[Federal Register Volume 68, Number 211 (Friday, October 31, 2003)]
[Rules and Regulations]
[Pages 62023-62026]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27490]


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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1845 and 1852

RIN 2700-AC73


Government Property--Instructions for Preparing NASA Form 1018

AGENCY: National Aeronautics and Space Administration.

ACTION: Interim rule.

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SUMMARY: This interim rule amends the NASA Federal Acquisition 
Regulation Supplement (NFS) to provide a definition of obsolete 
property, to address contractor validation of 1018 data, to clarify 
reporting of software to which NASA has title, to clarify other 
property classifications, and to revise the date for submission of 
annual property reports. NASA uses the data contained in contractor 
reports for annual financial statements and property management. This 
change will provide for consistent reporting of NASA property by 
contractors.

DATES: Effective Date: This interim rule is effective October 31, 2003.
    Comment Date: Comments should be submitted to NASA on or before 
December 30, 2003.

ADDRESSES: Lou Becker, NASA Headquarters, Office of Procurement, 
Contract Management Division (Code HK), Washington, DC 20546.

FOR FURTHER INFORMATION CONTACT: Lou Becker, NASA Headquarters, Office 
of Procurement, Contract Management Division (Code HK), Washington, DC 
20546, telephone: (202) 358-4593, e-mail to: [email protected].

SUPPLEMENTARY INFORMATION

A. Background

    Each year, NASA's financial statements are audited in accordance 
with generally accepted government auditing standards. NASA must 
maintain adequate controls to reasonably assure that property, plant 
and equipment and materials are presented fairly in its financial 
statements. Since contractors maintain NASA's official records for its 
assets in their possession, NASA uses the data contained in contractor 
reports for annual financial statements and property management. This 
interim rule provides policies and procedures related to obsolete 
property, contractor validation of 1018 data, and proper reporting of 
software to which NASA has title. This change will provide for 
consistent reporting of NASA property by contractors. It also reflects 
the need to change the date of submission for

[[Page 62024]]

annual property reports from October 31st to October 15th.

B. Regulatory Flexibility Act

    NASA certifies that this interim rule will not have a significant 
economic impact on a substantial number of small businesses within the 
meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.) 
because it clarifies existing property reporting policies and 
procedures contractors must follow when accounting for and reporting 
assets.

C. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the NFS do not impose new recordkeeping or information collection 
requirements which require the approval of the Office of Management and 
Budget under 44 U.S.C. 3501, et seq.

D. Determination To Issue an Interim Rule

    In accordance with 41 U.S.C. 418(d), NASA has determined that 
urgent and compelling reasons exist to promulgate this interim rule. 
The basis for this determination is that the clarifications contained 
in this interim rule are needed to ensure consistent reporting of NASA 
assets in contractor annual reports to be submitted for Fiscal Year 
2003. Public comments received in response to this interim rule will be 
considered in the formation of the final rule.

List of Subjects in 48 CFR Parts 1845 and 1852

    Government procurement.

Tom Luedtke,
Assistant Administrator for Procurement.

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Accordingly, 48 CFR Parts 1845 and 1852 are amended as follows:

0
1. The authority citation for 48 CFR Parts 1845 and 1852 continues to 
read as follows:

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

PART 1845--GOVERNMENT PROPERTY

0
2. Revise section 1845.7101 to read as follows:


1845.7101  Instructions for preparing NASA Form 1018.

    NASA must account for and report assets in accordance with 31 
U.S.C. 3512 and 31 U.S.C. 3515, Federal Accounting Standards, and 
Office of Management and Budget (OMB) instructions. Since contractors 
maintain NASA's official records for its assets in their possession, 
NASA must obtain periodic data from those records to meet these 
requirements. Changes in Federal Accounting Standards and OMB reporting 
requirements may occur from year to year, requiring contractor 
submission of supplemental information with the NASA Form (NF) 1018. 
The specific Statements of Federal Financial Accounting Standards 
(SFFAS) to be used for property records are SFFAS No. 3 ``Accounting 
for Inventory and Related Property'', SFFAS No. 6 ``Accounting for 
Property, Plant and Equipment'', SFFAS No. 10 ``Accounting for Internal 
Use Software'', and SFFAS No. 11 ``Amendments to PP&E: Definitions'' 
issued by the Federal Accounting Standards Advisory Board. 
Classifications of property, related costs to be reported, and other 
reporting requirements are discussed in this subpart. NF 1018 (see 
1853.3) provides critical information for NASA financial statements and 
property management. Accuracy, completeness, and timeliness of the 
report are critical to many aspects of NASA's operations.

0
3. Amend section 1845.7101-1 by revising paragraph (a), the 
introductory text of paragraphs (g) and (k) and paragraph (l) to read 
as follows:


1845.7101-1  Property classification.

    (a) General. (1) Contractors shall report costs in the 
classifications on NF 1018, as described in this section. The cost of 
heritage assets and obsolete property will be reported on the NF 1018 
under the appropriate classification. Supplemental reporting may also 
be required.
    (2)(i) Heritage assets are property, plant and equipment that 
possess one or more of the following characteristics:
    (A) Historical or natural significance;
    (B) Cultural, educational or artistic importance; or
    (C) Significant architectural characteristics.
    (ii) Examples of NASA heritage assets include buildings and 
structures designated as National Historic Landmarks as well as 
aircraft, spacecraft and related components on display to enhance 
public understanding of NASA programs. Heritage assets which serve both 
a heritage and government operation function are considered multi-use 
when the predominant use is in general government operations. Multi-use 
heritage assets will not be considered heritage assets for NF 1018 
supplemental reporting purposes.
    (3) Obsolete property is property for which there are no current 
plans for use in its intended purpose (i.e., it no longer provides 
service to NASA operations). Examples of obsolete property are items in 
configurations which are no longer required or used by NASA or items 
held for engineering evaluation purposes only. NASA may have approved 
the retention of these items for programmatic reasons even though they 
have no current plans for use.
* * * * *
    (g) Equipment. Includes costs of commercially available personal 
property capable of stand-alone use in manufacturing supplies, 
performing services, or any general or administrative purpose (for 
example, machine tools, furniture, vehicles, computers, software, test 
equipment, including their accessory or auxiliary items). Software 
integrated into and necessary to operate another item of Government 
property is considered to be an auxiliary item (see FAR 45.501) and 
should be considered part of the item of which it is an integral part. 
Other software to which NASA has title shall be classified as an 
individual item of equipment for reporting purposes if it has a useful 
life of 2 years or more and acquisition cost of $1,000,000 or more 
(also see 1845.7101-3(g)). Enhancement costs for existing software 
should be added to the software acquisition cost if the enhancement 
results in significant additional capability beyond that for which the 
software was originally developed (i.e., a capability that was not 
included in the original software specifications, the total cost of the 
enhancement is $1,000,000 or more, or the expected useful life of the 
enhanced software is 2 years or more). Software licenses are excluded. 
Contractors shall separately report:
* * * * *
    (k) Agency-Peculiar Property. Includes costs of completed items, 
unique to NASA aeronautical and space programs, which are capable of 
stand-alone operation. Examples include research aircraft, reusable 
space vehicles, ground support equipment, prototypes, and mock-ups. The 
amount of property, title to which vests in NASA as a result of 
progress payments to fixed price subcontractors, shall be included to 
reflect the pro rata cost of undelivered agency-peculiar property. 
Completed end items not related to the International Space Station or 
the Space Shuttle program which otherwise meet the definition of 
Agency-Peculiar Property, and are destined for permanent operation in 
space, such as satellites and space probes, shall not be reported. 
Contractors shall separately report:
* * * * *
    (l) Contract Work-in-Process. Work-in-process (WIP) consists of 
property items under construction (i.e., not complete).

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It includes costs of all work-in-process regardless of value, and 
excludes costs of completed items reported in other categories. While 
the costs of WIP for International Space Station and Space Shuttle 
components should be included as WIP, satellites and space probes and 
their components should be excluded from WIP as those items will be 
accounted for by NASA.

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4. Amend section 1845.7101-2 by revising the introductory text and 
paragraphs (a) and (c) to read as follows:


1845.7101-2  Transfers of property.

    A transfer is a change in accountability between and among prime 
contracts, NASA Centers, and other Government agencies (e.g., between 
contracts of the same NASA Center, contracts of different NASA Centers, 
a contract of one NASA Center to another, a NASA Center to a contract 
of another NASA Center, and a contract to another Government agency or 
its contract). To enable NASA to properly control and account for all 
transfers, they shall be adequately documented. Adequate documentation 
includes the appropriate dollar amount of the asset(s) transferred (as 
prescribed in 1845.7101-3) and the formal, signed NASA or contractor 
authorization approving the transfer. In addition, 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. The procedures described 
in this section shall be followed 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 accounted for and reported by the 
shipping contractor, regardless of the method of shipment, unless 
written evidence of receipt at destination has been received. 
Repairables provided under fixed price repair contracts that include 
the clause at 1852.245-72, Liability for Government Property Furnished 
for Repair or Other Services, remain accountable to the cognizant NASA 
Center and are not reportable on NF 1018; repairables provided under a 
cost-reimbursement contract, however, are accountable to the contractor 
and reportable on NF 1018. All materials provided to conduct repairs 
are reportable, regardless of contract type.
    (a) Approval and notification. The contractor must obtain approval 
of the contracting officer or designee for transfers of property off 
the prime contract before shipment. Each shipping document must be 
signed by the contracting officer or designee demonstrating such 
approval. Each shipping document must contain contract numbers, 
shipping references, property classifications in which the items are 
recorded (including Federal Supply Classification group (FSC) codes for 
equipment), unit acquisition costs (as defined in 1845.7101-3, Unit 
Acquisition Cost), original Government acquisition dates for items with 
a unit acquisition cost of $100,000 or more and a useful life of two 
years or more, and any other appropriate identifying or descriptive 
data. Where the DD Form 250, Material Inspection and Receiving Report, 
is used, the FSC code will be part of the national stock number (NSN) 
entered in Block 16 or, if the NSN is not provided, the FSC alone shall 
be shown in Block 16. The original Government acquisition date shall be 
shown in Block 23, by item. Other formats, such as the DD Form 1149, 
Requisition and Invoice/Shipping Document, should be clearly annotated 
with the required information. Unit acquisition costs shall be obtained 
from records maintained pursuant to FAR Part 45 and this Part 1845, or, 
for uncompleted items where property records have not yet been 
established, from such other record systems as are appropriate such as 
manufacturing or engineering records used for work control and billing 
purposes. Shipping contractors shall furnish a copy of the formally 
approved shipping document to the cognizant property administrator. 
Shipping and receiving contractors shall promptly submit copies of 
shipping and receiving documents to the Center Deputy Chief Financial 
Officer, Finance, responsible for their respective contracts when 
accountability for NASA property is transferred to, or received from, 
other contracts, contractors, NASA Centers, or Government agencies.
* * * * *
    (c) Incomplete documentation. If contractors receive transfer 
documents having insufficient detail to properly record the transfer 
(e.g., omission of property classification, FSC, unit acquisition cost, 
Government acquisition date, required signatures, etc.) they shall 
request the omitted data directly from the shipping contractor or 
through the property administrator as provided in FAR 45.505-2. The 
contracting officer shall assist the Government Property Administrator 
and the receiving contractor to obtain all required information for the 
receiving contractor to establish adequate property records.

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5. Amend section 1845.7101-3 by--
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(a) Redesignating paragraphs (c), (d), (e), and (f) as (d), (e), (f) 
and (h) respectively;
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(b) Adding a new paragraph (c);
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(c) Adding a new paragraph (g); and
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(d) Revising the redesignated paragraph (h).
    Paragraphs (c), (g) and (h) read as follows:


1845.7101-3  Unit acquisition cost.

* * * * *
    (c) Acquisition cost shall be developed using actual costs to the 
greatest extent possible, especially costs directly related to 
fabrication such as labor and materials. Where estimates are used, 
there must be a documented methodology based on a historical basis. All 
acquisition costs shall be properly documented, supported and retained. 
Supporting documentation shall be made available upon request.
* * * * *
    (g) Software acquisition costs include software costs incurred up 
through acceptance testing and material internal costs incurred to 
implement the software and otherwise make the software ready for use. 
Costs incurred after acceptance testing are excluded. License, 
maintenance, training, and data conversion costs are also excluded. If 
the software is purchased as part of a package, the costs will need to 
be segregated in such manner as to ensure that the excluded costs 
(maintenance, training, etc.) are not reported as part of the 
software's acquisition cost. Enhancement costs for existing software 
should be added to the acquisition cost if the enhancement results in 
significant additional capability beyond that for which the software 
was originally developed (i.e. a capability that was not included in 
the original software specifications), the total cost of the 
enhancement is $1,000,000 or more, and the expected useful life of the 
enhanced software is 2 years or more. Include the same types of cost as 
indicated above under new software. Costs incurred solely to repair a 
design flaw or perform minor upgrades should not be included.
    (h) The computation of work in process (WIP) shall include all 
direct and indirect costs of fabrication, including 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

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has begun work, and materials issued from inventory. The computation of 
WIP shall incorporate the other requirements for unit acquisition cost 
as outlined in paragraphs (a) through (e) of this section. In addition, 
acquisition cost of property furnished by the Government, which has 
been incorporated in the property item under construction or in process 
of fabrication, should be included. Do not include costs for operation 
or repairing existing completed property items. Once the property is 
complete, include all the costs outlined above in its acquisition value 
in the property record. The WIP values are inception to date until such 
time as the WIP is completed. It does not include future costs.

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

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6. Amend the clause at section 1852.245-73 by revising the date of the 
clause and revising paragraph (c) to read as follows:


1852.245-73  Financial Reporting of NASA Property in the Custody of 
Contractors.

* * * * *

Financial Reporting of NASA Property in the Custody of Contractors (Oct 
2003)

* * * * *
    (c)(1) 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 15. 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 15. Some activity 
may be estimated for the month of September, if necessary, to ensure 
the NF 1018 is received when due. However, contractors procedures 
must document the process for developing these estimates based on 
planned activity such as planned purchases or NASA Form 533 (NF 533 
Contractor Financial Management Report) cost estimates. It should be 
supported and documented by historical experience or other 
corroborating evidence, and be retained in accordance with FAR 
Subpart 4.7, Contractor Records Retention. Contractors shall 
validate the reasonableness of the estimates and associated 
methodology by comparing them to the actual activity once that data 
is available, and adjust them accordingly. In addition, differences 
between the estimated cost and actual cost must be adjusted during 
the next reporting period. Contractors shall have formal policies 
and procedures, which address the validation of NF 1018 data, 
including data from subcontractors, and the identification and 
timely reporting of errors. The objective of this validation is to 
ensure that information reported is accurate and in compliance with 
the NASA FAR Supplement. If errors are discovered on NF 1018 after 
submission, the contractor shall contact the cognizant NASA Center 
Industrial Property Officer (IPO) within 30 days after discovery of 
the error to discuss corrective action.
    (2) The Contracting Officer may, in NASA'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 in accordance 
with 1845.505-14 and any supplemental instructions for the current 
reporting period issued by NASA. Such reserve shall be withheld 
until the Contracting Officer has determined that NASA has received 
the required reports. The withholding of any amount or the 
subsequent payment thereof shall not be construed as a waiver of any 
Government right.
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[FR Doc. 03-27490 Filed 10-30-03; 8:45 am]
BILLING CODE 7510-01-P