page 54015]]

Government's rights in paragraphs (b)(1)(i) and (b)(1)(ii) of this 
clause end upon expiration of the time period in paragraph (e) of 
this clause.
    (3) Relinquishment of rights. Prior to purchasing equipment, 
special tooling, or special test equipment with Government funds 
provided for the conduct of basic or applied research, nonprofit 
organizations whose primary purpose is the conduct of scientific 
research or nonprofit institutions of higher education (see FAR 
35.014) may request the Contracting Officer to relinquish the 
Government's right to take title of such items. If the Contracting 
Officer agrees, prior to purchase, the Contractor shall have title 
to each such item having an acquisition cost less than $5,000. The 
Contractor shall furnish the Contracting Officer a list of all 
purchased property to which the Government has relinquished right to 
title within 10 days following the end of the calendar quarter 
during which the Contractor receives the property. The Contractor 
agrees that it will not allocate depreciation or amortization costs 
for such property to any existing or future Government contract and 
such property may be used by the Government or its subcontractors 
without charge in performance of any Government contract or 
subcontract thereunder. As a condition for the Government's 
relinquishing its rights to title under this clause, the Contractor, 
by signing this contract, agrees that--
    No person in the United States shall, on the ground of race, 
color, or national origin, be excluded from participation in, be 
denied the benefits of, or be otherwise subjected to discrimination 
(42 U.S.C. 2000d) under this contemplated financial assistance 
(title to equipment, special tooling or special test equipment).

    9. Section 252.245-7003 is added to read as follows:


252.245-7003  Government Property Control.

    As prescribed in 245.102(c)(i), use the following clause:

Government Property Control (XXX 19XX)

    (a) Definitions. The terms defined in the Right to Title--
Equipment, Special Tooling, and Special Test Equipment clause of 
this contract have the same meaning in this clause.
    (b) General. (1) This clause is applicable to Government 
furnished property and Government property stored by the Contractor 
at the Government's direction including property to which the 
Government has taken title under the Right to Title--Equipment, 
Special Tooling, and Special Test Equipment clause of this contract. 
It does not apply to property in which title is vested in the 
Government solely as a result of the financing provisions of this 
contract.
    (2) The Contractor is responsible for the maintenance, 
protection, and preservation of Government property in its or its 
subcontractors' possession. The Contractor shall account for such 
property as required by this contract.
    (3) If the Contractor does not have a property control system 
that is approved by the Government's property administrator, it 
shall establish a system that satisfies the requirements of this 
clause within 90 days following contract award (or such other 
mutually agreeable period). Notwithstanding any other provision of 
this contract regarding liability for loss, theft, or destruction 
of, or damage to, Government property in the Contractor's or its 
subcontractors' possession, the Contractor shall be liable for such 
loss, theft, destruction, or damage until its system is approved by 
the Government's property administrator. The Contractor shall 
maintain its system during the period Government property is in its 
or its subcontractors' possession.
    (4) The Contractor should use its existing property control 
system or a modification thereof when the existing or modified 
system satisfies the requirements of this clause.
    (c) Control system requirements. The property control system 
shall include written processes for--
    (1) Assessing the system's efficiency and effectiveness, 
recommending corrective action or general improvements, and 
implementing appropriate changes;
    (2) Obtaining approval of property actions from the responsible 
Government representative no later than the time specified in this 
contract (when such approval is required by this contract) and 
appropriately documenting such approval;
    (3) Inspecting property acquired by the Contractor or furnished 
by the Government for performance of this contract upon receipt;
    (4) Identifying Government property received by the Contractor 
that was intended for other persons or discrepancies between the 
type, quantity, or condition of Government furnished property 
shipped to and actually received by the Contractor and initiating 
corrective action;
    (5) Promptly entering all Government property into the property 
control system;
    (6) Ensuring that Government property is properly classified 
(see paragraph (f)(2)(viii) of this clause);
    (7) Ensuring that Government property's used only as authorized 
by the Contracting Officer;
    (8) Controlling the distribution and return of pilferable 
property;
    (9) Scheduling and monitoring Government property maintenance to 
ensure timely performance and recording of all maintenance actions;
    (10) Accurately recording by type and quantity Government 
furnished material consumed during contract performance;
    (11) Performing, reporting, and recording all inventories 
required by this contract;
    (12) Identifying and reporting lost, damaged, or destroyed 
Government property and generating corrective action 
recommendations;
    (13) Maintaining special security for classified or sensitive 
property commensurate with the property's security classification, 
special handling requirements, or both;
    (14) Accurately preparing and timely submitting the records and 
reports required by this contract;
    (15) Ensuring the subcontractors have adequate procedures for 
the control and protection of Government property;
    (16) Justifying the continued need for Government property to 
perform this contract;
    (17) Moving and storing Government property in a manner 
commensurate with the property's handling and storage requirements; 
and
    (18) Disposing of Government property in accordance with the 
requirements of this contract.
    (d) Access. The Government shall have access, at all reasonable 
times, to the premises at which any Government property is located 
and to the Contractor's Government property records and supporting 
information.
    (e) Property control system submission, review, and approval. 
(1) Except as provided in paragraph (e)(2) of this clause, offerors 
shall submit their written property control systems and processes 
with their offer if--
    (i) The offeror does not have an existing property control 
system or its existing system has not been approved by a Government 
property administrator;
    (ii) The offeror's property control system last was approved, or 
approval validated, more than 2 years prior to the date of its 
offer;
    (iii) A Government property administrator has requested 
corrections to the offeror's system or procedures and such 
corrections have not been made; or
    (iv) Approval of the system has been withdrawn.
    (2) The submission requirements in paragraph (e)(1) of this 
clause do not apply to offerors that have a Government property 
system that has been approved or validated by the Government no more 
than 2 years prior to the time for submission offers. Such offerors 
are required only to submit to the Government's property 
administrator, within 90 days following contract award, changes 
required to conform the system with requirements in this contract. 
The submission date may be extended by the Government's property 
administrator if the property administrator determines that an 
extension is warranted.
    (3) The Government's property administrator shall review the 
Contractor's system for conformance with contract requirements and 
approve or require corrections to the system and its implementing 
procedures. The Contractor shall accomplish the required corrections 
at no change in price or fee.
    (4) The Government may review the Contractor's previously 
approved system or require the Contractor to review a 
subcontractor's system to assure compliance with contract 
requirements. The Government's property administrator may validate 
approval of, require corrections to, or with the Administrative 
Contracting Officer's concurrence, withdraw approval of the 
Contractor's system or require the Contractor to have a 
subcontractor's system corrected. The Contractor shall implement 
corrections required by the Government's property administrator by 
the date specified by the property administrator or such other date 
agreed upon at no change in price or fee. The Contractor's failure 
to implement corrections in a timely manner might result in the 
system's approval being withdrawn.

[[Page 54016]]

    (5) The Contractor shall make available to the Government's 
property administrator all records and related information 
reasonably required to verify that the Contractor's or a 
subcontractor's property control system conforms to contract 
requirements. Any disagreement as to the amount or type of 
information required for such verification shall be referred to the 
Administrative Contracting Officer for resolution.
    (f) Property records and supporting information--(1) General. 
(i) The Contractor shall establish or maintain a property record 
that is current and complete for each Government property item in 
its or its subcontractors' possession. Identical items may be 
consolidated in a single property record if the consolidated record 
provides the information required by this clause. The Contractor 
shall identify useable components permanently removed from 
Government property as Governmental property items, enter such items 
into its property control system, and establish and maintain 
appropriate property records. Property records created by a 
subcontractor that has an approved property system may be used in 
lieu of creating new records.
    (ii) If the Contractor has an approved property control system, 
its documents evidencing receipt and issue shall be the property 
control records for Government material issued for immediate 
consumption.
    (iii) When the Government is responsible for the replacement of 
a property item under this contract and has elected--
    (A) To replace or have the Contractor replace the item, the 
Contractor shall annotate appropriately the property record for the 
item being replaced, close that record, and create a new property 
record for the replacement item; or
    (B) Not to replace or have the Contractor replace the item, the 
Contractor shall close the property record for that item.
    (iv) The Government shall provide the acquisition cost for 
Government furnished property within 30 days following delivery of 
the property to the Contractor. The Contractor shall notify the 
Government's property administrator promptly if the acquisition cost 
information is not received within the period.
    (v) Property records are not required for work in process.
    (2) Standard information. Each property control record shall 
contain the following information.
    (i) The item's name, description, and national stock number (if 
the item has a national stock number). The national stock number for 
property controlled by documents evidencing that receipt and issue 
is not required until property disposal.
    (ii) Contract number or equivalent code designation.
    (iii) Quantity received, issued, and on hand.
    (iv) The date of the most recent physical inventory or other 
posting reference.
    (v) Acquisition cost.
    (vi) Current location (for low value property, identify the 
initial location only).
    (vii) The most recent transaction date.
    (viii) The property's classification. (Use only one of the 
following for each property item: Land, Buildings, Other Real 
Property, Equipment, Special Test Equipment, Special Tooling, Unique 
Federal Property, or Material.)
    (3) Additional information--(i) Special test equipment records. 
The Contractor shall provide the information required by paragraph 
(f)(2) of this clause for each general purpose test equipment item 
that is a removable or reusable component or Government owned 
special test equipment it removal and reuse is economically 
feasible.
    (ii) Equipment records. Each record shall include the 
manufacturer's name, Commercial and Government Entity (CAGE) code or 
equivalent information, serial number, and model or part number.
    (iii) Real property records. (A) Records are not required for 
portable buildings or facilities specifically acquired or 
constructed for tests that will result in the destruction of such 
buildings or facilities.
    (B) Real property records must be itemized, indexed, and contain 
a description of the property, its location, original acquisition 
cost, a description of property alterations made or construction 
work performed by the Contractor including an identification of the 
construction sites supporting such alterations or construction, and 
separately identify the cost of such alterations or construction. 
Supporting documentation shall include maps, drawings, plans, 
specifications, and, if necessary, supplementary data needed to 
completely describe and value the property.
    (C) Costs incurred by the Government or the Contractor, to 
acquire, construct, alter, or improve Government owned or leased 
real property, including additions, expansions, extensions, 
conversions, shall be added to the property's acquisition cost if 
they increase the value, life, utility, capability, or 
serviceability of the property.
    (D) The real property records shall be modified and annotated 
with a statement of the pertinent facts when property is sold, 
transferred, donated, destroyed, abandoned by the Government in 
place, or condemned.
    (iv) Records of maintenance actions. The property records for 
items requiring maintenance shall contain the maintenance schedule, 
the dates maintenance actions were performed, and identify and 
deficiencies discovered.
    (v) Scrap records. (A) The scrap records shall provide the--
    (1) Contract number or equivalent code designation from which 
the scrap was derived;
    (2) Scrap classification by material content; and
    (3) Disposition and disposition dates.
    (B) When Contractor and Government owned property of the same 
stock or classification are used to produce an item or any component 
thereof and property scrapped during such production cannot be 
identified as Contractor or Government owned property, the 
Government property scrap records shall reflect a proportional, 
equitable share of such scrap.
    (vi) Property returned under warranty. The Contractor shall 
establish a separate property record for each item returned for 
correction under a warranty and maintain the records on a contract-
by-contract basis. The records shall identify the date received, the 
contract number under which the item was returned, the corrective 
action performed, and the date the item is returned to the 
Government. Once a property record has been established, identical 
items received for corrective action shall be added to the 
established record and the information required by this paragraph 
maintained for each item.
    (vii) Sensitive property. Property records shall legibly and 
conspicuously identify sensitive property.
    (g) Reports--(1) Government property. The Contractor shall 
report all Government property accountable under this contract that 
is in its or its subcontractors' possession as of September 30 of 
each calendar year or upon completion of all property disposal 
actions under this contract, whichever is sooner. The report shall 
be prepared using Standard Form 1422, U.S. Government Property in 
the Custody of Contractors (or an agency equivalent furnished by the 
Contracting Officer), and submitted to the Government's property 
administrator no later than October 31 of each calendar year.
    (2) Misdirected Government property. The Contractor shall submit 
a written report to the Government's property administrator 
immediately following receipt of Government property intended for 
another person or Government property not required for performance 
of a Government contract and request disposition instructions. To 
the extent practical, the report shall identify the shipment's 
content, the intended recipient, the carrier that made delivery, the 
Government activity from which the shipment originated, and the 
shipment's current location.
    (3)  Late Government furnished property. The Contractor shall 
report to the Contracting Officer, with a concurrent copy to the 
Government's property administrator, a failure to receive Government 
furnished property at the time stated in the contract or, when a 
time is not stated, in sufficient time to enable the Contractor to 
meet the contract's delivery or performance dates. Each report shall 
forward the Contractor's estimate of the extent to which such 
failure has affected or might affect contract performance.
    (h) Physical inventories.--(1) Periodic. Except for low value 
property and work in process, the Contractor shall periodically 
physically inventory all Government property in its possession. The 
Contractor, with the approval of the property administrator, shall 
establish the method, frequency, and procedures for such inventories 
to ensure that the existence and location of such property are 
accurately established and the records and reports required by this 
clause are complete and accurate. For purposes of this clause, 
electronic, optical, electro-magnetic, or similar inventory systems 
approved by the Government's property administrator satisfy the 
requirement for physical inventories.
    (2) Contract termination or completion inventories. The 
Contractor shall inventory all property furnished by the Government 
and all property to which the Government has taken title under this 
contract immediately following a notice of

[[Page 54017]]

termination or partial termination of this contract or upon 
completion of deliveries or performance under the contract except 
property that is authorized for use on a follow-on or other 
Government contract. Such property does not have to be inventoried 
if the Contractor has notified the property administrator that 
record balances have been transferred to the receiving contract.
    (3) Restriction. The Contractor personnel who perform physical 
inventories shall not be the same individuals who maintain the 
property records required by this contract or have custody of the 
property unless authorized to do so by the property administrator.
    (i) Markings. Promptly following receipt of Government furnished 
property, the Contractor shall determine whether the property bears 
a Government ownership marking, legibly and conspicuously mark 
unmarked property with the phrase ``U.S. Government Property'' (or a 
similar phrase that conveys Government ownership), and replace any 
control numbers affixed by others with the Contractor's control 
number.
    (j) Overseas contracts. In a contract performed outside the 
United States, its territories, or possessions, the words 
``Government'' and ``Government furnished,'' as used in this clause, 
mean ``United States Government'' and ``United States Government 
furnished,'' respectively.

(End of clause)

    ALTERNATE I (XXX 19XX) As prescribed in 245.102(c)(ii), 
substitute the following paragraphs (f) and (g) for paragraphs (f) 
and (g) of the basic clause:
    (f) Property records. The Contractor shall establish a separate 
property record for each Government property item returned for 
correction under a warranty and maintain the records on a contract-
by-contract basis. The records shall identify the item's name, 
description, property classification, and national stock number (if 
the item has a national stock number), the date received, the 
contract number under which the item was returned, the corrective 
action performed, and the date the item is returned to the 
Government. Once a property record has been established, identical 
items received for corrective action shall be added to the 
established record and the information required by this paragraph 
maintained for each item.
    (g) Reports.--(1) Misdirected Government property. The 
Contractor shall submit a written report to the Government's 
property administrator immediately following receipt of Government 
property intended for another person or Government property not 
required for performance of a Government contract and request 
disposition instructions. To the extent practical, the report shall 
identify the shipment's content, the intended recipient, the carrier 
that made delivery, the Government activity from which the shipment 
originated, and the shipment's current location.
    (2) Late Government furnished property. The Contractor shall 
report to the Contracting Officer, with a concurrent copy to the 
Government's property administrator, a failure to receive Government 
furnished property at the time stated in the contract or, when a 
time is not stated, in sufficient time to enable the Contractor to 
meet the contract's delivery or performance dates. Each report shall 
forward the Contractor's estimate of the extent to which such 
failure has affected or might affect contract performance.

[FR Doc. 97-27438 Filed 10-16-97; 8:45 am]
BILLING CODE 5000-04-M