[Federal Register Volume 72, Number 93 (Tuesday, May 15, 2007)]
[Rules and Regulations]
[Pages 27364-27397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-2256]


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DEPARTMENT OF DEFENSE

GENERAL SERVICES ADMINISTRATION

NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1, 2, 4, 7, 14, 15, 16, 17, 18, 19, 22, 28, 31, 32, 
35, 37, 41, 42, 43, 44, 45, 46, 49, 51, 52, and 53

[FAC 2005-17; FAR Case 2004-025; Docket 2007-0001, Sequence 2]
RIN 9000-AK30


Federal Acquisition Regulation; FAR Case 2004-025, Government 
Property

AGENCIES: Department of Defense (DoD), General Services Administration 
(GSA), and National Aeronautics and Space Administration (NASA).

ACTION: Final rule.

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SUMMARY: The Civilian Agency Acquisition Council and the Defense 
Acquisition Regulations Council (Councils) have agreed on a final rule 
amending the Federal Acquisition Regulation (FAR) to simplify 
procedures, clarify language, and eliminate obsolete requirements 
related to the management and disposition of Government property in the 
possession of contractors. FAR parts are amended to implement a policy 
that improves the management of Government property while fostering 
efficiency, flexibility, innovation and creativity by adopting property 
practices typically used in the commercial arena while continuing to 
protect the Government's interest. In

[[Page 27365]]

addition, the rule simplifies requirements on contractors by reducing 
the number of FAR clauses from nineteen clauses to three overarching 
clauses. The final rule specifically impacts contracting officers, 
property administrators, and contractors responsible for the management 
of Government property.

DATES: Effective Date: June 14, 2007.

FOR FURTHER INFORMATION CONTACT For clarification of content, contact 
Mrs. Jeritta Parnell, Procurement Analyst, at (202) 501-4082. Please 
cite FAC 2005-17, FAR case 2004-025. For information pertaining to 
status or publication schedules, contact the FAR Secretariat at (202) 
501-4755.

SUPPLEMENTARY INFORMATION:

A. Background

    The Department of Defense (DoD) proposed a rewrite of FAR Part 45, 
Government Property and associated clauses, to implement a policy that 
fosters efficiency, flexibility, innovation and creativity while 
continuing to protect the Government's interest. In the late 1990s, the 
DoD initiated a complete rewrite of the FAR, Part 45 and associated 
clauses. Beyond attempting to address long-standing property management 
issues, the effort reflected the general consensus that adoption of 
more typically commercial business practices would not only attract 
more commercial firms to the marketplace but also result in significant 
savings of acquisition dollars. For many reasons, only one of the 
proposed rules (Subpart 45.6) was implemented; the legalities and 
complexities that characterize Government property management drew out 
differences between the Government and industry parties, resulting in 
suspension of the rest of the project.
    DoD, GSA, and NASA published a proposed rule in the Federal 
Register at 70 FR 54878, September 19, 2005, and the public comment 
period closed November 18, 2005.
    Forty respondents submitted two-hundred-eighty-seven comments. The 
two-hundred-eighty-seven comments were grouped into thirty-two 
categories. The Councils considered all comments and concluded that the 
proposed rule should be converted to a final rule, with changes to the 
proposed rule. Differences between the proposed rule and final rule are 
identified in the Summary of Changes in Section C, and discussed in the 
responses to the public comments in Section B.

B. Public Comments

    The 287 comments received from forty respondents have been 
dispositioned as discussed below. The comments received were grouped 
under 32 general topics. A summary of the comments follows:
    1. Title.
    a. Title to Government Property. Fourteen comments were received 
from ten respondents regarding the title of Government property.
    (1) Two respondents addressed the proposed FAR revision as 
containing an elimination of the state law ``sale for resale'' 
exemption for overhead property allocable to cost type contracts. The 
respondents stated that the proposed rule eliminates the exemption from 
sales and use taxes on contractor overhead property allocable to cost 
type contracts and should be withdrawn and full consideration given to 
the impact of the change.
    (2) One respondent requested adding the statement to the proposed 
rule at FAR 52.245-1(e) ``Under cost reimbursement and cost sharing 
contracts'' to clarify title under cost type contracts versus fixed 
price contracts.
    (3) One respondent requested an additional sentence be added to the 
title paragraph clarifying that when this clause is used with Time-and-
Material (T&M) contracts, contractors shall only acquire material for 
direct charge to the contract.
    (4) One respondent recommended the following change to clarify FAR 
45.401, ``Under fixed price type contracts, the contractor retains 
title to all property acquired by the contractor for use on the 
contract, up until the time that such property is received, delivered 
and accepted as a part of the deliverable end-item by the Government.''
    (5) One respondent recommended adding a section to address cost 
Contract Line Item Numbers (CLINs) under fixed price contracts in FAR 
45.401(b).
    (6) One respondent recommended that FAR 52.245-1(e) be revised to 
replace direct item of cost with, either directly or conditionally, 
based upon the sub paragraphs (2), (3), and (4) that followed.
    (7) One respondent requested FAR 52.245-1(e) be revised to replace 
``direct item of cost'' with ``either directly or conditionally based 
on the subparagraphs (2), (3) and (4)'' or use optional wording ``FFP 
and Cost-type reimbursable contracts.''
    (8) One respondent recommended the retention of the current 
language in FAR 52.245-2 and 52.245-5 as to when title passes.
    (9) One respondent requested a revision to title language referring 
to indirect title issues as proposed in FAR 45.401 and FAR 52.245-1(e) 
to clarify indirect and direct overhead property.
    (10) One respondent provided the following response to the proposed 
rule at FAR 52.245-1, ``While the Government has not asserted title to 
all materials that may support the charging of indirect costs, 
including (for instance) office supplies (some portions of the cost of 
which may be allocated to a contract), we believe that financing 
payments normally must be secured by a title interest in contract 
materials. As a general rule, the value of the payments will be fairly 
approximated by the value of goods that are either incorporated into 
the end items, or consumed in their production (such as cutting 
materials, abrasives, special tooling, etc.). The Government's interest 
in such materials is not dependent on whether their costs are charged 
as direct or indirect costs. Sections 45.401(b) and (c), and paragraph 
(e) of the proposed Government Property clause, have therefore been 
corrected in this draft to eliminate this distinction.''
    (11) One respondent provided three comments.
    (i) A contract modification may not be necessary if contractor 
retention and use was the original intent of the contract. Requiring a 
modification serves no purpose. Under fixed price type contracts, the 
contractor retains title to all property acquired by the contractor for 
use on the contract except for property identified as a deliverable 
item. If a deliverable item is to be furnished to the contractor for 
use after inspection and acceptance by the Government, it shall be made 
accountable to the receiving contract as Government-furnished property.
    (ii) Clarify the FAR to be more consistent with the current and 
proposed title provisions. We believe there is no intent on the 
Government's part or the contractor's part to change how the title 
provisions currently function.
    (iii) Revise 52.245-1(d) and (e).
    Response: The intent of 52.245-2 and 52.245-5 remains unchanged. 
The proposed language at 45.401 and 52.245-1(d) and (e) is revised to 
reflect the current language in the FAR found at 52.245-2 and 52.245-5. 
Administrative changes (i.e., deletion of references to Special Tooling 
and Facilities) were made to 45.402 and 52.245-1(e)(2) and (3) in order 
to correlate with the final rule. Though the intent of the proposed 
rule was to provide clarity for title issues, the disparate public 
comments received gave evidence that questions still remain. Therefore, 
the Councils have

[[Page 27366]]

fundamentally retained existing FAR language under this case.
    b. Title Under Progress Payments.
    One respondent requested clarification in 52.232-16 that the 
Government does not take title to overhead property.
    Response: The Councils do not believe the recommended change at 
52.232-16 is necessary as related to this case. With respect to 
overhead materials, language will not be changed by the FAR Part 45 
rewrite.
    2. Use of Government Property (Suitability for Use and As-Is).
    a. One respondent recommended that contractors be allowed the 
opportunity to inspect Government-furnished property, expected to be 
suitable for contract performance, after the property has been received 
and installed.
    Response: The Councils agree that contractors should be allowed to 
determine whether Government-furnished property is suitable for 
contract performance. Therefore FAR 52.245-1(d)(3)(ii), renumbered as 
52.245-1(d)(2)(ii), is revised to allow contractors the opportunity to 
determine whether Government-furnished property is suitable for use 
after receipt and installation.
    b. One respondent recommended that FAR clause 52.245-1(d)(3)(i) and 
(ii) be revised to specify what constitutes a contractor's timely 
written request for equitable adjustment.
    Response:The Councils believe the final rule language is adequate 
for the contractor to advise the contracting officer of Government 
property received in a condition not suitable for its intended use or 
if the property is not delivered to the contractor by the contractually 
required date. The rule allows flexibility in accordance with agency 
procedures and/or individual contract requirements.
    c. One respondent recommended using original language as stated in 
FAR 52.245-2(a)(2) to disposition Government property not suitable for 
intended use. Since the property is owned by the Government, the 
decision concerning an appropriate action should rest with the 
contracting officer.
    Response: The Councils believe the final rule language is 
sufficient for disposition of Government property not suitable for 
intended use. The language gives the contracting officer the 
flexibility when choosing a course of action to remedy the problem. FAR 
clause 52.245-1(d)(2)(ii) specifically states that actions may include 
repairing, replacing, modifying, returning or otherwise disposing of 
the property at the Government's expense. Upon completion of the 
action(s), the contracting officer shall consider an equitable 
adjustment to the contract.
    d. Six respondents offered recommendations to the language 
regarding property offered ``as-is.'' The proposed rule did not address 
pre-contract inspection by the contractor for Government-furnished 
property offered in an ``as-is'' condition. This may cause adverse 
ramifications associated with the use of the ``as-is'' provisions.
    Response: The Councils believe that the recommendation to add 
language addressing pre-contract inspection by the contractor for 
Government-furnished property offered in an ``as-is'' condition is 
appropriate and has added language at FAR 45.201(a)(5). The new 
language requires the contracting officer to include a statement in all 
solicitations as to whether the Government property is to be furnished 
in an ``as-is'' condition and provide instructions for physical 
inspection.
    e. One respondent recommended that FAR clause 52.245-1(d)(3)(iii) 
be deleted in its entirety as the unilateral provisioning of ``as-is'' 
property is high risk to the contractor. In addition, it delays 
scheduling, increases cost to the contractor and to the Government and 
may present a costly event to the contractor should the item be 
determined hazardous.
    Response: The Councils do not agree with the recommendation to 
delete the Government's option to furnish property in an ``as-is'' 
condition. The FAR currently provides language to provide property in 
an as-is condition and the Councils see no evidence to justify the 
removal of this language. However, the Councils recognize the 
respondent's concern and have mitigated the risk by revising FAR clause 
52.245-1(d)(3)(iii), renumbered as 52.245-1(d)(2)(iii), to clarify that 
the contractor will be given the opportunity to inspect property 
provided in an ``as-is'' condition prior to the property being 
provided.
    f. One respondent stated that the listing at FAR 45.201(a) should 
include all material information required to make an informed decision 
regarding Government property to be offered in solicitations in an 
``as-is'' condition. The respondent recommended adding supply condition 
code and current location to the proposed listing.
    Response: The Councils believe the list in the proposed final rule 
is sufficient for inclusion in solicitations where Government-furnished 
property is anticipated and should not be modified to add supply 
condition code and current location. The contractor has the right to 
inspect property furnished ``as-is'' and determine the condition 
relative to overall utility prior to the property being provided under 
contract as stated in the revised rule, FAR clause 52.245-1(d)(3)(iii), 
renumbered as 52.245-1(d)(2)(iii).
    g. One respondent recommended that a reference to the Changes 
clause be included at FAR 52.245-1(i). The respondent further commented 
that the language is somewhat limiting. If a contractor relies on 
Government-Furnished Property (GFP) and that property is delayed, 
received in an unsuitable condition, substituted, etc. (see FAR 52.245-
1(i)(1)-(4)), contract performance may be impacted. An equitable 
adjustment may not be sufficient remedy for the contractor.
    Response: The Councils believe that the proposed language should 
not be revised to include a reference to the Changes clause nor should 
the equitable adjustment language be revised. A change is affected 
according to whether or not the contracting officer determines the 
necessity for such, in accordance with contract terms and conditions. 
Equitable adjustments require agreement by both parties.
    3. Scope.
    a. One respondent suggested the addition of a sentence to FAR 
45.000, scope of part, stating that ``nothing in this part prohibits 
the use of a property management contract.''
    Response: The FAR does not prohibit the use of a contract for 
performance of property management. Contracts for the performance of 
property management are a common form of service contracts. The 
Councils do not believe it is necessary to specifically state that the 
use of a contract for performance of property management is ``not 
prohibited.''
    b. One respondent suggested adding language to FAR 45.000, scope of 
part, to specifically exclude software.
    Response: While the definition of Contractor-acquired property 
remains unchanged, FAR 45.000 is revised to exclude software and 
intellectual property from this rule.
    c. Three respondents suggested replacing ``plant'' or ``plant 
equipment'' in the parenthetical phrase in FAR 45.000.
    Response: The language is revised to delete the term ``Plant 
equipment'' and replace it with the word ``Property'' in the 
parenthetical phrase in FAR 45.000. The term ``Property,'' rather than 
the term ``Plant equipment'' is more appropriately used because it is 
more inclusive and more definitive.
    d. One respondent suggested that since the definition for plant 
equipment has been deleted, and the term ``Equipment'' has been 
substituted in most cases in the re-write, the all-

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inclusive term ``Government property,'' as used in FAR 45.301(f) of the 
proposed rule, should also be replaced with the term ``Equipment'' 
based on the context.
    Response: The term ``Government property,'' rather than the term 
``Equipment'' or ``Government equipment'', is more appropriately used 
because it is more inclusive and more definitive.
    4. Definitions.
    a. Acquisition Cost.
    Seven comments were received from five respondents concerning the 
definition of ``Acquisition cost.'' One respondent stated that the 
proposed definition did not provide for the use of original acquisition 
cost. One respondent recommended deleting the language at paragraph (2) 
of the definition. One respondent recommended that the definition be 
revised to refer to generally accepted accounting principles (GAAP), 
not consistently applied sound accounting principles, and asked whether 
Cost Accounting Standards (CAS) is applicable. One respondent stated 
the definition should be revised to state that the fair market value 
attributed to the item should be agreed upon by the parties. One 
respondent stated that the definition in 45.101, 52.245-1, and 52.245-9 
included the term ``full cost'' which may be confusing to personnel 
unfamiliar with contractor's systems, e.g., for equipment, acquisition 
cost is referred to as ``unit acquisition cost.''
    Response: The Councils recognize the concerns and have revised the 
definition of acquisition cost that provides sufficient detail to 
permit application. As part of this revision, the Councils have 
replaced the term ``Full cost'' with ``Cost'' to avoid any potential 
confusion.
    b. Approved Scrap Procedure.
    One respondent recommended including a definition for ``Approved 
scrap procedures.''
    Response: The Councils believe there is no single definition for 
approved scrap procedure; it will vary, dependent upon the individual 
contractor.
    c. Cannibalize.
    Two respondents recommended adding a definition for 
``Cannibalize.''
    Response: The Councils agree with the recommendation and a 
definition for ``Cannibalize'' is added to 45.101 and 52.245-1.
    d. Common Item.
    Two comments received from one respondent recommended the 
definition for ``Common item'' be deleted at 45.101 and 52.245-1(a) 
because it is superfluous and not used elsewhere.
    Response: The term ``Common item'' is used in Part 31 and in the 
inventory disposal forms. However, because the term is used in more 
than one section of the FAR, the Councils decided the definition should 
be moved to Part 2.
    e. Contractor-Acquired Property.
    Two comments received from two respondents recommended revising the 
definition of ``Contractor-acquired property.'' One respondent 
recommended revising the definition as follows: ``means property 
acquired or otherwise provided by the contractor for performing a 
contract and to which the Government has provided funding or has 
title.'' One respondent recommended adding the word ``Government'' to 
the term to say ``Contractor acquired government property.''
    Response: The Councils believe the definition is adequate as 
written. The definition states ``to which the Government has title'' 
so, there is no additional value to adding the word Government to the 
term.
    f. Contractor Inventory.
    Eleven comments were received from three respondents recommending 
changes to the definition of ``Contractor inventory.'' Four comments 
stated that paragraph (1) should be revised to state only: ``Any 
property acquired by and or in the possession of a contractor or 
subcontractor under a contract for which title is vested in the 
Government and delete the language that states: ``and which exceeds the 
amounts needed to complete full performance under the entire 
contract.'' Two comments stated the term should be changed to 
``Contract inventory.'' Two comments stated that paragraph (2) should 
be deleted. Two comments stated that paragraph (3) should be deleted. 
One comment stated that term should be ``contractor property.''
    Response: The term and the definition of contractor inventory 
reflect the statutory definition in 40 U.S.C. 472.
    g. Demilitarization.
    Five comments were received from four respondents regarding the 
definition of ``Demilitarization.'' One respondent stated that the 
definition of demilitarization was ill-suited for its intended purpose 
and recommended it be toned down and moved away from its military 
slant. Other terms suggested were disenable, neutralize, incapacitate 
or decommission. One respondent stated that the word 
``demilitarization'' should be removed from the body of the definition. 
One respondent stated that the definitions in 45.101 and 52.245-1 
should be revised to say ``demilitarization means rendering designated 
equipment or material unusable for, and not restorable to, the purpose 
for which it was designed or is customarily used'' by deleting the 
phrase ``a product designated for demilitarization.'' One respondent 
stated that definition needed to be revised to replace ``product 
designated for demilitarization'' with ``equipment and material.''
    Response: The definition is revised to remove the words 
``designated for demilitarization,'' but the Councils did not concur 
with substituting ``equipment or material'' with ``disenable, 
neutralize, incapacitate or decommission.'' Demilitarization is a term 
of art specific for military purposes and denotes more requirements 
than are implied by the suggested terms.
    h. Discrepancies Incident to Shipment.
    Four comments were received from three respondents to revise the 
definition of ``Discrepancies incident to shipment'' to mean any 
difference between the items documented to have been shipped and items 
actually received.
    Response: The Councils agree with the suggested revisions and the 
definition is revised in 45.101 and 52.245-1.
    i. Equipment.
    Three comments were received from three respondents to revise the 
definition of ``Equipment.'' One respondent stated the phrase ``in-and-
of-itself'' is limiting, the statement on the expected useful life is 
superfluous and the phrase ``does not lose its identity or become a 
component part of another article when put into use'' creates 
confusion. One respondent stated ``in-and-of-itself'' should be 
replaced with ``functionally complete for its intended purpose.'' One 
respondent stated special tooling should be a subset of equipment.
    Response: The Councils agree that the phrase ``in-and-of-itself'' 
should be revised and replaced it with ``functionally complete for its 
intended purpose,'' but there are instances where a piece of equipment 
becomes part of a higher assembly, so that distinction is necessary.
    j. Government-Furnished Property.
    Two comments were received from one respondent to revise the 
definition of ``Government-furnished property'' to be consistent with 
the Unique Identification (UID) requirements by adding the phrase ``is 
a subset of property in the possession of a contractor (PIPC),'' in 
both 45.101 and the clause at 52.245-1.
    Response: The Councils do not believe the additional language is 
necessary and does not add clarity. UID is a unique DoD initiative, and 
the term

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PIPC is a DoD unique term, and therefore are not appropriate for 
inclusion in the FAR.
    k. Industry Leading Standard or Practice.
    One respondent stated that there should be a definition for 
``Industry leading standard or practice'' added to the clause at 
52.245-1.
    Response: The Councils believe that the term is a commonly used 
term and is meant to convey industry strategies and processes that are 
quantifiably and qualitatively demonstrated to be top performing.
    l. Information Technology Equipment.
    Two comments were received from one respondent stating that a 
definition should be added for ``Information Technology Equipment 
(ITE)'' in 45.101 and the clause at 52.245-1.
    Response: A definition of information technology exists in 2.101 
and captures information technology equipment within that definition.
    m. Material.
    Two comments were received from one respondent to revise the 
definition of ``Material'' to be more in line with the concept that 
tangible personal property is either material or equipment and to 
remove the exclusions of special tooling, special test equipment and 
unique Federal property, in 45.101 and in the clause at 52.245-1.
    Response: The Councils believe special tooling and special test 
equipment are still valid classifications and the exclusion still 
applies. Unique Federal property may be applicable at an agency level. 
The term ``Unique Federal property'' was removed from the final rule 
language.
    n. Non-severable.
    Two comments were received from one respondent to substitute the 
word construction for erection in the definition of ``Non-severable'' 
in both 45.101 and the clause at 52.245-1.
    Response: The definition is revised because the Councils believe 
that ``construction'' provides a better description.
    o. Personal Property.
    Two respondents stated that there is no definition for ``Personal 
property'' and a definition should be included here.
    Response: The definition for Personal property can be found in 
2.101.
    p. Property in the Possession of Contractors (PIPC).
    One comment was received stating there needed to be a definition 
for ``Property in the Possession of Contractors (PIPC).''
    Response: An additional definition is not necessary because this is 
not a term used in the FAR.
    q. Plant Clearance Officer (PLCO) and Property Administrator (PA).
    Four comments were received from two respondents regarding 
revisions to the definition of ``Plant Clearance Officer'' (PLCO) and 
``Property Administrator'' (PA). One respondent stated that PLCO and PA 
should be defined in the same place and that the word ``assigned'' 
should be revised to read ``appointed'' in both definitions because 
they both must have a certificate of appointment. One respondent stated 
that the revisions to the PLCO definition appear to redefine the duties 
of the PLCO and proposed a revised definition as ``an authorized 
representative of the contracting officer appointed to disposition 
property accountable under Government contracts.'' One respondent 
stated that the definition should be left as is.
    Response: The definitions of PLCO and PA were revised to replace 
the word ``assigned'' with ``appointed'' in FAR 2.101 (PLCO), 45.101 
(PA) and 52.245-1 (PA). The Councils believe the proposed revision most 
accurately reflects the duties and authorities of the appointed 
individual. PLCO is defined in FAR 2.101. PA is only used in 45 and is 
therefore inappropriate to be defined in FAR 2.101.
    r. Provide.
    Two comments were received from one respondent recommending that 
the definition of ``Provide'' should be consistent with the Defense 
Federal Acquisition Regulation Supplement (DFARS) 245.301 definition.
    Response: The definition of ``Provide'' is revised in the final 
rule at 45.101 and 52.245-1.
    s. Real Property.
    Two comments were received from one respondent stating that the 
definitions for ``Real property'' should be moved from 45.101 and 
52.245-1 to 2.101.
    Response: The Councils believe that the definition for ``Real 
property'' is more appropriate in Part 45 because this definition 
relates to property management and may conflict with the use of the 
term as used elsewhere in the FAR. The final rule retains the current 
FAR Part 45 definitions of Real property and Plant equipment. The 
proposed rule included a revised definition of Real property in FAR 
Part 45, and also deleted the definition of Plant equipment. However, 
upon further review, the Councils are concerned that removing the term 
``Plant'' from ``Plant equipment'' may inappropriately narrow the 
definition of Real property. The current definition states that Real 
property does not include the foundations and work necessary to install 
plant equipment. Plant equipment is currently defined as encompassing 
only Personal property. However, the term ``Equipment'' can encompass 
both Real and Personal property. Thus, the Councils believe it is 
advisable to retain the current definitions of Real property and Plant 
equipment. However, in Section 45.000, Scope of part, the Councils 
believe that the term ``Property'' is more appropriate than ``Plant 
equipment'', i.e., the distinction between Real and Personal property 
is not relevant in the context of this particular section.
    t. Scrap.
    Two comments were received from two respondents stating that the 
proposed rule does not provide a definition of ``Scrap.''
    Response: FAR Part 2 includes a definition of scrap.
    u. Sensitive Property.
    One respondent stated that the definition of ``Sensitive property'' 
should include sensitive and classified information.
    Response: A revision to the definition of ``Sensitive property'' is 
not necessary. The proposed rule applies only to tangible property and 
does apply to information such as software or intellectual property.
    v. Special Tooling and Special Test Equipment.
    Four comments were received from four respondents regarding the use 
of the terms ``Special Tooling (ST)'' and ``Special Test Equipment 
(STE)'' and the location of the definitions. One respondent stated that 
if the ST and STE clauses are being deleted, then the terms should be 
deleted as well. One respondent asked whether Part 2 was going to be 
revised to include the definitions of ST and STE, since it does not 
currently. One respondent stated that ``replacement of these items'' 
should be deleted from the definition of Special tooling.
    Response:Even though the clauses for special tooling and special 
test equipment are being deleted, the terms are still appropriate 
classifications. The definitions of ST and STE are included in the 
proposed rule under Part 2. The Councils agree that the phrase 
``replacement of these items'' should be deleted from the special 
tooling definition in FAR 2.101 and has revised the definition 
accordingly.
    w. Stewardship.
    Two respondents stated that the revised rule should include a 
definition of ``Stewardship.''
    Response: The Councils believe the term is a common dictionary term 
and does not need to be defined.
    x. Surplus Property.

[[Page 27369]]

    Two comments were received from one respondent stating the 
definition of ``Surplus property'' should be revised in both 45.101 and 
52.245-1 to state ``excess personal property not required by any 
Federal agency as determined by the Administrator of the General 
Services Administration (GSA) or as delegated.''
    Response: GSA has not delegated the authority to determine that 
items are surplus to the Government.
    y. Unique Federal Property.
    Two comments were received from one respondent stating that 
``Unique Federal property'' is a subset of equipment and the definition 
of ``Unique Federal property'' should be revised to replace the term 
``Personal property'' with ``Equipment'' in both FAR 45.101 and the 
clause at 52.245-1.
    Response: ``Unique Federal property'' is not exclusively a subset 
of equipment. ``Unique Federal property'' may include equipment and 
other classifications of personal property. However, the definition is 
deleted because it is not used in the prescriptive language or in the 
clause.
    z. Voluntary Consensus Standards.
    One respondent stated that definition of ``Voluntary consensus 
standards'' should be the same as the definition in OMB Circular A-119.
    Response: The definition is based on the definition in OMB Circular 
A-119 and is tailored to the requirements of FAR Part 45.
    aa. Work In Progress (WIP).
    One comment was received regarding the addition of a definition for 
``WIP,'' in both Part 45 and the clause at 52.245-1.
    Response: The term ``WIP'' is not used in Part 45, and therefore, 
there is no need to define the term.
    5. Policy.
    a. One respondent stated that the FAR should provide a more 
detailed explanation of what is needed for a contracting officer to 
provide property.
    Response: FAR 45.102(b) sets forth overall requirements that must 
be met for contracting officers to make a determination to furnish 
Government property. Any further details are subject to Agency policies 
and procedures.
    b. One respondent suggested the Councils clarify the intent of the 
requirement that contracting officers ``provide property to contractors 
only when it is clearly demonstrated.''
    Response: The proposed language in FAR 45.102(b) sets forth clear 
requirements regarding what must be demonstrated in order for 
contracting officers to provide Government property. To further define 
these requirements would hinder contracting officers' flexibility in 
making informed business decisions in the best interest of the 
Government.
    c. One respondent questioned how contracting officers are supposed 
to calculate the cost of administration etc. under FAR 45.102(b)(2).
    Response: Calculating the cost of administration should be 
considered on a case by case basis and in accordance with Agency 
procedures and individual contractual circumstances and requirements.
    d. One respondent questioned what is meant by the phrase ``increase 
the Government's assumption of risk'' under FAR 45.102(b)(3).
    Response: The Government's assumption of risk is not specifically 
defined since the FAR cannot predict all aspects of risk. Such aspects 
may include, but are not limited to, successful contract completion, 
loss of Government property, national security, etc. To further define 
these requirements would hinder contracting officers' flexibility in 
making informed business decisions in the best interest of the 
Government.
    e. Two respondents were concerned that the proposed rule will make 
furnishing property to contractors much easier administratively, and 
consequently will result in more Government property being furnished to 
contractors.
    Response: The language allows contracting officers, the flexibility 
to make appropriate business decisions regarding their contracts. This 
may include the provision of property, but only when it is in the best 
interests of the Government.
    f. One respondent stated that FAR 45.103 also defines Voluntary 
consensus standards and as such, they embrace this concept whole-
heartedly. The respondent suggested that for consistency, it would make 
sense to use the verbiage as spelled out in FAR 11.101(c).
    Response: Section 11.101 provides guidance for the use of Voluntary 
consensus standards. To restate such guidance would be redundant. The 
definition of Voluntary consensus standards was added to 2.101 in the 
proposed rule and is based on the definition in OMB circular A-119.
    6. General.
    a. One respondent stated that it may be difficult to estimate 
Government-Furnished Property (GFP) utilization over a 5 or 10-year 
contract period and recommended that allowances be made for revisiting 
the timely turn-in of excess property, where exceptional circumstances 
exist.
    Response: In order to ensure maximum practical use of the property 
and timely disposition of excess property, the Councils believe the 
final rule language found at FAR 45.103(a)(6), which requires 
contractors to justify retaining Government property not needed for 
contract performance, is necessary. It should be noted that the 
prescriptive language would be subject to agency procedures.
    b. One respondent suggested that FAR 45.103(a)(2) be divided into 
two separate requirements, as the subject matter is not related.
    Response: The Councils agree with the respondent and has revised 
FAR 45.103(a)(2) to make two separate requirements. As a result, 
proposed paragraphs (3), (4), and (5) have been renumbered in the final 
rule as (4), (5), and (6). In addition, the invalid reference to 45.602 
has been deleted.
    c. One respondent questioned what possible justification could a 
contractor provide to substantiate keeping Government property not 
required for performance of a Government contract.
    Response: Normally Government property is returned to the 
Government. Contractors are required to justify retention of Government 
property not needed for contract performance in order to ensure maximum 
practical use of the property and to ensure timely disposition of 
excess property. There are several instances in which it is in the 
Government's best interest for contractors to retain Government 
property (e.g., future procurements and spare part procurements, 
medical studies and industrial readiness).
    7. Industry Leading Standards and Practices.
    a. One respondent, with respect to 45.103, asked who sets the 
``Leading Industry Standards.''
    Response: An ``Industry leading'' standard is meant to convey 
industry strategies and processes that are both quantifiably and 
qualitatively demonstrated to be top performing within a given 
industry.
    b. Two respondents, with respect to the Background Section of the 
Federal Register Notice, stated that it is unclear how the use of 
commercial practices will apply to the management of Government 
property under Government contracts especially when contractors do not 
provide their own property to other contractors under their contracts.
    Response: Contractors are not necessarily being asked to provide 
processes for contractor-to-contractor relationships. Rather, 
contractors are being required to apply the same industry leading 
standards or voluntary

[[Page 27370]]

consensus standards that they use to manage their own property.
    c. One respondent stated, with respect to 45.103, that voluntary 
consensus standards currently in print would not be efficient to 
protect the Government's interest. An area that is unclear is whether 
contractors will be required to go to a voluntary consensus standard if 
for the past twenty years the contractor's property control system has 
met or exceeded the requirements of FAR Subpart 45.5. If contractor 
metrics ASTM, ISO, etc., are used by the Government to monitor 
contractor compliance, what precedent does the FAR, DoD Supplement, and 
DoD Manual have in relationship to the contractor based metric?
    Response: The effectiveness of Voluntary consensus standards is 
well established; their use is prescribed in OMB Circular 119 and in 
FAR Part 11. The proposed rule included the requirement for consistent 
application of prescribed outcomes.
    d. One respondent stated that the use of industry-leading standards 
and practices versus the previous standard of sound industrial 
practices imposes a hardship on small business.
    Response: The Councils believe that the rule allows small 
businesses to use industry practices instead of Government imposed 
standards and is therefore less burdensome. Industry leading practices 
are not an exclusive purview of large business. The rule balances 
regulation with principle-based standards that allow for minimal 
regulatory requirement and greater flexibility and efficiency to 
achieve best value for the Government.
    e. One respondent asks, ``How are contracting officers to be aware 
of industry leading practices? Will the council direct the creation of 
new Defense Acquisition University (DAU) courses specifically for this 
purpose?''
    Response: The Councils believe that contracting officers are 
professionals in their fields of acquisition and are capable of 
accessing the necessary information from various sources applicable to 
their respective fields. The Councils will work with DAU to determine 
if and to what extent course revisions or new courses are required.
    8. Insurance and Indemnification (FAR 31.205-19).
    Three respondents requested a change to the use of ``undue'' and 
``theft'' in regard to FAR 31.205-19. One respondent recommended a 
revision of paragraph 31.205-19(e)(2)(iv) to (1) remove ``Government 
has determined'' and replace with the ``contracting officer has made a 
final determination,'' and (2) to use ``material risk'' instead of 
``undue risk.'' The respondent stated that ``materiality'' is defined 
in FAR 30.602 (48 CFR 9903.305), and (3) remove the word ``theft.'' The 
respondent stated that the word ``loss'' is still listed, and theft is 
just one specific type of ``loss.'' The addition of the word ``theft'' 
here and in other parts of the re-write is redundant. Two respondents 
recommended that the word ``undue'' be replaced with ``material'' in 
FAR 31.205-19(e)(2)(iv) per the definition in 30.602, and both 
respondents recommended deleting the word ``theft'' as it is a subset 
of loss and should be deleted in FAR 31.205-19(e)(2)(iv) and in FAR 
32.502-16 risk of loss.
    Response: The Councils disagree with the recommendation to replace 
the term ``Undue'' with ``Material'' and have removed the language from 
this Subpart. The Councils did not agree with the deletion of the word 
``theft'' because it denotes a specific meaning. In addition, the 
Councils believe that the term ``Government'' allows the Government 
decision maker greater flexibility than use of the term ``final 
determination.''
    9. Theft.
    Nine comments were received from one respondent recommending 
omitting the word ``theft'' from various parts and clauses in the 
proposed rule.
     One respondent recommended eliminating the word ``theft'' 
from FAR 45.104(a). The elimination would be consistent with prior 
comments on damage, or destruction, of Government property.
     One respondent recommended eliminating the word ``theft'' 
from FAR 52.245-1(f)(1)(vi)(A). The following change was suggested for 
``Loss, damaged, or destruction. Unless otherwise directed by the 
Property Administrator, the contractor shall investigate and promptly 
furnish to the Property Administrator, a written narrative of all 
incidents of loss, damage, or destruction, as soon as the facts become 
known or when requested by the Government. Such reports shall, at a 
minimum, contain the following information....''
     One respondent recommended eliminating the word ``theft'' 
from FAR 52.245-1(f)(1)(vi)(B) and provided the suggested language as 
follows: ``The contractor shall take all reasonable actions necessary 
to protect the Government property from further loss, damage, or 
destruction. The contractor shall separate the damaged and undamaged 
Government property, place all the affected Government property in the 
best possible order, and take such other action as the Property 
Administrator directs.''
     One respondent recommended eliminating the word ``theft'' 
from FAR 52.245-1(f)(1)(vi)(C) and provided the following suggested 
language: ``The contractor shall do nothing to prejudice the 
Government's rights to recover against third parties for any loss, 
damaged, or destruction, of Government property.''
     One respondent recommended eliminating the word ``theft'' 
from FAR 52.245-1(f)(1)(x) and suggested replacing with the following 
language: ``The contractor shall promptly perform and report to the 
Property Administrator contract property closeout, to include 
reporting, investigating and securing closure of all loss, damage, or 
destruction, cases; physically inventorying all property upon 
termination or completion of this contract; and disposing of items at 
the time they are determined to be excess to contractual needs.''
     One respondent recommended eliminating the word ``theft'' 
from FAR 52.245-1(h) and suggested language as follows: ``Contractor 
liability for government property. (1) Unless otherwise provided for in 
the contract, the contractor shall not be liable for loss, damaged, or 
destruction to the Government property furnished or acquired under this 
contract, except when any one of the following applies:''
     One respondent recommended eliminating the word ``theft'' 
from FAR 52.245-1(h)(1)(ii) and the suggested language as follows: 
``The loss, damage, or destruction, is the result of willful misconduct 
or lack of good faith on the part of the contractor's managerial 
personnel. Contractor's managerial personnel, in this clause mean the 
contractor's directors, officers, managers, superintendents, or 
equivalent representatives who have supervision or direction of all or 
substantially all of the contractor's business; all or substantially 
all of the contractor's operation at any one plant or separate 
location; or a separate and complete major industrial operation.''
     One respondent recommended eliminating the words ``theft 
and undue'' from FAR 52.245-1(h)(1)(iii). The respondent also 
recommended eliminating the words ``Clear and convincing evidence,'' 
because the standard places an undue burden on Government contractors. 
The suggested change provided by the respondent is as follows: ``The 
contracting office has, in writing, withdrawn the Government's 
assumption of risk for loss, damage, or destruction, due to a 
determination under paragraph (g) of this clause that the contractor's 
property management practices are inadequate, and/or present

[[Page 27371]]

a material risk to the Government, and the contractor failed to take 
timely corrective action. If the contractor can establish that the 
loss, damage or destruction of Government property occurred while the 
contractor had adequate property management practices, or the loss, 
damage, or destruction of Government property did not result from the 
contractor's failure to maintain adequate property management 
practices, the contractor shall not be held liable.''
     One respondent recommended eliminating the word ``theft'' 
from the proposed rule at FAR 52.245-1(h) and the suggested language as 
follows: ``The contractor assumes the risk of, and shall be responsible 
for, any loss, damage, or destruction, of Government property upon its 
delivery to the contractor as Government-furnished property. However, 
the contractor is not responsible for reasonable wear and tear to 
Government property properly consumed in performing this contract.''
    Response: The Councils concluded that the word ``theft'' would not 
be deleted from the FAR due to the specific meaning associated with the 
word.
    10. Responsibility and Liability.
    a. One respondent recommended that procedures be added at FAR 
45.102 for the flow of accountability for Government- Furnished 
Property (GFP) from a contractor back to the Government, with the 
Government organization in possession of the GFP having liability for 
the GFP, or alternatively that clarification be added that GFP provided 
to a contractor is for the sole use of the contractor in meeting the 
requirements of the contract, and not as a repository for Government 
property intended for actual use by the Government.
    Response: Since procedures do exist in Agency directives and in 
individual contracts on the accountability of GFP, which is used by the 
Government, it is not necessary to prescribe procedures for such an 
event in the FAR. Liability and accountability are not synonymous and 
are addressed separately in the FAR. A contractor could serve as a 
repository for Government property, depending on contract requirements.
    b. One respondent asked, what does ``revoke Government's assumption 
of risk'' at FAR 45.104(b) entail, and why would this compel 
compliance?
    Response: Since revocation justification information would be set 
forth in agency procedures, it is not necessary to prescribe this 
information in the FAR. Revocation would compel compliance because 
contractors would then be financially liable for loss, damage, 
destruction, or theft.
    c. One respondent stated that FAR 45.104(b) contains two separate 
thoughts and recommended that it be divided into two separate 
paragraphs (b) revocation and (c) dealing with prime and subcontractor 
risk of loss relationships.
    Response: Paragraph is revised to reflect suggested structure.
    d. One respondent recommended adding or reinstating language that 
is substantially similar to the current FAR 45.103(c) to proposed FAR 
45.104, in order to be consistent with the proposed FAR clause 52.245-
1(h). The current FAR 45.103(c) states that ``the contract may require 
the contractor to assume greater liability for loss of or damage to 
Government property than that contemplated by the Government property 
clauses....''
    Response: The Councils believe the liability provisions in proposed 
FAR 45.104 are sufficient to protect the Government's interest.
    e. One respondent recommended that at FAR 45.105(b) the contractor 
rather than the Government provide the schedule for the correction of 
deficiencies to a contractor's management of property, since the 
contractor is in a better position to establish such a schedule. The 
respondent stated that a contractor-developed schedule would assist in 
correcting root causes rather than achieving a quick fix.
    Response: The Councils believe that a Government provided schedule 
is necessary to ensure the correction of contractor deficiencies that 
place the Government at risk, within a reasonable period.
    f. Two respondents recommended replacing the word ``undue'' with 
``material'' in FAR 45.105(b), and change the wording to ``shall 
request from the contractor prompt correction of deficiencies and a 
schedule for their completion.''
    Response: The Councils concluded that the term ``undue'' is better 
suited to the context of the prescriptive language. The Government must 
retain the right to determine the scope and schedule of any corrective 
actions for a contractor deficiency that puts the Government at risk.
    g. One respondent recommended changes to FAR 52.245-1(g)(3) to 
allow for resolution where the contractor does not believe direction 
provided by the property administrator would result in the best value 
for the Government. The respondent suggested replacing the word 
``undue'' with ``material'' and the addition of the following sentence:
    ``In instances where the contractor does not concur with the 
corrective actions suggested by the Property Administrator, differences 
will be resolved with consultation with the contracting officer.''
    Response: The term ``undue'' is better suited to the context of the 
clause. The Councils believe that it is unnecessary to specifically 
state that consultation with the contracting officer is required. 
Communication between the Government and the contractor should take 
place throughout contract performance.
    h. One respondent recommended replacing the word ``undue'' with 
``material'' in FAR 45.104(b), as material can be quantified by 
industry writings and documents and the word undue is purely subjective
    Response: The term ``undue'' is better suited to the context of the 
clause.
    i. The respondent suggested adding the following language to 
52.245-1(h):
    ``The prime contractor shall enforce for the benefit of the 
Government any liability that the subcontractor may have for loss, 
damage, destruction, or theft of Government property.''
    Response: The language provided for subcontractor controls is 
sufficient. The prime contractor has the right to enforce remedies 
against their subcontractors. The Government does not prescribe prime 
contractor remedies.
    11. Subcontractor.
    a. One respondent recommended that instruction to the contractor 
related to subcontractor control be removed from 45.501 and be added to 
the clause at 52.245-1(f)(1)(v).
    Response: The Councils revised the language in Subpart 45.5 and 
added language at 52.245-1(f)(1)(v).
    b. Two respondents recommended that the language at 52.245-
1(f)(1)(v) be revised to remove the language related to cost savings.
    Response: The paragraph is revised to read, ``The contractor shall 
award subcontracts that clearly identify assets to be provided and 
shall ensure appropriate flow down of contract terms and conditions, 
e.g., extent of liability for loss, damage, destruction or theft of 
Government property.'' The language related to cost savings is removed.
    c. Two respondents recommended language related to the flow down of 
the appropriate assumption for risk of loss, damage or destruction to 
subcontracts. One respondent questioned the effect of the language 
regarding flow down of risk of loss to subcontractors.
    Response: FAR 52.245-1(f)(1)(v) allows for flow-down to 
subcontractors. Limited risk of loss is added as an example. The 
paragraph is revised to read, ``The contractor shall award subcontracts 
that clearly identify assets

[[Page 27372]]

to be provided and shall ensure appropriate flow down of contract terms 
and conditions, e.g., limited liability for loss, damage, destruction 
or theft of Government property.''
    d. One respondent stated that the language at 52.245-1(f)(1)(v)(B) 
was vague because it did not assign responsibility for accomplishing 
reviews of subcontractors and providing determinations related to those 
reviews.
    Response: The language assigns responsibility to the prime 
contractor for performance of subcontractors, including the performance 
of Government property management functions. The language provides the 
contractor the flexibility to determine the most appropriate method for 
accomplishing those reviews and obtaining subcontract compliance.
    e. One respondent recommended the deletion of 52.245-1(f)(1)(v)(A) 
and 52.245-1(f)(1)(v)(B) because methods of subcontract property 
management would be included in the prime's property plans.
    Response: Paragraph A will not be deleted but the language is 
revised for clarity. This language and practice protects the 
Government's interest. Paragraph B will not be deleted because this 
language and practice, as well, protects the Government's interest.
    12. Contractor Property Management System.
    a. One respondent submitted two comments in regard to 45.105. The 
respondent suggested that FAR 45.105 should be renamed ``Analysis and 
correction of contractor's property management system'' and that 
notification to the contractor for the withdrawal of assumption of risk 
should be by certified mail.
    Response: The heading in FAR 45.105 is changed to ``Contractor's 
property management system compliance.'' This is a more meaningful 
heading, consistent with the spirit of the respondent's comment. Any 
additional requirements for certified mail notification would be 
addressed in Agency procedures.
    b. One respondent recommended that ``In areas where the FAR 
requires a response, a suggested time frame for responses should be 
stated (i.e., within 10 business days).''
    Response: Specifying an exact number of days would limit 
flexibility. However, Agencies may require specific timeframes in their 
agency procedures and in accordance with specific issues.
    c. One respondent recommended that after initial contract award, 
verification of the existence of inventory systems be done by 
exception. Requiring routine verifications places an unnecessary 
additional burden on the contracting officer without a just cause to 
suspect the initial is faulty or not in use.
    Response: The respondent suggests a risk-based approach to system 
analysis; the proposed rule does not prohibit such an approach. Current 
language allows agencies maximum flexibility in conducting system 
analysis.
    d. One respondent recommended that FAR 45.105(b) be revised so that 
the contracting officer and not the property administrator is the 
official requesting/directing correction of deficiencies.
    Response: The Property Administrator performs the analysis of the 
contractor's system, and so is in the best position to request/direct 
the contractor on correction of deficiencies.
    e. One respondent recommend that the language be changed at FAR 
45.105(b)(3) to state, ``other rights or remedies available to the 
contracting officer under the contract.''
    Response: The Councils revised language at FAR 45.105(b)(3) to 
state ``other rights or remedies available to the contracting 
officer.'' In addition, FAR 45.105(b)(3) is renumbered as 45.105(b)(2) 
in accordance with another recommendation.
    f. One respondent recommended changing the wording at FAR 45.105(b) 
to delete the words ``shall provide'' from the phrase ``shall provide a 
schedule for their completion'' which would allow the contractor to 
propose a schedule for corrective action instead of the Government.
    Response: A definitive action and a schedule for completion of 
corrective actions are reasonable and mitigate risk to the Government.
    g. One respondent recommended a requirement to maintain utilization 
data similar to that of FAR 45.509-2(b)(2) be reinstated.
    Response: The current rule allows for the flexibility of data 
retention. FAR 45.105 allows contractors and property administrators to 
establish methods to ensure property is fully utilized.
    h. One respondent recommends adding language to provide the option 
for the Property Administrator to request the contractor submit (by a 
specific date) a corrective action plan. As written, FAR 45.105(b) 
requires the Property Administrator to provide the contractor with a 
schedule for completion of corrective action.
    Response: Definitive action and schedule of corrective actions 
needs to be defined by the Government for a contractor deficiency that 
puts the Government at risk. The FAR does not prohibit Property 
Administrators from negotiating a schedule and corrective action.
    i. One respondent recommends adding language in the clause at 
52.245-1(b)(1), ``except where inconsistent with law or regulation'' 
after the words ``property management''.
    Response: FAR 52.245-1(b)(1) is revised to add ``except where 
inconsistent with law or regulation'' after the words ``property 
management.''
    13. Contract Price Adjustment.
    Three respondents made three comments recommending the deletion of 
``contract price adjustment'' as one of the examples of corrective 
action if a contractor does not correct property management system 
deficiencies or suggested including enablers in the FAR clause 52.245-1 
for contracting officers to effect a price adjustment.
    Response: FAR 45.105(b)(1) is deleted and the remaining paragraphs 
renumbered because it would be difficult for contracting officers to 
quantify a contract price adjustment associated with the failure to 
correct a property management system deficiency.
    14. Relief of Responsibility.
    a. Two respondents requested addition of language that describes 
the conditions and circumstances under which a property administrator 
could grant contractors relief of accountability and responsibility.
    Response: Language is added to 45.105(d) and 52.245-1(f)(1)(vii)(A) 
to describe the conditions and circumstances under which a property 
administrator could grant contractors relief of accountability and 
responsibility.
    b. One respondent requested language to set a threshold for 
automatic relief of responsibility based on the contractor's property 
plan.
    Response: The Government intends to retain the authority to 
determine whether or not to grant relief of responsibility for loss, 
damage, destruction or theft. The Councils do not believe thresholds 
are advisable. The determination of relief of responsibility should be 
determined on a case-by-case basis.
    15. Transferring Accountability.
    a. One respondent requested clarification and additional language 
for warranty of Government-furnished property acquired or fabricated 
initially by the contractor.
    Response: Language is added at 52.245-1(d) and 45.106 to provide 
for the inapplicability of warranties of suitability of use and timely 
delivery of Government-furnished property to property acquired or 
fabricated initially by the contractor, and subsequently transferred to 
another contract with this contractor.

[[Page 27373]]

    b. One respondent requested that consideration might be given to 
adding guidance as to which contractor, gaining or losing, would 
typically absorb (or bill for) the cost of the property transfer.
    Response: The language as written allows flexibility. Costs for the 
property transfer are covered under FAR Part 31.
    c. One respondent stated confusion between 52.245-1(d)(4)(i) and 
45.106. 52.245-1 states the contracting officer may by written 
notification, at any time increase or decrease the amount of 
Government-furnished property under this contract. FAR 45.106 states 
such transfer shall be documented by modification to both gaining and 
losing contracts.
    Response: The coverage in FAR 45.106 (Transferring Accountability) 
is the policy for transferring Government- furnished property from one 
contract to another. The clause at 52.245-1(d)(4)(i) provides for the 
increase or decrease in the amount of Government-furnished property.
    d. One respondent stated that requiring formal modifications to 
transfer property between contracts is incompatible with the FAR 
principle of minimizing administrative cost. The respondent has 
suggested that there should be another administrative mechanism to 
accomplish this effort more efficiently that satisfies the desired 
outcome. Current practice only requires a contract modification to the 
gaining contract. The respondent recommended the use of Wide Area Work 
Flow (WAWF) for such transfers.
    Response: A contract modification is the only authority to affect 
the transfer of Government property between contracts.
    16. Contract Clauses.
    a. Two respondents made three comments that recommended 
clarification of the prescription and use of the clauses provided in 
45.107. Respondents recommended several changes regarding the use of 
the contract clauses including: the concurrent use of FAR clauses 
52.245-1, Government Property, and 52.245-2, Government Property 
Installation Operations for Services; the mandatory use of FAR clause 
52.245-9, Uses and Charges, in all solicitations and contracts that 
furnish or authorize the acquisition of Government Property; and the 
recommendation to add language regarding the appropriate use of FAR 
clause 52.245-1 in FAR Part 12 solicitations and contracts.
    Response: The Councils believe that the recommended clarifications 
are appropriate and have revised FAR 45.107(a)(1)(iii), 45.107(b), 
45.107(c), 45.107(d), and 52.245-2 to incorporate the recommended 
revisions.
    b. One respondent recommended that the language found at 45.107(d) 
be changed to clarify the use of Government property clauses in 
purchase orders for property repair.
    Response: The Councils agree the language should be clarified, and 
revised FAR 45.107(d) with some editorial changes to the respondent's 
recommended language.
    c. One respondent recommended the Government property clause not be 
included in all cost reimbursement, time-and-material, and labor-hour 
solicitations and contracts, especially in service contracts where 
property is not involved or where the contractor supplies all required 
property.
    Response: Due to the uncertainties involved in cost-reimbursement, 
time-and-material, and labor-hour contracts, and the fact that each 
contract has the potential for Government property, the Councils 
believe it is in the Government's best interest to include the 
Government property clause in those solicitations and contracts.
    d. One respondent recommended the prescriptive language at FAR 
45.107(b) specifically limit FAR clause 52.245-2 to fixed price 
contracts.
    Response: The FAR clause 52.245-2 was created for use in 
solicitations and contracts for Installation Operation Services. This 
type of effort can be contracted using a fixed price arrangement or a 
cost-reimbursement arrangement.
    e. One respondent recommended a Fixed Price with Cost CLINs 
contract type be listed among the types of contracts because fixed 
price contracts may contain cost-reimbursement type contract line 
items.
    Response: The Councils believe the prescriptive language 
sufficiently addresses all FAR types of contracts, which are grouped 
into two broad categories (fixed price and cost-reimbursement). It is 
not necessary to name a combination of types.
    f. One respondent questioned where the definition of ``Simplified 
acquisition threshold'' could be found in the FAR.
    Response: The simplified acquisition thresholds are defined in FAR 
2.101.
    g. One respondent recommended the reference to FAR 35.014 be 
deleted from FAR 45.107(a)(3) as it is slated for removal, as stated in 
Federal Register Volume 70, Number 180, dated September 19, 2005 (FAR 
Case 2004-025).
    Response: FAR 35.014 is not being deleted in its entirety, however, 
paragraph (e) is revised to delete references to outdated property 
clauses and to remove references to facilities clauses.
    17. Solicitation and Evaluation Procedures.
    a. One respondent recommended that a clause be established, or the 
current clause be modified, to provide the list of requirements found 
at FAR 45.201(a) when it is anticipated that Government-Furnished 
Property (GFP) will be provided.
    Response: The Councils do not believe that an additional clause is 
necessary. The proposed FAR clause 52.245-1, paragraph (f)(1)(iii) 
requires the contractor to create and maintain records of all 
Government property, including GFP. The clause also requires the 
contractor to maintain certain information in the property record 
(paragraph (f)(1)(iii)(A)) which the Councils consider to be adequate 
for tracking GFP.
    b. One respondent recommended Contract-Acquired Property (CAP) be 
identified by the contractor, and contracting officer approval be 
obtained prior to acquiring CAP.
    Response: The Councils believe the proposed property rewrite is 
adequate and flexible enough to allow the contracting officer to 
establish solicitation requirements to sufficiently comply with FAR 
45.102 and 45.105. Many times CAP cannot be identified at the time of 
award.
    c. One respondent recommended changes to 45.201(b) to eliminate 
predetermined contractual requirements, as the requirements may be 
counter to seeking best value.
    Response: FAR 45.201(b) states that ``in a competitive acquisition, 
solicitations should specify that the contractor is responsible for'' 
all costs related to making the property available for use - and it is 
generally in the Government's best interest to allow contractors to 
assess transportation, installation or rehabilitation costs. However, 
the language is flexible enough to allow contracting officers to adjust 
the requirements.
    18. Use and Rental.
    a. One respondent recommended exclusion of Government-owned, 
contractor operated plants operating on a cost-plus-fixed-fee basis 
from rental charges.
    Response: The Councils agree with the recommendation to change FAR 
45.301(b) to remove the exception for Government-owned, contractor-
operated plants operating on a cost-plus-fixed-fee basis from rental 
charges. The language in the final rule is revised accordingly.
    b. One respondent stated FAR 45.303(b) conflicts with Cost 
Accounting Standards 420 and the

[[Page 27374]]

contractor's disclosure statement. The conflict will cause confusion 
and extraordinary administrative burden to the contractor and the 
Government as consideration for rental costs is required under FAR 
clause 52.245-9, Uses and Charges.
    Response: The Councils recognize the concern and have revised the 
language to preclude ``reimbursement'' rather than not permitting the 
costs to be ``charged.''
    c. One respondent recommended deletion of FAR 45.303(c).
    Response: The Councils believe the language at FAR 45.303(c) is 
necessary because the rental charge protects the interest of the 
Government when independent research and development costs are 
allocated to commercial contracts. It should be noted that the original 
language is retained and relocated from 45.406(c) to 45.303(c) and the 
reference for computing rent is updated in the final rule.
    19. Support Property Administration.
    a. One respondent observed that the task of support property 
administration involves more than subcontractors.
    Response: FAR 45.501 is revised to add language for clarification 
that the coverage includes subcontractors and prime contractor 
alternate locations.
    b. Four respondents requested more clarification regarding the 
process for contracting officer action when a prime contractor rejects 
a request for support property administration.
    Response: The language at 45.501(b) is renumbered as 45.502(a) and 
clarified to state that the prime contractor must agree to allow 
support property administration. However, the process can vary by 
agency and is most appropriately addressed in agency regulations.
    c. Three respondents suggested changes to the language of 45.501 
that would place the responsibility for initiating a request for 
support property administration with the prime contractor rather than 
the property administrator. The respondents suggest that the initiation 
of this action by the property administrator may exceed the scope of 
contract privity.
    Response: The Councils do not completely agree. However, FAR 
Subpart 45.5 has been revised to clarify support Government property 
administration. This is not a privity of contract issue since the prime 
contractor still has responsibility for proper administration of 
Government property. The Government must have the right to inspect, 
review and assure that Government property is properly managed by the 
prime contractor regardless of location.
    d. One respondent recommended that 45.501(b) and (c) be modified to 
allow a team approach to deciding whether or not support property 
administration is necessary and for resolution of other disputes when 
the prime does not agree.
    Response: Ultimately, the responsibility for protecting the 
public's interest in Government property resides with the Government. A 
contractor disagreement with the Government's resolution is covered by 
the disputes clause.
    e. One respondent recommended that FAR 45.501(d) be deleted, citing 
concerns that the prime contractor's property administrator is forced 
by the language to accept a support property administrator's findings.
    Response: The prime contractor has responsibility for proper 
administration of Government property. However, the Government must 
have the right to inspect, review and assure that Government property 
is properly managed by the prime contractor regardless of location. FAR 
Subpart 45.5 has been revised to clarify support Government property 
administration.
    20. Use of Government Property.
    a. One respondent believes that there is confusion regarding the 
treatment of Government property (such as desks, computers, phones 
etc.) that remains under the Government's control as Government-
furnished property subject to the requirement in FAR 45. They do not 
believe that the intent of the revision is to cover the aforementioned 
circumstances. If this is in fact correct, then the respondent believes 
this should be made clear. However, if this interpretation is 
incorrect, then they recommend a third alternate to the clause at 
52.245-1, or a new clause, that specifically addresses the contractor's 
use of Government property that never leaves the Government's 
possession and for which the Government retains responsibility.
    Response: Use of property by contractors performing on a Government 
installation does not meet the typical meaning of Government provided 
or furnished property. The Government retains responsibility for 
accountability, security, use, maintenance, and disposal of this 
property. Therefore, a third alternate to 52.245-1 is not necessary.
    b. One respondent recommended revising FAR clause 52.245-1(c) to 
enable the contracting officer to effectively use discretionary 
authority without having to modify the contract. Such approvals are 
generally considered routine and administrative in nature, and the 
requirement to modify the contract in all such instances is considered 
to be an undue administrative burden.
    Response: FAR 52.245-1(c) does not require modification to the 
contract to obtain contracting officer approval. The contracting 
officer has the discretion as to whether a contract modification is 
necessary.
    21. Inventory Systems.
    One respondent believes that maintaining a separate property system 
for the management of Government property is an onerous burden on 
contractors and recommended that the proposed language be changed to 
allow contractors to use Government systems for the management of 
property when the systems exist and the records are already in the 
systems.
    Response: Neither the current or proposed rules require contractors 
to establish separate property systems for the management of Government 
property, only that their systems meet minimal standards for protection 
of the Government's interest. In fact, contractors are encouraged to 
use the same property systems they use for their own property to manage 
Government property. Furthermore, contractors may use existing 
inventory systems to manage Government property under certain 
circumstances (GOCO's).
    22. Inventory Thresholds.
    Three respondents provided three comments regarding establishment 
of value thresholds for recording and reporting Government property.
    a. One respondent commented that requiring recording of low dollar 
value equipment is not cost effective.
    Response: Voluntary consensus standards and leading industry 
practices allow for the creation of summary records and recording of 
items in quantity rather than individually, based on the requirements 
of the contract. Also, reporting of contractor inventory for possible, 
alternative use by the Government or eligible donees is required by 
law, whenever the property is no longer required for contract 
performance. Without some form of records, it would be difficult or 
impossible to comply with this legal requirement.
    b. One respondent stated that the use of voluntary consensus 
standards and sound business standards would be a major improvement for 
managing Government property if contractors didn't have to account for 
all Government owned property upon completion or termination of a 
contract. Contractors typically do not tag and record contractor owned 
equipment under their depreciation threshold.
    Response: Reporting of contractor inventory for possible, 
alternative use

[[Page 27375]]

by the Government or eligible recipients is required by law, whenever 
the property is no longer required for contract performance. Without 
some form of record, it would be difficult or impossible to identify 
the available property and comply with this legal requirement.
    c. One respondent expressed concern that contractors should be 
accountable for all Government property in their possession for the 
protection of the taxpayers' interests.
    Response: The proposed rule establishes minimal standards within 
the clause and allows for flexibility for both the Government and the 
contractor to implement processes and practices to mitigate risk to the 
Government associated with the provision of property.
    23. Physical Inventory.
    a. Two comments questioned ambiguity of instructions regarding 
requirements for timing of physical inventories. One of these also 
questioned testing for unauthorized use.
    Response: Physical inventory requirements cannot be reduced to a 
one-size fits-all regulatory requirement. The requirements contained in 
the clause are substantially the same as the current FAR. Physical 
inventory practices are complex, and can be effectively accomplished 
using a number of different techniques and practices. Effective 
physical inventory performance is not dependent solely on timing. Best 
physical inventory practices consider a variety of factors such as the 
value and sensitivity of the inventory, the number of transactions 
posted against the item's record, prior evaluations of record accuracy, 
and the results of prior physical inventories. Physical inventory 
practices should be included in the contractor's property management 
plan, based on the type of property, the scope of the procurement, and 
other factors. Unauthorized use of Government property will continue to 
be tested during Property Management System analysis.
    b. One respondent recommended removal of all language requiring 
physical inventories, stating that this could be addressed within a 
contractors' property management plan.
    Response: Physical inventories are the primary tool used to 
establish the existence of property and the completeness of Government 
property records. As such, they serve as the ultimate test of property 
record accuracy. They support both property management and financial 
reporting requirements. This language and practice protects the 
Government's interest.
    24. Property Management.
    a. Two respondents recommended adding ``procedures'' after the word 
`systems' in the third sentence of the clause at FAR 52.245-1(b)(1) for 
clarification.
    Response: The Councils agree and FAR 52.245-1(b)(1) is revised 
accordingly.
    b. One respondent recommended revising FAR 52.245-1(f)(1) to add 
the word ``procedures'' to the first sentence in (f)(1) after the word 
``system.''
    Response: The Councils agree and FAR 52.245-1(f)(1) is revised 
accordingly for clarification.
    c. One respondent recommended adding the word ``move'', i.e., 
``consume, MOVE and store...'' to FAR 52.245-1(f)(1)(viii).
    Response: The Councils agree and FAR 52.245-1(f)(1)(viii) is 
revised accordingly for clarification.
    d. One respondent recommended adding the words ``including the 
multi-part assets'' at FAR 52.245-1(b).
    Response: The Councils do not believe additional language is 
necessary; the proposed language includes ``all'' property.
    e. One respondent recommended revising 52.245-1(f)(1)(viii) to add 
the following at (B) ``unless otherwise authorized in this contract or 
by the Property Administrator the contractor shall not commingle 
Government property with property not owned by the Government.''
    Response: The Councils agree and FAR 52.245-1(f)(1)(viii) is 
revised to include new paragraph (B) for clarification.
    25. Systems Analysis.
    a. One respondent recommended revising language at FAR 52.245-1(g) 
to include access to all Government property as well as premises.
    Response: The Councils agree and FAR 52.245-1(g) is revised to 
require access to all Government property as well as premises.
    b. One respondent recommends revising FAR 52.245-1(g)(1) to read as 
follows: ``The Government shall have access to the contractor's 
premises, at reasonable times, for the purposes of reviewing, 
inspecting and evaluating the contractor's Government property 
management plan, systems, procedures, records, and supporting 
documentation that pertains to Government property.''
    Response: The Councils agree to revise FAR 52.245-1(g)(1) to add 
the words ``plan'' and ``that pertains to Government property'', to 
clarify that the focus is on Government property only. However, the 
Councils do not agree with the recommendation to add ``Government'' as 
this would imply a separate system is required for management of 
Government property.
    26. Contractor Plans and Systems.
    a. One respondent recommends clarification of FAR 52.245-
1(f)(1)(ii) to require identification of Government property by adding 
an addendum ``physically identify the property as Government property 
with an appropriate identification, e.g., stamp, tag, mark or other 
identification that is legible, conspicuous and securely affixed.''
    Response: The Councils agree that, in some instances, appropriate 
identification is necessary. However, the Councils also believe the 
recommend language is overly broad. Therefore, FAR 52.245-1(f)(1)(ii) 
is revised to clarify the identification of Government property.
    b. One respondent recommended revising FAR 52.245-1(f)(1) to add a 
new paragraph as follows: ``The contractor shall disclose significant 
changes in its property management system to the Property Administrator 
30 Days prior to implementation.''
    Response: The Councils agree that contractors should be required to 
disclose significant changes to its property management system. FAR 
52.245-1(b)(1) is revised. However, the Councils do not believe that a 
specific number of days should be specified. Contractors should notify 
the Government as soon as they become aware that significant changes 
will be made to their property management system.
    c. One respondent recommended revising FAR 52.245-1(f)(1)(ii)(A) to 
add ``The contractor shall report all discrepancies pertaining to the 
shipment, packaging, or transportation of Government-furnished property 
in accordance with agency procedures.'' In addition, the respondent 
recommends adding the following language, ``Upon request from the 
contractor, the property administrator may assist and coordinate 
resolution of unresolved discrepancies.''
    Response: Additional prescriptive language is not necessary. 
Assisting and coordinating resolution of unresolved discrepancies is a 
normal part of the property administrator's duties and does not need to 
be specified in the FAR.
    d. Two respondents recommended revising FAR 52.245-1(f)(1) to 
delete paragraphs (i) and (ii). The wording is redundant to 52.245-
1(b)(1) and prescriptive in nature. In addition the respondents 
recommend inserting at 52.245-1(b)(1) ``The contractor shall have a 
system to manage (acquire, receive, control, utilize, preserve, 
protect, move, repair, maintain, dispose

[[Page 27376]]

and report) Government property in its possession.''
    Response: The Councils do not agree. The language at FAR 52.245-
1(f)(1)(i) and (ii) is retained to protect the Government's interest.
    e. One respondent recommended revising FAR 52.245-1(f)(1)(i) to add 
``of the prime contractor'' after ``disclosure statement.''
    Response: The reference to ``cost accounting disclosure statement'' 
was removed.
    27. Records.
    a. One respondent recommended changing the phrase ``all Government 
property accountable to the contract'' at FAR clause 52.245-
1(f)(1)(iii) to ``all Government property in the contractor's 
possession, regardless of value.'' The respondent used the example of a 
logistics services operation where receipt, storage, loan and issue of 
Government property on a continuing basis is the primary function of 
the contract and that the contractor should not be required to maintain 
records of the property that was not specifically furnished to the 
contractor under the contract.
    Response: The Councils believe that if a contract is for the 
storage, maintenance and issue of Government property, then the 
property should be listed on the contract and accountable to the 
contract and records maintained by the contractor.
    b. One respondent stated that with the elimination of the language 
at the current FAR 45.105, it appears that it may now become necessary 
for the Government to maintain its own official property records 
separate from the contractor's records. This respondent asked whether 
the contractor's records are still intended to serve as the 
Government's official property records. The respondent stated that if 
this is the case then those records should be clearly and concisely 
defined in the FAR.
    Response: The Councils do not agree. Only the Government can keep 
the Government's ``official'' records. The Government will maintain 
their own Government property records. However, custodial records must 
be maintained by the contractor.
    c. One respondent recommends that at ``FAR clause 52.245-
1(f)(iii)(A)(3),'' unit acquisition cost be revised to add ``(or 
reasonable estimate if definite unit cost cannot be obtained)'' because 
obtaining the actual unit cost of minor contractor fabricated items 
that must be identified and controlled is, at times, not practical or 
possible.
    Response: The Councils do not agree. Contractors' accounting 
systems should have actual unit cost information available. Therefore, 
no change to the final rule is necessary.
    d. One respondent states that while the Government does not specify 
a numbering system for items of property, the implementation of a 
consistent numbering system by contractors is critical and recommends 
that it should be added to the data elements set forth at FAR clause 
52.245-1(f)(1)(iii)(A).
    Response: The Councils believe that a numbering system is but one 
of many industry leading practices and does not need to be identified 
in the clause.
    e. One respondent states that the term ``Receipt and issue'' is not 
clear at FAR clause 52.245-1(f)(1)(iii)(B). This respondent recommended 
adding a heading, ``Use of a receipt and issue system for Government 
material,'' and modifying the word ``formal'' to ``stock record'' or 
``perpetual inventory property record.''
    Response: The Councils agree with the title addition. However, the 
Councils do not agree with the proposed revision to ``stock record'' or 
``perpetual inventory property record'' because the term ``formal 
record'' is more encompassing and does not specify a particular 
recording system.
    f. One respondent recommended adding acquisition contract number to 
the required fields at FAR clause 52.245-1(f)(1)(iii) to assist in the 
audit trail to validate correct ownership.
    Response: The Councils believe that this information is not 
necessary and that the clause is sufficient for audit purposes.
    g. One respondent recommended that FAR clause 52.245-1(f)(1)(viii) 
specify what constitutes prompt reporting.
    Response: The Councils do not agree. As soon as the contractor 
determines that the property is no longer required for contract 
performance, they must report to the Government. The rule allows 
flexibility in accordance with agency procedures.
    h. One respondent recommended that FAR clause 52.245-1(f)(1)(viii) 
specify what constitutes a prompt disclosure.
    Response: The Councils do not agree. As soon as the contractor 
determines that the property is no longer required for contract 
performance, they must report it to the Government. The rule allows 
flexibility in accordance with agency procedures.
    i. Two respondents recommended that the requirements at FAR clause 
52.245-1(f)(3) be revised to clearly indicate access to a contractor's 
internal audits and reviews will be limited to information related 
directly to Government property.
    Response: The Councils do not completely agree. The proposed rule 
provides access to the results of the contractors' internal audit of 
property relevant to a specific Government contract or groups of 
Government contracts. The recommended limitations would be inconsistent 
with FAR 52.215-2. However, FAR 52.245-1(f)(3) is revised to include 
``significant findings'' and ``audits pertaining to Government 
property'' which provides access to findings and/or results of reviews 
related directly to Government property.
    j. One respondent asks what does ``posting reference'' and ``date 
of transaction'' mean at FAR clause 52.245-1(f)(1)(iii). The respondent 
suggests clarifying them to respectively read ``the document that 
caused the transaction'' and ``the date the transaction occurred.''
    Response: The Councils believe the terms ``posting reference'' and 
``date of transaction'' are self-explanatory.
    k. One respondent states that the requirements at FAR clause 
52.245-1(f)(1)(i) on documenting the acquisition of property are too 
prescriptive in light of the requirements for a property management 
system at paragraph (b)(1) of the same clause.
    Response: The Councils believe that this documentation is necessary 
to protect the Government's interest.
    l. One respondent states that the requirements at FAR clause 
52.245-1(f)(1)(i) on documenting the receipt of Government property are 
too prescriptive in light of the requirements for a property management 
system at paragraph (b)(1) of the same clause.
    Response: The Councils believe that this documentation is necessary 
to protect the Government's interest.
    m. One respondent states that the requirements at FAR clause 
52.245-1(f)(1)(ii)(A) on procedures for reporting damages/discrepancies 
upon the receipt of Government-furnished property to the Property 
Administrator are too prescriptive in light of the requirements for a 
property management system at paragraph (b)(1) of the same clause. The 
respondent further states that such reporting is currently handled 
through the Government's Report of Discrepancy (ROD) form issued as 
required. The respondent also states that the ROD is processed per the 
ROD instructions, and that resolution of this type of issue is a 
contracts/quality/program office issue.
    Response: The Councils do not agree. The Councils believe these 
procedures are necessary to protect both the Government's interest and 
the contractor's interest. The final rule language also protects the 
contractor in

[[Page 27377]]

terms of timeliness, availability, and possible liability for the 
property being furnished.
    n. One respondent stated that in the data elements for property 
records under FAR clause 52.245-1(f)(1)(iii)(A)(1) that not all 
property has a ``commercial part number,'' that ``Bulk identifier'' is 
covered by ``Unit of measure,'' and that not all property has a ``model 
number.'' The respondent recommends substituting the following 
language, ``The name, commercial part number, if provided, and 
description, manufacturer, model/part number, and National Stock Number 
(if needed for additional item identification tracking and/or 
disposition).'' Another respondent recommended that the term ``bulk 
identifier'' be clarified.
    Response: While the Councils do not agree with the specific 
recommended language, for clarification purposes the final rule is 
revised at 45.201(a)(1) and 52.245-1(f)(1)(iii)(A)(1) to replace 
``commercial part number'' with ``part number'' and remove ``bulk 
identifier.''
    o. One respondent recommended revising the term ``acquisition 
cost'' for the property records data element at FAR clause 52.245-
1(f)(1)(iii)(A)(3) because it may be confusing to personnel unfamiliar 
with contractors' systems. This respondent states that ``unit 
acquisition cost'' is the more appropriate data element for the clause.
    Response: No action is necessary. The term for the data element at 
FAR clause 52.245-1(f)(1)(iii)(A)(3) is ``unit acquisition cost'' 
rather than ``acquisition cost.'' This respondent referenced the same 
comment for FAR clause 52.245-1(f)(1)(iii)(A)(3) and FAR clause 52.245-
1(a)(1) which does contain the term ``Acquisition cost.''
    p. One respondent recommended deleting the property records data 
element ``date placed in service'' at FAR clause 52.245-
1(f)(1)(iii)(A)(10) for production material or non-capitalized items, 
citing needless, significant cost impact for system and process 
changes.
    Response: The Councils believe the data must be required, unless 
otherwise determined by the Property Administrator. Capital equipment 
and real property requires ``date placed in service'' for accounting 
purposes. Agencies have different capital thresholds; therefore, the 
property administrator is in the best position for making these 
decisions.
    q. One respondent recommended not requiring the approval at FAR 
clause 52.245-1(f)(1)(iii)(B) of the Property Administrator for 
contractors to maintain in lieu of formal property records, a file of 
appropriately cross-referenced documents evidencing receipt, issue, and 
use of material that is issued for immediate consumption, particularly 
in the case of non-production contracts, engineering studies, and low 
dollar research and development efforts. The respondent suggested the 
following substitute language ``In accordance with a contractor's 
property plan, the contractor may maintain, in lieu of formal property 
records, a file of appropriately cross-referenced documents evidencing 
receipt, issue, and use of material that is issued for immediate 
consumption.''
    Response: The Councils believe the Property Administrator must 
approve receipt and issue records on a case-by-case basis. Receipt and 
issue systems may put the Government at risk and the Property 
Administrator is in the best position to determine the level of risk 
the Government is willing to accept. Property Administrator approval 
and the plan are not mutually exclusive. The contractor must identify 
in the proposed plan any requirement for receipt and issue.
    28. Reports.
    a. One comment from one respondent recommended that the language at 
52.245-1(f)(1)(vi)(B), (C), and (D) be moved to 52.245-1(h)(2), (3), 
(4), and (5) renumbered. The language was actually instructions to the 
contractor on how to store, protect and manage property that had been 
damaged or destroyed, not on the preparation of reports.
    Response: The Councils agree. Language is moved from 52.245-
1(f)(1)(vi)(B), (C), and (D) to 52.245-1(h)(2), (3), (4) and (5) 
renumbered for clarification.
    b. Three comments were received from a single respondent.
    (1) The first comment recommended adding the language, ``The type, 
frequency and reporting format will be agreed upon between the 
contractor and property administrator'' to the physical inventory 
reporting section at 52.245-1(f)(1)(iv) of the clause.
    Response: The Councils do not believe that the recommended language 
should be accepted. Both industry leading standards and practices and 
voluntary consensus standards recognize the importance of physical 
inventories. Both include methods to perform them and to disclose their 
results. As a result, responsible contractor property management plans 
should include the format for disclosing physical inventory results and 
the timing of those disclosures. If these plans lack this, agencies 
will have the opportunity to review and recommend appropriate revision 
of plans prior to contract inception. However, the language of 52.245-
1(f)(1)(vi) requires that contractor systems are capable of providing 
results of physical inventories and the final language at 52.245-
1(f)(1)(iv) is revised to require disclosure of the results of the 
physical inventory.
    (2) A second comment was received from the same respondent, 
recommending that the proposed clause at 52.245-1(f)(1)(vi) be revised 
to include direction to subcontractors in the preparation of reports of 
loss, damage or destruction of Government property.
    Response: The Councils do not completely agree. The Government's 
contractual relationship remains with the prime contractor. Property is 
provided to the prime contractor for performance of the contract. 
Should the prime contractor further provide the Government property to 
a subcontractor, the prime retains responsibility for the compliance 
with contract terms and conditions and for obtaining any necessary 
information for the reports from subcontractors. However, the language 
of the clause at 52.245-1(f)(1)(v) is revised to require appropriate 
subcontractor flow down of contract requirements.
    (3) A third comment recommended adding information to reports of 
loss, damage or destruction regarding the last known location of the 
property, whether or not the property was sensitive or hazardous and 
whether or not the agencies involved had been notified of the loss or 
theft.
    Response: The Councils agree. FAR 52.245-1(f)(1)(vi) is revised to 
add paragraphs (12) and (13) to add language for last known location 
and a statement that the property did or did not contain sensitive or 
hazardous material, and if so, that the appropriate agencies were 
notified.
    b. One respondent submitted two comments related to reports. One 
recommended clarification of the report requirement at 52.245-
1(f)(1)(vi) by changing the language to read: ``(vi) Reports. The 
contractor shall have a process to create and provide reports such as 
discrepancies; loss, damage and destruction; physical inventory 
results; audits and self-assessments; corrective actions; and other 
property related reports relevant to the contract as directed by the 
contracting officer.''
    Response: The Councils do not completely agree. 52.245-1(f)(1)(vi) 
is revised to clarify the lead-in language for examples of reports to 
be provided by the contractor. The Councils believe the phrase 
``relevant to the contract'' is not necessary, as all reports are 
relevant to the contract.

[[Page 27378]]

    c. The respondent also suggested that a standard form be developed 
for reporting Lost, Damaged, or Destroyed (LDD) property in concert 
with Plant Clearance Automated Reutilization Screening System (PCARSS) 
changes.
    Response: The Councils do not believe it is necessary to develop 
standard forms for reporting LDD property. Information required for a 
LDD report need not be submitted on a standard form. In addition, the 
FAR does not mandate the use of PCARRS. PCARRS is a Department of 
Defense electronic system and not all non-DoD agencies may have access 
to that system.
    29. Annual Reports.
    One respondent stated that the requirement for an annual report is 
essential. Agencies have a continued need to collect and report the 
value of Government property associated with existing contracts as part 
of their financial statements and the associated audits. FAR should 
require contractors to submit an annual report.
    Response: The final rule contains a requirement for the contractor 
to be able to produce ``property'' reports. The timing and format for 
such reports will be defined by Agencies.
    30. Disposal.
    a. One respondent requested that the proposed rule accommodate 
Plant Clearance Automated Reutilization Screening System (PCARSS) and 
allow submission of a SF 1428 or electronic equivalents.
    Response: The FAR does not mandate the use of PCARRS. PCARRS is a 
Department of Defense electronic system. Non-DoD agencies may not have 
access or choose not to use that system. Agencies may provide 
electronic equivalents as needed.
    b. One respondent recommended deletion of the language ``by the 
plant clearance officer'' at FAR clause 52.245-1(j) because many 
contracts are not delegated for property management or for plant 
clearance and therefore do not have a plant clearance officer 
identified.
    Response: The plant clearance officer is an authorized 
representative of the contracting officer and is appointed the 
responsibility of directing the disposal of contractor inventory from a 
contractor's plant or work site. In the absence of a delegation to a 
Plant Clearance Officer, the contracting officer would retain those 
responsibilities. The Councils believe the language in the final rule 
is adequate for contractor inventory disposal.
    c. One respondent stated the contractors scrap plan/agreement 
should cover all items that would generally be produced under the 
contract and there would be no need to require disposition schedules if 
disposition guidance is covered in the contract, via the scrap 
procedure. In addition, plans approved by the contracting officer may 
be developed with more expertise and understanding of the contractual 
requirements than those considered necessary by plant clearance 
officers. The respondent recommends revising the language at FAR clause 
52.245-1(j)(1)(A) to add ``is not covered under the contractor's 
property plan'' to the last sentence of the paragraph.
    Response: The Councils do not believe the recommended language 
should be added to the FAR. The proposed rule did not change the 
original disposal requirements. The risk associated with possible 
improper disposition of sensitive property or property requiring 
demilitarization necessitates Government oversight, notwithstanding 
whether disposal of the property is covered in the contractors' 
property plan.
    d. One respondent recommended adding ``overhaul, repair'' to the 
description of services generating scrap. In addition the respondent 
recommended deletion of the inventory disposal schedule requirements 
list at FAR clause 52.245-1(j)(1)(B). Individual contracts should 
address disposition of aircraft parts under such contracts. The propose 
rule is contrary to current practices under long-term arrangements.
    Response: The Councils do not believe the proposed rule is contrary 
to current practices, as the original disposal requirements for scrap 
resulting from other than production or testing have not changed. 
Proper disposition of scrap that is created from overhaul/repair is 
addressed at FAR 52.245-1(j)(1). The final rule is appropriate for 
disposal of scrap.
    e. One respondent stated that internal contractor screening should 
occur before items are processed through plant clearance. The 
respondent recommended revising the language at FAR clause 52.245-
1(j)(2) to add ``under this contract or other contracts'' for 
predisposal requirements.
    Response: The Councils believe the final rule language is adequate 
and should not be changed to add contractor internal screening 
requirements. Contractor-acquired property is accountable to individual 
contracts and the recommended revised language would be redundant. 
Predisposal requirements allow Government visibility for the use of 
property on other contracts or for other Government use. In addition, 
FAR 45.106 sets forth the policy for transfer of Government property 
between Government contracts.
    f. One respondent recommended that ``customary'' be deleted from 
the language at FAR clause 52.245-1(j)(2)(ii) because it was redundant. 
By definition, a practice is done customarily.
    Response: While the word ``customary'' may seem redundant when used 
with respect to all contractors, the final rule uses the word to refer 
to practices that are considered to be ``customary'' to that specific 
supplier. The Councils believe that the final rule provides clear 
guidance regarding predisposal requirements.
    g. One respondent recommended revision of FAR clause 52.245-
1(j)(2)(iii) because it was redundant with 52.245-1(j)(2)(i) and (ii).
    Response: FAR clause 52.245-1(j)(2)(iii), renumbered as 52.245-
1(j)(2)(ii), provides instructions for reporting property not included 
earlier in paragraph (j)(2). Therefore, the language is not considered 
to be redundant.
    h. One respondent recommended deletion of FAR clause 52.245-
1(j)(3)(iii)(A) through (G). Individual schedules are no longer 
required per FAR Subpart 45.6 for termination inventory.
    Response: The Councils believe that separate schedules are required 
for disposal of different types of property. Prior revisions to FAR 
Subpart 45.6 eliminated duplicate reporting forms. However, unless the 
Plant Clearance Officer has agreed otherwise or the contract requires 
electronic submission, the contractor shall prepare separate inventory 
disposal schedules for different types of property, using the Standard 
Form 1428, Inventory Disposal Schedule.
    i. One respondent recommended a revision of FAR clause 52.245-
1(j)(3)(iv) to delete the first sentence and replace with ``The 
contractor shall describe the property consistent with the requirements 
contained in FAR 52.245-1(f)(1)(iii).''
    Response: Understanding the intended use or possible use of an item 
allows the Government to facilitate reutilization, transfer, or 
donation potential. Therefore, the Councils believe the final rule is 
adequate as written.
    j. Two respondents recommended revisions to FAR clause 52.245-
1(j)(4)(i) to provide an extension period for submitting inventory 
disposal schedules for screening and to remove reference to performance 
on the specific contract. The recommended changes will allow enough 
time for contractors to generate inventory schedules and to conduct

[[Page 27379]]

internal screening with other site contracts.
    Response: The Councils believe the 30-day period allowed for 
submission of inventory disposal schedules to the plant clearance 
officer is reasonable. It should be noted that the original FAR 
disposal requirements have not changed. Regarding other site contracts, 
property is accountable to a specific contract and the contractor must 
make a determination that the Government property is no longer required 
for performance of that contract. FAR 45.106 prescribe the policy for 
transferring Government property between contracts.
    k. One respondent recommended revisions to FAR clause 52.245-
1(j)(6), removing the specific timeframe of 10 days for notification in 
order to enable reutilization of Government property within the 
contract. Post submission adjustments normally occur on an exception 
basis and timing is not usually controllable. The respondent also 
recommended elimination of plant clearance officer approval prior to 
withdrawal.
    Response: The Councils believe the notification timeframes and 
approvals stated in the final rule are reasonable to flexibly manage 
post submission adjustments, e.g., to rescind actions that have 
occurred subsequent to acceptance of the inventory disposal schedule.
    l. One respondent recommended FAR clause 52.245-1(j)(7)(ii) be 
deleted and replaced with, ``The contractor shall notify the Plant 
Clearance Officer when property that is on a plant clearance case is 
relocated prior to final disposition instructions.'' The respondent 
believes contractors are already required to have a system in place to 
manage movement and storage of Government property.
    Response: The Councils believe it is necessary for the contractor 
to obtain the plant clearance officer's approval before removing 
Government property from the premises in order to protect the interest 
of the Government in managing and tracking Government property. It 
should be noted that the proposed rule did not change the original 
storage requirements.
    m. One respondent recommended changing the title and language of 
FAR clause 52.245-1(j)(8)(i) to read ``scrap disposition instructions'' 
and ``inventory schedule or scrap list'' because an inventory schedule 
can be a scrap list.
    Response: The Councils believe disposition instructions include 
more than ``scrap'' and the recommended language would be too broad.
    n. One respondent recommended revising the language at FAR clause 
52.245-1(j)(9) to read ``contract property'' instead of ``Contractor 
inventory.''
    Response: The Councils believe the term ``Contractor inventory'' 
has a specific meaning under statute and is relevant to the clause 
language.
    o. One respondent recommended deleting FAR clause 52.245-1(j)(10), 
subcontractor inventory disposal schedules, because it limits the prime 
contractor's ability to minimize administrative costs. The prime should 
be able to delegate the submission of subcontractor inventory schedules 
directly to the plant clearance officer, as currently allowed in 
PCARSS.
    Response: The Councils believe the FAR language for obtaining 
subcontractor inventory disposal schedules is necessary and should not 
be deleted. The language assigns responsibility to the prime contractor 
for performance of subcontractors, including the submission of 
subcontractor inventory disposal schedules. The language does provide 
the contractor the flexibility to determine the most appropriate 
methods for ensuring subcontractor performance.
    Abandonment of Government Property
    p. Two respondents recommended adding language to FAR clause 
52.245-1(k)(1) and (k)(2) to prevent abandonment of Government property 
on a Federal installation.
    Response: The Councils believe that policy relevant to preventing 
abandonment of Government property on a Federal installation would be 
more appropriately covered in agency procedures and not in the FAR 
because the cost of disposal is typically a local issue.
    q. Two respondents submitted three recommendations to revise FAR 
clause 52.245-1(k)(1) to remove the word ``sensitive'' and require 
mutual consent for abandoning any Government property.
    Response: The Councils believe the abandonment of sensitive 
Government property must be coordinated and managed in a manner that 
protects the interest of the Government. There are times when it is 
more advantageous to the Government to abandon Government property, 
e.g., estimated cost to sell the property is greater than the proceeds 
from the sale, and the Government may do so in accordance with FAR 
45.604-2.
    r. One respondent suggested deleting part of the language at FAR 
clause 52.245-1(k)(3) stating, ``The Government has no obligation to 
restore or rehabilitate the contractor's premises under any 
circumstances;'' because it is overly restrictive.
    Response: The Councils believe the language regarding abandonment 
of Government property stating that the Government has no obligation to 
restore or rehabilitate the contractor's premises under any 
circumstances is not overly restrictive. While the Government is not 
under obligation to restore or rehabilitate the contractors premises, 
there are situations which the Government may consider on a case by 
case basis where an equitable adjustment may properly include 
restoration or rehabilitation costs (see FAR clause 52.245-1(k)(3)). 
The language is necessary to protect the interest of the Government.
    s. One respondent asked how the contracting officer will know the 
``authorized'' law or regulation governing the disposition of property. 
The respondent requests that the Councils explain the rule or give 
reference to the law or regulation.
    Response: The FAR (specifically FAR Subpart 45.6) provides 
regulatory guidance sufficient for the administration of the law.
    t. One respondent stated that the proposed amendment does not 
address the disparity in the disposition of excess/surplus property in 
the possession of a Federal Agency and the same type of property in the 
possession of a contractor.
    Response: There is no disparity in the disposition of excess/
surplus property in the possession of a Federal Agency or contractor. 
However, the FAR provides an opportunity for the contractor to purchase 
contractor-acquired inventory, at acquisition cost, prior to the 
property being declared excess.
    31. Property Classification (Facilities, Special Tooling, Special 
Test Equipment).
    a. One respondent supports the elimination of the 1989 version of 
the special tooling clause, which is currently in the FAR. However, the 
respondent does not support elimination of the 1984 version of the 
special tooling clause that the Department of Defense is using through 
a Deviation that has been in force and effect since 1990. This protects 
the Government from multiple purchases of unidentified special tooling 
and should be retained.
    Response: The Councils do not agree. If needed, Special Tooling 
(ST) may be obtained as a deliverable under a Contract Line Item 
(CLIN).

[[Page 27380]]

    b. One respondent recommended redefining the term ``facilities'' in 
FAR Part 2 to mean real property.
    Response: The Councils do not agree that the term ``facilities'' 
should be redefined in Part 2 to mean ``real property.'' The term 
``facilities'' is broader than the term ``real property'' since it can 
also include equipment and utility services. However, the Council 
deleted the term ``facilities'' as it relates to facilities contracts. 
Where the term ``facilities'' is used to reference Government property, 
the term is substituted with ``Government property.''
    c. One respondent stated that ``if the Special Tooling clause is 
eliminated, additional language should be added at 52.245-1 to either: 
1) include a provision directing the contractor to submit a final list 
of acquired Special Tooling to the contracting officer for review, 60 
days prior to contract completion, identifying those tools that have 
not become obsolete. The contracting officer will issue a modification, 
adding a Contract Line Item for those items of Special Tooling, and 
corresponding tool drawings (electronic or physical), required by the 
Government as deliverable end items, or 2) include a provision giving 
the Government unlimited rights to the tool drawings (electronic or 
physical) produced in performance of the contract.''
    Response: The Councils do not agree. If needed, special tooling may 
be obtained as a deliverable under a contract line item number.
    d. One respondent stated that they currently have a facilities type 
contract and having that type contract in place saves the Government 
both time and money. Property on this contract supports over 150 
Government tasks, across multiple agencies. The elimination of the 
facilities use type of contracts will have a negative effect on how we 
currently manage Government property.
    Response: The Councils do not agree. A ``facilities contract'' is 
merely a form of service contract for property management. Agencies are 
not prohibited from issuing service contracts for this purpose.
    e. One respondent proposed that service contracts have a standard 
template of terms and conditions for the management of Government 
property for consistency through the various agencies.
    Response: The Councils do not agree. Terms and conditions are 
negotiated on a contract by contract basis to provide flexibility to 
both Government and contractor communities rather than prescriptive or 
proscriptive processes and requirements.
    f. One respondent agreed with the deletion of the Special Tooling 
clause.
    Response: The Councils agree.
    g. One respondent stated that the Councils should carefully 
consider the impact of the elimination of facilities use contracting on 
tenant use agreements entered into under the authority of the Armament 
Retooling and Manufacturing Support (ARMS) Act.
    Response: The Councils do not agree. A ``facilities contract'' is 
merely a form of service contract for property management. Agencies are 
not prohibited from issuing service contracts for this purpose.
    h. One respondent does not agree with the elimination of the 
Special Test Equipment clause.
    Response: The Councils do not agree. Screening of Special Test 
Equipment prior to acquisition is no longer feasible or practical 
because the Government no longer centrally manages Special Test 
Equipment.
    i. One respondent does not agree with the elimination of the 
Special Tooling clause, especially right to title language. Air Force 
Equipment Management System (AFEMS) has been mandated for managing and 
tracking all Government owned tooling, which allows the Air Force to 
comply with CFO reporting requirements. Most of the AFEMS data 
requirements for tooling mirror the data requirement in the Special 
Tooling clause.
    Response: The Councils do not agree. If needed, special tooling may 
be obtained as a deliverable under a contract line item. Reporting 
requirements may be imposed on a contract-by-contract basis dependant 
on performance requirements.
    j. One respondent recommended that the Special Tooling clause be 
retained.
    Response: The Councils do not agree. If needed, Special Tooling may 
be obtained as a deliverable under a Contract Line Item.
    32. Miscellaneous.
    a. OMB Approvals. One respondent stated that FAR 1.106 should be 
changed to match the proposed rule.
    Response: FAR 1.106, which lists OMB approvals under the paperwork 
reduction act, should reflect the proposed rule. However, the Councils 
believe no further change is necessary, as the revision was 
accomplished in the proposed rule.
    b. Closeout. One respondent requested moving paragraphs (2) and (3) 
from FAR 52.245-1(f)(1)(x) as it does not belong under property 
closeout to paragraph (f) Contract plans and systems.
    Response: The Councils do not agree. Paragraphs (2) and (3) are not 
part of (f)(1)(x); they are (f)(2) and (f)(3) and contain higher-level 
clausal language to support contract property closeout and are properly 
located under paragraph (f).
    c. Awards Under A-76. One respondent stated that with the emphasis 
directed at awards under the A-76 process, consideration might be given 
to providing property accountability guidance relative to the different 
types of service providers (as opposed to merely contractors) that may 
be selected under A-76.
    Response: The Councils do not agree. Property management for 
property in the custody of the Government is covered under the Federal 
Management Regulation and specific agency regulations. A-76 
competitions that are won by commercial firms become contracts that are 
subject to FAR.
    d. Use of Government Sources. One respondent stated that FAR 
51.106(b) references an old clause that the proposed rule eliminates, 
and recommended that the final rule be updated to reflect the 
appropriate reference.
    Response: The proposed rule updated the reference cited at FAR 
51.106(b) to read ``52.245-1'' and no further change is necessary.
    e. Service Contracts. One respondent requested that sample language 
be provided for use of Government property in services contracts when 
Government personnel will be maintaining records/inventories of the 
``provided property.''
    Response: The Councils do not agree. The statement of work should 
reflect the individual requirements of the agency. Agencies may choose 
to provide examples within Agency policies and training materials.
    f. Inter-work Transfer Agreements (IWTAs). One respondent asks, 
``Should IWTAs be addressed somewhere? Are all of the branches from a 
corporation really to be considered alternate locations?''
    Response: The Councils do not agree. The Government does not use 
these types of documents.
    g. One respondent supports the regulation as is.
    Response: Noted.

C. Summary of Proposed Rule Changes

    The Team made the following changes to the proposed rule as a 
result of the public comments and Team deliberations:
    Facilities contracts:

[[Page 27381]]

    The final rule reflects the following changes and includes 
administrative changes as a result of the deletions of ``facilities 
contracts'' (ref: FAR Case 2005-008, Use of Facilities Contracts):
    Revised or deleted FAR 4.703(b)(3), 4.804-4(b), 7.105(b)(14), 
14.502(b)(2), 15.209(b)(2), 15.404-1(e)(1), 15.407-2(e)(1), 15.407-
4(a)(1) and (c)(1), 15.605(b)(4), 16.302(b), 16.307(a)(1), (b), (d), 
(e)(1), (f)(1), (g)(1) and (2), (h), and (i), 17.603(a)(5), 
19.803(b)(2), 19.1103(b), 19.1307(c), 22.405, 22.407(d), 31.106, 
32.403(c), 32.407(c), 32.704(a)(1), 32.705-2(a), (b) and (c), 
35.014(e), 35.017(a)(2), 37.101, 41.102(b)(6), 41.701(b), 
42.302(a)(30), 42.1102, 42.1107, 42.1305(c) and (d), 43.205(b)(5), 
44.101, 44.202-2(a)(2) and (10), extensively throughout Part 45 and 
especially Subpart 45.3, 46.310, 49.505, 51.107, 52.215-2 Alternate I, 
52.216-11, 52.216-12, 52.216-13 and Alternate I, 52.216-14, 52.222-17, 
52.232-20, 52.232-21, 52.242-16, 52.243-2 Alternate IV, 52.243-4, 
52.246-10, 52.249-11, 52.249-12, 52.249-13, 52.249-14, and 52.251-1 
Alternate I to remove any references to ``facilities contracts.''
    Changes to definitions:
    Revised the definition of ``Acquisition cost'' in 45.101, 52.245-1, 
and 52.245-9 for compliance with Generally Accepted Accounting 
Principles.
    Revised 45.101 and 52.245-1 to include a definition of 
``Cannibalize''.
    Moved the definition of ``Common item'' from 45.101 and 52.245-1 to 
2.101.
    Revised the definition at 52.245-1 of ``Contractor's management 
personnel'' to add paragraph (3) to be consistent with the same 
definition at 45.101.
    Revised the definition of ``Demilitarization'' in 45.101 and 
52.245-1.
    Revised 45.101 and 52.245-1 for the definition of ``Discrepancies 
incident to shipment'' to clarify that it means any differences between 
items shipped and items received.
    Revised 45.101 and 52.245-1 to clarify the definition of 
``Equipment''.
    Revised 45.101 and 52.245-1 to replace ``erection'' with 
``construction'' in the definition of ``Non-severable''.
    Retained the definition of ``Plant equipment'' in 45.101 and added 
the definition in 52.245-1 and 52.245-9.
    Revised the definition of ``Property Administrator'' in 45.101 and 
52.245-1 and Plant Clearance Officer in 2.101 to change ``assigned'' to 
``appointed.''
    Revised 45.101 and 52.245-1 for the definition of ``Provide'' to 
clarify when property is Government-furnished or contractor-acquired.
    Retained the definition of ``Real property'' in 45.101, 52.245-1, 
and 52.245-9.
    In the definition of ``Sensitive property'' at 45.101 and 52.245-1, 
removed the example of classified property.
    Revised 2.101 definition of ``Special tooling.'' to remove 
references to ``replacement'' and ``unique Federal property''.
    Deleted the definition for ``Unique Federal property'' from FAR 
45.101 and 52.245-1, and references to it in the definitions of 
``Material'' and ``Special tooling''.
    In 2.101 added example of international voluntary consensus 
standard making bodies in the definition of ``Voluntary consensus 
standards''.
    Other changes:
    Revised 31.205-19(e)(2)(iv) to clarify the allowability of the cost 
of insurance for the risk of loss, damage, destruction or theft of 
Government property.
    Revised 32.503-15(b)(1) to make an editorial change.
    Revised 45.000 to clarify language regarding management and use of 
Government property; to replace the term ``Plant equipment'' with the 
term ``Property''; and to exclude software and intellectual property 
and the scenario for which the Government has acquired a lien or title 
to property solely because of performance-based payments from the scope 
of this subpart.
    Revised 45.102 to set forth the exception for property furnished 
for repair or overhaul to requirements that must be met for contracting 
officers to make a determination to furnish Government property.
    Revised FAR 45.103(a)(2) to correct a formatting error. As a 
result, subparagraphs (3), (4), and (5) have been renumbered as (4), 
(5), and (6).
    Revised FAR 45.103(a)(3) to remove the invalid reference to FAR 
45.602.
    Revised 45.104(b) to identify two issues: (1) the revocation of 
Government's assumption of risk and (2) prime and subcontractor risk of 
loss relationships, by reformatting the section into two paragraphs, 
(b) and (c).
    Revised 45.105 to change the heading to ``Contractor's property 
management system compliance.''
    Deleted 45.105(b)(1) and renumbered remaining paragraphs in order 
to eliminate ``contract price adjustment'' as one of the examples of 
corrective action if a contractor does not correct property management 
system deficiencies.
    Revised 45.105(b)(3) to renumber as 45.105(b)(2) in accordance with 
another recommendation. 45.105(b)(2) was revised to state ``other 
rights or remedies available to the contracting officer.''
    Revised 45.105(d) to add language describing the conditions and 
circumstances under which the Property Administrator may grant relief 
of responsibility.
    Revised 45.106 and 52.245-1(d)(1) to add language for the 
inapplicability of warranties of suitability of use and timely delivery 
of Government-furnished property, to property acquired or fabricated 
initially by the contractor, and subsequently transferred to another 
contract with this contractor.
    Revised 45.107(a)(1)(iii) to add language regarding the use of the 
Government property clause 52.245-1 in FAR Part 12 solicitations and 
contracts.
    Revised 45.107(b) to clarify that Government property clauses 
52.245-1 and 52.245-2 may be used concurrently under a single contract.
    Revised 45.107(c) to mandate the use of clause 52.245-9, Uses and 
Charges, for all solicitations and contracts that furnish or authorize 
the acquisition of Government property.
    Revised 45.107(d) to clarify the use of Government property clauses 
in purchase orders for property repair.
    Revised 45.201(a)(1) and 52.245-1(f)(1)(iii)(A)(1) to replace 
``commercial part number'' with ``part number'' and remove ``bulk 
identifier'' as required elements of property records.
    Revised 45.201(a) to add a requirement for the contracting officer 
to include a statement in all solicitations as to whether the 
Government property is to be furnished in an ``as-is'' condition and 
instructions for physical inspection.
    Revised 45.201 to move paragraphs (d) and (e) into FAR 45.202, and 
eliminate the (d)(2) requirement to charge rent when adjusting the 
evaluation is not practical; add a new paragraph (d) to provide 
guidance for the use of property on more than one contract.
    Deleted the requirement of 45.301(b)(1) to exclude Government-
owned, contractor-operated plants operating on a cost-plus-fixed-fee 
basis from rental charges. As a result of the deletion, 45.301(b) is 
restructured.
    Revised 45.303(b) for clarification and (c) to update the reference 
for computing rent.
    Revised 45.401(b) and (c), moved them into 45.402, and revised 
clause 52.245-1(d) and (e) to retain title language in the current FAR 
at 52.245-2 and 52.245-5.
    Revised 45.501 to provide for the property administrator assigned 
to the prime contract to request support

[[Page 27382]]

property administration from another contract administration office, 
for purposes of evaluating prime contractor management of property 
located at subcontractors and alternate locations.
    Revised 45.501 and 45.502 to provide that for property located at a 
subcontractor, the prime contractor must agree to allow support 
property administration. Should the prime contractor not agree, the 
property administrator assigned to the prime contractor shall 
immediately refer the matter to the contracting officer.
    Revised 52.244-2(b) to delete the reference to special test 
equipment and the clause at 52.245-18.
    Revised the third sentence of 52.245-1(b)(1) to add ``procedures'' 
and add ``except where inconsistent with law or regulation'' after the 
words ``property management.''. Added a new fourth sentence: ``During 
the period of performance, the contractor shall disclose any 
significant changes to their property management system to the Property 
Administrator prior to implementation.''
    Revised 52.245-1(b)(2) to add words ``or stolen.''
    Revised clause 52.245-1(d)(3)(ii) (renumbered as (d)(2)(ii)) to 
allow the contractor the opportunity to inspect Government-furnished 
property, expected to be suitable for contract performance, after 
receipt and installation.
    Revised clause 52.245-1(d)(3)(iii) (renumbered as (d)(2)(iii)) to 
ensure that the contractor is given the opportunity to inspect property 
furnished in an ``as-is'' condition prior to the property being 
provided on contract.
    Revised 52.245-1(f)(1) to add the word ``procedures'' to the first 
sentence in (f)(1) after the word ``system.''
    Revised 52.245-1(f)(1)(ii) to clarify the identification of 
Government property.
    Revised 52.245-1(f)(1)(iii)(B) to add the heading ``Use of a 
Receipt and Issue System for Government Material'' and make editorial 
changes.
    Revised 52.245-1(f)(1)(iv) to require disclosure of the results of 
the physical inventory.
    Revised 52.245-1(f)(1)(v) to provide that the contractor shall 
award subcontracts that clearly identify assets to be provided and 
shall ensure appropriate flow down of contract terms and conditions, 
e.g., extent of liability for loss, damage, destruction or theft of 
Government property, and deleted the requirement to flow down any cost 
savings achieved as a result of its prime contract relationship with 
the Government.
    Revised 52.245-1(f)(1)(vi) to clarify the lead-in language for 
examples of reports to be provided by the contractor.
    Revised 52.245-1(f)(1)(vi)(B), (C), and (D); and moved language to 
52.245-1(h)(2), (3), (4), and (5) and renumbered.
    Revised 52.245-1(f)(1)(vi) to add paragraphs (12) and (13) to add 
language for last known location and a statement that the property did 
or did not contain sensitive or hazardous material, and if so, that the 
appropriate agencies were notified.
    Revised 52.245-1(f)(1)(vii)(A) to state that a Property 
Administrator may grant relief for loss, damage, destruction or theft 
of Government property.
    Revised 52.245-1(f)(1)(viii), adding the word ``move'', and revised 
FAR 52.245-1(f)(1)(viii) to add a new paragraph (B).
    Revised 52.245-1(f)(1)(ix) to add the words ``and routine.''
    Revised 52.245-1(f)(3) to include ``significant'' and ``pertaining 
to Government property'' which now provides access to significant 
findings and/or results of reviews and audits related directly to 
Government property.
    Revised 52.245-1(g)(1) to add the words ``plan'' and ``that 
pertains to Government property'', and (g)(1) and (4) are revised to 
require access to all Government property as well as premises, and to 
premises of the subcontractor as well as the prime.
    Revised the title to the clause 52.245-2 and the prescriptive 
language for the clause in FAR 45.107(b) for clarity.
    Revised 52.245-2(c) to delete ``(i.e.)'' and add the word ``and.''
    Revised 52.245-2 to add a paragraph (e) which requires the 
contracting officer to identify Government Property provided under the 
clause, and to revise paragraph (a) to add reference to (e).
    This is not a significant regulatory action, and therefore, is not 
subject to review under Section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993. This rule is 
not a major rule under 5 U.S.C. 804.

D. Regulatory Flexibility Act

    The Regulatory Flexibility Act, 5 U.S.C. 601, et seq., applies to 
this final rule. The Councils prepared a Final Regulatory Flexibility 
Analysis (FRFA), and it is summarized as follows:
    This final regulatory flexibility analysis has been prepared 
consistent with 5 U.S.C. 604.
    1. Succinct statement of the need for, and the objectives of, 
the rule.
    Title II of the Federal Property and Administrative Services Act 
of 1949, Public Law 81-152, as amended, requires, in part that 
executive agencies account for Government property, determine when 
such property is excess, and dispose of excess Government property 
promptly. The final rule amends the FAR to revise the policies for 
the management of Government owned property used and acquired by 
private industry in the performance of Government contracts.
    2. Summary of the significant issues raised by the public 
comments in response to the initial regulatory flexibility analysis, 
a summary of the assessment of the agency of such issues, and a 
statement of any changes made in the proposed rule as a result of 
such comments.
    No comments were received that specifically mentioned the 
Initial Regulatory Flexibility Analysis.
    3. Description of and an estimate of the number of small 
entities to which the rule will apply.
    It is estimated that approximately 5000 contractors have Federal 
property in their possession. Department of Defense (DoD) has 2,242 
contractors. Approximately 62 percent of DoD's contractors are small 
businesses. Given that property in the possession of contractors is 
overwhelmingly DoD property, it is estimated the DoD ratio of small 
business to total businesses having such property is a reasonable 
approximation for all Government contractors. Therefore, it is 
estimated that approximately 3,100 small businesses have Government 
property in their possession.
    4. Description of the projected reporting, recordkeeping and 
other compliance requirements of the rule, including an estimate of 
the classes of small entities, which will be subject to the 
requirement and the type of professional skills necessary for 
preparation of the report or record.
    The rule does not impose any new reporting, recordkeeping, or 
compliance requirements. This final rule substantially decreases the 
impact of the current Federal Acquisition Regulation (FAR) 
provisions by simplifying procedures, reducing recordkeeping and 
eliminating requirements related to the management of Government 
property in the possession of contractors. The final rule continues 
the philosophy of ordinarily requiring contractors to furnish all 
property necessary to perform Government contracts, but also 
introduces more modern and innovative concepts.
    The final rule is structured around a number of principles or 
objectives, which it is believed, will have an overall positive 
impact on contractors regardless of size. The rule balances 
regulation with principle-based standards that allow for minimal 
regulatory requirement and greater flexibility and efficiency to 
achieve best value for the Government. The rule introduces 
commercial standards and industry best practices into the property 
management process to the maximum extent possible. This facilitates 
moving from a prescribed regulatory process to a performance-based 
outcome environment. The use of voluntary consensus standards and 
leading industry practices should reduce both the Government's and 
the contractor's ongoing administrative costs of dealing with 
Government property. The contractors will initiate and maintain the 
processes, systems, records, and methodologies necessary for 
effective control of the Government's property.

[[Page 27383]]

    While it may be that small businesses are more dependent on 
Government--furnished property than large businesses, the underlying 
philosophy has not changed (i.e., contractors are ordinarily 
required to furnish all property necessary to perform the Government 
contracts).
    5. Description of the steps the agency has taken to minimize the 
significant economic impact on small entities consistent with the 
stated objectives of applicable statutes, including a statement of 
the factual, policy, and legal reasons for selecting the alternative 
adopted in the final rule and why each one of the other significant 
alternatives to the rule considered by the agency which affect the 
impact on small entities was rejected.
    The final rule changes the approach to managing Government 
property by accepting commercial practices and standards instead of 
prescriptive-type requirements, alleviating the need for a separate 
and costly Government-dictated property system. The final rule 
further alleviates the burden on small businesses by reducing their 
risk on ``as-is'' Government-furnished property by allowing 
contractors to inspect ``as-is'' property prior to acceptance. By 
moving to one clause at FAR 52.245-1, Government Property, the 
Government has streamlined numerous clauses into one ``overarching'' 
clause, simplifying the understanding of Government property to the 
contracting community. The rule will reduce burdens on the entire 
contracting community, large business as well as small.
    Interested parties may obtain a copy of the FRFA from the FAR 
Secretariat. The FAR Secretariat has submitted a copy of the FRFA to 
the Chief Counsel for Advocacy of the Small Business Administration.

E. Paperwork Reduction Act

    The Paperwork Reduction Act (Pub. L. 104-13) applies because the 
final rule contains information collection requirements. Accordingly, 
the FAR Secretariat will forward a request for approval of a new 
information collection requirement concerning 9000-0075 to the Office 
of Management and Budget under 44 U.S.C. 3501, et seq. Public comments 
concerning this request will be invited through a subsequent Federal 
Register notice.

List of Subjects in 48 CFR Parts 1, 2, 4, 7, 14, 15, 16, 17, 18, 
19, 22, 28, 31, 32, 35, 37, 41, 42, 43, 44, 45, 46, 49, 51, 52, and 
53

    Government procurement.

    Dated: May 2, 2007.
Al Matera,
Acting Director,Contract Policy Division.

0
Therefore, DoD, GSA, and NASA amend 48 CFR parts 1, 2, 4, 7, 14, 15, 
16, 17, 18, 19, 22, 28, 31, 32, 35, 37, 41, 42, 43, 44, 45, 46, 49, 51, 
52, and 53 as set forth below:
0
1. The authority citation for 48 CFR parts 1, 2, 4, 7, 14, 15, 16, 17, 
18, 19, 22, 28, 31, 32, 35, 37, 41, 42, 43, 44, 45, 46, 49, 51, 52, and 
53 continues to read as follows:

    Authority: Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; 
and 42 U.S.C. 2473(c).

PART 1--FEDERAL ACQUISITION REGULATIONS SYSTEM


1.106   [Amended]

0
2. Amend section 1.106, in the table following the introductory 
paragraph, by--
0
a. Removing FAR segment ``52.216-13'', and its corresponding OMB 
Control Number ``9000-0069'';
0
b. Removing FAR segment ``52.232-21'', and its corresponding OMB 
Control Number ``9000-0074'';
0
c. Adding FAR segment ``52.245-1'', and its corresponding OMB Control 
Number ``9000-0075''; and
0
d. Removing FAR segments ``52.245-2'', ``52.245-3'', ``52.245-5'', 
``52.245-7'', ``52.245-8'', ``52.245-10'', ``52.245-11'', ``52.245-
16'', ``52.245-17'', and ``52.245-18'' and their corresponding OMB 
Control Number ``9000-0075''.

PART 2--DEFINITIONS OF WORDS AND TERMS

0
3. Amend section 2.101 in paragraph (b) by--
0
a. Adding, in alphabetical order, the definition ``Common item'';
0
b. Revising the definition ``Plant clearance officer''; and
0
c. Adding, in alphabetical order, the definitions ``Special test 
equipment'', ``Special tooling'', and ``Voluntary consensus standards'' 
to read as follows:


2.101   Definitions.

* * * * *
    (b) * * *
    Common item means material that is common to the applicable 
Government contract and the contractor's other work.
* * * * *
    Plant clearance officer means an authorized representative of the 
contracting officer, appointed in accordance with agency procedures, 
responsible for screening, redistributing, and disposing of contractor 
inventory from a contractor's plant or work site. The term 
``Contractor's plant'' includes, but is not limited to, Government-
owned contractor-operated plants and Federal installations as may be 
required under the scope of the contract.
* * * * *
    Special test equipment means either single or multipurpose 
integrated test units engineered, designed, fabricated, or modified to 
accomplish special purpose testing in performing a contract. It 
consists of items or assemblies of equipment including foundations and 
similar improvements necessary for installing special test equipment, 
and standard or general purpose items or components that are 
interconnected and interdependent so as to become a new functional 
entity for special testing purposes. Special test equipment does not 
include material, special tooling, real property, and equipment items 
used for general testing purposes or property that with relatively 
minor expense can be made suitable for general purpose use.
    Special tooling means jigs, dies, fixtures, molds, patterns, taps, 
gauges, and all components of these items including foundations and 
similar improvements necessary for installing special test equipment, 
and which are of such a specialized nature that without substantial 
modification or alteration their use is limited to the development or 
production of particular supplies or parts thereof or to the 
performance of particular services. Special tooling does not include 
material, special test equipment, real property, equipment, machine 
tools, or similar capital items.
* * * * *
    Voluntary consensus standards means common and repeated use of 
rules, conditions, guidelines or characteristics for products, or 
related processes and production methods and related management 
systems. Voluntary Consensus Standards are developed or adopted by 
domestic and international voluntary consensus standard making bodies 
(e.g., International Organization for Standardization (ISO) and ASTM-
International). See OMB Circular A-119.
* * * * *

PART 4--ADMINISTRATIVE MATTERS


4.703   [Amended]

0
4. Amend section 4.703 in paragraph (b)(3) by removing ``, and 
subparagraph (c)(2) of the clause at 52.216-13, Allowable Cost and 
Payment--Facilities''.


4.804-4  [Amended]

0
5. Amend section 4.804-4 by removing from paragraph (b) ``Facilities 
contracts and rental'' and adding ``Rental'' in its place.

PART 7--ACQUISITION PLANNING

0
6. Amend section 7.105 by revising paragraph (b)(14) to read as 
follows:


7.105   Contents of written acquisition plans.

* * * * *

[[Page 27384]]

    (b) * * *
    (14) Government-furnished property. Indicate any Government 
property to be furnished to contractors, and discuss any associated 
considerations, such as its availability or the schedule for its 
acquisition (see 45.102).
* * * * *

PART 14--SEALED BIDDING

0
7. Amend section 14.502 by revising paragraph (b)(2) to read as 
follows:


14.502   Conditions for use.

* * * * *
    (b) * * *
    (2) Government property to be made available to the successful 
bidder.
* * * * *

PART 15--CONTRACTING BY NEGOTIATION


15.209  [Amended]

    8. Amend section 15.209 by removing and reserving paragraph (b)(2).


15.404-1  [Amended]

0
9. Amend section 15.404-1 by removing from paragraph (e)(1) 
``facilities'' and adding ``equipment, real property'' in its place.


15.407-2  [Amended]

    10. Amend section 15.407-2 by removing from paragraph (e)(1) 
``facilities'' and adding ``equipment or real property'' in its place.


15.407-4  [Amended]

0
11. Amend section 15.407-4 by removing from paragraph (a)(1) 
``facilities'' and adding ``equipment, real property'' in its place; 
and by removing from paragraph (c)(1) ``facilities'' and adding ``real 
property,'' in its place.


15.605   [Amended]

0
12. Amend section 15.605 by removing from paragraph (b)(4) 
``facilities, equipment, materials,'' and adding ``Government 
property'' in its place.

PART 16--TYPES OF CONTRACTS


16.302  [Amended]

0
13. Amend section 16.302 by removing from paragraph (b) ``, and for 
facilities contracts''.


16.307   [Amended]

0
14. Amend section 16.307 by--
0
a. Removing from paragraph (a)(1) ``(other than a facilities 
contract)'';
0
b. Removing from paragraph (b) ``facilities contract or a'';
0
c. Removing from paragraph (d) ``(other than a facilities contract)'';
0
d. Removing from paragraph (e)(1) ``or a facilities contract'';
0
e. Removing from paragraph (f)(1) ``(other than a facilities 
contract)'';
0
f. Removing paragraphs (g) and (h); and redesignating paragraph (i) as 
paragraph (g); and
0
g. Removing the last sentence from the newly designated paragraph (g).

PART 17--SPECIAL CONTRACTING METHODS

0
15. Amend section 17.603 by revising paragraph (a)(5) to read as 
follows:


17.603   Limitations.

    (a) * * *
    (5) Functions that can more properly be accomplished in accordance 
with Subpart 45.3, Authorizing the Use and Rental of Government 
Property.
* * * * *

PART 18--EMERGENCY ACQUISITIONS


18.123  [Amended]

0
16. Amend section 18.123 by removing ``45.404(a)(3) and (4)'' and 
adding ``45.301'' in its place.

PART 19--SMALL BUSINESS PROGRAMS


19.803  [Amended]

0
17. Amend section 19.803 by removing from paragraph (b)(2) 
``facilities'' and adding ``equipment and real property'' in its place.


19.1103   [Amended]

0
18. Amend section 19.1103 by removing from paragraph (b) ``facilities'' 
and adding ``property'' in its place.


19.1307   [Amended]

0
19. Amend section 19.1307 by removing from paragraph (c) ``facilities'' 
and adding ``property'' in its place.

PART 22--APPLICATION OF LABOR LAWS TO GOVERNMENT ACQUISITIONS


22.405   [Removed and Reserved]

0
20. Section 22.405 is removed and reserved.


22.407   [Amended]

0
21. Amend section 22.407 by removing and reserving paragraph (d).

PART 28--BONDS AND INSURANCE


28.303  [Amended]

0
22. Amend section 28.303 by removing ``45.103'' and adding ``45.104'' 
in its place.

PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES


31.106  [Removed and Reserved]

0
23. Remove and reserve section 31.106.
0
23a. Remove sections 31.106-1 through 31.106-3.
0
24. Amend section 31.205-19 by revising paragraph (e)(2)(iv) to read as 
follows:


31.205-19   Insurance and indemnification.

* * * * *
    (e) * * *
    (2) * * *
    (iv) Costs of insurance for the risk of loss, damage, destruction, 
or theft of Government property are allowable to the extent that--
    (A) The contractor is liable for such loss, damage, destruction, or 
theft;
    (B) The contracting officer has not revoked the Government's 
assumption of risk (see 45.104(b)); and
    (C) Such insurance does not cover loss, damage, destruction, or 
theft which results from willful misconduct or lack of good faith on 
the part of any of the contractor's managerial personnel (as described 
in FAR 52.245-1(h)(1)(ii)).
* * * * *


31.205-40  [Amended]

0
25. Amend section 31.205-40 by removing from paragraph (a) ``45.101'' 
and adding ``2.101(b)'' in its place.

PART 32--CONTRACT FINANCING

0
26. Amend section 32.403 by revising paragraph (c) to read as follows:


32.403  Applicability.

* * * * *
    (c) Contracts for acquisition, at cost, of property for Government 
ownership.
* * * * *


32.407   [Amended]

0
27. Amend section 32.407 by removing from paragraph (c) ``facilities'' 
and adding ``property'' in its place.
0
28. Amend section 32.503-15 by removing from the introductory text of 
paragraph (b) ``other clauses, as follows:'' and adding an em-dash in 
its place; and by revising paragraph (b)(1) to read as follows:


32.503-15   Application of Government title terms.

* * * * *
    (b) * * *
    (1) The clause at 52.245-1, Government Property; and
* * * * *


32.704   [Amended]

0
29. Amend section 32.704 by removing from paragraph (a)(1)

[[Page 27385]]

``52.232-21, Limitation of Cost (Facilities);''.


32.705-2  [Amended]

0
30. Amend section 32.705-2 by removing from paragraph (a) ``, except 
those for consolidated facilities, facilities acquisition, or 
facilities use''; removing paragraph (b); and redesignating paragraph 
(c) as paragraph (b).

PART 35--RESEARCH AND DEVELOPMENT CONTRACTING

0
31. Amend section 35.014 by revising paragraph (e) to read as follows:


35.014   Government property and title.

* * * * *
    (e) The policies in paragraphs (b)(1) through (b)(3) and paragraph 
(d) of this section are implemented in the Government Property clauses.


35.017   [Amended]

0
32. Amend section 35.017 by removing from paragraph (a)(2) 
``facilities'', each time it appears, and adding ``installations 
equipment and real property'' in its place (twice).

PART 37--SERVICE CONTRACTING


37.101  [Amended]

0
33. Amend section 37.101, by removing from paragraph (5) of the 
definition ``Service Contract'' ``facilities'' and adding ``real 
property'' in its place.

PART 41--ACQUISITION OF UTILITY SERVICES


41.102  [Amended]

0
34. Amend section 41.102 by removing from paragraph (b)(6) 
``Government-owned facilities'' and adding ``Government-owned equipment 
and real property'' in its place.


41.701   [Amended]

0
35. Amend section 41.701 by removing from paragraph (b) ``facilities'' 
and adding ``equipment and real property'' in its place.

PART 42--CONTRACT ADMINISTRATION AND AUDIT SERVICES

0
36. Amend section 42.302 by removing and reserving paragraph (a)(27); 
and by revising the introductory text of paragraph (a)(30), and 
(a)(30)(i) through (a)(30)(iii) to read as follows:


42.302   Contract administration functions.

    (a) * * *
    (27) [Reserved]
* * * * *
    (30) When contractors request Government property--
    (i) Evaluate the contractor's requests for Government property and 
for changes to existing Government property and provide appropriate 
recommendations to the contracting officer;
    (ii) Ensure required screening of Government property before 
acquisition by the contractor;
    (iii) Approve use of Government property on a noninterference basis 
in accordance with the clause at 52.245-9, Use and Charges;
* * * * *


42.705-1  [Amended]

0
37. Amend section 42.705-1 by removing from paragraph (b)(1) ``or 
52.216-13''.


42.705-3  [Amended]

0
38. Amend section 42.705-3 by removing from paragraph (b)(5)(ii) 
``16.307(i)'' and adding ``16.307(g)'' in its place.


42.708   [Amended]

0
39. Amend section 42.708 by removing from paragraph (b) ``or 52.216-
13''.


42.709-6  [Amended]

0
40. Amend section 42.709-6 by removing ``52.216-13,''.


42.1102   [Amended]

0
41. Amend section 42.1102 by removing ``facilities,''.


42.1107   [Amended]

0
42. Amend section 42.1107 by removing from paragraph (a) ``a facilities 
contract,''.


42.1305   [Amended]

0
43. Amend section 42.1305 by removing paragraph (c), and redesignating 
paragraph (d) as paragraph (c).

PART 43--CONTRACT MODIFICATIONS


43.205  [Amended]

0
44. Amend section 43.205 by removing and reserving paragraph (b)(5).

PART 44--SUBCONTRACTING POLICIES AND PROCEDURES


44.101   [Amended]

0
45. Amend section 44.101 by removing the definition ``Facilities''.


44.202-1  [Amended]

0
46. Amend section 44.202-1 by removing from paragraph (c) ``paragraph 
(k)'' and adding ``paragraph (j)'' in its place.
0
47. Amend section 44.202-2 by revising paragraphs (a)(2) and (a)(10) to 
read as follows:


44.202-2   Considerations.

    (a) * * *
    (2) Is the subcontract for special test equipment, equipment or 
real property that are available from Government sources?
* * * * *
    (10) Has adequate consideration been obtained for any proposed 
subcontract that will involve the use of Government-provided equipment 
and real property?
* * * * *

PART 45--GOVERNMENT PROPERTY

0
48. Revise section 45.000 to read as follows:


45.000   Scope of part.

    This part prescribes policies and procedures for providing 
Government property to contractors, contractors' management and use of 
Government property, and reporting, redistributing, and disposing of 
contractor inventory. It does not apply to property under any statutory 
leasing authority, (except as to non-Government use of property under 
45.301(f)); to property to which the Government has acquired a lien or 
title solely because of partial, advance, progress, or performance-
based payments; to disposal of real property; or to software and 
intellectual property.
0
49. Revise Subparts 45.1 through 45.5 to read as follows:
Subpart 45.1--General
Sec.
45.101 Definitions.
45.102 Policy.
45.103 General.
45.104 Responsibility and liability for Government property.
45.105 Contractors' property management system compliance.
45.106 Transferring accountability.
45.107 Contract clauses.
Subpart 45.2--Solicitation and Evaluation Procedures
45.201 Solicitation.
45.202 Evaluation procedures.
Subpart 45.3--Authorizing the Use and Rental of Government Property
45.301 Use and rental.
45.302 Contracts with foreign governments or international 
organizations.
45.303 Use of Government property on independent research and 
development programs.
Subpart 45.4--Title to Government Property
45.401 Title to Government-furnished property.
45.402 Title to contractor-acquired property.

[[Page 27386]]

Subpart 45.5--Support Government Property Administration
45.501 Prime contractor alternate locations.
45.502 Subcontractor locations.
45.503 Support property administrator findings.

Subpart 45.1--General


45.101  Definitions.

    As used in this part--
    Acquisition cost means the cost to acquire a tangible capital asset 
including the purchase price of the asset and costs necessary to 
prepare the asset for use. Costs necessary to prepare the asset for use 
include the cost of placing the asset in location and bringing the 
asset to a condition necessary for normal or expected use.
    Cannibalize means to remove serviceable parts from one item of 
equipment in order to install them on another item of equipment.
    Contractor-acquired property means property acquired, fabricated, 
or otherwise provided by the contractor for performing a contract and 
to which the Government has title.
    Contractor inventory means--
    (1) Any property acquired by and in the possession of a contractor 
or subcontractor under a contract for which title is vested in the 
Government and which exceeds the amounts needed to complete full 
performance under the entire contract;
    (2) Any property that the Government is obligated or has the option 
to take over under any type of contract, e.g., as a result either of 
any changes in the specifications or plans thereunder or of the 
termination of the contract (or subcontract thereunder), before 
completion of the work, for the convenience or at the option of the 
Government; and
    (3) Government-furnished property that exceeds the amounts needed 
to complete full performance under the entire contract.
    Contractor's managerial personnel means the contractor's directors, 
officers, managers, superintendents, or equivalent representatives who 
have supervision or direction of--
    (1) All or substantially all of the contractor's business;
    (2) All or substantially all of the contractor's operation at any 
one plant or separate location; or
    (3) A separate and complete major industrial operation.
    Demilitarization means rendering a product unusable for, and not 
restorable to, the purpose for which it was designed or is customarily 
used.
    Discrepancies incident to shipment means any differences (e.g., 
count or condition) between the items documented to have been shipped 
and items actually received.
    Equipment means a tangible asset that is functionally complete for 
its intended purpose, durable, nonexpendable, and needed for the 
performance of a contract. Equipment is not intended for sale, and does 
not ordinarily lose its identity or become a component part of another 
article when put into use.
    Government-furnished property means property in the possession of, 
or directly acquired by, the Government and subsequently furnished to 
the contractor for performance of a contract.
    Government property means all property owned or leased by the 
Government. Government property includes both Government-furnished 
property and contractor-acquired property.
    Material means property that may be consumed or expended during the 
performance of a contract, component parts of a higher assembly, or 
items that lose their individual identity through incorporation into an 
end-item. Material does not include equipment, special tooling, and 
special test equipment.
    Nonseverable means property that cannot be removed after 
construction or installation without substantial loss of value or 
damage to the installed property or to the premises where installed.
    Plant equipment means personal property of a capital nature 
(including equipment, machine tools, test equipment, furniture, 
vehicles, and accessory and auxiliary items) for use in manufacturing 
supplies, in performing services, or for any administrative or general 
plant purpose. It does not include special tooling or special test 
equipment.
    Precious metals means silver, gold, platinum, palladium, iridium, 
osmium, rhodium, and ruthenium.
    Property means all tangible property, both real and personal.
    Property Administrator means an authorized representative of the 
contracting officer appointed in accordance with agency procedures, 
responsible for administering the contract requirements and obligations 
relating to Government property in the possession of a contractor.
    Provide means to furnish, as in Government-furnished property, or 
to acquire, as in contractor-acquired property.
    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 plant equipment.
    Sensitive property means property potentially dangerous to the 
public safety or security if stolen, lost, or misplaced, or that shall 
be subject to exceptional physical security, protection, control, and 
accountability. Examples include weapons, ammunition, explosives, 
controlled substances, radioactive materials, hazardous materials or 
wastes, or precious metals.
    Surplus property means excess personal property not required by any 
Federal agency as determined by the Administrator of the General 
Services Administration (GSA).


45.102  Policy.

    (a) Contractors are ordinarily required to furnish all property 
necessary to perform Government contracts.
    (b) Contracting officers shall provide property to contractors only 
when it is clearly demonstrated--
    (1) To be in the Government's best interest;
    (2) That the overall benefit to the acquisition significantly 
outweighs the increased cost of administration, including ultimate 
property disposal;
    (3) That providing the property does not substantially increase the 
Government's assumption of risk; and
    (4) That Government requirements cannot otherwise be met.
    (c) The contractor's inability or unwillingness to supply its own 
resources is not sufficient reason for the furnishing or acquisition of 
property.
    (d) Exception. Property provided to contractors for repair or 
overhaul is not subject to the requirements of paragraph (b) of this 
section.


45.103   General.

    (a) Agencies shall--
    (1) Allow and encourage contractors to use voluntary consensus 
standards (see FAR 11.101(c)) and industry-leading practices and 
standards to manage Government property in their possession;
    (2) Eliminate to the maximum practical extent any competitive 
advantage a prospective contractor may have by using Government 
property;
    (3) Ensure maximum practical reutilization of contractor inventory 
for government purposes;
    (4) Require contractors to use Government property already in their 
possession to the maximum extent practical in performing Government 
contracts;
    (5) Charge appropriate rentals when the property is authorized for 
use on other than a rent-free basis; and

[[Page 27387]]

    (6) Require contractors to justify retaining Government property 
not needed for contract performance and to declare property as excess 
when no longer needed for contract performance.
    (b) Agencies will not generally require contractors to establish 
property management systems that are separate from a contractor's 
established procedures, practices, and systems used to account for and 
manage contractor-owned property.


45.104   Responsibility and liability for Government property.

    (a) Generally, contractors are not held liable for loss, damage, 
destruction, or theft of Government property under the following types 
of contracts:
    (1) Cost-reimbursement contracts.
    (2) Time-and-material contracts.
    (3) Labor-hour contracts.
    (4) Fixed-price contracts awarded on the basis of submission of 
cost or pricing data.
    (b) The contracting officer may revoke the Government's assumption 
of risk when the property administrator determines that the 
contractor's property management practices are inadequate and/or 
present an undue risk to the Government.
    (c) A prime contractor that provides Government property to a 
subcontractor shall not be relieved of any responsibility to the 
Government that the prime contractor may have under the terms of the 
prime contract.


45.105   Contractors' property management system compliance.

    (a) The agency responsible for contract administration shall 
conduct an analysis of the contractor's property management policies, 
procedures, practices, and systems. This analysis shall be accomplished 
as frequently as conditions warrant, in accordance with agency 
procedures.
    (b) The property administrator shall notify the contractor in 
writing when the contractor's property management system does not 
comply with contractual requirements, and shall request prompt 
correction of deficiencies and shall provide a schedule for their 
completion. If the contractor does not correct the deficiencies in 
accordance with the schedule, the contracting officer shall notify the 
contractor, in writing, that failure to take the required corrective 
action(s) may result in--
    (1) Revocation of the Government's assumption of risk for loss, 
damage, destruction, or theft; and/or
    (2) The exercise of other rights or remedies available to the 
contracting officer.
    (c) If the contractor fails to take the required corrective 
action(s) in response to the notification provided by the contracting 
officer in accordance with paragraph (b) of this section, the 
contracting officer shall notify the contractor in writing of any 
Government decision to apply the remedies described in paragraphs 
(b)(1) and (b)(2) of this section.
    (d) When the property administrator determines that a reported case 
of loss, damage, destruction or theft of Government property 
constitutes a risk assumed by the Government, the property 
administrator shall notify the contractor in writing that they are 
granted relief of responsibility in accordance with FAR clause 52.245-
1(f)(1)(vii). Where the property administrator determines that the risk 
of loss is not assumed by the Government, the property administrator 
shall forward a recommendation requesting that the contracting officer 
hold the contractor liable.


45.106   Transferring accountability.

    Government property shall be transferred from one contract to 
another only when firm requirements exist under the gaining contract 
(see 45.102). Such transfers shall be documented by modifications to 
both gaining and losing contracts. Once transferred, all property shall 
be considered Government-furnished property to the gaining contract. 
The warranties of suitability of use and timely delivery of Government-
furnished property do not apply to property acquired or fabricated by 
the contractor as contractor-acquired property that is subsequently 
transferred to another contract with the same contractor.


45.107  Contract clauses.

    (a)(1) Except as provided in paragraph (d) of this section, the 
contracting officer shall insert the clause at 52.245-1, Government 
Property, in--
    (i) All cost reimbursement, time-and-material, and labor-hour type 
solicitations and contracts; and
    (ii) Fixed-price solicitations and contracts when the Government 
will provide Government property.
    (iii) Contracts or modifications awarded under FAR Part 12 
procedures where Government property that exceeds the simplified 
acquisition threshold, as defined in FAR 2.101, is furnished or where 
the contractor is directed to acquire property for use under the 
contract that is titled in the Government.
    (2) The contracting officer shall use the clause with its Alternate 
I in contracts other than those identified in FAR 45.104(a), 
Responsibility and Liability for Government Property.
    (3) The contracting officer shall use the clause with its Alternate 
II when a contract for the conduct of basic or applied research at 
nonprofit institutions of higher education or at nonprofit 
organizations whose primary purpose is the conduct of scientific 
research (see 35.014) is contemplated.
    (b) The contracting officer shall also insert the clause at 52.245-
2, Government Property (Installation Operation Services), in service 
contracts to be performed on a Government installation when Government-
furnished property will be provided for initial provisioning only and 
the Government is not responsible for repair or replacement.
    (c) The contracting officer shall insert the clause at 52.245-9, 
Use and Charges, in solicitations and contracts when the clause at 
52.245-1 is included.
    (d) Purchase orders for property repair need not include a 
Government property clause when the acquisition cost of Government 
property to be repaired does not exceed the simplified acquisition 
threshold, unless other Government property (not for repair) is 
provided.

Subpart 45.2--Solicitation and Evaluation Procedures


45.201   Solicitation.

    (a) The contracting officer shall insert a listing of the 
Government property to be offered in all solicitations where 
Government-furnished property is anticipated (see 45.102). The listing 
shall include at a minimum--
    (1) The name, part number and description, manufacturer, model 
number, and National Stock Number (if needed for additional item 
identification tracking and/or disposition);
    (2) Quantity/unit of measure;
    (3) Unit acquisition cost;
    (4) Unique-item identifier or equivalent (if available and 
necessary for individual item tracking); and
    (5) A statement as to whether the property is to be furnished in an 
``as-is'' condition and instructions for physical inspection.
    (b) When Government property is offered for use in a competitive 
acquisition, solicitations should specify that the contractor is 
responsible for all costs related to making the property available for 
use, such as payment of all transportation, installation or 
rehabilitation costs.
    (c) The solicitation shall describe the evaluation procedures to be 
followed, including rental charges or equivalents

[[Page 27388]]

and other costs or savings to be evaluated, and shall require all 
offerors to submit the following information with their offers--
    (1) A list or description of all Government property that the 
offeror or its subcontractors propose to use on a rent-free basis. The 
list shall identify the accountable contract under which the property 
is held and the authorization for its use (from the contracting officer 
having cognizance of the property);
    (2) The dates during which the property will be available for use 
(including the first, last, and all intervening months) and, for any 
property that will be used concurrently in performing two or more 
contracts, the amounts of the respective uses in sufficient detail to 
support prorating the rent;
    (3) The amount of rent that would otherwise be charged in 
accordance with FAR 52.245-9, Use and Charges; and
    (4) The voluntary consensus standard or industry leading practices 
and standards to be used in the management of Government property, or 
existing property management plans, methods, practices, or procedures 
for accounting for property.
    (d) When use of property on more than one contract is anticipated, 
any additional instructions to the contractor regarding property 
management, accountability, and use, not addressed in FAR clause 
52.245-1, Government Property, should be specifically addressed in the 
statement of work on the contract providing property.


45.202   Evaluation procedures.

    (a) The contracting officer shall consider any potentially unfair 
competitive advantage that may result from the contractor possessing 
Government property. This shall be done by adjusting the offers by 
applying, for evaluation purposes only, a rental equivalent evaluation 
factor.
    (b) The contracting officer shall ensure the offeror's property 
management plans, methods, practices, or procedures for accounting for 
property are consistent with the requirements of the solicitation.

Subpart 45.3--Authorizing the Use and Rental of Government Property


45.301   Use and rental.

    This subpart prescribes policies and procedures for contractor use 
and rental of Government property.
    (a) Government property shall normally be provided on a rent-free 
basis in performance of the contract under which it is accountable or 
otherwise authorized.
    (b) Rental charges, to the extent authorized do not apply to 
Government property that is left in place or installed on contractor-
owned property for mobilization or future Government production 
purposes; however, rental charges shall apply to that portion of 
property or its capacity used for non-government commercial purposes or 
otherwise authorized for use.
    (c) The contracting officer cognizant of the Government property 
may authorize the rent-free use of property in the possession of 
nonprofit organizations when used for research, development, or 
educational work and--
    (1) The use of the property is in the national interest;
    (2) The property will not be used for the direct benefit of a 
profit-making organization; and
    (3) The Government receives some direct benefit, such as rights to 
use the results of the work without charge, from its use.
    (d) In exchange for consideration as determined by the cognizant 
contracting officer(s), the contractor may use Government property 
under fixed-price contracts other than the contract to which it is 
accountable. When, after contract award, a contractor requests the use 
of Government property, the contracting officer shall obtain a fair 
rental or other adequate consideration if use is authorized.
    (e) The cognizant contracting officer(s) may authorize the use of 
Government property on a rent-free basis on a cost type Government 
contract other than the contract to which it is accountable.
    (f) In exchange for consideration as determined by the cognizant 
contracting officer, the contractor may use Government property for 
commercial use. Prior approval of the Head of the Contracting Activity 
is required where non-Government use is expected to exceed 25 percent 
of the total use of Government and commercial work performed.


45.302   Contracts with foreign governments or international 
organizations.

    Requests by, or for the benefit of, foreign Governments or 
international organizations to use Government property shall be 
processed in accordance with agency procedures.


45.303  Use of Government property on independent research and 
development programs.

    The contracting officer may authorize a contractor to use the 
property on an independent research and development (IR&D) program, 
if--
    (a) Such use will not conflict with the primary use of the property 
or enable the contractor to retain property that could otherwise be 
released;
    (b) The contractor agrees not to claim reimbursement against any 
Government contract for the rental value of the property; and
    (c) A rental charge for the portion of the contractor's IR&D 
program cost allocated to commercial work is deducted from the claim 
for reimbursement of any agreed-upon Government share of the 
contractor's IR&D costs.

Subpart 45.4--Title to Government Property


45.401  Title to Government-furnished property.

    The Government retains title to all Government-furnished property 
until properly disposed of, as authorized by law or regulation. 
Property that is leased by the Government and subsequently furnished to 
the contractor for use shall be considered Government-furnished 
property under the clause 52.245-1, Government Property.


45.402  Title to contractor-acquired property.

    (a) Under fixed price type contracts, the contractor retains title 
to all property acquired by the contractor for use on the contract, 
except for property identified as a deliverable end item. The 
Government acquires title to property acquired or fabricated by the 
contractor in accordance with the financing provisions or other 
specific requirements for passage of title in the contract. If a 
deliverable item is to be retained by the contractor for use after 
inspection and acceptance by the Government, it shall be made 
accountable to the contract through a contract modification listing the 
item as Government-furnished property.
    (b) Under cost type and time-and-material contracts, the Government 
acquires title to all property to which the contractor is entitled to 
reimbursement, in accordance with paragraph (e)(3) of clause 52.245-1.

Subpart 45.5--Support Government Property Administration


45.501  Prime contractor alternate locations.

    The property administrator assigned to the prime contract may 
request support property administration from another contract 
administration office, for purposes of evaluating prime contractor 
management of property located at subcontractors and alternate 
locations.

[[Page 27389]]

45.502   Subcontractor locations.

    (a) For property located at a subcontractor, FAR 52.245-1(g) 
requires that the prime contractor allow support property 
administration. Should the prime contractor fail to comply with FAR 
52.245-1(g), the property administrator assigned to the prime 
contractor shall immediately refer the matter to the contracting 
officer.
    (b) The prime property administrator shall accept the findings of 
the delegated support property administrator and advise the prime 
contractor of any deficiencies within the subcontractor's property 
management system.


45.503   Support property administrator findings.

    In instances where the prime contractor does not concur with the 
findings of the support Property Administrator, the prime property 
administrator shall immediately refer the matter to the contracting 
officer.
0
50. Revise section 45.600 to read as follows:


45.600   Scope of subpart.

    This subpart establishes policies and procedures for the reporting, 
reutilization, and disposal of contractor inventory excess to contracts 
and of property that forms the basis of a claim against the Government 
(e.g., termination inventory under fixed-price contracts). This subpart 
does not apply to the disposal of real property or to property for 
which the Government has a lien or title solely as a result of advance, 
progress, or performance-based payments that have been liquidated.


45.601   [Removed and Reserved]

0
51. Remove and reserve section 45.601.

PART 46--QUALITY ASSURANCE


46.202-3  [Amended]

0
52. Amend section 46.202-3 by removing from paragraph (a) ``and 
46.310,''.


46.310   [Removed and Reserved]

0
53. Remove and reserve section 46.310.

PART 49--TERMINATION OF CONTRACTS

0
54. Amend section 49.108-3 by revising paragraph (b)(1) to read as 
follows:


49.108-3   Settlement procedure.

* * * * *
    (b) * * *
    (1) All subcontractor termination inventory be disposed of and 
accounted for in accordance with the procedures contained in paragraph 
(j) of the clause at 52.245-1, Government Property; and
* * * * *


49.502   [Amended]

0
55. Amend section 49.502 by removing from paragraphs (a)(1)(iv) and 
(b)(1)(i)(C) ``49.505(a), (b), or (e)'' and adding ``49.505(a) or (c)'' 
in its place.
0
56. Amend section 49.505 by removing paragraphs (a) and (c), and 
redesignating paragraph (b) as paragraph (a), paragraph (d) as 
paragraph (b), and paragraph (e) as paragraph (c); and revising the 
last sentence of the newly designated paragraph (b) to read as follows:


49.505   Other termination clauses.

* * * * *
    (b) * * * The contracting officer shall also insert the clause in 
time-and-material contracts, and labor-hour contracts.
* * * * *


49.603   [Amended]

0
57. Amend section 49.603 by removing ``49.505(e)'' and adding 
``49.505(c)'' in its place.

PART 51--USE OF GOVERNMENT SOURCES BY CONTRACTORS


51.106   [Amended]

0
58. Amend section 51.106 by removing from paragraph (b) ``52.245-2'' 
and adding ``52.245-1'' in its place; and by removing ``, or 52.245-5, 
Alternate I''.


51.107   [Amended]

0
59. Amend section 51.107 by removing ``may authorize'' and adding 
``authorizes'' in its place, and by removing the last sentence.


51.200   [Amended]

0
60. Amend section 51.200 by removing ``45.304'' and adding ``45.102'' 
in its place.

PART 52--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


52.215-2  [Amended]

0
61. Amend section 52.215-2 by removing and reserving Alternate I.


52.216-11  [Amended]

0
62. Amend section 52.216-11 by removing from the introductory text ``or 
a facilities contract''.


52.216-12  [Amended]

0
63. Amend section 52.216-12 by removing from the introductory text 
``(other than a facilities contract)''.


52.216-13 and 52.216-14  [Removed and Reserved]

0
64. Remove and reserve sections 52.216-13 and 52.216-14.


52.216-15  [Amended]

0
65. Amend the introductory text of section 52.216-15 by removing 
``16.307(i)'' and adding ``16.307(g)'' in its place.


52.222-17   [Removed and Reserved]

0
66. Remove and reserve section 52.222-17.


52.232-20  [Amended]

0
67. Amend the introductory text of section 52.232-20 by removing 
``except those for consolidated facilities, facilities acquisition, or 
facilities use,''.


52.232-21   [Removed and Reserved]

0
68. Remove and reserve section 52.232-21.


52.232-22  [Amended]

0
69. Amend the introductory text of section 52.232-22 by removing 
``32.705-2(c)'' and adding ``32.705-2(b)'' in its place.


52.242-16   [Removed and Reserved]

0
70. Remove and reserve section 52.242-16.


52.242-17  [Amended]

0
71. Amend the introductory text of section 52.242-17 by removing 
``42.1305(d)'' and adding ``42.1305(c)'' in its place.


52.243-2  [Amended]

0
72. Amend section 52.243-2 by removing and reserving Alternate IV.
0
73. Amend section 52.243-4 by revising the date of the clause and 
paragraph (a)(3) to read as follows:


52.243-4   Changes.

* * * * *
    CHANGES (JUNE 2007)
    (a) * * *
    (3) In the Government-furnished property or services; or
* * * * *


52.244-2  [Amended]

0
74. Amend section 52.244-2 by--
0
a. Revising the date of the clause to read ``(JUNE 2007)'';
0
b. Removing paragraph (b) and redesignating paragraphs (c) through (k) 
as (b) through (j), respectively;
0
c. Amending the newly designated paragraph (b) by removing ``paragraph 
(d) or (e)'' and adding ``paragraph (c) or (d)'' in its place;
0
d. Amending the newly designated paragraphs (e)(1) and (e)(2) by 
removing ``paragraph (c), (d), or (e)'' and adding ``paragraph (b), 
(c), or (d)'' in its place;

[[Page 27390]]

0
e. Amending the newly designated paragraph (j) by removing ``Paragraphs 
(d) and (f)'' and adding ``Paragraphs (c) and (e)'' in its place; and
0
f. Amending Alternate I as follows:
0
1. Revising the date of Alternate I to read ``(JUNE 2007)'';
0
2. Removing from the introductory text of Alternate I ``paragraph 
(f)(2)'', each time it appears, and adding ``paragraph (e)(2)'' in its 
place (twice);
0
3. Redesignating paragraph (f)(2) as paragraph (e)(2), and removing 
``paragraph (d), or (e)'' and adding ``paragraph (c), or (d)'' in its 
place; and
0
4. Removing from the newly designated paragraph (e)(2)(ii) ``paragraphs 
(f)(1)(i) through (f)(1)(iv)'' and adding ``paragraphs (e)(1)(i) 
through (e)(1)(iv)'' in its place.
0
75. Revise sections 52.245-1 and 52.245-2 to read as follows:


52.245-1   Government Property.

    As prescribed in 45.107(a), insert the following clause:
    GOVERNMENT PROPERTY (JUNE 2007)
    (a) Definitions. As used in this clause--
    Acquisition cost means the cost to acquire a tangible capital 
asset including the purchase price of the asset and costs necessary 
to prepare the asset for use. Costs necessary to prepare the asset 
for use include the cost of placing the asset in location and 
bringing the asset to a condition necessary for normal or expected 
use.
    Cannibalize means to remove serviceable parts from one item of 
equipment in order to install them on another item of equipment.
    Contractor-acquired property means property acquired, 
fabricated, or otherwise provided by the Contractor for performing a 
contract, and to which the Government has title.
    Contractor inventory means--
    (1) Any property acquired by and in the possession of a 
Contractor or subcontractor under a contract for which title is 
vested in the Government and which exceeds the amounts needed to 
complete full performance under the entire contract;
    (2) Any property that the Government is obligated or has the 
option to take over under any type of contract, e.g., as a result 
either of any changes in the specifications or plans thereunder or 
of the termination of the contract (or subcontract thereunder), 
before completion of the work, for the convenience or at the option 
of the Government; and
    (3) Government-furnished property that exceeds the amounts 
needed to complete full performance under the entire contract.
    Contractor's managerial personnel means the Contractor's 
directors, officers, managers, superintendents, or equivalent 
representatives who have supervision or direction of--
    (1) All or substantially all of the Contractor's business;
    (2) All or substantially all of the Contractor's operation at 
any one plant or separate location; or
    (3) A separate and complete major industrial operation.
    Demilitarization means rendering a product unusable for, and not 
restorable to, the purpose for which it was designed or is 
customarily used.
    Discrepancies incident to shipment means any differences (e.g., 
count or condition) between the items documented to have been 
shipped and items actually received.
    Equipment means a tangible asset that is functionally complete 
for its intended purpose, durable, nonexpendable, and needed for the 
performance of a contract. Equipment is not intended for sale, and 
does not ordinarily lose its identity or become a component part of 
another article when put into use.
    Government-furnished property means property in the possession 
of, or directly acquired by, the Government and subsequently 
furnished to the Contractor for performance of a contract.
    Government property means all property owned or leased by the 
Government. Government property includes both Government-furnished 
and Contractor-acquired property.
    Material means property that may be consumed or expended during 
the performance of a contract, component parts of a higher assembly, 
or items that lose their individual identity through incorporation 
into an end-item. Material does not include equipment, special 
tooling and special test equipment.
    Nonseverable means property that cannot be removed after 
construction or installation without substantial loss of value or 
damage to the installed property or to the premises where installed.
    Plant equipment as used in this part, means personal property of 
a capital nature (including equipment, machine tools, test 
equipment, furniture, vehicles, and accessory and auxiliary items) 
for use in manufacturing supplies, in performing services, or for 
any administrative or general plant purpose. It does not include 
special tooling or special test equipment.
    Precious metals means silver, gold, platinum, palladium, 
iridium, osmium, rhodium, and ruthenium.
    Property means all tangible property, both real and personal.
    Property Administrator means an authorized representative of the 
Contracting Officer appointed in accordance with agency procedures, 
responsible for administering the contract requirements and 
obligations relating to Government property in the possession of a 
Contractor.
    Provide means to furnish, as in Government-furnished property, 
or to acquire, as in contractor-acquired property.
    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 plant 
equipment.
    Sensitive property means property potentially dangerous to the 
public safety or security if stolen, lost, or misplaced, or that 
shall be subject to exceptional physical security, protection, 
control, and accountability. Examples include weapons, ammunition, 
explosives, controlled substances, radioactive materials, hazardous 
materials or wastes, or precious metals.
    Surplus property means excess personal property not required by 
any Federal agency as determined by the Administrator of the General 
Services Administration (GSA).
    (b) Property management. (1) The Contractor shall have a system 
to manage (control, use, preserve, protect, repair and maintain) 
Government property in its possession. The system shall be adequate 
to satisfy the requirements of this clause. In doing so, the 
Contractor shall initiate and maintain the processes, systems, 
procedures, records, and methodologies necessary for effective 
control of Government property, consistent with voluntary consensus 
standards and/or industry-leading practices and standards for 
Government property management except where inconsistent with law or 
regulation. During the period of performance, the Contractor shall 
disclose any significant changes to their property management system 
to the Property Administrator prior to implementation.
    (2) The Contractor's responsibility extends from the initial 
acquisition and receipt of property, through stewardship, custody, 
and use until formally relieved of responsibility by authorized 
means, including delivery, consumption, expending, disposition, or 
via a completed investigation, evaluation, and final determination 
for lost, damaged, destroyed, or stolen property. This requirement 
applies to all Government property under the Contractor's 
accountability, stewardship, possession or control, including its 
vendors or subcontractors (see paragraph (f)(1)(v) of this cluase).
    (3) The Contractor shall include the requirements of this clause 
in all subcontracts under which Government property is acquired or 
furnished for subcontract performance.
    (c) Use of Government property. The Contractor shall use 
Government property, either furnished or acquired under this 
contract, only for performing this contract, unless otherwise 
provided for in this contract or approved by the Contracting 
Officer. The Contractor shall not modify, cannibalize, or make 
alterations to Government property unless this contract specifically 
identifies the modifications, alterations or improvements as work to 
be performed.
    (d) Government-furnished property. (1) The Government shall 
deliver to the Contractor the Government-furnished property 
described in this contract. The Government shall furnish related 
data and information needed for the intended use of the property. 
The warranties of suitability of use and timely delivery of 
Government-furnished property do not apply to property acquired or 
fabricated by the Contractor as contractor-acquired property and 
subsequently transferred to another contract with this Contractor.
    (2) The delivery and/or performance dates specified in this 
contract are based upon the expectation that the Government-
furnished property will be suitable for contract performance and 
will be delivered to the Contractor by the dates stated in the 
contract.

[[Page 27391]]

    (i) If the property is not delivered to the Contractor by the 
dates stated in the contract, the Contracting Officer shall, upon 
the Contractor's timely written request, consider an equitable 
adjustment to the contract.
    (ii) In the event property is received by the Contractor, or for 
Government-furnished property after receipt and installation, in a 
condition not suitable for its intended use, the Contracting Officer 
shall, upon the Contractor's timely written request, advise the 
Contractor on a course of action to remedy the problem. Such action 
may include repairing, replacing, modifying, returning, or otherwise 
disposing of the property at the Government's expense. Upon 
completion of the required action(s), the Contracting Officer shall 
consider an equitable adjustment to the contract (see also paragraph 
(f)(1)(ii)(A) of this clause).
    (iii) The Government may, at its option, furnish property in an 
``as-is'' condition. The Contractor will be given the opportunity to 
inspect such property prior to the property being provided. In such 
cases, the Government makes no warranty with respect to the 
serviceability and/or suitability of the property for contract 
performance. Any repairs, replacement, and/or refurbishment shall be 
at the Contractor's expense.
    (3)(i) The Contracting Officer may by written notice, at any 
time--
    (A) Increase or decrease the amount of Government-furnished 
property under this contract;
    (B) Substitute other Government-furnished property for the 
property previously furnished, to be furnished, or to be acquired by 
the Contractor for the Government under this contract; or
    (C) Withdraw authority to use property.
    (ii) Upon completion of any action(s) under aragraph (d)(3)(i) 
of this clause, and the Contractor's timely written request, the 
Contracting Officer shall consider an equitable adjustment to the 
contract.
    (e) Title to Government property. (1) The Government shall 
retain title to all Government-furnished property. Title to 
Government property shall not be affected by its incorporation into 
or attachment to any property not owned by the Government, nor shall 
Government property become a fixture or lose its identity as 
personal property by being attached to any real property.
    (2) Fixed-price contracts. (i) All Government-furnished property 
and all property acquired by the Contractor, title to which vests in 
the Government under this paragraph (collectively referred to as 
``Government property)'', are subject to the provisions of this 
clause.
    (ii) Title to each item of equipment, special test equipment and 
special tooling acquired by the Contractor for the Government under 
this contract shall pass to and vest in the Government when its use 
in performing this contract commences or when the Government has 
paid for it, whichever is earlier, whether or not title previously 
vested in the Government.
    (iii) If this contract contains a provision directing the 
Contractor to purchase material for which the Government will 
reimburse the Contractor as a direct item of cost under this 
contract--
    (A) Title to material purchased from a vendor shall pass to and 
vest in the Government upon the vendor's delivery of such material; 
and
    (B) Title to all other material shall pass to and vest in the 
Government upon--
    (1) Issuance of the material for use in contract performance;
    (2) Commencement of processing of the material or its use in 
contract performance; or
    (3) Reimbursement of the cost of the material by the Government, 
whichever occurs first.
    (3) Title under Cost-Reimbursement or Time-and-Material 
Contracts or Cost-Reimbursable contract line items under Fixed-Price 
contracts. (i) Title to all property purchased by the Contractor for 
which the Contractor is entitled to be reimbursed as a direct item 
of cost under this contract shall pass to and vest in the Government 
upon the vendor's delivery of such property.
    (ii) Title to all other property, the cost of which is 
reimbursable to the Contractor, shall pass to and vest in the 
Government upon--
    (A) Issuance of the property for use in contract performance;
    (B) Commencement of processing of the property for use in 
contract performance; or
    (C) Reimbursement of the cost of the property by the Government, 
whichever occurs first.
    (iii) All Government-furnished property and all property 
acquired by the Contractor, title to which vests in the Government 
under this paragraph (e)(3)(i) (collectively referred to as 
``Government property)'', are subject to the provisions of this 
clause.
    (f) Contractor plans and systems. (1) Contractors shall 
establish and implement property management plans, systems, and 
procedures at the contract, program, site or entity level to enable 
the following outcomes:
    (i) Acquisition of Property. The Contractor shall document that 
all property was acquired consistent with its engineering, 
production planning, and material control operations.
    (ii) Receipt of Government Property. The Contractor shall 
receive Government property (document the receipt), record the 
information necessary to meet the record requirements of paragraph 
(f)(1)(iii)(A)(1) through (5) of this clause, identify as Government 
owned in a manner appropriate to the type of property (e.g., stamp, 
tag, mark, or other identification), and manage any discrepancies 
incident to shipment.
    (A) Government-furnished property. The Contractor shall furnish 
a written statement to the Property Administrator containing all 
relevant facts, such as cause or condition and a recommended 
course(s) of action, if overages, shortages, or damages and/or other 
discrepancies are discovered upon receipt of Government-furnished 
property.
    (B) Contractor-acquired property. The Contractor shall take all 
actions necessary to adjust for overages, shortages, damage and/or 
other discrepancies discovered upon receipt, in shipment of 
Contractor-acquired property from a vendor or supplier, so as to 
ensure the proper allocability and allowability of associated costs.
    (iii) Records of Government property. The Contractor shall 
create and maintain records of all Government property accountable 
to the contract, including Government-furnished and Contractor-
acquired property.
    (A) Property records shall enable a complete, current, auditable 
record of all transactions and shall, unless otherwise approved by 
the Property Administrator, contain the following:
    (1) The name, part number and description, manufacturer, model 
number, and National Stock Number (if needed for additional item 
identification tracking and/or disposition).
    (2) Quantity received (or fabricated), issued, and balance-on-
hand.
    (3) Unit acquisition cost.
    (4) Unique-item identifier or equivalent (if available and 
necessary for individual item tracking).
    (5) Unit of measure.
    (6) Accountable contract number or equivalent code designation.
    (7) Location.
    (8) Disposition.
    (9) Posting reference and date of transaction.
    (10) Date placed in service.
    (B) Use of a Receipt and Issue System for Government Material. 
When approved by the Property Administrator, the Contractor may 
maintain, in lieu of formal property records, a file of 
appropriately cross-referenced documents evidencing receipt, issue, 
and use of material that is issued for immediate consumption.
    (iv) Physical inventory. The Contractor shall periodically 
perform, record, and disclose physical inventory results. A final 
physical inventory shall be performed upon contract completion or 
termination. The Property Administrator may waive this final 
inventory requirement, depending on the circumstances (e.g., overall 
reliability of the Contractor's system or the property is to be 
transferred to a follow-on contract).
    (v) Subcontractor control. (A) The Contractor shall award 
subcontracts that clearly identify assets to be provided and shall 
ensure appropriate flow down of contract terms and conditions (e.g., 
extent of liability for loss, damage, destruction or theft of 
Government property).
    (B) The Contractor shall assure its subcontracts are properly 
administered and reviews are periodically performed to determine the 
adequacy of the subcontractor's property management system.
    (vi) Reports. The Contractor shall have a process to create and 
provide reports of discrepancies; loss, damage, destruction, or 
theft; physical inventory results; audits and self-assessments; 
corrective actions; and other property related reports as directed 
by the Contracting Officer.
    (A) Loss, damage, destruction, or theft. Unless otherwise 
directed by the Property Administrator, the Contractor shall 
investigate and promptly furnish a written narrative of all 
incidents of loss, damage, destruction, or theft to the property 
administrator as soon as the facts become known or when requested by 
the Government.
    (B) Such reports shall, at a minimum, contain the following 
information:

[[Page 27392]]

    (1) Date of incident (if known).
    (2) The name, commercial description, manufacturer, model 
number, and National Stock Number (if applicable).
    (3) Quantity.
    (4) Unique Item Identifier (if available).
    (5) Accountable Contract number.
    (6) A statement indicating current or future need.
    (7) Acquisition cost, or if applicable, estimated scrap 
proceeds, estimated repair or replacement costs.
    (8) All known interests in commingled property of which the 
Government property is a part.
    (9) Cause and corrective action taken or to be taken to prevent 
recurrence.
    (10) A statement that the Government will receive any 
reimbursement covering the loss, damage, destruction, or theft, in 
the event the Contractor was or will be reimbursed or compensated.
    (11) Copies of all supporting documentation.
    (12) Last known location.
    (13) A statement that the property did or did not contain 
sensitive or hazardous material, and if so, that the appropriate 
agencies were notified.
    (vii) Relief of stewardship responsibility. Unless the contract 
provides otherwise, the Contractor shall be relieved of stewardship 
responsibility for Government property when such property is--
    (A) Consumed or expended, reasonably and properly, or otherwise 
accounted for, in the performance of the contract, including 
reasonable inventory adjustments of material as determined by the 
Property Administrator; or a Property Administrator granted relief 
of responsibility for loss, damage, destruction or theft of 
Government property;
    (B) Delivered or shipped from the Contractor's plant, under 
Government instructions, except when shipment is to a subcontractor 
or other location of the Contractor; or
    (C) Disposed of in accordance with paragraphs (j) and (k) of 
this clause.
    (viii) Utilizing Government property. (A) The Contractor shall 
utilize, consume, move, and store Government Property only as 
authorized under this contract. The Contractor shall promptly 
disclose and report Government property in its possession that is 
excess to contract performance.
    (B) Unless otherwise authorized in this contract or by the 
Property Administrator the Contractor shall not commingle Government 
property with property not owned by the Government.
    (ix) Maintenance. The Contractor shall properly maintain 
Government property. The Contractor's maintenance program shall 
enable the identification, disclosure, and performance of normal and 
routine preventative maintenance and repair. The Contractor shall 
disclose and report to the Property Administrator the need for 
replacement and/or capital rehabilitation.
    (x) Property closeout. The Contractor shall promptly perform and 
report to the Property Administrator contract property closeout, to 
include reporting, investigating and securing closure of all loss, 
damage, destruction, or theft cases; physically inventorying all 
property upon termination or completion of this contract; and 
disposing of items at the time they are determined to be excess to 
contractual needs.
    (2) The Contractor shall establish and maintain Government 
accounting source data, as may be required by this contract, 
particularly in the areas of recognition of acquisitions and 
dispositions of material and equipment.
    (3) The Contractor shall establish and maintain procedures 
necessary to assess its property management system effectiveness, 
and shall perform periodic internal reviews and audits. Significant 
findings and/or results of such reviews and audits pertaining to 
Government property shall be made available to the Property 
Administrator.
    (g) Systems analysis. (1) The Government shall have access to 
the contractor's premises and all Government property, at reasonable 
times, for the purposes of reviewing, inspecting and evaluating the 
Contractor's property management plan, systems, procedures, records, 
and supporting documentation that pertains to Government property.
    (2) Records of Government property shall be readily available to 
authorized Government personnel and shall be safeguarded from 
tampering or destruction.
    (3) Should it be determined by the Government that the 
Contractor's property management practices are inadequate or not 
acceptable for the effective management and/or control of Government 
property under this contract, and/or present an undue risk to the 
Government, the Contractor shall immediately take all necessary 
corrective actions as directed by the Property Administrator.
    (4) The Contractor shall ensure Government access to 
subcontractor premises, and all Government property located at 
subcontractor premises, for the purposes of reviewing, inspecting 
and evaluating the subcontractor's property management plan, 
systems, procedures, records, and supporting documentation that 
pertains to Government property.
    (h) Contractor Liability for Government Property. (1) Unless 
otherwise provided for in the contract, the Contractor shall not be 
liable for loss, damage, destruction, or theft to the Government 
property furnished or acquired under this contract, except when any 
one of the following applies--
    (i) The risk is covered by insurance or the Contractor is 
otherwise reimbursed (to the extent of such insurance or 
reimbursement). The allowability of insurance costs shall be 
determined in accordance with 31.205-19.
    (ii) The loss, damage, destruction, or theft is the result of 
willful misconduct or lack of good faith on the part of the 
Contractor's managerial personnel. Contractor's managerial 
personnel, in this clause, means the Contractor's directors, 
officers, managers, superintendents, or equivalent representatives 
who have supervision or direction of all or substantially all of the 
Contractor's business; all or substantially all of the Contractor's 
operation at any one plant or separate location; or a separate and 
complete major industrial operation.
    (iii) The Contracting Officer has, in writing, revoked the 
Government's assumption of risk for loss, damage, destruction, or 
theft, due to a determination under paragraph (g) of this clause 
that the Contractor's property management practices are inadequate, 
and/or present an undue risk to the Government, and the Contractor 
failed to take timely corrective action. If the Contractor can 
establish by clear and convincing evidence that the loss, damage, 
destruction, or theft of Government property occurred while the 
Contractor had adequate property management practices or the loss, 
damage, destruction, or theft of Government property did not result 
from the Contractor's failure to maintain adequate property 
management practices, the Contractor shall not be held liable.
    (2) The Contractor shall take all reasonable actions necessary 
to protect the Government property from further loss, damage, 
destruction, or theft. The Contractor shall separate the damaged and 
undamaged Government property, place all the affected Government 
property in the best possible order, and take such other action as 
the Property Administrator directs.
    (3) The Contractor shall do nothing to prejudice the 
Government's rights to recover against third parties for any loss, 
damage, destruction, or theft of Government property.
    (4) Upon the request of the Contracting Officer, the Contractor 
shall, at the Government's 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.
    (i) Equitable adjustment. Equitable adjustments under this 
clause shall be made in accordance with the procedures of the 
Changes clause. The right to an equitable adjustment shall be the 
Contractor's exclusive remedy and the Government shall not be liable 
to suit for breach of contract for the following:
    (1) Any delay in delivery of Government-furnished property.
    (2) Delivery of Government-furnished property in a condition not 
suitable for its intended use.
    (3) An increase, decrease, or substitution of Government-
furnished property.
    (4) Failure to repair or replace Government property for which 
the Government is responsible.
    (j) Contractor inventory disposal. Except as otherwise provided 
for in this contract, the Contractor shall not dispose of Contractor 
inventory until authorized to do so by the Plant Clearance Officer.
    (1) Scrap to which the Government has obtained title under 
paragraph (e) of this clause. (i) Contractor with an approved scrap 
procedure. (A) The Contractor may dispose of scrap resulting from 
production or testing under this contract without Government 
approval. However, if the scrap requires demilitarization or is 
sensitive property, the Contractor shall submit the scrap on an 
inventory disposal schedule.
    (B) For scrap from other than production or testing the 
Contractor may prepare scrap lists in lieu of inventory disposal 
schedules (provided such lists are consistent with the approved 
scrap procedures), except that

[[Page 27393]]

inventory disposal schedules shall be submitted for scrap aircraft 
or aircraft parts and scrap that--
    (1) Requires demilitarization;
    (2) Is a classified item;
    (3) Is generated from classified items;
    (4) Contains hazardous materials or hazardous wastes;
    (5) Contains precious metals; or
    (6) Is dangerous to the public health, safety, or welfare.
    (ii) Contractor without an approved scrap procedure. The 
Contractor shall submit an inventory disposal schedule for all 
scrap. The Contractor may not dispose of scrap resulting from 
production or testing under this contract without Government 
approval.
    (2) Predisposal requirements. (i) Once the Contractor determines 
that Contractor-acquired property is no longer needed for contract 
performance, the Contractor in the following order of priority--
    (A) May contact the Contracting Officer if use of the property 
in the performance of other Government contracts is practical;
    (B) May purchase the property at the acquisition cost; or
    (C) Shall make reasonable efforts to return unused property to 
the appropriate supplier at fair market value (less, if applicable, 
a reasonable restocking fee that is consistent with the supplier's 
customary practices).
    (ii) The Contractor shall list, on Standard Form 1428, Inventory 
Disposal Schedule, property that was not used in the performance of 
other Government contracts under paragraph (j)(2)(i)(A) of this 
clause, property that was not purchased under paragraph (j)(2)(i)(B) 
of this clause, and property that could not be returned to a 
supplier under paragraph (j)(2)(i)(C) of this clause.
    (3) Inventory disposal schedules. (i) The Contractor shall use 
Standard Form 1428, Inventory Disposal Schedule, to identify--
    (A) Government-furnished property that is no longer required for 
performance of this contract, provided the terms of another 
Government contract do not require the Government to furnish that 
property for performance of this contract;
    (B) Contractor-acquired property, to which the Government has 
obtained title under paragraph (e) of this clause, which is no 
longer required for performance of that contract; and
    (C) Termination inventory.
    (ii) The Contractor may annotate inventory disposal schedules to 
identify property the Contractor wishes to purchase from the 
Government.
    (iii) Unless the Plant Clearance Officer has agreed otherwise, 
or the contract requires electronic submission of inventory disposal 
schedules, the Contractor shall prepare separate inventory disposal 
schedules for--
    (A) Special test equipment with commercial components;
    (B) Special test equipment without commercial components;
    (C) Printing equipment;
    (D) Information technology (e.g., computers, computer 
components, peripheral equipment, and related equipment);
    (E) Precious metals;
    (F) Nonnuclear hazardous materials or hazardous wastes; or
    (G) Nuclear materials or nuclear wastes.
    (iv) The Contractor shall describe the property in sufficient 
detail to permit an understanding of its intended use. Property with 
the same description, condition code, and reporting location may be 
grouped in a single line item.
    (4) Submission requirements. The Contractor shall submit 
inventory disposal schedules to the Plant Clearance Officer no later 
than--
    (i) 30-days following the Contractor's determination that a 
Government property item is no longer required for performance of 
this contract;
    (ii) 60 days, or such longer period as may be approved by the 
Plant Clearance Officer, following completion of contract deliveries 
or performance; or
    (iii) 120 days, or such longer period as may be approved by the 
Termination Contracting Officer following contract termination in 
whole or in part.
    (5) Corrections. The Plant Clearance Officer may--
    (i) Reject a schedule for cause (e.g., contains errors, 
determined to be inaccurate); and
    (ii) Require the Contractor to correct an inventory disposal 
schedule.
    (6) Postsubmission adjustments. The Contractor shall notify the 
Plant Clearance Officer at least 10 working days in advance of its 
intent to remove an item from an approved inventory disposal 
schedule. Upon approval of the Plant Clearance Officer, or upon 
expiration of the notice period, the Contractor may make the 
necessary adjustments to the inventory schedule.
    (7) Storage. (i) The Contractor shall store the property 
identified on an inventory disposal schedule pending receipt of 
disposal instructions. The Government's failure to furnish disposal 
instructions within 120 days following acceptance of an inventory 
disposal schedule may entitle the Contractor to an equitable 
adjustment for costs incurred to store such property on or after the 
121\st\ day.
    (ii) The Contractor shall obtain the Plant Clearance Officer's 
approval to remove Government property from the premises where the 
property is currently located prior to receipt of final disposition 
instructions. If approval is granted, any costs incurred by the 
Contractor to transport or store the property shall not increase the 
price or fee of any Government contract. The storage facility shall 
be appropriate for assuring the property's physical safety and 
suitability for use. Approval does not relieve the Contractor of any 
liability for such property under this contract.
    (8) Disposition instructions. (i) If the Government does not 
furnish disposition instructions to the Contractor within 45 days 
following acceptance of a scrap list, the Contractor may dispose of 
the listed scrap in accordance with the Contractor's approved scrap 
procedures.
    (ii) The Contractor shall prepare for shipment, deliver f.o.b. 
origin, or dispose of Contractor inventory as directed by the Plant 
Clearance Officer. If not returned to the Government, the Contractor 
shall remove and destroy any markings identifying the property as 
U.S. Government-owned property prior to its disposal.
    (iii) The Contracting Officer may require the Contractor to 
demilitarize the property prior to shipment or disposal. In such 
cases, the Contractor may be entitled to an equitable adjustment 
under paragraph (i) of this clause.
    (9) Disposal proceeds. As directed by the Contracting Officer, 
the Contractor shall credit the net proceeds from the disposal of 
Contractor inventory to the contract, or to the Treasury of the 
United States as miscellaneous receipts.
    (10) Subcontractor inventory disposal schedules. The Contractor 
shall require its Subcontractors to submit inventory disposal 
schedules to the Contractor in accordance with the requirements of 
paragraph (j)(4) of this clause.
    (k) Abandonment of Government property. (1) The Government shall 
not abandon sensitive Government property or termination inventory 
without the Contractor's written consent.
    (2) The Government, upon notice to the Contractor, may abandon 
any nonsensitive Government property in place, at which time all 
obligations of the Government regarding such property shall cease.
    (3) The Government has no obligation to restore or rehabilitate 
the Contractor's premises under any circumstances; however, if 
Government--furnished property is withdrawn or is unsuitable for the 
intended use, or if other Government property is substituted, then 
the equitable adjustment under paragraph (i) of this clause may 
properly include restoration or rehabilitation costs.
    (l) Communication. All communications under this clause shall be 
in writing.
    (m) Contracts outside the United States. If this contract is to 
be performed outside of the United States and its outlying areas, 
the words ``Government'' and ``Government-furnished'' (wherever they 
appear in this clause) shall be construed as ``United States 
Government'' and ``United States Government-furnished,'' 
respectively.
    (End of Clause)
    Alternate I ``(JUNE 2007)''. As prescribed in 45.107(a)(2), 
substitute the following for paragraph (h)(1) of the basic clause:
    (h)(1) The Contractor assumes the risk of, and shall be 
responsible for, any loss, damage, destruction, or theft of 
Government property upon its delivery to the Contractor as 
Government-furnished property. However, the Contractor is not 
responsible for reasonable wear and tear to Government property or 
for Government property properly consumed in performing this 
contract.
    Alternate II ``(JUNE 2007)''. As prescribed in 45.107(a)(3), 
substitute the following for paragraph (e)(3) of the basic clause:
    (e)(3) Title to property (and other tangible personal property) 
purchased with funds available for research and having an 
acquisition cost of less than $5,000 shall vest in the Contractor 
upon acquisition or as soon thereafter as feasible; provided that 
the Contractor obtained the Contracting Officer's

[[Page 27394]]

approval before each acquisition. Title to property purchased with 
funds available for research and having an acquisition cost of 
$5,000 or more shall vest as set forth in this contract. If title to 
property vests in the Contractor under this paragraph, the 
Contractor agrees that no costs shall be allowed for any 
depreciation, amortization, or use under any existing or future 
Government contract or subcontract thereunder. The Contractor shall 
furnish the Contracting Officer a list of all property to which 
title is vested in the Contractor under this paragraph within 10 
days following the end of the calendar quarter during which it was 
received. Vesting title under this paragraph is subject to civil 
rights legislation, 42 U.S.C. 2000d. Before title is vested and by 
signing this contract, the Contractor accepts and agrees that--
    ``No person in the United States or its outlying areas 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 under this contemplated financial 
assistance (title to property).''


52.245-2   Government Property Installation Operation Services.

    As prescribed in 45.107(b), insert the following clause:
    GOVERNMENT PROPERTY INSTALLATION OPERATION SERVICES (JUNE 2007)
    (a) This Government Property listed in paragraph (e) of this 
clause is furnished to the Contractor in an ``as-is, where is'' 
condition. The Government makes no warranty regarding the 
suitability for use of the Government property specified in this 
contract. The Contractor shall be afforded the opportunity to 
inspect the Government property as specified in the solicitation.
    (b) The Government bears no responsibility for repair or 
replacement of any lost, damaged or destroyed Government property. 
If any or all of the Government property is lost, damaged or 
destroyed or becomes no longer usable, the Contractor shall be 
responsible for replacement of the property at Contractor expense. 
The Contractor shall have title to all replacement property and 
shall continue to be responsible for contract performance.
    (c) Unless the Contracting Officer determines otherwise, the 
Government abandons all rights and title to unserviceable and scrap 
property resulting from contract performance. Upon notification to 
the Contracting Officer, the Contractor shall remove such property 
from the Government premises and dispose of it at Contractor 
expense.
    (d) Except as provided in this clause, Government property 
furnished under this contract shall be governed by the Government 
Property clause of this contract.
    (e) Government property provided under this clause:
    --------------------------
    --------------------------
    --------------------------
    (End of clause)


52.245-3 through 52.245-8  [Removed and Reserved]

0
76. Remove and reserve sections 52.245-3 through 52.245-8.
0
77. Amend section 52.245-9 by--
0
a. Removing from the introductory text ``45.106(h)'' and adding 
``45.107(c)'' in its place;
0
b. Revising the date of clause;
0
c. Revising the definitions ``Acquisition cost'' and ``Government 
property'';
0
d. Adding the definition ``Plant equipment''; and
0
e. Amending the definition ``Real property'' by removing ``or 
equipment'' and adding ``or plant equipment'' in its place.
0
The revised and added text reads as follows:


52.245-9  Use and Charges.

* * * * *
    USE AND CHARGES (JUNE 2007)
    (a) * * *
    Acquisition cost means the cost to acquire a tangible capital 
asset including the purchase price of the asset and costs necessary 
to prepare the asset for use. Costs necessary to prepare the asset 
for use include the cost of placing the asset in location and 
bringing the asset to a condition necessary for normal or expected 
use.
    Government property means all property owned or leased by the 
Government. Government property includes both Government-furnished 
and Contractor-acquired property.
    Plant equipment, as used in this part, means personal property 
of a capital nature (including equipment, machine tools, test 
equipment, furniture, vehicles, and accessory and auxiliary items) 
for use in manufacturing supplies, in performing services, or for 
any administrative or general plant purpose. It does not include 
special tooling or special test equipment.
* * * * *


52.245-10 through 52.245-19   [Removed]

0
78. Remove sections 52.245-10 through 52.245-19.


52.246-10   [Removed and Reserved]

0
79. Remove and reserve section 52.246-10.


52.249-11   [Removed and Reserved]

0
80. Remove and reserve section 52.249-11.


52.249-12  [Amended]

0
81. Amend section 52.249-12 by removing from the introductory text 
``49.505(b)'' and adding ``49.505(a)'' in its place.


52.249-13   [Removed and Reserved]

0
82. Remove and reserve section 52.249-13.
0
83. Revise the introductory text of section 52.249-14 to read as 
follows:


52.249-14  Excusable Delays.

    As prescribed in 49.505(b), insert the following clause in 
solicitations and contracts for supplies, services, construction, and 
research and development on a fee basis whenever a cost-reimbursement 
contract is contemplated. Also insert the clause in time-and-material 
contracts, and labor-hour contracts. When used in construction 
contracts, substitute the words ``completion time'' for ``delivery 
schedule'' in the last sentence of the clause.
* * * * *


52.251-1  [Amended]

0
84. Amend section 52.251-1 by removing Alternate I.

PART 53--FORMS


53.245   [Amended]

0
85. Amend section 53.245 by removing from paragraph (e) ``SF 1428 (Rev. 
5/04)'' and adding ``SF 1428 (Rev. 6/2007)'' in its place and removing 
``52.245-2(i), 52.245-5(i)'' and adding ``52.245-1,'' in its place.


53.249   [Amended]

0
86. Amend section 53.249 by removing from paragraph (b) ``SF 1428 (Rev. 
5/04)'' and adding ``SF 1428 (Rev. 6/2007)'' in its place.
0
87. Amend section 53.301-1428 by revising the form to read as follows:


53.301-1428   Inventory Disposal Schedule.

[[Page 27395]]

[GRAPHIC] [TIFF OMITTED] TR15MY07.000


[[Page 27396]]


[GRAPHIC] [TIFF OMITTED] TR15MY07.001


[[Page 27397]]


[FR Doc. 07-2256 Filed 5-14-07; 8:45 am]
BILLING CODE 6820-EP-S