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					Overview of FAR Case 2004-025
National Contract
Management Association
World Congress
                          Tom Ruckdaschel
                          Office of the Under Secretary of
                          Defense (Acquisition, Technology
                          and Logistics) Property &
                          Equipment Policy Office
                          April 25, 2007
                                                         1
Discussion Topics

  Problem/purpose
    – Historical Perspective
    – Background
    – Highlights
  Top 10 things every Contracting officer
   should know about Government Property




                                             2
Problem/Purpose

  Problem: current FAR (property)
   language is well over 50 years old;
   contains inconsistent, often conflicting
   language; is at odds with modern
   materials management and technology
  Purpose: revise the FAR (Property
   Management) requirements to create an
   approach that fosters efficiency,
   innovation, and creativity


                                              3
Background

  Original Proposal: 1994
  DoD assembled a team to address
   Government and industry concern
   regarding contract property
  Effort moved along; public hearings were
   held, but no real consensus was
   achieved



                                              4
Background (cont.)

  Second Proposal: 2000
  Another team established
  Again, no real consensus was achieved;
   the legalities and complexities revealed
   deep divisions between Government and
   Industry




                                              5
Background (cont.)

  Third Proposal: FAR Case 2004-025
  A new vision—based on:
   – FAR Guiding Principles; and
   – A deep commitment to making it happen
   – Lessons learned
  Broad spectrum of subject matter
   experts sought
  Large outreach campaign

                                             6
Background (cont.)

  Proposed Rule published Sept 19, 2005
  Public comment period ended Nov. 19,
   2005
  Over 300 comments received, ranging
   from small tweaks to extensive
   recommendations
  Approx. 90% of comments accepted; no
   ―show stoppers‖
  Final Rule now pending

                                           7
Today’s FAR

  Primary Clauses: 52.245-2 or 52.242-5
  Ancillary Clauses: 52.245-1 (Property
   Records); 52.245-3 (Identification); 52.245-4
   [Short Form]; and 52.245-19 (Government
   Property Furnished) [As Is]
  Other Clauses: 52.245-17 (Special Tooling),
   52.245-18 (Special Test Equipment), Various
   Facilities Clauses


                                                   8
Highlights of the Proposed
Rule
 Over 80% of current FAR (property)
  language eliminated, including 14
  clauses;
 One basic Government property clause
  for all contractor requirements
 Greater justification for furnishing GP
 Part 45 is now strictly limited to
  requirements placed upon the
  Government

                                            9
Highlights (cont.)

 More than 20 FAR sections (Parts)
  affected
 Contractor managed self-assessment
  programs
 No more property control system
  approvals




                                       10
The Process

 Contract
 Clause




“Contractors
shall develop                                             See ASTM Standard E-2219
property                      Acquisition
management                    Receipt
plans and                     Records
systems, at                                                                Systems Analysis
                              Physical Inventory       Performance
the contract,                                                              Performed by DoD
                              Sub-contractor control   Outcomes                     Systems Analysis
program, site                                                              Property Administrator
                              Reports
or entity level
                              Utilization
that reflect
                              Maintenance
                                                        Data
their efforts to
                                                        Elements
obtain best                   Contract close-out

value”

                   See ASTM Standard
                                                                                     System Corrected, etc.
                   2279-03




                                                                                                              11
Top Ten Things Every Contracting
Officer Should Know About GP
  What is Government Property
  When to use the property clause
  ―Providing‖ Government Property
      When, Why
  Contractor/Government responsibilities
  Solicitation Requirements and Evaluation
  Unique Item Identification
  Responsibility and Liability
  Property Disposal
                                              12
1) What is Government Property?

   Government Property is:
        Real Property
        Equipment
        Special Tooling
        Special Test Equipment
        Repairables and;
        Material
   Government Property is not: letting a contractor
    use Government office space (telephones, fax
    machines, PCs)


                                                       13
2) When to use the Property Clause

  52.245-1 – Government Property
  Used in:
    All cost-reimbursement, time and material, and labor
     hour type solicitations and contracts
    All fixed-price solicitations and contracts when the
     Government will provide Government Property
    All Contracts or modifications awarded under FAR Part
     12 procedures where Government Property that exceeds
     the simplified acquisition threshold

  Note: Service contracts for repair are not
   excluded--they still require the property
   clause!
                                                             14
2) When to use the Property Clause
(cont.)

   Note: the Clause 52.245-1 has two
    Alternates:
  ALTERNATE 1: used in contracts with adequate price
   competition, i.e., Fixed Price, i.e., ―Plain Vanilla‖ contracts
    Why? Different liability provision. For such
    contracts, the contractor is liable for loss, damage,
    destruction, theft
  ALTERNATE 2: used in contracts involving basic or applied
   research at non profit institutions of higher education or non
   profit organizations involved in scientific research
    Why? Different title vesting provisions (statutory)


                                                                     15
2) When to use the Property Clause
(cont.)

  52.245-2 - Government Property
   (Installations Operation Services)
    Used in service contracts to be performed on a
     Government installation when Government-
     Furnished property will be provided
    This Clause provides for the initial
     provisioning of property; the Government is
     not responsible or repair or replacement




                                                      16
3) When to Provide Government
Property?
  ―Contractors are ordinarily required to
   furnish all property necessary to perform
   Government contracts.‖ (FAR 45.102)
  Notable exceptions
     For Repair
     Standardization of the end item
     Expedite production
     Long-lead time


                                               17
4) Why Provide Government Property?

 45.102 Policy

 “Contracting officers shall provide property to contractors only when
 it is clearly demonstrated --
   (1) To be in the Government's best interest;
   (2) That the overall benefit to the procurement significantly
 outweighs the increased cost of administration, including ultimate
 property disposal;
   (3) That providing the property does not substantially increase the
 Government's assumption of risk; and
   (4) That Government requirements cannot otherwise be met.”




                                                                         18
5) Contractor Responsibilities

  52.245-1 Government Property

       “The Contractor shall have a system to manage
   (control, use, preserve, protect, repair and maintain
   Government property in its possession.”
       “The Contractor shall initiate and maintain the
   processes, systems, records, and methodologies
   necessary for effective control of Government
   property…consistent with voluntary consensus
   standards and/or industry-leading practices and
   standards for Government property management.”

                                                           19
Voluntary Consensus Standards

 The Federal Acquisition Regulations (FAR) Part
 11 describes agency needs and addresses the
 use of Voluntary Consensus Standards in
 writing the government's requirements. OMB
 Circular A-119 and the FAR mandate the use of
 voluntary consensus standards in lieu of
 government-unique standards. The use of
 existing standards provides substantial cost
 benefits for the government.

                                                  20
e.g., Voluntary Consensus
Standards

ISO 9000 “Generic” -- applicable to any organization,
 large or small, product or service, Government or
 industry

   • Identification of Processes
   • Written procedures, etc., ability to audit

ASTM International
   –14 Standards applicable to Property Management




                                                         21
6) Government Responsibilities

 45.105 Analysis of Contractor’s Property
  Management System
 a) “The agency responsible for contract administration shall
 conduct an analysis of the contractor’s property
 management policies, procedures, practices, and system
 b) The property administrator shall notify the contractor in
 writing when the contractor’s property management system
 does not comply with contractual requirements, and shall
 request prompt correction of deficiencies…” Failure to take
 corrective action may result in:
      - Revocation of the Government’s assumption of risk
      - Other rights and remedies available to the Contracting
      Officer


                                                                 22
6) Government Responsibilities (cont.)

  The Contracting Officer can revoke the
   Government’s assumption of risk when
   contractor’s property management
   practices are inadequate or present an
   undue risk to the Government
  This is equivalent to the old concept of
   ―withdrawing‖ the approval of a
   contractor’s property control system
  Major change: the Government will no
   longer ―approve‖ a contractor’s property
   control system
                                              23
7) Solicitation Requirements and Eval.

   “The contracting officer shall insert a listing
   of the Government property to be offered in
   all solicitations where Government-furnished
   property is anticipated (see FAR 45.102).
   The listing shall include at a minimum -


          OLD REQUIREMENT BUT…
  PROVIDES GREATER SPECIFICITY IN THE DATA
  REQUIRED ON THE PART OF THE GOVERNMENT

                                                     24
7) Solicitation Requirements and Eval.
(cont.)

   (1)The name, part number and description,
   manufacturer, model number, and National Stock
   Number (if needed for additional item identification
   tracking and/or disposition);
   (2) Quantity/unit of measure;
   (3) Unit acquisition cost; and
   (4) Unique-item identifier or equivalent (if available
   and necessary for individual item tracking).
   (5) A statement as to whether the Property is to be
   furnished in an “as is” condition and instructions for
   physical inspection.”

                                                            25
7) Solicitation Requirements and Eval.
(cont.)


  “The solicitation shall describe the evaluation procedures
  to be followed, including rental charges or equivalents
  and other costs or savings to be evaluated, and shall
  require all offerors to submit the following information
  with their offers:

  CO MUST DESCRIBE EVALUATION PROCEDURES IN REGARD TO GP
     CO MUST ALSO INCLUDE IN SOLICITATION A REQUEST FOR
INFORMATION - EACH CO IS GOING TO NEED TO CRAFT CONTRACTUAL
                LANGUAGE TO ACCOMPLISH THIS.



                                                               26
7) Solicitation Requirements and Eval.
(cont.)


   “A list or description of all Government property that the
   offeror or its subcontractors propose to use on a rent-
   free basis. The list shall identify the accountable contract
   under which the property is held and the authorization
   for its use (from the contracting officer having
   cognizance of the property).”




                                                                  27
7) Solicitation Requirements and Eval.
(cont.)

   “The dates during which the property will be available for
   use (including the first, last, and all intervening months)
   and, for any property that will be used concurrently in
   performing two or more contracts, the amounts of the
   respective uses in sufficient detail to support prorating
   the rent.”




                                                                 28
7) Solicitation Requirements and Eval.
(cont.)

    “The amount of rent that would otherwise be
    charged in accordance with the clause at
    52.245-9, Use and Charges.”




                                                  29
 7) Solicitation Requirements and Eval.
 (cont.)

        “The voluntary consensus standard or industry leading
        practices and standards to be used in the management
        of Government property, or existing property
        management plans, methods, practices, or procedures
        for accounting for property.”




•CONTRACTOR WILL BE REQUIRED TO PROVIDE A PROPERTY MANAGEMENT PLAN, NOTE – WE
          ARE NOT ASKING CONTRACTORS TO SUBMIT THEIR PROCEDURES!!!




                                                                                30
7) Solicitation Requirements and Eval.
(cont.)

      “When use of property on more than one contract is
      anticipated, any additional instructions to the
      contractor regarding property management,
      accountability, and use, not addressed in FAR
      Clause 52.245-1, Government Property, should be
      specifically addressed in the statement of work on
      the contract providing property.”


 AGENCIES MAY IMPOSE OTHER PROPERTY RELATED REQUIREMENTS. THESE MUST BE
                                SPELLED OUT IN THE SOW!
   e.g., Army, Navy, Air Force Regs., ARMS ACT issues for the Army Ammo Plants, GOCO
                                      requirements, etc.




                                                                                       31
7) Solicitation Requirements and Eval.
(cont.)

   “The contracting officer shall consider any
   potentially unfair competitive advantage that
   may result from the contractor possessing
   Government property. This shall be done by
   adjusting the offers by applying, for evaluation
   purposes only, a rental equivalent evaluation
   factor.”

  LONG ESTABLISHED GOVERNMENT POLICY AND
               REQUIREMENT


                                                      32
7) Solicitation Requirements and Eval.
(cont.)

 “The contracting officer shall ensure the offeror’s
 property management plans, methods,
 practices, or procedures for accounting for
 property are consistent with the requirements of
 the solicitation.”



  WHILE IN THE PAST THIS WAS AN IMPLICIT REQUIREMENT IT IS NOW A SPECIFIC TASK
                             IMPOSED UPON THE CO.
            CO NEEDS TO BE AWARE OF THE PA’s AVAILABILITY TO ASSIST!


                                                                                 33
8) Unique Item Identification

 Policy for Unique Identification (UID) of Tangible Items –
  New Procurements, Major Modifications, and
  Reprocurements of Equipment and Spares, dated July
  29, 2003
 IUID Legacy Policy, Memorandum dated December 23,
  2004
   – ACAT 1D Program Implementation Plans (June 2005)
   – All remaining Program Implementation Plans (January
     2006)
 Final IUID DFARS Rule published April 22, 2005
   – Amended June 2005


                                                               34
8) Unique Item Identification
(cont.)

 GFP IUID Policy, Memorandum dated May 12, 2005
   – Directs expansion of WAWF to capture property transfers
   – Directs expansion of IUID Registry for electronic GFP
      management
 Proposed DFARS published March 21, 2006, comment period
  closed May 22, 2006 [Case 2005-D015]
 Publication as an interim rule is forthcoming
 Note: IUID effort for managing GFP began in FY2006 and is still
  underway. To date, Registry contains: 983 contracts with GFP,
  246 contractors, and 108,643 GFP items registered. Total items
  in registry to date: 1.3 M.



                                                                    35
9) Responsibility and Liability

  45.104 – Responsibility and Liability of
   Government Property
  Generally, contractors are not held liable for loss, damage,
   destruction, or theft of Government, under the following types of
   contracts:
       Cost - reimbursement contracts
       Time and Material contracts
       Labor-hour contracts
       Fixed-price contracts awarded on the basis of
        submission of cost and pricing data
  No change in policy. The Government acts as a sell insurer.
   In other words, the Government assumes the risk
  Exception: i.e., ―Plain Vanilla‖ fixed price contracts

                                                                       36
10) Disposal



  FAR 45.6 provides explicit policy on disposal of
   property excess to contract requirements
  These requirements on based on statute
  FOLLOW THEM!
  It’s not worth a career




                                                     37
Questions or Comments?




                         38

				
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