Overview
FAR 52.245-1 is the primary clause governing the management, accountability, and use of Government property in the possession of contractors. It establishes a comprehensive framework for how property—whether furnished by the Government or acquired by the contractor—must be tracked, maintained, and eventually disposed of.
Key Rules
- Property Management System: Contractors must establish and maintain a system of internal controls to manage Government property, which is subject to review and "System Analysis" by the Government Property Administrator.
- Title Vesting: The Government retains title to all Government-furnished property (GFP). For cost-reimbursement contracts, title to contractor-acquired property (CAP) typically vests in the Government upon delivery or reimbursement.
- Limited Liability: Generally, the Government assumes the risk of loss for its property; however, the contractor remains liable if the loss results from willful misconduct/lack of good faith by managerial personnel or if the Contracting Officer has revoked the Government’s assumption of risk due to an inadequate management system.
- Record Keeping: Contractors are required to maintain auditable records for all Government property, including specific data elements such as unit acquisition cost, quantity, and location.
- Utilization and Disposal: Government property may only be used for the performance of the specific contract for which it was provided. Disposal of excess property (Contractor Inventory) requires authorization from a Plant Clearance Officer.
- Subcontractor Flow-down: The requirements of this clause must be included in all subcontracts where Government property is acquired or furnished.
Practical Implications
- Audit Readiness: Contractors must be prepared for Property Management System Analyses (PMSAs) where the Government validates the effectiveness of their tracking and maintenance procedures.
- Financial Risk: While the "limited liability" provision protects contractors from most accidental losses, a failure to address system deficiencies identified by the Government can result in the contractor becoming financially responsible for all subsequent property losses.
- Administrative Burden: Compliance requires significant administrative overhead to manage the lifecycle of property, from initial receipt and tagging to final inventory closeout and disposition.