1.6 Government Property Administration & Liability (FAR Part 45)

1.6 Government Property Administration & Liability (FAR Part 45)

Federal procurement policy establishes a strict baseline: contractors are ordinarily expected to furnish all property necessary to perform government contracts. FAR Part 45 (Government Property) prescribes policies and procedures for providing property to contractors, managing contractor property control systems, establishing risk of loss liability, and executing property disposition.

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Policy Criteria for Providing Government Property (FAR 45.102)

Contracting Officers shall not provide property to contractors unless the CO documents a written Determination and Findings establishing that:

1. It is in the Government's best interest;
2. The overall benefit to the acquisition significantly outweighs the administrative cost of managing the property;
3. Providing property does not create an unfair competitive advantage for the contractor; AND
4. Government requirements cannot otherwise be met.

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Classifications of Government Property (FAR 45.101)

Government property includes all property owned by or leased to the Government, or acquired by the Government under a contract. It is divided into two primary acquisition origins and five functional categories:

Acquisition Origins

• Government-Furnished Property (GFP): Property in the possession of or directly acquired by the Government and subsequently furnished to the contractor for contract performance.
• Contractor-Acquired Property (CAP): Property acquired, fabricated, or otherwise provided by the contractor for contract performance, title to which vests in the Government under cost-reimbursement contracts.

Functional Categories

1. Equipment: Tangible items used in operations (e.g., machine tools, vehicles, test equipment).
2. Material: Property that may be consumed or expended during performance (e.g., raw stock, electronic components, hardware).
3. Special Tooling (ST): Specialized jigs, dies, fixtures, molds, and patterns crafted for single-purpose defense manufacturing.
4. Special Test Equipment (STE): Single or multipurpose integrated test units engineered to accomplish specialized testing.
5. Real Property: Land, buildings, structures, and utility systems.

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Property Management System & Contractor Stewardship (FAR Subpart 45.105 & Clause 52.245-1)

Contractors holding government property must establish and maintain a compliant Property Management System across 10 lifecycle processes:

1. Acquisition: Verifying authority to acquire property.
2. Receipt: Inspecting and documenting received property.
3. Records: Maintaining detailed property records (tagging, serial numbers, location, value).
4. Physical Inventory: Conducting periodic physical counts.
5. Subcontract Control: Extending property oversight to subcontracts.
6. Reports: Issuing annual property accountability reports.
7. Discrepancies: Investigating and reporting loss, theft, damage, or destruction (LTDD).
8. Consumption: Tracking raw material usage against contract requirements.
9. Maintenance: Performing preventive maintenance and repair.
10. Property Closeout: Executing final inventory screening and disposition.

Government Property Roles

• Property Administrator (PA): Authorized representative of the CO assigned to conduct Property Management System Analyses (PMSA) and audit contractor compliance.
• Plant Clearance Officer (PLCO): Authorized representative of the CO assigned to screen, declare surplus, and direct final disposition of excess government property.

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Risk of Loss & Liability Regimes (FAR 45.104 & Clause 52.245-1)

Liability for lost, stolen, damaged, or destroyed (LTDD) government property depends directly on the contract type:

Managerial Willful Misconduct Exception

Under cost-reimbursement contracts, the Government's self-insurance rule is voided if property loss or destruction is caused by willful misconduct or lack of good faith on the part of contractor managerial personnel (corporate officers, directors, plant managers, or site superintendents). In such cases, the contractor is fully liable for repairing or replacing the damaged property at its own expense.

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Property Disposition & Contract Closeout Procedures

When government property becomes excess to contract requirements, the contractor must submit Standard Form 1428 (SF 1428 Inventory Disposal Schedule) to the Plant Clearance Officer (PLCO).

• The PLCO initiates plant clearance screening through the automated Plant Clearance Automated Reutilization Screening System (PCARSS).
• Property disposition priorities follow a strict sequence: 1. Reutilization within agency; 2. Transfer to other federal agencies; 3. Donation to eligible state agencies; 4. Commercial public sale; 5. Scrap or destruction.
• Upon completion of disposition, the PLCO issues relief of stewardship, allowing contract property closeout.

Property Management System Analysis (PMSA) & Loss Reporting Protocols

Under FAR 45.105, the Property Administrator (PA) periodically conducts a Property Management System Analysis (PMSA) to evaluate the effectiveness of the contractor property management control system. If the PA identifies systemic deficiencies in contractor property tracking, receipt, or physical inventory processes, the PA issues a formal written notification of system disapproval to the Contracting Officer. In the event of lost, stolen, damaged, or destroyed (LTDD) government property, the contractor must promptly submit a detailed incident report through the eTools / LTDD system. Under cost-reimbursement contracts, if the loss is determined to be the result of managerial willful misconduct or lack of good faith by corporate officers, the Contracting Officer issues a formal demand for financial restitution equal to the full replacement value of the lost asset.