[Federal Register Volume 87, Number 34 (Friday, February 18, 2022)]
[Proposed Rules]
[Pages 9303-9306]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-03379]


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GENERAL SERVICES ADMINISTRATION

41 CFR Part 102-39

[FMR Case 2019-102-01; Docket No. GSA-FMR-2019-0015; Sequence No. 1]
RIN 3090-AK11


Federal Management Regulation; Replacement of Personal Property 
Pursuant to the Exchange/Sale Authority

AGENCY: Office of Government-wide Policy, General Services 
Administration (GSA).

ACTION: Proposed rule.

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SUMMARY: GSA is proposing to amend the Federal Management Regulation 
(FMR) to clarify the exchange/sale provisions to improve the 
application of this important authority across Federal agencies. The 
related FMR part Replacement of Personal Property to the Exchange/Sale 
Authority was last revised November 1, 2011.

DATES: Interested parties should submit comments in writing on or 
before April 19, 2022.

ADDRESSES: Submit comments in response to FMR Case 2019-102-01 to 
Regulations.gov at https://www.regulations.gov. Enter ``FMR Case 2019-
102-01'' under the heading ``Enter Keyword or ID'' and select 
``Search''. Select the link ``Submit a Comment'' that corresponds with 
``FMR Case 2019-102-01''. Follow the instructions provided at the 
``Comment Now'' screen. Please include your name, company name (if 
any), and ``FMR Case 2019-102-01'' on your attached document.
    All comments received will be posted without change, including any 
personal and/or business confidential information provided. To confirm 
receipt of your comment(s), please check https://www.regulations.gov 
approximately two to three days after submission to verify posting.

FOR FURTHER INFORMATION CONTACT: For clarification of content, contact 
William Garrett, Director, Personal Property Policy Division, Office of 
Government-wide Policy, Office of Asset and Transportation Management 
(MA), at 202-368-8163 or [email protected]. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat (MVCB), 202-501-4755. Please cite FMR Case 2019-102-01.

SUPPLEMENTARY INFORMATION:

A. Authority and Background of This Program

    Personal property includes a wide variety of Government items such 
as computers, office equipment, furniture, and vehicles, as well as 
more specialized items specific to agencies, such as medical equipment 
for the U.S. Department of Veterans Affairs (VA) and medical 
helicopters for the U.S. Army. The Federal Government owns and manages 
more than a trillion dollars of personal property. In Fiscal Year (FY) 
2020, Federal agencies reported approximately $1.9 trillion in 
capitalized personal property assets under their control. Over time, 
agencies' personal property may no longer adequately perform the task 
for which it was acquired. 40 United States Code (U.S.C.) Sec.  503 
authorizes agencies to exchange (trade-in) or sell such property still 
needed to meet mission needs and apply the exchange allowance or sale 
proceeds to acquire similar replacement property.
    Such transactions are known as personal property ``exchange/sale'' 
transactions. These transactions facilitate the replacement of personal 
property by allowing agencies to offset the cost of new, similar 
property, resulting in savings to agency funds. Without this authority, 
agencies would have to expend the full purchase price of new personal 
property from appropriations, while depositing the proceeds from the 
disposition of worn property in the U.S. Treasury. Because exchange/
sale transactions provide agencies with opportunities to save costs, it 
is important that agencies using this authority establish policies, 
processes, and procedures with effective controls, in order to ensure 
that they meet applicable requirements and are good stewards of 
Government resources.
    GSA's regulations at 41 Code of Federal Regulations (CFR) Part 102-
39 describe the terms, conditions, and reporting requirements for 
exchanges and sales of personal property. The personal property 
exchange/sale authority in FMR Sec.  102-39.60 allows agencies to 
replace property that is not excess or surplus, i.e., the property is 
still needed to meet the agency's continuing mission. In addition,

[[Page 9304]]

agencies must meet the following requirements to use the exchange/sale 
authority:
     The property exchanged or sold is similar to the property 
acquired.
     The personal property exchanged or sold was not acquired 
for the principal purpose of later exchanging it or selling it using 
the authority. For example, an agency cannot purchase a more costly 
piece of equipment than necessary to meet mission needs for the sole 
reason that it will deliver a higher value when sold using this 
exchange/sale authority.
     Proceeds from the sale can only be put toward the purchase 
of similar replacement property and cannot be used for services. In 
other words, an agency can use proceeds from the sale of a vehicle to 
purchase a new vehicle, but it cannot use proceeds to hire a mechanic 
to repair an existing vehicle.
     Proceeds from sale are available during the same fiscal 
year (FY) the property was sold and the following FY for replacement 
property. This means that for an item sold in FY 2021, an agency has 
the rest of FY 2021, as well as FY 2022 to purchase a replacement item. 
If agencies do not spend these funds by the end of the next FY, monies 
are to be deposited in the U.S. Treasury as miscellaneous receipts, 
except as otherwise authorized by law. Such legal authority may, for 
example, take the form of an authorized revolving fund where the rules 
of the program allow use of funds beyond the restrictions of the FMR.
     Agencies are prohibited from using the authority to 
replace certain types of property as detailed in FMR Sec.  102-39.60 
(weapons, nuclear ordinances, etc.).
    Agencies may choose between two transaction methods to replace 
property, the exchange (trade-in) method or the sale method, but must 
determine which method provides the greatest return to the Government, 
including factoring in administrative and overhead expenses. A typical 
exchange occurs when the original manufacturer delivers a replacement 
item to the agency and removes the item being replaced. The 
manufacturer applies a trade-in credit (an allowance) for the purchase 
of the replacement item. If the sale method is used, the agency 
receives the sale proceeds for the sale of the item and applies those 
proceeds to the purchase of the replacement personal property.
    If contemplating an exchange/sale, agencies are guided to follow a 
process similar to the disposal process for excess property by making 
it available to other Federal agencies and state agencies by posting it 
to GSAXcess at https://gsaxcess.gov/. This is GSA's website for 
reporting, searching, and selecting property. This process allows other 
Federal agencies or state agencies to obtain the property for the price 
required by the reporting agency to help fund the acquisition of 
replacement property under the exchange/sale authority.
    Agencies are required to submit a summary report to GSA through the 
GSA Personal Property Reporting Tool (PPRT), https://www.property.reporting.gov/PPRT/PPRTLogin, at the end of each FY on the 
type, the quantity, the exchange allowances and/or sale proceeds, as 
applicable, and the original acquisition cost of items for both 
exchange and sale transactions. Agencies with no transactions during a 
FY must submit a negative report. Ultimately, agencies decide whether 
to use the exchange/sale authority to replace property in their 
inventories.

B. Changes Proposed by This Rule and Expected Impact

    In 2018, the Government Accountability Office (GAO) Report 19-33, 
``GSA and VA Have Opportunities to Improve the Exchange/Sale Process'', 
identified confusion among some agencies on the use of the exchange/
sale authority which could be alleviated by, among other actions, 
revising FMR Part 102-39. In addition to amending the exchange/sale 
regulations found in FMR Part 102-39 with this rule, GSA published FMR 
Bulletin B-48, ``Exchange/Sale Financial Accounting,'' December 18, 
2018, and other guidance, frequently asked questions, best practices, 
and deviation request procedures all of which can be found at 
www.gsa.gov/exchangesale.
     GSA is proposing to revise the definition of ``similar'' 
in FMR Sec.  102-39.20 to more narrowly tailor one of the criteria of 
``similar'' to require that replacement property fall within a defined 
Federal Supply Classification (FSC), which can be found at https://public.logisticsinformationservice.dla.mil/H2/search.aspx, as opposed 
to an FSC Group. A FSC Group is a two-digit number that categorizes 
types of property, whereas a FSC is a four-digit number that further 
categorizes types of property within the FSC Group. For example, FSC 
Group 12 is for Fire Control Equipment. Within FSC Group 12, there are 
FSCs that further categorize this type of property, e.g., FSC 1210--
Fire Control Directors. GSA observes that not all property within the 
same broad FSC Group would reasonably be considered ``similar.'' 
Further, another criterion to meet the definition of ``similar'' is 
being updated to reflect that items will be deemed to be ``similar'' 
for the purposes of an exchange/sale transaction if the assets are 
designed or constructed for the same general purpose, regardless of the 
assigned FSC. Only one of the criteria in this definition needs to be 
met for the property to be considered ``similar'' and eligible for an 
exchange/sale transaction.
     Amend FMR Sec.  102-39.25 to allow all provisions in this 
part to be subject to deviation except for those mandated by statute 
and FMR Sec.  102-39.80.
     Amend the question in FMR Sec.  102-39.40 and clarify the 
difference between the exchange/sale authority and the more frequently 
used excess/surplus disposal process. The primary difference is that 
personal property disposal under the excess/surplus process does not 
allow for the use of proceeds or allowances (if any), in acquiring 
replacement similar assets. Exchange/sale property is replacement 
property that is non-excess and non-surplus, meaning the agency has a 
continuing need for the property, but the specific item(s) are no 
longer suitable to the need and must be replaced, and therefore are not 
reported to GSA as excess or surplus for transfer or donation purposes.
     Revise the ``prohibited list'' at FMR Sec.  102-39.60 by 
removing FSC Groups 42, Firefighting, rescue, and safety equipment; 51, 
Hand tools; and 54, Prefabricated structure and scaffolding (FSC 5410 
Prefabricated and Portable Buildings, FSC 5411 Rigid Wall Shelters, and 
FSC 5419 Collective Modular Support System only). The restrictions 
remaining in this section involve assets which are inherently dangerous 
or pose a significant public health or safety concern.
     Remove ``. . . , except medicinal chemicals'' from FMR 
Sec.  102-39.60 as these are categorized under FSG 65, not FSG 68.
     Amend FMR Sec.  102-39.65 to clarify that an exchange or 
sale under this FMR part may occur after the acquisition of the 
replacement property. For example, if a Magnetic Resonance Imaging 
(MRI) machine is needed for use daily, the replacement machine may be 
acquired and installed before the existing machine is removed and 
exchanged or sold. If the existing machine is sold, in accordance with 
agency policy, the funds may be returned to the appropriation used to 
acquire the replacement machine. If the existing machine is exchanged, 
in accordance with agency policy, the agency agreement with the entity 
providing the replacement must document the responsibilities of both 
parties to execute this transaction.

[[Page 9305]]

     Update FMR Sec.  102-39.80 by adding parallel language 
from the edits to FMR Sec.  102-39.25 that states that no deviations 
will be granted to this section.
     Update the reporting policy and processes in FMR Sec.  
102-39.85 to reflect the use of a new online reporting tool and 
reporting requirements.
     Add FMR Sec.  102-39.90 in accordance with the 
recommendations of GAO Report 19-33 to provide additional guidance to 
agencies, such as reminding agencies of the publication of Bulletin B-
48 and the guidance available at the GSA website on this exchange/sale 
topic.
    According to GSA's annual summary data, 27 agencies reported using 
the exchange/sale authority and received a total of about $2.8 billion 
in exchange allowances or sale proceeds from fiscal year 2016 through 
fiscal year 2020. While many agencies used the authority, a few 
agencies, particularly GSA, together accounted for about 88 percent of 
all allowances and proceeds. Specifically, 5 of 27 agencies reported 
nearly all exchange allowances and sale proceeds. GSA accounted for 
about $1.5 billion of about $2.8 billion (or about 55 percent) of 
reported allowances and proceeds across the federal government. Four 
other agencies--the Departments of Homeland Security, Agriculture, 
Defense, and the Interior--accounted for about $899 million (or about 
32 percent) of the total. The other 22 agencies using the authority 
reported about $340 million (or about 12 percent) in exchange 
allowances or sales proceeds over the 5-year period. Finally, agencies 
reported using the sale method more than the exchange method. Sales by 
agencies accounted for about $2.5 billion (or about 91 percent), while 
use of the exchange method accounted for about $247 million (or about 9 
percent) of total transactions reported, primarily due to GSA's 
reporting more use of the sale method over the exchange method.
    While some agencies reported hundreds of millions of dollars in 
exchange allowances and sale proceeds, the data show that 8 federal 
agencies-- including the Department of Labor and the Office of 
Personnel Management--reported relatively few transactions, which 
totaled less than $200,000 in exchange allowances and sales proceeds.
    By using the exchange/sale authority, agencies have an opportunity 
to be good stewards of government property by efficiently replacing 
needed property, including high-value items, that serves critical and 
continuing requirements to meet agency missions. GSA expects these 
proposed amendments to increase agency flexibility and understanding of 
this program. GSA believes these proposed amendments will help agencies 
take better advantage and increase the use of this authority, thereby 
becoming more effective stewards of government property and 
replenishing property more efficiently.

C. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This proposed rule is not anticipated to be a significant regulatory 
action, and therefore, was not subject to review under Section 6(b) of 
E.O. 12866, Regulatory Planning and Review, dated September 30, 1993.

D. Congressional Review Act

    OIRA has determined that this rule is not a ``major rule'' as 
defined by 5 U.S.C. 804(2). Additionally, this rule is excepted from 
Congressional Review Act reporting requirements prescribed under 5 
U.S.C. 801 since it relates to agency management or personnel.

E. Regulatory Flexibility Act

    This proposed rule will not have a significant economic impact on a 
substantial number of entities within the meaning of the Regulatory 
Flexibility Act, 5 U.S.C. 601, et seq.

F. Paperwork Reduction Act

    The Paperwork Reduction Act does not apply because the changes to 
the FMR do not impose recordkeeping or information collection 
requirements, or the collection of information from offerors, 
contractors, or members of the public that require the approval of the 
Office of Management and Budget under 44 U.S.C. 3501, et seq. Reporting 
requirements are only addressed to Federal agencies regarding their 
Federal personal property transactions.

List of Subjects in 41 CFR Part 102-39

    Replacement of personal property pursuant to the exchange/sale 
authority; Government property management; surplus Government property.

Krystal J. Brumfield,
Associate Administrator, Office of Government-wide Policy.

    For the reasons set forth in the preamble, GSA proposes to amend 41 
CFR part 102-39 as set forth below:

0
1. The authority for part 102-39 continues to read as follows:

    Authority:  40 U.S.C. 121(c); 40 U.S.C. 503.

PART 102-39--REPLACEMENT OF PERSONAL PROPERTY PURSUANT TO THE 
EXCHANGE/SALE AUTHORITY

0
2. Amend Sec.  102-39.20, in the definition of ``Similar,'' by revising 
paragraphs (2) and (4) to read as follows:


Sec.  102-39.20   What definitions apply to this part?

* * * * *
    Similar * * *
    (2) Fall within a single Federal Supply Classification (FSC) 
(includes any and all forms of property within an FSC); or
* * * * *
    (4) Are designed or constructed for the same general purpose 
(includes any and all forms of property regardless of the FSC to which 
they are assigned).

    Note 1 to Sec.  102-39.20:  Only one of the criteria in this 
definition needs to be met for the property to be considered 
``similar'' and eligible for an exchange/sale transaction.

* * * * *
0
3. Revise Sec.  102-39.25 to read as follows:


Sec.  102-39.25  Which exchange/sale provisions are subject to 
deviation?

    All of the provisions in this part are subject to deviation (upon 
presentation of adequate justification) except for those mandated by 
statute, as described in the Note to Sec.  102-39.60(a), and Sec.  102-
39.80. See the link on ``Exchange/Sale'' at www.gsa.gov/personalpropertypolicy for additional information on requesting 
deviations from this part.
0
4. Revise Sec.  102-39.40 to read as follows:


Sec.  102-39.40  How does the exchange/sale authority differ from the 
disposal process for excess/surplus personal property?

    (a) The primary difference from your perspective is that sales 
proceeds or exchange allowances may be used to acquire similar 
replacement personal property that is still needed under the exchange/
sale authority as described in this part; whereas under the more 
frequently used excess/surplus disposal process, you would not be able 
to use sales proceeds or exchange allowances

[[Page 9306]]

to acquire replacement personal property.
    (b) Your use of the exchange/sale authority is optional and should 
be considered when needed replacement assets may be acquired under the 
provisions of this part. If exchange/sale is not practicable (for 
example, if conducting an exchange/sale transaction is not cost 
effective), you should dispose of the property through the excess/
surplus disposal process by reporting the property as excess, as 
addressed in Part 102-36 of this chapter.
    (c) In the excess/surplus disposal process, any net proceeds from 
the sale of surplus property generally must be forwarded to the 
miscellaneous receipts account at the United States Treasury, and thus 
would not be available to you for use in acquiring similar replacement 
property or for any other purpose. You may use the exchange/sale 
authority in the acquisition of personal property even if the 
acquisition is under a services contract, as long as the property 
acquired under the services contract is similar to the property 
exchanged or sold (e.g., for a service life extension program (SLEP), 
exchange allowances or sales proceeds would be available for 
replacement of similar items, but not for services).
0
5. Amend Sec.  102-39.60 by revising paragraph (a) to read as follows:


Sec.  102-39.60  What restrictions and prohibitions apply to the 
exchange/sale of personal property?

* * * * *
    (a) The following FSC Groups of personal property:

10 Weapons.
11 Nuclear ordinance.
44 Furnace, Steam Plant, and Drying Equipment; and Nuclear Reactors 
(FSC Class 4470, Nuclear Reactors only).
68 Chemical and chemical products.
84 Clothing, individual equipment, and insignia.

    Note to 102-39.60(a):  Under no circumstances will deviations be 
granted for FSC Class 1005, Guns through 30mm. Deviations are not 
required for Department of Defense (DoD) property in FSC Groups 10 
(for classes other than FSC Class 1005), or any other FSC Group, for 
which the applicable DoD demilitarization requirements and any other 
applicable regulations and statutes are met.

* * * * *
0
6. Amend Sec.  102-39.65 by--
0
a. Removing ``and'' at the end of paragraph (d);
0
b. Redesignating paragraph (e) as paragraph (f); and
0
c. Adding a new paragraph (e).
    The addition reads as follows:


Sec.  102-39.65   What conditions apply to the exchange/sale of 
personal property?

* * * * *
    (e) Your agency documents at the time of exchange or sale (or at 
the time of acquiring the replacement property if acquisition precedes 
the exchange or sale) that the exchange allowance or sale proceeds will 
be applied to the acquisition of replacement property; and
* * * * *
0
7. Amend Sec.  102-39.80 by adding a sentence at the end of the section 
to read as follows:


Sec.  102-39.80  What are the accounting requirements for exchange 
allowances or proceeds of sale?

    * * * Under no circumstances will deviations be granted to for 
Sec.  102-39.80.
0
8. Revise Sec.  102-39.85 to read as follows:


Sec.  102-39.85   What information am I required to report?

    You must submit, within 90 calendar days after the close of each 
FY, an exchange/sale report using the online Personal Property 
Reporting Tool template found at https://www.property.reporting.gov/
PPRT/PPRTlogin. This template provides the specific information needed 
for your agency's report. You can contact the GSA Help Desk at 
[email protected] if you need assistance accessing the online reporting 
tool. All reports, including negative reports, must be submitted 
electronically through the Personal Property Reporting Tool. 
Transactions involving books and periodicals in your libraries need not 
be reported.
0
9. Add Sec.  102-39.90 to read as follows:


Sec.  102-39.90  Where do I obtain additional information?

    Additional information is provided at the GSA websites www.gsa.gov/bulletin and www.gsa.gov/exchangesale.

[FR Doc. 2022-03379 Filed 2-17-22; 8:45 am]
BILLING CODE 6820-14-P