FAR Part 45 - Government Property: Analysis & Summary

Overview

FAR Part 45 establishes the policies and procedures for the lifecycle management of Government property provided to or acquired by contractors. It mandates that contractors generally provide all property necessary for contract performance, while outlining the strict requirements for accountability, title, maintenance, and disposal when Government-furnished or contractor-acquired property is involved.

Key Rules

• Provision Policy: The Government will only provide property to contractors when it is in the Government’s best interest, the benefit outweighs the administrative cost/risk, and requirements cannot otherwise be met.
• Title Vesting:
  • Government-Furnished Property (GFP): The Government always retains title.
  • Contractor-Acquired Property (CAP): In cost-reimbursement and time-and-material contracts, title vests in the Government upon reimbursement. In fixed-price contracts, the contractor generally retains title unless the property is a deliverable end item.
• Competitive Advantage: Contracting Officers must eliminate any unfair competitive advantage by applying "rental equivalent evaluation factors" to the offers of contractors who possess Government property.
• Liability for Loss: Generally, contractors are not held liable for the loss of Government property under cost-reimbursement, T&M, and certain fixed-price contracts, provided their property management system is compliant.
• Exclusions: This part does not apply to software, intellectual property, or "incidental" property (e.g., office space, desks, and chairs) used by contractor personnel at a Government installation.
• Management Systems: Contractors are encouraged to use voluntary consensus standards and industry-leading practices rather than being forced to create unique Government-only accounting systems.

Responsibilities

• Contracting Officer (CO):
  • Authorizes the provision of property and determines if it is in the Government’s best interest.
  • Evaluates solicitations for competitive advantages.
  • Determines the extent of contractor liability in the event of loss.
  • Revokes the Government’s assumption of risk if the contractor’s system is non-compliant.
• Property Administrator (PA):
  • Conducts analyses of the contractor's property management policies and systems.
  • Notifies contractors of deficiencies and monitors corrective action plans.
  • Grants relief of stewardship responsibility for lost property when the risk is assumed by the Government.
• Contractor:
  • Responsible for the management, stewardship, and maintenance of all Government property in its possession.
  • Must justify the retention of any Government property not actively needed for contract performance.
  • Must report production scrap and excess inventory for disposal/reutilization.
• Plant Clearance Officer (PLCO):
  • Reviews and accepts inventory disposal schedules and manages the reutilization or sale of surplus property.

Practical Implications

• System Compliance is High-Stakes: A contractor with a "non-compliant" property management system risks the Contracting Officer revoking the "assumption of risk." In a cost-reimbursement environment, this could suddenly shift the financial burden of millions of dollars in equipment loss from the Government to the contractor.
• Incidental Property Simplification: Contractors working on-site at Government facilities (e.g., SETA or advisory services) benefit from the "incidental property" exception. They do not need to track Government-provided desks, laptops, or chairs as "Government Property" under FAR 45, significantly reducing administrative overhead.
• Proposal Strategy: When bidding on contracts where Government-furnished equipment (GFE) is available, offerors must account for "rental equivalent" adjustments. Using GFE might lower your direct costs but could increase your "evaluated price," potentially making your bid less competitive than a firm providing its own equipment.
• Closeout Burdens: The disposal of "Contractor Inventory" at the end of a contract is a rigorous process. Contractors must be prepared for the "reporting and screening" phase, where they must account for every item of CAP and GFP before the contract can be formally closed and final payments made.