Overview
FAR 45.101 establishes a foundational vocabulary for the management, accountability, and control of property in the possession of contractors. It provides specific classifications for different types of assets—such as equipment, material, and sensitive property—while defining the parameters for property loss and managerial responsibility.
Key Rules
- Government Property Composition: Defined as the sum of Government-furnished property (GFP) and contractor-acquired property (CAP); it specifically excludes intellectual property and software.
- Material vs. Equipment: Material is defined as property that is consumed, expended, or incorporated into a higher assembly, whereas equipment is durable, functionally complete, and does not lose its identity during use.
- Contractor Inventory: Includes any property (GFP or CAP) that exceeds the amount needed for full performance or property the Government chooses to take over due to contract termination or specification changes.
- Loss Classification: "Loss of Government Property" is limited to unintended, unforeseen, or accidental incidents (theft, damage, or disappearance) and explicitly excludes normal wear and tear, obsolescence, or purposeful destructive testing.
- Managerial Personnel: This definition is restricted to high-level leadership (officers, directors, or plant managers), which is critical for determining a contractor's liability for loss under the Government Property clause.
- Valuation Standards: Unit acquisition cost is determined by the Government-assigned value for GFP, while CAP is valued based on the contractor's accounting records using Generally Accepted Accounting Principles (GAAP).
Practical Implications
- Contractors must categorize assets correctly upon receipt or acquisition, as "material" and "equipment" have different tracking, maintenance, and disposal requirements under the standard Government Property clause.
- The exclusion of software and intellectual property means that contractors should look to FAR Part 27, rather than Part 45, for regulations regarding the management and rights of intangible assets.
- Properly identifying "sensitive property" is vital for compliance, as these items (like weapons or hazardous materials) require enhanced physical security and stricter accountability measures than standard commercial items.