Overview
FAR Subpart 45.1 establishes the foundational policies and procedures for the management, use, and accountability of Government property in the possession of contractors. It emphasizes that while contractors are generally expected to provide all resources necessary for performance, the Government may provide property when it is in the best interest of the United States and significantly outweighs the administrative costs and risks.
Key Rules
- Government-Furnished vs. Contractor-Acquired: "Government property" includes both property furnished by the Government (GFP) and property acquired by the contractor to which the Government has title (CAP).
- Policy of Self-Sufficiency: Contracting Officers (COs) should only provide property if it is in the Government's best interest, requirements cannot otherwise be met, and it does not substantially increase Government risk.
- Liability Limitations: Under cost-reimbursement, time-and-material, and labor-hour contracts, contractors are generally not held liable for the loss of Government property, provided their property management system is adequate.
- System Standards: Contractors are encouraged to use voluntary consensus standards and industry-leading practices rather than being forced to create separate Government-unique property management systems.
- Transfer of Accountability: Property cannot be moved between contracts simply for convenience; there must be a firm requirement on the gaining contract, and the transfer must be documented via formal contract modifications.
- Nonseverability: Government property (except foundations) should not be installed on contractor-owned real property in a way that makes it non-removable, unless specifically authorized.
Responsibilities
- Contracting Officer (CO):
- Determines when providing Government property is justified.
- Decides the extent of contractor liability in the event of loss.
- Revokes the Government’s assumption of risk if property systems are non-compliant.
- Executes contract modifications for property transfers.
- Property Administrator (PA):
- Appointed representative of the CO who administers property requirements.
- Conducts analyses of the contractor’s property management policies and systems.
- Notifies the contractor of system deficiencies and recommends whether the CO should hold the contractor liable for losses.
- Contractor:
- Maintains stewardship and creates/maintains the "Property Records."
- Justifies the retention of Government property and declares excess items.
- Remains responsible for any Government property provided to subcontractors.
Practical Implications
- Audit Risk: The "assumption of risk" by the Government is conditional. If a contractor’s property management system is found deficient and they fail to implement a corrective action plan, they may suddenly face full financial liability for all Government property in their possession—a potential multi-million dollar risk.
- The "Cost" of Free Equipment: While receiving GFP may seem like a benefit, the administrative burden of maintaining records, reporting "loss" (which includes simple damage or theft), and managing the eventual disposal or demilitarization can be significant.
- Contract Closeout: "Contractor inventory" rules mean that anything left over at the end of a contract that the Government has title to must be formally reported. Contractors cannot simply keep or "cannibalize" surplus Government property for other projects without express authorization and contract modifications.
- Simplified Procedures: For small-scale operations, purchase orders for property repair do not require the standard Government Property clause if the acquisition cost is below the Simplified Acquisition Threshold (SAT).