Overview
FAR 45.105 establishes the requirements for Government oversight of a contractor’s property management system and prescribes the administrative actions and penalties triggered when a system fails to meet contractual standards.
Key Rules
- System Analysis: The administrative contracting agency is required to periodically analyze the contractor’s property policies, procedures, and practices based on current conditions and agency-specific procedures.
- Notification and Correction: When deficiencies are identified, the Property Administrator (PA) must provide written notification, requesting a formal corrective action plan and a completion schedule from the contractor.
- Escalation to Contracting Officer: If the contractor fails to follow the corrective action schedule, the Contracting Officer (CO) must warn the contractor that non-compliance may lead to severe remedies.
- Remedies for Non-compliance: The Government may revoke its "assumption of risk" for loss of Government property or exercise other contractual rights and remedies.
- Liability Determinations: The PA determines whether the Government assumes the risk for lost property (granting "relief of stewardship") or whether the CO should hold the contractor financially liable for the loss.
Practical Implications
- Financial Exposure: A contractor’s failure to maintain an adequate property system can shift the financial burden of equipment damage or loss from the Government to the contractor, potentially leading to significant unallowable costs.
- Administrative Rigor: Contractors must ensure their internal property manuals are not only current but are strictly followed in practice, as the PA’s analysis will compare actual "practices" against written "policies."