Overview
This section establishes the policies and procedures governing when a contractor may use Government property rent-free and the specific conditions under which rental charges or other consideration must be applied. It distinguishes between use for the primary contract, use on other Government contracts, and use for commercial purposes.
Key Rules
- Default Rent-Free Use: Government property is typically provided on a rent-free basis for the performance of the contract to which the property is specifically accountable.
- Mobilization and Storage: Property left in place for future Government production or mobilization is rent-free, but rental charges apply to any portion of that property used for non-government commercial work.
- Nonprofit Exceptions: Contracting officers may authorize rent-free use for nonprofits (educational/research) if it serves the national interest, does not benefit a profit-making entity, and provides a direct benefit back to the Government.
- Fixed-Price Contracts: Using property on a fixed-price contract other than the one it is accountable to requires fair rental or adequate consideration.
- Cost-Type Contracts: Rent-free use may be authorized for cost-type contracts other than the one to which the property is accountable.
- Commercial Use Limits: Commercial use of Government property requires consideration; if commercial use is expected to exceed 25% of total usage, approval from the Head of the Contracting Activity (HCA) is mandatory.
Practical Implications
- Utilization Tracking: Contractors must strictly monitor and document the usage hours or capacity of Government property to ensure accurate rental payments if the property is used for commercial production.
- Administrative Approvals: Contractors seeking to leverage existing Government-owned equipment for commercial ventures must factor in the time and justification required to obtain HCA approval if the usage exceeds the 25% threshold.