1. LOSS OF GOVERNMENT PROPERTY
Presented by:
Tara S. Miller,
And
Rosanne (Beth) Green, Consultant
Presented by Beth Green and Tara Miller
11/6/2018

2. What Constitutes a Loss?
What is considered a loss?
Unintended, unforeseen or accidental loss, damage, or destruction of Government property that reduces the Government’s expected economic benefits of the property.
Does not include losses due to:
Purposeful destructive testing
Obsolescence
Normal wear and tear
Manufacturing defects
Do not include in your loss report
There is a new definition in the FAR under Loss (definitions). This is really a great change from all of the previous written regulations. The FAR has removed references to LTDD, LDDT or LDD from the old FAR. Now the new term is Loss! The DoD FAR Supplement had this definition prior to the 2012 change.
Reasonable inventory adjustments are usually related to material. We will talk about Resonableness during this class.
Presented by Beth Green and Tara Miller
11/6/2018

3. What Constitutes a Loss? continued
Does include:
Items that cannot be found after a reasonable search
Theft
Damage resulting in unexpected harm to property requiring repair to restore the item to usable condition
Destruction resulting from incidents that render the item useless for its intended purpose or beyond economical repair
Presented by Beth Green and Tara Miller
11/6/2018

4. Responsibility and Liability
Read this before going to the next slide!
Responsibility and liability for Government property (April 2012) says to the Government Contracting Officer “Generally, contractors are not held liable for loss of Government property…”.
However the contracting officer may revoke the Government’s assumption of risk when a GPA determines that the contractor’s property management practices are noncompliant with contract requirements. Don’t forget about subcontractors they can hold the same risk of loss as the prime contract.
This is something that is spelled out clearly now which was vague in the before.
Need to be careful about non-compliance.
Let’s talk about some of the things that you can prevent becoming revoked.
Be proactive in correcting deficiencies found by you or GPA.
Presented by Beth Green and Tara Miller
11/6/2018

5. Liability The CO / PA determine:
The extent of contractor liability based upon the amount of damages corresponding to the associated property loss
The appropriate form and method of Government recovery (may include repair, replacement, or other restitution)
Presented by Beth Green and Tara Miller
11/6/2018

6. Relief of Stewardship and Responsibility
Relief can be obtained when property is:
Consumed or expended, reasonably and properly, or otherwise accounted for, in the performance of the contract
Reasonable inventory adjustments of material
GPA grants relief of responsibility for loss
Delivered or shipped from the Contractor’s plant, under Government instructions
Inventory disposal
Abandoned
FAR tells the Government what to do in the case a Contractor does not complete their corrective action.
Your Property Plan and/or Procedures should indicate you will disclose and report excess property to the Government or prime when it is no longer needed.
By not reporting excess you may end up with losses. Also don’t forget if you are a subcontractor you must report all excess property to your prime.
When certain circumstances prevail the contractor is relieved of stewardship responsibility and liability
Presented by Beth Green and Tara Miller
11/6/2018

7. Liability for Loss
The Contractor shall not be liable for loss except when any one of the following applies—
The equipment is covered by insurance
Loss was the result of willful misconduct or lack of good faith on the part of the Contractor’s managerial personnel
Unless otherwise provided for in the contract….
Let’s talk about how the government may hold the contractor liable. These are some of the exceptions:
The equipment covered by insurance
The risk is covered by insurance or the Contractor is otherwise reimbursed (to the extent of such insurance or reimbursement). The allowability of insurance costs shall be determined in accordance with Such as insurance required by contract or e.g. a private owned car runs into a building and damages building and equipment the insurance of the car will pay for the damages.
The loss of Government property was the result of willful misconduct or lack of good faith on the part of the Contractor’s managerial personnel. Contractor’s managerial personnel, in this clause means the Contractor’s directors, officers, managers, superintendents, or equivalent representatives who have supervision or direction of all or substantially all of the Contractor’s business; all or substantially all of the Contractor’s operation at any one plant or separate location; or a separate and complete major industrial operation.
Presented by Beth Green and Tara Miller
11/6/2018

8. Liability for Loss
The Contractor shall not be liable for loss except when any one of the following applies— (continued)
The Contracting Officer has, in writing, revoked the Government’s assumption of risk for loss
The Contractor shall not be held liable if by clear and convincing evidence they maintained an adequate property management system
The Contracting Officer has, in writing, revoked the Government’s assumption of risk for loss because: Contractor’s property management practices are inadequate, and/or present an undue risk to the Government, and the Contractor failed to take timely corrective action.
If the Contractor can establish by clear and convincing evidence That the loss of Government property occurred while the Contractor had adequate property management practices or the loss did not result from the Contractor’s failure to maintain adequate property management practices, the Contractor shall not be held liable.
Presented by Beth Green and Tara Miller
11/6/2018

9. Actions to Take Immediate actions the Contractor must take:
All reasonable actions necessary to protect the Government property from further loss
Shall separate the damaged and undamaged property, place all the affected property in the best possible order
Any other actions required by the GPA
Presented by Beth Green and Tara Miller
11/6/2018

10. Responsibility and Liability
The Contractor shall:
Do nothing to prejudice the Government’s rights to recover against third parties for any loss of Government property
Reimburse the Government for loss of Government property, to the extent that the Contractor is financially liable for such loss, as directed by the Contracting Officer
Presented by Beth Green and Tara Miller
11/6/2018

11. Responsibility and Liability
The Contractor shall, continued:
At the Government’s expense, furnish to the Government –
All reasonable assistance and cooperation, including the prosecution of suit and the execution of instruments of assignment in favor of the Government in obtaining recovery
Presented by Beth Green and Tara Miller
11/6/2018

12. Relief of Stewardship Responsibility and Liability
Presented by Beth Green and Tara Miller
11/6/2018

13. Contractor Responsibility
The Contractor is responsible for promptly:
Recognizing
Investigating
Disclosing
Reporting losses of Government property
If a loss occurs, the Contractor is also responsible for identifying and implementing corrective actions necessary to prevent recurrence.
Includes losses at the subcontractor or alternate locations
Presented by Beth Green and Tara Miller
11/6/2018

14. Loss Investigation
The Contractor shall investigate and report all incidents of property loss as soon as the facts become known
A report must be sent to the Government; there is a list of required elements listed in the FAR
Handout the sample form (this form holds all of the elements listed in the FAR (f) (vii) Relief of stewardship responsibility and liability (B) (April 2012)
Presented by Beth Green and Tara Miller
11/6/2018

15. Loss Report
On the loss report one of the required elements is to write a statement indicating current or future need
Is the property still needed for the performance of your contract?
Is it damaged beyond repair or can it be repaired?
Determine value
Intrinsic value
What should be considered to recover the property?
Repair
Replace
Other; i.e., compensation
Let’s talk about some things that you might want to put in your report.
Intrinsic (value to the owner)
Scrap Value - GP is lost or destroyed. Government has NO current or probable future need.
Salvage - GP is damaged Government has No current or probable Future need
Repair - GP is damaged Government still has a current or probable Future need
Replacement - GP is Lost or destroyed Government still has a current or probable future need
Presented by Beth Green and Tara Miller
11/6/2018

16. Root Cause What is a root cause?
Is a fundamental cause, basis, or essence of something, or the source from which something derives.
Some root causes can be part of your system
Human Resources
Maintenance Required
Environment
Improvements are required to reduce common cause
Define the discrepancy – don’t for get root cause
Lack of training is usually the primary cause of Loss.
One method to determine root cause is to ask “Why” a minimum of 5 times to each answer. An example of this would be:
Why is the item lost? The item is lost because it is not in the right location
Why is the item not in the right location? Because the record was not updated
Why wasn’t the record updated? Because the property custodian wasn’t provided the information
Why wasn’t the property custodian provided the right information? Because the user didn’t know they were supposed to
Why didn’t the user know they were supposed to? Because they did not receive proper training
Presented by Beth Green and Tara Miller
11/6/2018

17. Root Cause vs. Common Cause
There are many degrees of differences in a process from common causes
Are there separate systems (e.g. procurement, receiving, or property control program)
Can it be a common cause and fixed immediately
Can the cause be isolated to one event
Are problems occurring irregularly or difficult to predict
Presented by Beth Green and Tara Miller
11/6/2018

18. Corrective Action Plan
Corrective action plan – required!
Define discrepancy
Timeline
Action
Responsible Individual
Who to contact when complete
Presented by Beth Green and Tara Miller
11/6/2018

19. Corrective Action Plan
Before submitting a Corrective Action Plan determine the following:
Examine all the facts and circumstances
Determine the connection or link associated to the cause
Decide what part of the processes were effected
After a corrective action has been implemented, the process must be analyzed for effectiveness
Presented by Beth Green and Tara Miller
11/6/2018

20. Corrective Action Plan
Reasonableness
Materiality
Significance in absolute terms
Upper management, may become aware of an adverse situation and must verify how deeply rooted is the problem how deep of an impact to the contract performance must be measured. Before these losses are judged to be a problem, a number of factors must be considered.
Reasonableness: What do you consider acceptable. For example: If you have 100 bags of bolts (that cost $6.00 a bag) and one bag is missing – This is would be reasonable because they are low value, non-critical items this would not be reasonable to judge this a defect. BUT on the other hand what if they were stainless steel and they cost $100 a bag and you had 50% missing. Quantitative evaluations must be tempered by reasonableness.
Materiality: Even if the material is low value or high value if the same losses came up several times there may be a systemic defect in the way the material is handled.
Significance in Absolute Terms: There are certain dollar amounts that would be considered significant, no matter what the circumstances. When losses worth ten, five or even 1 million is would definitely be considered a defect.
Presented by Beth Green and Tara Miller
11/6/2018

21. Corrective Action Plan
Exposure
Peril
Hazard
Incident
Accident
Occurrence
Loss
Claim
Severity
Terms
These terms may help you describe losses in your reports:
 EXPOSURE - The possibility of loss  PERIL - A cause of source of a loss  HAZARD - A condition within an exposure that may lead to an accident  INCIDENT - An event that disrupts normal activities and may result in a loss or a claim  ACCIDENT - An unexpected incident resulting in injury or property damage  OCCURRENCE - An accident with the limitation of time removed  LOSS - A reduction of asset value, a reduction of income, or an increase in expenses or an unintended, unforeseen, or accidental loss, damage or destruction that may reduce an expected economic benefits of the property  CLAIM - A demand or obligation for payment as a result of a loss  FREQUENCY - The number of times a loss occurs  SEVERITY - The monetary impact of a loss
Presented by Beth Green and Tara Miller
11/6/2018

22. Non-Compliance Consequences
Potential consequence of non-compliance include:
Increased surveillance and findings
Need to implement corrective action plans
Increased liability and financial risk
Increased insurance costs
Increased borrowing costs
Damaged credibility with customers
If there are losses they must be put down in a final report – then a corrective action plan must be developed.
Presented by Beth Green and Tara Miller
11/6/2018

23. Relief of Stewardship and Responsibility
When the GPA determines a reported case of loss is a risk assumed by the Government, the GPA will grant relief
When the GPA determines the risk of loss is not assumed by the Government, they will recommend the contracting officer hold the contractor liable
FAR 45 is talking to the Government and telling them how to handle Relief of Stewardship Responsibility when a contractor has given them a report/request for Relief of Stewardship Responsibility and Liability
Relief is granted is accordance w/FAR (f)(1)(vii)
Please note the GPA shall forward your request to the Contracting Officer when they feel the contractor should be held liable. They do not make the decision by themselves.
Presented by Beth Green and Tara Miller
11/6/2018

24. References
FAR Contractors’ property management system compliance. (April 2012)
FAR (a) Definitions (April 2012)
FAR   Responsibility and liability for Government property (April 2012)
FAR (f) Contractor plans and systems (vii) Relief of stewardship responsibility and Liability (April 2012)
FAR (h) Contractor Liability for Government Property (April 2012)
Presented by Beth Green and Tara Miller
11/6/2018

25. Contact us if you have any questions!
Contact Information
Contact us if you have any questions!
Tara S. Miller
Beth
Cell:
Home:
Presented by Beth Green and Tara Miller
11/6/2018