Overview
Subpart 45.3 establishes the policies and procedures for allowing contractors to use Government property for purposes other than the specific contract to which the property is assigned. It defines the criteria for rent-free use, the requirements for rental charges during commercial use, and the specific conditions under which nonprofit organizations and research programs may utilize Government-owned assets.
Key Rules
- Default Rent-Free Status: Government property is typically provided on a rent-free basis for the performance of the contract under which it is accountable.
- Nonprofit Exemptions: Rent-free use can be authorized for nonprofit organizations performing research or educational work, provided the use is in the national interest and the Government receives a direct benefit (e.g., rights to research results).
- Commercial Use Limits: Contractors may use Government property for commercial (non-Government) work in exchange for consideration. However, if the commercial use is expected to exceed 25% of the total use, prior approval from the Head of the Contracting Activity (HCA) is mandatory.
- Fixed-Price vs. Cost-Type Contracts:
- For fixed-price contracts other than the primary one, contractors must provide fair rental or adequate consideration.
- For cost-type contracts other than the primary one, the Contracting Officer may authorize rent-free use.
- IR&D Conditions: Use of property for Independent Research and Development (IR&D) is permitted only if it does not interfere with the property's primary Government purpose and the contractor does not claim the rental value as a reimbursable cost.
- Foreign Entities: Requests for property use by foreign governments or international organizations are not governed by these standard rules but must follow specific agency-level procedures.
Responsibilities
- Contracting Officer (CO):
- Determines and obtains "fair rental" or "adequate consideration" for property use outside of the primary contract.
- Authorizes rent-free use for nonprofits and cost-type contracts.
- Ensures that IR&D use of property does not conflict with primary contract requirements.
- Head of the Contracting Activity (HCA):
- Responsible for reviewing and providing prior approval for any non-Government use of property that exceeds the 25% threshold.
- Contractor:
- Must request authorization for any use of property beyond the contract to which it is accountable.
- Must credit the Government for the portion of IR&D costs allocated to commercial work when using Government property for such programs.
- Responsible for maintaining records to support the percentage of use for commercial vs. Government work.
Practical Implications
- Prevents Unfair Competitive Advantage: By requiring rental charges for commercial use, the FAR ensures that a contractor using Government-owned equipment does not have an unfair pricing advantage over a competitor who had to purchase their own equipment.
- Administrative Burden for Mixed-Use: Contractors using the same machinery for both a Government contract and private commercial work must implement rigorous tracking systems. If the commercial throughput nears the 25% mark, they must trigger a high-level approval process (HCA), which can lead to administrative delays if not planned in advance.
- Incentivizing Research: The provision for rent-free use by nonprofits and for IR&D programs encourages innovation and technology development without burdening the Government with additional procurement costs, provided the Government retains rights to the intellectual outputs.
- Negotiation Point: In fixed-price environments, "adequate consideration" for property use is a negotiable item. Contractors might offer price reductions or other non-monetary benefits in exchange for using existing Government property on new efforts.