FAR PART 45

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(No Transcript)
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FAR PART 45 52REWRITE

• PRESENTED TO THE
• SIERRA VISTA
• CORONADO NCMA CHAPTER
• Presented by
• Dr. Douglas N. Goetz
• Professor of Contract Management
• Defense Acquisition University

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OVERVIEW OF TECHNICAL MATERIALS

• PROBLEM STATEMENT AND VISION
• HISTORY
• QUICK DISCUSSION OF POLICY
• FAR PART 45
• And related Areas
• CONTRACTUAL REQUIREMENTS
• THE FAR Government Property clauses
• 52.245-1 MAIN FOCUS
• 52.245-2
• 52.245-9

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PROBLEM STATEMENT and VISION
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Problem/Purpose

• The Problem current FAR language is well over
  fifty years old contains inconsistent, often
  conflicting guidance is at odds with modern
  materials management and technology.
• Broad Purpose to revise the FAR (Property
  Management) requirementscreate a property
  management approach that fosters efficiency,
  flexibility, innovation, and creativity.

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Cracking the Code (cont.)

• Contractors are stewards of Government Property
• Currently, there are several thousand Government
  entities with GP
• As such, they need to manage the Government
  property in their possession via commercial
  processes, not Government prescribed actions.

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Cracking the Code (cont.)

• These processes need to be
• Built on voluntary consensus standards (VCS)
• E.g., ISO and ASTM and others,
• In the absence of VCSs
• Documented and Emerging Leading Practices for the
  applicable industry
• Continuously improved through contemporary
  techniques
• Lean, Six Sigma, Lean six sigma, etc.
• to produce a life-cycle approach to property
  management with the appropriate OUTCOMES

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Guiding Principles FAR Part 1

• FAR 1.102 -- Statement of Guiding Principles for
  the Federal Acquisition System
• The vision for the Federal Acquisition System
  is to deliver on a timely basis the best value
  product or service to the customer, while
  maintaining the publics trust and fulfilling
  public policy objectives.

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HISTORY OF THE FAR REWRITE

• Once upon a time, in a galaxy far away.

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HISTORY OF THE FAR REWRITE

• Original Proposal 1994
• DPAP assembled a team to address Government and
  Industry concern regarding the Government
  Property Requirements
• Effort moved along, but did not reach fruition.
• Public Hearings were held
• No general agreement as to direction rule should
  go.

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HISTORY OF THE FAR REWRITE

• Second Effort, 2000
• DPAP assembled another team to tackle the effort.
• Different perspectives and visions were broached
  for this iteration of the rule.
• Again, No general agreement as to direction rule
  should go.

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HISTORY OF THE FAR REWRITE

• Third Effort, 2003 to the present
• OUSD/ATL/PE, developed a consortium of people,
  spanning the property spectrum, to tackle this
  effort.
• Developed and Communicated the vision of a new
  Property world
• Reached general agreement with the Profession
• Served as the Guide on the Side working it
  through the committee review process.

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HISTORY OF THE FAR REWRITE

• IT WAS PUBLISHED IN MAY 15th!!!

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SEQUENCE OF EDUCATION

• QUICK OVERVIEW OF FAR PART 45
• 45.1- GENERAL
• 45.2 SOLICITATION AND EVALUATION PROCEDURES
• 45.3 AUTHORIZING THE USE and/or RENTAL OF
  GOVERNMENT PROPERTY
• 45.4 TITLE TO GOVERNMENT PROPERTY
• 45.5 SUPPORT GOVERNMENT PROPERTY ADMINISTRATION
• 45.6 - REPORTING, REUTILIZATION, AND DISPOSAL

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SEQUENCE OF EDUCATION

• ANALYSIS OF CLAUSES
• 52.245-1 GOVERNMENT PROPERTY
• 52.245-2 GOVERNMENT PROPERTY (INSTALLATION
  OPERATIONS FOR SERVICES)
• 52.245-9 USE AND CHARGES CLAUSE

FOCUS
X
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ANALYSIS OF FAR PART 45

• APPLIES TO GOVERNMENT
• POLICY!!!

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45.1 GENERAL

• SEVEN SECTIONS UNDER 45.1
• 45.101 Definitions.
• 45.102 Policy.
• 45.103 General.
• 45.104 Responsibility and liability for
  Government property.
• 45.105 Analysis of contractors' property
  management system.
• 45.106 Transferring accountability.
• 45.107 Contract clauses.

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45.2 SOLICITATION AND EVALUATION PROCEDURES

• ONE SUBSECTION
• 45.201 General.
• Lots of stuff here for the PCO to consider!!!

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45.3 Authorizing the Use and/or Rental of
Government Property

• THREE SUBSECTIONS
• 45.301 Use and rental.
• 45.302 Contracts with foreign Governments or
  international organizations.
• 45.303 Use of Government property on independent
  research and development programs.

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45.4 TITLE

• ONE SUBSECTION
• 45.401 Title to Government property.

SIGNIFICANT ADDITION

• THERE WAS NO DISCUSSION OF GOVERNMENT TITLE UNDER
  THE OLD FAR PART 45.
• Title discussions were scattered amongst and
  between various subparts and clauses.

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45.5 SUPPORT GOVERNMENT PROPERTY ADMINISTRATION

• ONE SUBSECTION
• 45.501 Support Government property
  administration.
• Deals with an Internal Government GP Issue.

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FAR 45.6DISPOSAL

• NO CHANGES
• RULE FROM MAY 2004
• RETAINED

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THEGOVERNMENTPROPERTYCLAUSES
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THREE GOVERNMENT PROPERTY CLAUSES

• 52.245-1 GOVERNMENT PROPERTY
• THREE VARIANTS
• 52.245-1
• 52.245-1 with ALTERNATE I
• 52.245-1 with ALTERNATE II
• 52.245-2 GOVERNMENT PROPERTY (Installation
  Operations for Services)
• 52.245-9 USE AND CHARGES

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X
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52.245-1
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FAR 52.245-1 Government Property

• (a) Definitions
• (b) Property Management
• (c) Use of Government Property
• (d) Government Furnished Property
• (e) Title to Contractor Acquired Property
• (f) Contractor Plans and Systems
• (g) Systems Analysis
• (h) Contractor Liability for Government Property
• (i) Equitable Adjustment
• (j) Contractor Inventory disposal
• (k) Abandonment of Government Property
• (l) Communication
• (m) Overseas Contracts

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FAR 52.245-1 Government Property
(a) DEFINITIONS

• Acquisition cost
• Common item
• Contractor-acquired property
• Contractor's managerial personnel
• Contractor inventory
• Demilitarization
• Discrepancies incident to shipment
• Equipment
• Government-furnished property

• Government property
• Material
• Nonseverable
• Precious metals
• Property
• Property Administrator
• Provide
• Real property
• Sensitive property
• Surplus property
• Unique Federal Property

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(b) Property management

• (1) The Contractor shall have a system to manage
  (control, use, preserve, protect, repair and
  maintain) Government property in its possession.

• LONG ESTABLISHED GOVERNMENT POLICY
• CONTRACTORS HAVE BEEN DOING THIS FOR US FOR YEARS!

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(b) Property management

• The system shall be adequate to satisfy the
  requirements of this clause. In doing so, the
  Contractor shall initiate and maintain the
  processes, systems, records, and methodologies
  necessary for effective control of Government
  property

• LONG ESTABLISHED GOVERNMENT POLICY
• OLD FAR 45.406

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(b) Property management

• consistent with voluntary consensus standards
  and/or industry-leading practices and standards
  for Government property management.

SIGNIFICANT NEW CHANGE AND ALLOWANCE
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VOLUNTARY CONSENSUS STANDARDS

• Voluntary Consensus Standard means common and
  repeated use of rules, conditions, guidelines or
  characteristics for products, or related
  processes and production methods and related
  management systems. Voluntary Consensus Standards
  are developed or adopted by domestic and
  international voluntary consensus standard making
  bodies.

• Pub. L. 104-113, the "National Technology
  Transfer and Advancement Act of 1995,"

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VOLUNTARY CONSENSUS STANDARDS BODIES

• "Voluntary consensus standards bodies" are
  domestic or international organizations which
  plan, develop, establish, or coordinate voluntary
  consensus standards using agreed-upon procedures.
  For purposes of this Circular, "voluntary,
  private sector, consensus standards bodies," as
  cited in Act, is an equivalent term. The Act and
  the Circular encourage the participation of
  federal representatives in these bodies to
  increase the likelihood that the standards they
  develop will meet both public and private sector
  needs. A voluntary consensus standards body is
  defined by the following attributes (i)
  Openness. (ii) Balance of interest. (iii) Due
  process. (vi) An appeals process.

FAR 11.101 and OMB Circular A-119
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USE OF VCSs

• FAR 11.101 MANDATES THE USE OF VCSs BY THE
  GOVERNMENT IN ITS ACQUISITION/PROCUREMENT PROCESS
• The Government DOES NOT ENDORSE any one VCS nor
  VCS Body.
• There are HUNDREDS of VCS Bodies
• http//www.ses-standards.org/displaycommon.cfm?an
  1subarticlenbr45
• www.dsp.dla.mil
• CONTRACTORS WILL DETERMINE THE APPLICABILITY OF
  VCSs IN THEIR RESPECTIVE CONTRACTING
  ENVIRONMENTS.

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PROPERTY VCSs

• With that said in the previous slide the MAJOR
  PROPONENT FOR PROPERTY VCSs is ASTM International
  with its E-53 Committee.
• http//www.astm.org

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A BIT OF HUMOR

• "The nice thing about standards is that there are
  so many to choose from.
• Andrew S. Tanenbaum, Computer Scientist and
  creator of Minux

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INDUSTRY LEADING PRACTICES

• CONCEPTUALIZATION FROM THE DOD PROPERTY MANUAL
  REWRITE TEAM
• Industry leading practices (ILP) are generally
  accepted processes, including best practices,
  that have been proven throughout related
  businesses, to be managerially and economically
  effective, efficient, and successful at meeting
  particular objectives of a contractors
  management system, and where specified, in
  compliance with the required Government Outcomes.
  

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INDUSTRY LEADING PRACTICES

• The ILP should be based on empirical research,
  evidence and literature pertaining to that
  business practice, product or system as a
  leading practice. In order for a process to
  become an ILP, it should be widely used.
  Generally, there should be supporting historical
  data from an accepted source, e.g., trade
  publications, literature, etc., to support that
  process as being repeatable, efficient,
  measurable, and verifiable.

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INDUSTRY LEADING PRACTICES

• For Example - There are numerous Government
  Accountability Office (GAO) reports that clearly
  define, describe and document ILPs, e.g., GAO
  Report 02-447G, entitled Best Practices in
  Achieving Consistent, Accurate Physical Counts of
  Inventory and Related Property.
• http//www.gao.gov/new.items/d02447g.pdf

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INDUSTRY LEADING PRACTICES

• With the rapid rate of technological and business
  systems development it is anticipated that
  numerous new processes will emerge. In such
  cases there may not be a developed body of
  literature supporting these processes. As such
  the PA needs to be open to the use of emerging
  processes as a potential ILP.

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(b) Property management

• (2) The Contractor's responsibility extends from
  the initial acquisition and receipt of property,
  through stewardship, custody, and use until
  formally relieved of responsibility by authorized
  means, including delivery, consumption,
  expending, disposition, or via a completed
  investigation, evaluation, and final
  determination for lost, damaged, or destroyed
  property.

CLARIFIES an OLD REQUIREMENT - LIFE CYCLE
MANAGEMENT
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(b) Property management(Contd)

• This requirement applies to all Government
  property under the Contractor's accountability,
  stewardship, possession or control, including its
  vendors or subcontractors (see paragraph
  (f)(1)(v) of this clause).

• LONG ESTABLISHED GOVERNMENT POLICY.
• NEW WORD STEWARDSHIP!

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(b) Property management

• (3) The Contractor shall include the requirements
  of this clause in all subcontracts under which
  Government property is acquired or furnished for
  subcontract performance.

FLOW DOWN REQUIREMENT

• CONTRACTORS WILL NEED TO REVIEW AND MODIFY THEIR
  SUBKTR/P.O. TERMS AND CONDITIONS

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(c) Use of Government property

• The Contractor shall use Government property,
  either furnished or acquired under this contract,
  only for performing this contract, unless
  otherwise provided for in this contract or
  approved by the Contracting Officer.

• LONG ESTABLISHED GOVERNMENT POLICY and
• CONTRACTUAL REQUIREMENT

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(c) Use of Government property (Contd)

• The Contractor shall not modify, cannibalize, or
  make alterations to Government property unless
  this contract specifically identifies the
  modifications, alterations or improvements as
  work to be performed.

• MIXTURE OF OLD AND NEW REQUIREMENT
  CANNIBALIZATION, THOUGH DONE PREVIOUSLY, IS NOW
  SPECIFICALLY ADDRESSED AND CALLED OUT

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(d) Government-furnished property

• (1) The Government shall deliver to the
  Contractor the Government-furnished property
  described in this contract.
• (2) The Government shall retain title to all
  Government-furnished property.
• (3) GFP will be suitable for use/delivered in a
  timely fashion
• Warranties for GFP
• Suitable for Use
• Timely Delivery
• Right to Equitable Adjustment

• NO CHANGE

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(d) Government-furnished property

• (4)(i) The Contracting Officer may by written
  notice, at any time
• (A) Increase or decrease the amount of
  Government-furnished property under this
  contract
• (B) Substitute other Government-furnished
  property
• (C) Withdraw authority to use property.
• (4)(ii) Right to an Equitable Adjustment

• LONG ESTABLISHED GOVERNMENT POLICY
• ONE CHANGE UNILATERAL RIGHT TO INCREASE GFP
• OLD FAR 52.245-2(b)

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(e) Title to Contractor-acquired property.

• Title to all property purchased by the
  Contractor, for which the Contractor is entitled
  to be reimbursed as a direct item of cost, under
  this contract, shall pass to and vest in the
  Government upon
• (1) A vendor's or supplier's initial delivery of
  such property to the Contractor
• (2) Issuance of the property for use in contract
  performance, including the installation of parts
  through normal maintenance
• (3) Commencement of processing of the property
  for use in contract performance or
• (4) Reimbursement by the Government for the cost
  of the property, whichever occurs first.

• "The public comments questioned whether this
  proposed language reflects a change in the
  Government's position on title to
  contractor-acquired property." 

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(f) Contractor plans and systems
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(f) Contractor plans and systems

• (1) Contractors shall develop property management
  plans and systems, at the contract, program, site
  or entity level to // enable the following
  outcomes

• LONG ESTABLISHED GOVERNMENT POLICY and
• CONTRACTUAL REQUIREMENT
• RECOGNIZES THAT SYSTEMS MAY BE CREATED AT
  DIFFERENT ACTIVITY LEVELS

• NEW REQUIREMENT
• PROCESS AND OUTCOME DRIVEN!

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(f) Contractor plans and systems
We now have a clear delineation of the PROCESSES
and OUTCOMES that have been in use for DECADES

• ACQUISITION
• RECEIVING
• Identification
• RECORDS
• PHYSICAL INVENTORY
• SUBCONTRACTOR CONTROL
• REPORTS

• RELIEF OF STEWARDSHIP
• Consumed/expended
• Delivered or shipped
• Disposed of
• UTILIZATION
• Use
• Consume
• Store
• MAINTENANCE
• CONTRACT CLOSEOUT

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APPLICATION OF VCS/ILPsTO EXISTING SYSTEMS
NEW FAR REQUIRED PROCESSES OUTCOMES P R O C E
S S E S
CONTRACTORS EXISTING PROPERTY CONTROL SYSTEM
AND PROCEDURES What you Already Have and
do!
VOLUNTARY CONSENSUS STANDARDS

INDUSTRY LEADING PRACTICES
Continuous Improvement
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(f) Contractor plans and systems

• (i) Acquisition of property. The Contractor shall
  document that all property was acquired
  consistent with its engineering, production
  planning, material control operations, and/or
  cost accounting disclosure statement.

LONG ESTABLISHED AND PERFORMED PROCESS
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(f) Contractor plans and systems

• (ii) Receipt of Government property. The
  Contractor shall receive Government property
  (document the receipt), record (the information
  necessary to meet the record requirements of
  paragraphs (f)(1)(iii)(A)(1), (2), (3), (4) and
  (5) of this clause), identify (as
  Government-owned), and manage any discrepancies
  incident to shipment.

LONG ESTABLISHED AND PERFORMED PROCESS
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(f) Contractor plans and systems

• (iii) Records of Government property. The
  Contractor shall create and maintain records of
  all Government property accountable to the
  contract, including Government-furnished and
  Contractor-acquired property.
• (A) Property records shall enable a complete,
  current, auditable record of all transactions and
  shall, unless otherwise approved by the Property
  Administrator, contain the following data

LONG ESTABLISHED AND PERFORMED PROCESS
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(f) Contractor plans and systems

• (1) The name, commercial part number and
  description, manufacturer, bulk identifier, model
  number, and National Stock Number (if needed for
  additional item identification tracking and/or
  disposition).
• (2) Quantity received (or fabricated),
  issued, and balance-on-hand.
• (3) Unit acquisition cost.
• (4) Unique-item identifier or equivalent (if
  available and
• necessary for individual item tracking).
• (5) Unit of measure.
• (6) Accountable contract number or equivalent
  code designation.
• (7) Location.
• (8) Disposition.
• (9) Posting reference and date of
  transaction.
• (10) Date placed in service.

SAME DATA REQUIREMENTS AS OLD BASIC INFORMATION
EXCEPT...
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(f) Contractor plans and systems

• (B) When approved by the Property Administrator,
  the Contractor may maintain, in lieu of formal
  property records, a file of appropriately
  cross-referenced documents evidencing receipt,
  issue, and use of material that is issued for
  immediate consumption.

• LONG ESTABLISHED PROCESS FOR MANAGING ITEMS
  ISSUED FOR IMMEDIATE CONSUMPTION
• A RECEIPT AND ISSUE SYSTEM

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(f) Contractor plans and systems

• (iv) Physical inventory.
• (v) Subcontractor Control
• (vi) Reports
• (vii) Utilization
• Use, Consume, Store and Move
• (ix) Maintenance
• (x) Property Closeout

LONG ESTABLISHED AND PERFORMED PROCESSES
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(f) Contractor plans and systems

• (3) The Contractor shall establish and maintain
  procedures necessary to assess its property
  management system effectiveness, and shall
  perform periodic internal reviews and audits. The
  findings and/or results of such reviews and
  audits shall be made available to the Property
  Administrator.

SIGNIFICANT NEW REQUIREMENT BUT CONSISTENT
WITH COMMERCIAL REQUIREMENTS
A-21
ISO
SOX
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(g) Systems analysis

• (1) The Government shall have access to the
  Contractor's premises, at reasonable times.
• (2) Records of Government property shall be
  readily available to authorized Government
  personnel and shall be safeguarded from tampering
  or destruction.

LONG ESTABLISHED REQUIREMENT
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(g) Systems analysis

• (3) Should it be determined by the Government
  that the Contractor's property management
  practices are inadequate or not property under
  this contract and/or present an undue risk to
  the Government, the Contractor shall immediately
  take all necessary corrective actions as directed
  by the Property Administrator.

• LONG ESTABLISHED GOVERNMENT REQUIREMENT AND
  PROCESS
• Old FAR 45.104

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(h) Contractor Liability for Government Property.

• (1) Unless otherwise provided for in the
  contract, the Contractor shall not be liable for
  loss, damage, destruction, or theft to the
  Government property furnished or acquired under
  this contract

LONG ESTABLISHED POLICY
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(h) Contractor Liability for Government Property.

• NOTICE THE SWITCH IN LOCATION!
• Under the OLD FAR
• The FULL Risk of Loss was in the Primary clause
• The LIMITED Risk of Loss was in the ALTERNATE I
• Under the PROPOSED RULE
• The LIMITED Risk of Loss is in the PRIMARY Clause
  and
• The FULL Risk of Loss was in the ALTERNATE!

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COMPARE OLD AND NEW

• NEW
• 52.245-1
• Paragraph (h)
• LIMITED RISK OF LOSS
• 52.245-1
• Alternate I
• FULL RISK OF LOSS

• OLD
• 52.245-2
• Paragraph (g)
• FULL RISK OF LOSS
• 52.245-2
• Alternate I
• 52.245-5
• LIMITED RISK OF LOSS

• FLIPPED THE TWO PROVISIONS

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(h) Contractor Liability for Government Property.

• The Contractor shall not be liable except when
  any one of the following applies
• (i) The risk is covered by insurance or the
  Contractor is otherwise reimbursed (to the extent
  of such insurance or reimbursement).
• (ii) The loss, damage, destruction, or theft is
  the result of willful misconduct or lack of good
  faith on the part of the Contractor's managerial
  personnel.

LONG ESTABLISHED POLICY
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(h) Contractor Liability for Government Property.

• Definition of Managerial Personnel

SAME AS BEFORE!!!
LONG ESTABLISHED POLICY
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(h) Contractor Liability for Government Property.

• LIABILITY CONTINUED
• except when any one of the following applies
• (iii) The Contracting Officer has, in writing,
  withdrawn the Government's assumption of risk for
  loss, damage, destruction, or theft, due to a
  determination under paragraph (g) of this clause
  that the Contractor's property management
  practices are inadequate, and/or present an undue
  risk to the Government, and the Contractor failed
  to take timely corrective action.

• LONG ESTABLISHED GOVERNMENT POLICY CONCEPT but
• The Government no longer Approves or Disapproves
  the contractors PCS. As such the CO now has the
  AUTHORITY to WITHDRAW the Governments ASSUMPTION
  of Risk for failing to comply with the
  REQUIREMENT of the Clause/Contract

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(h) Contractor Liability for Government Property.

• ISSUE OF TIME OF OCCURRENCE AND NEXUS
• If the Contractor can establish by clear and
  convincing evidence that the loss, damage,
  destruction, or theft of Government property
  occurred while the Contractor had adequate
  property management practices or the loss,
  damage, destruction, or theft of Government
  property did not result from the Contractor's
  failure to maintain adequate property management
  practices, the Contractor shall not be held
  liable.

LONG ESTABLISHED POLICY
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(h) Contractor Liability for Government Property.

• (2) The allowability of insurance costs shall be
  determined in accordance with 31.205-19 of the
  Federal Acquisition Regulation.

LONG ESTABLISHED POLICY
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(i) Equitable adjustment

• Equitable adjustments under this clause shall be
  made in accordance with the procedures of the
  Changes clause for
• (1) Any delay in delivery of Government-furnished
  property.
• (2) Delivery of Government-furnished property in
  a condition not suitable for its intended use.
• (3) An increase, decrease, or substitution of
  Government-furnished property.
• (4) Failure to repair or replace Government
  property for which the Government is responsible.

LONG ESTABLISHED POLICY
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(j) Contractor inventory disposal.

• THERE WERE NO CHANGES PROPOSED FOR THE DISPOSAL
  SECTION OF THE CLAUSE FROM THE MAY 2004 VERSION.
• THEREFORE, WE WILL NOT BE COVERING THIS PARAGRAPH

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FULL RISK OF LOSSPROVISION

• Alternate I (Date). As prescribed in
  45.107(a)(2), substitute the following for
  paragraph (h)(1) of the basic clause
• (h)(1) The Contractor assumes the risk of, and
  shall be responsible for, any loss, damage,
  destruction, or theft of Government property upon
  its delivery to the Contractor as
  Government-furnished property. However, the
  Contractor is not responsible for reasonable wear
  and tear to Government property or for Government
  property properly consumed in performing this
  contract.

• LONG ESTABLISHED GOVERNMENT POLICY AND
  REQUIREMENT
• THE FULL RISK OF LOSS IS NOW THE ALTERNATE

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TITLE VESTING PROVISION FOR NON-PROFITS

• Alternate II (Date). As prescribed in
  45.107(a)(3), substitute the following for
  paragraph (e) of the basic clause
• (e) Title to property (and other tangible
  personal property) purchased with funds available
  for research and having an acquisition cost of
  less than 5,000 shall vest in the Contractor
  upon acquisition or as soon thereafter as
  feasible provided that the Contractor obtained
  the Contracting Officer's approval before each
  acquisition. Title to property purchased with
  funds available for research and having an
  acquisition cost of 5,000 or more shall vest as
  set forth in this contract.

• LONG ESTABLISHED GOVERNMENT POLICY

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RECAP

• DURING THIS SESSION WE HAVE COVERED AND ANALYZED
• FAR PART 45
• POLICY BINDING UPON THE GOVERNMENT
• GOVERNMENT PROPERTY CLAUSES
• 52.245-1
• Binding Upon CONTRACTOR and Government

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QUESTIONS
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CONTACT INFO

• Dr. Douglas N. Goetz
• Defense Acquisition University
• 3100 Research Blvd
• POD 3, 3rd Floor
• Kettering, OH 45420
• 937-781-1077
• Douglas.Goetz_at_dau.mil