[Federal Register: May 15, 2007 (Volume 72, Number 93)]
[Rules and Regulations]
[Page 27364-27397]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15my07-9]
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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-
[[Page 27367]]
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
[[Page 27368]]
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.