1. Intermediate Government Furnished Property for Contracting Professionals
Carol Vigna, OSD AT&L DPAP
David Guinasso, supporting OSD AT&L DPAP
2 August 2016

2. Topics
The areas covered in this training are recurring areas of concern for audit, accountability and ensuring that contracts protect the governments assets and public’s interests.
-Contractor Acquired Property
-Bailment
-Exchange or Sale
-Use and Rental
-Loans

3. Definitions
Government Furnished Property (GFP) – is defined as property in the possession of or acquired by the Government and subsequently furnished to the Contractor for performance of a contract.
It includes items like spares and property furnished for repair, maintenance, overhaul, or modification. It can be items taken or requisitioned from Government inventory or purchased by the Government specifically to be provided on a contract.
GFP also includes contractor-acquired property if the contractor-acquired property is a deliverable under a cost contract that has been accepted by the Government for continued use under that contract or a future contract.
Contractor Acquired Property (CAP) - is property purchased or fabricated by a contractor for use on a contract to which the Government has title.

4. Not considered GFP
Government property that is incidental to the place of performance, when the contract requires contractor personnel to be located on a Government site or installation, and when the property used by the contractor within the location remains accountable to the Government.
Located on a Government site or installation
Used within the location
Remains accountable to the Government 4

5. Contractor Acquired Property

6. Cost Contract Title Provision in GP Clause
FAR Government Property
Title under Cost-Reimbursement or Time-and-Material Contracts or Cost-Reimbursable contract line items under Fixed-Price contracts.
Title to all property purchased by the Contractor for which the Contractor is entitled to be reimbursed as a direct item of cost under this contract shall pass to and vest in the Government upon the vendor's delivery of such property.
(ii) Title to all other property, the cost of which is reimbursable to the
Contractor, shall pass to and vest in the Government upon—
(A) Issuance of the property for use in contract performance;
(B) Commencement of processing of the property for use in
contract performance; or
(C) Reimbursement of the cost of the property by the
Government, whichever occurs first.
Must be in all Cost Reimbursable and T&M contracts

7. An Illustration
CAP
Deliverable

8. Important Things to Remember
Title is not changed by incorporation of Government property into property owned by the contractor.
Title to cost reimbursable line items on Fixed Price contracts is the same as title under a cost contract.
CAP can not be used on a different contract unless it is:
Delivered and accepted and provided as GFP
Repurchased or credited by the contractor*
*Subject to the requirements of the Materials Management and Accounting System (MMAS)

9. Sharing CAP under MMAS
FAR
…the Contractor may accomplish the material transaction using a loan/pay-back technique. The “loan/pay-back technique” means that the physical part is moved temporarily from the contract, but the cost of the part remains on the contract. When the technique is used, the Contractor shall have controls to ensure—
(A) Parts are paid back expeditiously;
(B) Procedures and controls are in place to correct any overbilling that might occur;
(C) Monthly, at a minimum, identification of the borrowing contract and the date the part was borrowed; and
(D) The cost of the replacement part is charged to the borrowing contract; 9

10. What Happens to CAP May be consumed in production of the deliverable
May be delivered
May be credited to the contract and charged to a different contract if needed on the succeeding contract
(Reasonable, Allocable, and Allowable test)
May be repurchased by the contractor
At full cost; or,
Returned to suppliers less reasonable restock costs
If not consumed, repurchased or delivered, must be reported to the Government for plant clearance whenever no longer required for performance
Either during or at the completion of the contract
May be provided to succeeding contracts as GFP after inspection and acceptance and delivery

11. How CAP is Delivered
PGI Delivery of contractor-acquired property.
(1)(i) When delivery of contractor-acquired property is required, the contracting officer shall direct that the delivery be accomplished by contract line item, except as described in paragraph (1)(ii) of this section.
(2) Each contract line item of contractor-acquired property shall include the following information:
Contractor-Acquired Property Delivery Contract Line Item
*Contractor-acquired property items shall be marked as required by DFARS clause
CLIN
Item Description/
Nomenclature
Type Designation
NSN
PIN
Quantity
Unit of Measure
Serial Number
(UII)*
Original Unit Acquisition Cost
Date Placed in Service by the Contractor x
As required
If known

12. Delivery of CAP
Once Contract Line Items are created, CAP will be delivered as any other deliverable line item, using WAWF iRAPT in accordance with:
DFARS (b) Except as provided in paragraph (c) of this clause, the Contractor shall submit payment requests and receiving reports using WAWF, in one of the following electronic formats that WAWF accepts: Electronic Data Interchange, Secure File Transfer Protocol, or World Wide Web input. Information regarding WAWF is available on the Internet at
DFARS  "(b) Contractor submission of the material inspection and receiving information required by Appendix F of the Defense FAR Supplement by using the Wide Area WorkFlow (WAWF) electronic form (see paragraph (b) of the clause at   < ) fulfills the requirement for a material inspection and receiving report (DD Form 250).“
DFARS Appendix F (b) The use of the DD Form 250 is on an exception basis (see DFARS < (a)) because use of the WAWF RR is now required by most DoD contracts

13. Bailment

14. Bailment What is a “Bailment”? When do you use it?
DFARS PGI 217_75 defines bailment as:
“The process whereby a part is loaned to a recipient with the agreement that the part will be returned at an appointed time. The government retains legal title to such material even though the borrowing agency has possession during the stated period.”
Items remain accountable to the DoD activity that loans them (Loaning Activity) and will be recorded in accountable property system of record as required by DoDI
When do you use it?
Under PGI 217_75
used to loan parts to a contractor that DoD believes qualified to become a “second source” for items which are only available sole source (Spare Parts Breakout Program)
To provide military unique items for contractors to use in IR&D and B&P
Should Not be used to provide property for use in performing a contract
If there is a contract, the property should be provided as GFP
Bailment agreements and loans are not governed by FAR Part 45 and associated DFARS clauses

15. Bailment Agreements
Loaning Activity must work with counsel to prepare a bailment or loan agreement
Bailment/Loan agreement should:
Specify the allowed use for the item (and disallow any other use)
Set the term of the loan (beginning and ending dates)
Specify transportation arrangements and costs
Reserve the right for the government to inspect the item at reasonable times
Require regular confirmation of the existence of the item (physical inventory)
Allow for government to require return of the property at any time, without compensation to the contractor
Discuss responsibility for liability associated with the use or loss of the property
Require reporting of any loss of government property
Specify any export restrictions or intellectual property considerations

16. Exchange or Sale

17. Exchange or Sale Exchange – most commonly thought of as a “trade in”
Sell – disposal sales as part of the federal disposal process
Plant Clearance under FAR and Federal Management Regulations (FMR)
FMR Disposal Process under FMR

18. Exchange or Sale Legal Authority - 40 USC
§ 503. Exchange or sale of similar items
(a) Authority of Executive Agencies. – In acquiring personal property, an executive agency may exchange or sell similar items and may apply the exchange allowance or proceeds of sale in whole or in part payment for the property acquired.
(b) APPLICABLE REGULATION AND LAW –
REGULATIONS PRESCRIBED BY ADMINISTRATOR OF GENERAL SERVICES. – A transaction under subsection (a) must be carried out in accordance with regulations the Administrator of General Services prescribes, subject to regulations prescribed by the Administrator for Federal Procurement Policy under division B (except sections and 2303) of subtitle I of title 41.
IN WRITING – A transaction under subsection (a) must be evidenced in writing.
SECTION 6101(b) to (d) OF TITLE 41 – Section 6101(b) to (d) of title 41 applies to a sale of property under subsection (a), except that fixed price sales may be conducted in the same manner and subject to the same conditions as are applicable to the sale of property under section 545(d) of this title.

19. Personal Property [Exchange or Sale]
FMR
“Personal property” means any property, except real property. For purposes of this part, the term excludes records of the Federal Government, and naval vessels of the following categories: battleships, cruisers, aircraft carriers, destroyers, and submarines.
FAR 2.101
“Personal property” means property of any kind or interest in it except real property, records of the Federal Government, and naval vessels of the following categories:
(1) Battleships;
(2) Cruisers;
(3) Aircraft carriers;
(4) Destroyers; and
(5) Submarines.

20. Similar Items [Exchange or Sale]
Defined in FMR
“Similar” means the acquired item(s) and replaced item(s):
(1)  Are identical; or
(2) Fall within a single Federal Supply Classification (FSC) Group of property (includes any and all forms of property within a single FSC Group); or
(3) Are parts or containers for similar end items; or
(4) Are designed or constructed for the same purpose (includes any and all forms of property regardless of the FSC Group to which they are assigned).

21. When You Can Do An Exchange
Replacement of property that is still required, but is no longer functional due to wear or obsolescence
May be accomplished as part of the acquisition of new property
May be used to acquire property under a service contract provided the property is similar to that being exchanged or sold

22. Prohibitions on Exchange or Sale
Prohibited Federal Supply Groups
10 – Weapons (DoD exception for all except FSC 1005 Guns)
11 – Nuclear ordnance
42 – Firefighting, rescue, and safety equipment
44 – Nuclear reactors (FSC Class 4470 only )
51 – Hand tools
54 – Prefabricated structure and scaffolding
FSC 5410 Prefabricated and Portable Buildings
FSC 5411 Rigid Wall Structures
FSC 5419 Collective Modular Support System only
68 – Chemicals and chemical products, except medicinal chemicals
84 – Clothing, individual equipment, and insignia

23. More Prohibitions on Exchange or Sale
Materials in the National Defense Stockpile
NRC Controlled materials (except for § )
Controlled substances (except for § )
Scrap condition property except
Property that had utility when exchange/sale authority was determined
Property that was determined in scrap condition due to damage after exchange/sale determination
Scrap gold for fine gold
Other agency excess, forfeited property or property not obtained from an acquisition, unless it has been in use for no less than 1 year since obtaining

24. Still More Prohibitions on Exchange or Sale
Dangerous property not rendered innocuous
Combat material without demil or other DoD authorization
Flight Safety Critical Aircraft Parts and Critical Safety Items
Unless meeting the provisions of
For acquisition of unauthorized replacement property
Acquisition of replacement property that violates any
Restriction on procurement of a commodity or commodities
Replacement policy of standard prescribed by the President, Congress or the Administrator of GSA
Contractual Obligation
Vessels subject to 40USC548
Aircraft and aircraft parts, unless there is full compliance with all exchange/sale provisions in Part of the FMR

25. Conducting an Exchange
Procurements may carry a line item which identifies the value of items to be traded in
In order to comply with 40 USC and FMR annual reporting requirements transactions must be documented

26. Aircraft Parts in Exchange or Sale
§ —Special requirements for acquiring military Flight Safety Critical Aircraft Parts (FSCAP) When you acquire Flight Safety Critical Aircraft Parts (FSCAP), you must— (a) Accept a FSCAP only when it is documented or traceable to its original equipment manufacturer (a FSCAP’s DOD FSCAP Criticality Code should be marked or tagged on the part or appear on its invoice/transfer document; see for further explanation of the FSCAP Criticality Codes); and (b) Not install undocumented, but traceable FSCAP until you have the parts inspected and recertified by the original equipment manufacturer or FAA- approved production approval holder (see on FSCAP). § —Special requirements for acquiring life-limited parts When you acquire new or used life-limited parts, you must— (a) Identify and inspect the parts, ensuring that they have civil or military- certified documentation (i.e., complete life histories); and (b) Mutilate and dispose of any expired life-limited parts (see on handling life-limited parts).

27. Exchange or Sale Summary
Agencies are encouraged to utilize the proceeds from sale or trade-in of existing property when purchasing replacement property.
Under contracts, even service contracts, property must be acquired.
Property must be similar, but need not be equivalent in quantity, as long as the function remains the same, e.g. several small trucks could be sold or exchanged for one large truck that can haul the same or better volume
Agencies must report exchange/sale transactions in list form to GSA annually
List form implies that individual transactions are recorded AND reported

28. Use and Rental of Government Property

29. Policy FAR 45.3 Authorizing the Use and Rental of Government Property
DFARS Authorizing the Use and Rental of Government Property (Contracts with foreign governments or international organizations).
Contract Clause Use and Charges Clause
Authorizing use of GFP outside of the contract to which it is accountable 29

30. Authorizing Use
Authorization comes from the Contracting Officer cognizant of the property (the Contracting Officer for the contract the property is accountable to) 30

31. Rent Free Use
The Contractor may use the Government property without charge in the performance of—
(1) Contracts with the Government that specifically authorize such use without charge;
(2) Subcontracts of any tier under Government prime contracts if the Contracting Officer having cognizance of the prime contract—
(i) Approves a subcontract specifically authorizing such use; or
(ii) Otherwise authorizes such use in writing; and
(3) Other work, if the Contracting Officer specifically authorizes in writing use without charge for such work. 31

32. Rent Free Use
Property at nonprofit organizations when used for research, development, or educational work and—
(1) The use of the property is in the national interest;
(2) The property will not be used for the direct benefit of a profit-making organization; and
(3) The Government receives some direct benefit, such as rights to use the results of the work without charge, from its use. 32

33. Consideration Fixed-Price
In exchange for consideration the contractor may use Government property under fixed-price contracts other than the contract to which it is accountable.
When, after contract award, a contractor requests the use of Government property, the contracting officer shall obtain a fair rental or other adequate consideration if use is authorized. 33

34. Consideration Cost Type
The cognizant contracting officer(s) may authorize the use of Government property on a rent-free basis on a cost type Government contract other than the contract to which it is accountable. 34

35. Commercial Use
In exchange for consideration as determined by the cognizant contracting officer, the contractor may use Government property for commercial use. Prior approval of the Head of the Contracting Activity is required where non-Government use is expected to exceed 25 percent of the total use of Government and commercial work performed. 35

36. Rental Calculation of rent is detailed in 52.245-9
See the DFARS for special rule for FMS and foreign direct sales
Material cannot be rented
The Government may revoke nongovernmental use authorization at any time and require the Contractor to return the property in its pre-rental condition (less normal wear and tear), or both.
The unauthorized use of Government property can subject a person to fines, imprisonment, or both under 18 U.S.C. 641. 36

37. Non-Interference
All use, Rental and Rent-Free, can not interfere with the use of the property on the contract it is accountable 37

38. Use and Charges - Summary
The owning Contracting Officer can authorize use outside the accountable contract
Consideration is required on Fixed-Price contracts or for non-Government use
All use is on a Non-Intereference Basis. 38

39. Loans

40. There are no Loans* Property is provided to contractors: As CAP As GFP
Through Non-Interference Use
Through Bailment
As an Exchange/Sale (Title transferred)
*Except Loan/Pay-Back as discussed on slide 9 40

41. GFP Policy Training, Procedures,
For more information
GFP Policy Training, Procedures,
Tools

42. Training Certificates
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43. Any Questions?