[Federal Register Volume 88, Number 81 (Thursday, April 27, 2023)]
[Rules and Regulations]
[Pages 25508-25511]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-08549]


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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. 2]
RIN 3090-AK11


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

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

ACTION: Final rule.

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SUMMARY: GSA is issuing a final rule amending the Federal Management 
Regulation (FMR) to clarify the exchange/sale provisions and improve 
the application of this important authority across Federal agencies. 
The related FMR Part, Replacement of Personal Property Pursuant to the 
Exchange/Sale Authority, was last revised in November of 2011.

DATES: Effective: May 30, 2023.

FOR FURTHER INFORMATION 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 clarification of content. For information 
pertaining to status or publication schedules, contact the Regulatory 
Secretariat Division at 202-501-4755 or [email protected]. Please cite 
FMR Case 2019-102-01.

SUPPLEMENTARY INFORMATION: 

I. Background

    This final rule amends the Federal Management Regulation (FMR) to 
update current policy and remove outdated and unnecessary information 
as proposed with changes published on February 18, 2022 at 87 FR 9303. 
These changes, made as a result of public comments, are detailed in 
section II.B. of this notice. 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.
    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) 
2021, 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. Title 40, United States Code (U.S.C.), 
section 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 
personal property exchanged or sold under this authority. The personal 
property exchange/sale authority 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, 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.
     Exchange allowances and sales proceeds 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.
     Exchange allowances and sales proceeds are available 
during the same fiscal year (FY) the property was exchanged or sold and 
the following FY. This means that for an item sold in FY 2023, an 
agency has the rest of FY 2023, as well as FY 2024 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,

[[Page 25509]]

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, 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 personal property in their 
inventories.

II. Discussion of the Final Rule

A. Summary of Significant Changes

    The definition for ``similar'' in FMR Sec.  102-39.20 is revised to 
include items designed or constructed for the same general purpose. A 
Note is also added to clarify that only one of the criteria in this 
definition needs to be met for the property to be considered 
``similar'' for an exchange/sale transaction.
    FMR Sec.  102-39.25 is revised to allow deviations to the exchange/
sale provisions except for those mandated by statute or otherwise 
described in the part, including FMR Sec.  102-39.80, which details the 
accounting requirements for exchange allowances and sales proceeds.
    FMR Sec.  102-39.40 is revised to clarify the differences between 
the use of the exchange/sale authority and the disposal process for 
excess/surplus personal property. 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 nonsurplus, 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.
    The following Federal Supply Classification (FSC) Groups are 
removed from the ``prohibited list'' at FMR Sec.  102-39.60:
     FSC Group 42: Firefighting, rescue, and safety equipment;
     FSC Group 51: Hand tools; and
     FSC Group 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 FMR Sec.  102-39.60 involve assets 
which are inherently dangerous or could pose a significant public 
health or safety concern, comprising assets in the following FSC Groups 
of personal property:
     10 Weapons.
     11 Nuclear ordnance.
     44 Furnace, Steam Plant, and Drying Equipment; and Nuclear 
Reactors (FSC Class 4470, Nuclear Reactors only);
     FSC Group 84: Clothing, individual equipment, and 
insignia; and
     68 Chemical and chemical products.
    This change also removes ``except medicinal chemicals'' from FMR 
Sec.  102-39.60 as they are categorized under FSG 65, not FSG 68.
    FMR Sec.  102-39.65 is revised to clarify that an exchange or sale 
under this 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.
    FMR Sec.  102-39.80 is revised to add language that no deviations 
will be granted for this section.
    FMR Sec.  102-39.85 is revised to update the reporting policy and 
process to reflect the use of a new online reporting tool.
    FMR Sec.  102-39.90 is added in accordance with the recommendations 
of GAO report 19-33 to provide additional guidance to Federal agencies 
regarding the publication of GSA Bulletins, including Bulletin B-48, 
Guidance on Exchange/Sale Financial Accounting for Personal Property, 
and updates to GSA's exchange/sale website.
    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

[[Page 25510]]

these amendments to increase agency flexibility and understanding of 
this program. GSA believes these 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.

B. Analysis of Public Comments

    The proposed rule was published in the Federal Register on February 
18, 2022 (87 FR 9303). Comments were received from six respondents, 
some of which included multiple questions, comments, or concerns. Of 
the comments received, there were five topics germane to and within the 
scope of the final rule. An analysis of these public comments follows:
    Comment: Five respondents expressed concerns about the proposed 
revision to one of the criteria of the definition of ``similar'' in FMR 
Sec.  102-39.20 to require that replacement property fall within a 
defined Federal Supply Classification (FSC), instead of the current, 
broader FSC Group. In particular, many objected that the revision would 
negatively impact agency missions and place extensive administrative 
and financial burden on their aviation, vehicle, and maritime programs.
    Response: Agree. Revising the definition of ``similar'' to more 
narrowly tailor one of the criteria of ``similar'' to require that 
replacement property fall within a defined 4-digit Federal Supply 
Classification is unduly restrictive. The proposed revision to FMR 
Sec.  102-39.20(2) was removed and is not included in the final rule.
    Comment: In addition to the concern addressed directly above, one 
respondent suggested also adding ``capability'' to the definition of 
``similar'' in FMR Sec.  102-39.20(4).
    Response: Disagree. GSA informed the commenting agency that the 
proposed revision to FMR Sec.  102-39.20(2) was removed from the final 
rule. The commenting agency still recommended adding capability to FMR 
Sec.  102-39.20(4), but does not object to leaving FMR Sec.  102-
39.20(4) as is. As a result, GSA chose to maintain the language of the 
proposed rule. Additionally, an item only needs to meet one of the four 
criteria of the definition of ``similar.''
    Comment: One respondent opposed prohibiting deviations to FMR Sec.  
102-39.80, which states exchange allowances or proceeds of sale will be 
available during the fiscal year in which the property was exchanged or 
sold and for one fiscal year thereafter for the purchase of replacement 
property.
    Response: Disagree. GSA does not have the authority to alter an 
agency's applicable fiscal law constraints as determined by the GAO, 
and therefore, cannot extend the availability of funds. Please refer to 
the GAO, Principles of Federal Appropriations Law, 3rd ed., 2008 rev., 
ch. 12, sec. A.4, GAO-08-978SP (Washington, DC: Sept. 2008). The 
regulation does, however, recognize that agencies may be allowed to 
retain allowances or proceeds ``as authorized by law.'' GSA accordingly 
recommends that agencies consult their respective Offices of Chief 
Financial Officer and Offices of the General Counsel, as well as their 
Office of Management and Budget Resource Management Officers, as 
necessary, on the use and availability of these funds.
    Comment: One respondent suggested that GSA should eliminate the 
proposed revision to FMR Sec.  102-39.60, which would remove the 
following FSC Groups from the prohibited list: 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).
    Response: Disagree. The removal of the aforementioned FSC Groups 
will allow agencies to recoup funds for vital programs to support their 
agency missions. The remaining restrictions on the prohibited list 
involve assets which are inherently dangerous or pose a significant 
public health or safety concern.
    Comment: One respondent suggested that GSA should add additional 
reporting requirements to FMR Sec.  102-39.85. Specifically, the 
respondent suggested agencies should be required to include the four-
digit FSC and the item nomenclature as part of the annual exchange/sale 
report.
    Response: Disagree. As explained above under paragraph A of this 
section, the proposed revisions to FMR Sec.  102-39.20(2) were removed 
and are not included in the final rule; therefore, collecting data at 
the 4-digit FSC Group level is not warranted.

C. Expected Cost Impact to the Public

    There is no expected cost to the public from this rule, as this 
rule is largely administrative. The changes will clarify the exchange/
sale provisions and improve the application of this important authority 
across Federal agencies.

III. 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. 
The Office of Information and Regulatory Affairs (OIRA) has determined 
that this is not a significant regulatory action and, therefore, was 
not subject to review under section 6(b) of Executive Order 12866, 
Regulatory Planning and Review, dated September 30, 1993.

IV. 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 under 5 
U.S.C. 804(3).

V. Regulatory Flexibility Act

    This final rule will not have a significant economic impact on a 
substantial number of small entities within the meaning of the 
Regulatory Flexibility Act, 5 U.S.C. 601, et seq., because it applies 
to agency management or personnel. Therefore, an Initial Regulatory 
Flexibility Analysis has not been performed.

VI. 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 (OMB) 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

    Excess and surplus Government property, Government property 
management.

Robin Carnahan,
Administrator of General Services.

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

[[Page 25511]]

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

0
1. The authority citation for 41 CFR part 102-39 continues to read as 
follows:

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


0
2. Amend Sec.  102-39.20 in the definition ``Similar'' by revising 
paragraph (4) and adding a note to read as follows:


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

* * * * *
    Similar * * *
    (4) Are designed or constructed for the same general purpose 
(includes any and all forms of property regardless of the FSC Group to 
which they are assigned).
    Note 1 to the definition of ``similar'': Only one of the criteria 
in this definition needs to be met for the property to be considered 
``similar'' for an exchange/sale transaction.
* * * * *

0
3. Amend Sec.  102-39.25 by revising the first sentence 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 note 1 to Sec.  102-39.60(a) and Sec.  102-
39.80. * * *

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 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 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:
    (1) 10 Weapons.
    (2) 11 Nuclear ordinance.
    (3) 44 Furnace, Steam Plant, and Drying Equipment; and Nuclear 
Reactors (FSC Class 4470, Nuclear Reactors only).
    (4) 68 Chemical and chemical products.
    (5) 84 Clothing, individual equipment, and insignia.
    Note 1 to paragraph (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'' from the end of paragraph (d);
0
b. Redesignating paragraph (e) as paragraph (f); and
0
c. Adding 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 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 for this 
section.

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 
fiscal year (FY), an exchange/sale report using the online Personal 
Property Reporting Tool template found at https://www.property.reporting.gov. 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. 2023-08549 Filed 4-26-23; 8:45 am]
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