[Federal Register: May 15, 2007 (Volume 72, Number 93)] [Rules and Regulations] [Page 27364-27397] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr15my07-9] ----------------------------------------------------------------------- DEPARTMENT OF DEFENSE GENERAL SERVICES ADMINISTRATION NATIONAL AERONAUTICS AND SPACE ADMINISTRATION 48 CFR Parts 1, 2, 4, 7, 14, 15, 16, 17, 18, 19, 22, 28, 31, 32, 35, 37, 41, 42, 43, 44, 45, 46, 49, 51, 52, and 53 [FAC 2005-17; FAR Case 2004-025; Docket 2007-0001, Sequence 2] RIN 9000-AK30 Federal Acquisition Regulation; FAR Case 2004-025, Government Property AGENCIES: Department of Defense (DoD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA). ACTION: Final rule. ----------------------------------------------------------------------- SUMMARY: The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council (Councils) have agreed on a final rule amending the Federal Acquisition Regulation (FAR) to simplify procedures, clarify language, and eliminate obsolete requirements related to the management and disposition of Government property in the possession of contractors. FAR parts are amended to implement a policy that improves the management of Government property while fostering efficiency, flexibility, innovation and creativity by adopting property practices typically used in the commercial arena while continuing to protect the Government's interest. In [[Page 27365]] addition, the rule simplifies requirements on contractors by reducing the number of FAR clauses from nineteen clauses to three overarching clauses. The final rule specifically impacts contracting officers, property administrators, and contractors responsible for the management of Government property. DATES: Effective Date: June 14, 2007. FOR FURTHER INFORMATION CONTACT For clarification of content, contact Mrs. Jeritta Parnell, Procurement Analyst, at (202) 501-4082. Please cite FAC 2005-17, FAR case 2004-025. For information pertaining to status or publication schedules, contact the FAR Secretariat at (202) 501-4755. SUPPLEMENTARY INFORMATION: A. Background The Department of Defense (DoD) proposed a rewrite of FAR Part 45, Government Property and associated clauses, to implement a policy that fosters efficiency, flexibility, innovation and creativity while continuing to protect the Government's interest. In the late 1990s, the DoD initiated a complete rewrite of the FAR, Part 45 and associated clauses. Beyond attempting to address long-standing property management issues, the effort reflected the general consensus that adoption of more typically commercial business practices would not only attract more commercial firms to the marketplace but also result in significant savings of acquisition dollars. For many reasons, only one of the proposed rules (Subpart 45.6) was implemented; the legalities and complexities that characterize Government property management drew out differences between the Government and industry parties, resulting in suspension of the rest of the project. DoD, GSA, and NASA published a proposed rule in the Federal Register at 70 FR 54878, September 19, 2005, and the public comment period closed November 18, 2005. Forty respondents submitted two-hundred-eighty-seven comments. The two-hundred-eighty-seven comments were grouped into thirty-two categories. The Councils considered all comments and concluded that the proposed rule should be converted to a final rule, with changes to the proposed rule. Differences between the proposed rule and final rule are identified in the Summary of Changes in Section C, and discussed in the responses to the public comments in Section B. B. Public Comments The 287 comments received from forty respondents have been dispositioned as discussed below. The comments received were grouped under 32 general topics. A summary of the comments follows: 1. Title. a. Title to Government Property. Fourteen comments were received from ten respondents regarding the title of Government property. (1) Two respondents addressed the proposed FAR revision as containing an elimination of the state law ``sale for resale'' exemption for overhead property allocable to cost type contracts. The respondents stated that the proposed rule eliminates the exemption from sales and use taxes on contractor overhead property allocable to cost type contracts and should be withdrawn and full consideration given to the impact of the change. (2) One respondent requested adding the statement to the proposed rule at FAR 52.245-1(e) ``Under cost reimbursement and cost sharing contracts'' to clarify title under cost type contracts versus fixed price contracts. (3) One respondent requested an additional sentence be added to the title paragraph clarifying that when this clause is used with Time-and- Material (T&M) contracts, contractors shall only acquire material for direct charge to the contract. (4) One respondent recommended the following change to clarify FAR 45.401, ``Under fixed price type contracts, the contractor retains title to all property acquired by the contractor for use on the contract, up until the time that such property is received, delivered and accepted as a part of the deliverable end-item by the Government.'' (5) One respondent recommended adding a section to address cost Contract Line Item Numbers (CLINs) under fixed price contracts in FAR 45.401(b). (6) One respondent recommended that FAR 52.245-1(e) be revised to replace direct item of cost with, either directly or conditionally, based upon the sub paragraphs (2), (3), and (4) that followed. (7) One respondent requested FAR 52.245-1(e) be revised to replace ``direct item of cost'' with ``either directly or conditionally based on the subparagraphs (2), (3) and (4)'' or use optional wording ``FFP and Cost-type reimbursable contracts.'' (8) One respondent recommended the retention of the current language in FAR 52.245-2 and 52.245-5 as to when title passes. (9) One respondent requested a revision to title language referring to indirect title issues as proposed in FAR 45.401 and FAR 52.245-1(e) to clarify indirect and direct overhead property. (10) One respondent provided the following response to the proposed rule at FAR 52.245-1, ``While the Government has not asserted title to all materials that may support the charging of indirect costs, including (for instance) office supplies (some portions of the cost of which may be allocated to a contract), we believe that financing payments normally must be secured by a title interest in contract materials. As a general rule, the value of the payments will be fairly approximated by the value of goods that are either incorporated into the end items, or consumed in their production (such as cutting materials, abrasives, special tooling, etc.). The Government's interest in such materials is not dependent on whether their costs are charged as direct or indirect costs. Sections 45.401(b) and (c), and paragraph (e) of the proposed Government Property clause, have therefore been corrected in this draft to eliminate this distinction.'' (11) One respondent provided three comments. (i) A contract modification may not be necessary if contractor retention and use was the original intent of the contract. Requiring a modification serves no purpose. Under fixed price type contracts, the contractor retains title to all property acquired by the contractor for use on the contract except for property identified as a deliverable item. If a deliverable item is to be furnished to the contractor for use after inspection and acceptance by the Government, it shall be made accountable to the receiving contract as Government-furnished property. (ii) Clarify the FAR to be more consistent with the current and proposed title provisions. We believe there is no intent on the Government's part or the contractor's part to change how the title provisions currently function. (iii) Revise 52.245-1(d) and (e). Response: The intent of 52.245-2 and 52.245-5 remains unchanged. The proposed language at 45.401 and 52.245-1(d) and (e) is revised to reflect the current language in the FAR found at 52.245-2 and 52.245-5. Administrative changes (i.e., deletion of references to Special Tooling and Facilities) were made to 45.402 and 52.245-1(e)(2) and (3) in order to correlate with the final rule. Though the intent of the proposed rule was to provide clarity for title issues, the disparate public comments received gave evidence that questions still remain. Therefore, the Councils have [[Page 27366]] fundamentally retained existing FAR language under this case. b. Title Under Progress Payments. One respondent requested clarification in 52.232-16 that the Government does not take title to overhead property. Response: The Councils do not believe the recommended change at 52.232-16 is necessary as related to this case. With respect to overhead materials, language will not be changed by the FAR Part 45 rewrite. 2. Use of Government Property (Suitability for Use and As-Is). a. One respondent recommended that contractors be allowed the opportunity to inspect Government-furnished property, expected to be suitable for contract performance, after the property has been received and installed. Response: The Councils agree that contractors should be allowed to determine whether Government-furnished property is suitable for contract performance. Therefore FAR 52.245-1(d)(3)(ii), renumbered as 52.245-1(d)(2)(ii), is revised to allow contractors the opportunity to determine whether Government-furnished property is suitable for use after receipt and installation. b. One respondent recommended that FAR clause 52.245-1(d)(3)(i) and (ii) be revised to specify what constitutes a contractor's timely written request for equitable adjustment. Response:The Councils believe the final rule language is adequate for the contractor to advise the contracting officer of Government property received in a condition not suitable for its intended use or if the property is not delivered to the contractor by the contractually required date. The rule allows flexibility in accordance with agency procedures and/or individual contract requirements. c. One respondent recommended using original language as stated in FAR 52.245-2(a)(2) to disposition Government property not suitable for intended use. Since the property is owned by the Government, the decision concerning an appropriate action should rest with the contracting officer. Response: The Councils believe the final rule language is sufficient for disposition of Government property not suitable for intended use. The language gives the contracting officer the flexibility when choosing a course of action to remedy the problem. FAR clause 52.245-1(d)(2)(ii) specifically states that actions may include repairing, replacing, modifying, returning or otherwise disposing of the property at the Government's expense. Upon completion of the action(s), the contracting officer shall consider an equitable adjustment to the contract. d. Six respondents offered recommendations to the language regarding property offered ``as-is.'' The proposed rule did not address pre-contract inspection by the contractor for Government-furnished property offered in an ``as-is'' condition. This may cause adverse ramifications associated with the use of the ``as-is'' provisions. Response: The Councils believe that the recommendation to add language addressing pre-contract inspection by the contractor for Government-furnished property offered in an ``as-is'' condition is appropriate and has added language at FAR 45.201(a)(5). The new language requires the contracting officer to include a statement in all solicitations as to whether the Government property is to be furnished in an ``as-is'' condition and provide instructions for physical inspection. e. One respondent recommended that FAR clause 52.245-1(d)(3)(iii) be deleted in its entirety as the unilateral provisioning of ``as-is'' property is high risk to the contractor. In addition, it delays scheduling, increases cost to the contractor and to the Government and may present a costly event to the contractor should the item be determined hazardous. Response: The Councils do not agree with the recommendation to delete the Government's option to furnish property in an ``as-is'' condition. The FAR currently provides language to provide property in an as-is condition and the Councils see no evidence to justify the removal of this language. However, the Councils recognize the respondent's concern and have mitigated the risk by revising FAR clause 52.245-1(d)(3)(iii), renumbered as 52.245-1(d)(2)(iii), to clarify that the contractor will be given the opportunity to inspect property provided in an ``as-is'' condition prior to the property being provided. f. One respondent stated that the listing at FAR 45.201(a) should include all material information required to make an informed decision regarding Government property to be offered in solicitations in an ``as-is'' condition. The respondent recommended adding supply condition code and current location to the proposed listing. Response: The Councils believe the list in the proposed final rule is sufficient for inclusion in solicitations where Government-furnished property is anticipated and should not be modified to add supply condition code and current location. The contractor has the right to inspect property furnished ``as-is'' and determine the condition relative to overall utility prior to the property being provided under contract as stated in the revised rule, FAR clause 52.245-1(d)(3)(iii), renumbered as 52.245-1(d)(2)(iii). g. One respondent recommended that a reference to the Changes clause be included at FAR 52.245-1(i). The respondent further commented that the language is somewhat limiting. If a contractor relies on Government-Furnished Property (GFP) and that property is delayed, received in an unsuitable condition, substituted, etc. (see FAR 52.245- 1(i)(1)-(4)), contract performance may be impacted. An equitable adjustment may not be sufficient remedy for the contractor. Response: The Councils believe that the proposed language should not be revised to include a reference to the Changes clause nor should the equitable adjustment language be revised. A change is affected according to whether or not the contracting officer determines the necessity for such, in accordance with contract terms and conditions. Equitable adjustments require agreement by both parties. 3. Scope. a. One respondent suggested the addition of a sentence to FAR 45.000, scope of part, stating that ``nothing in this part prohibits the use of a property management contract.'' Response: The FAR does not prohibit the use of a contract for performance of property management. Contracts for the performance of property management are a common form of service contracts. The Councils do not believe it is necessary to specifically state that the use of a contract for performance of property management is ``not prohibited.'' b. One respondent suggested adding language to FAR 45.000, scope of part, to specifically exclude software. Response: While the definition of Contractor-acquired property remains unchanged, FAR 45.000 is revised to exclude software and intellectual property from this rule. c. Three respondents suggested replacing ``plant'' or ``plant equipment'' in the parenthetical phrase in FAR 45.000. Response: The language is revised to delete the term ``Plant equipment'' and replace it with the word ``Property'' in the parenthetical phrase in FAR 45.000. The term ``Property,'' rather than the term ``Plant equipment'' is more appropriately used because it is more inclusive and more definitive. d. One respondent suggested that since the definition for plant equipment has been deleted, and the term ``Equipment'' has been substituted in most cases in the re-write, the all- [[Page 27367]] inclusive term ``Government property,'' as used in FAR 45.301(f) of the proposed rule, should also be replaced with the term ``Equipment'' based on the context. Response: The term ``Government property,'' rather than the term ``Equipment'' or ``Government equipment'', is more appropriately used because it is more inclusive and more definitive. 4. Definitions. a. Acquisition Cost. Seven comments were received from five respondents concerning the definition of ``Acquisition cost.'' One respondent stated that the proposed definition did not provide for the use of original acquisition cost. One respondent recommended deleting the language at paragraph (2) of the definition. One respondent recommended that the definition be revised to refer to generally accepted accounting principles (GAAP), not consistently applied sound accounting principles, and asked whether Cost Accounting Standards (CAS) is applicable. One respondent stated the definition should be revised to state that the fair market value attributed to the item should be agreed upon by the parties. One respondent stated that the definition in 45.101, 52.245-1, and 52.245-9 included the term ``full cost'' which may be confusing to personnel unfamiliar with contractor's systems, e.g., for equipment, acquisition cost is referred to as ``unit acquisition cost.'' Response: The Councils recognize the concerns and have revised the definition of acquisition cost that provides sufficient detail to permit application. As part of this revision, the Councils have replaced the term ``Full cost'' with ``Cost'' to avoid any potential confusion. b. Approved Scrap Procedure. One respondent recommended including a definition for ``Approved scrap procedures.'' Response: The Councils believe there is no single definition for approved scrap procedure; it will vary, dependent upon the individual contractor. c. Cannibalize. Two respondents recommended adding a definition for ``Cannibalize.'' Response: The Councils agree with the recommendation and a definition for ``Cannibalize'' is added to 45.101 and 52.245-1. d. Common Item. Two comments received from one respondent recommended the definition for ``Common item'' be deleted at 45.101 and 52.245-1(a) because it is superfluous and not used elsewhere. Response: The term ``Common item'' is used in Part 31 and in the inventory disposal forms. However, because the term is used in more than one section of the FAR, the Councils decided the definition should be moved to Part 2. e. Contractor-Acquired Property. Two comments received from two respondents recommended revising the definition of ``Contractor-acquired property.'' One respondent recommended revising the definition as follows: ``means property acquired or otherwise provided by the contractor for performing a contract and to which the Government has provided funding or has title.'' One respondent recommended adding the word ``Government'' to the term to say ``Contractor acquired government property.'' Response: The Councils believe the definition is adequate as written. The definition states ``to which the Government has title'' so, there is no additional value to adding the word Government to the term. f. Contractor Inventory. Eleven comments were received from three respondents recommending changes to the definition of ``Contractor inventory.'' Four comments stated that paragraph (1) should be revised to state only: ``Any property acquired by and or in the possession of a contractor or subcontractor under a contract for which title is vested in the Government and delete the language that states: ``and which exceeds the amounts needed to complete full performance under the entire contract.'' Two comments stated the term should be changed to ``Contract inventory.'' Two comments stated that paragraph (2) should be deleted. Two comments stated that paragraph (3) should be deleted. One comment stated that term should be ``contractor property.'' Response: The term and the definition of contractor inventory reflect the statutory definition in 40 U.S.C. 472. g. Demilitarization. Five comments were received from four respondents regarding the definition of ``Demilitarization.'' One respondent stated that the definition of demilitarization was ill-suited for its intended purpose and recommended it be toned down and moved away from its military slant. Other terms suggested were disenable, neutralize, incapacitate or decommission. One respondent stated that the word ``demilitarization'' should be removed from the body of the definition. One respondent stated that the definitions in 45.101 and 52.245-1 should be revised to say ``demilitarization means rendering designated equipment or material unusable for, and not restorable to, the purpose for which it was designed or is customarily used'' by deleting the phrase ``a product designated for demilitarization.'' One respondent stated that definition needed to be revised to replace ``product designated for demilitarization'' with ``equipment and material.'' Response: The definition is revised to remove the words ``designated for demilitarization,'' but the Councils did not concur with substituting ``equipment or material'' with ``disenable, neutralize, incapacitate or decommission.'' Demilitarization is a term of art specific for military purposes and denotes more requirements than are implied by the suggested terms. h. Discrepancies Incident to Shipment. Four comments were received from three respondents to revise the definition of ``Discrepancies incident to shipment'' to mean any difference between the items documented to have been shipped and items actually received. Response: The Councils agree with the suggested revisions and the definition is revised in 45.101 and 52.245-1. i. Equipment. Three comments were received from three respondents to revise the definition of ``Equipment.'' One respondent stated the phrase ``in-and- of-itself'' is limiting, the statement on the expected useful life is superfluous and the phrase ``does not lose its identity or become a component part of another article when put into use'' creates confusion. One respondent stated ``in-and-of-itself'' should be replaced with ``functionally complete for its intended purpose.'' One respondent stated special tooling should be a subset of equipment. Response: The Councils agree that the phrase ``in-and-of-itself'' should be revised and replaced it with ``functionally complete for its intended purpose,'' but there are instances where a piece of equipment becomes part of a higher assembly, so that distinction is necessary. j. Government-Furnished Property. Two comments were received from one respondent to revise the definition of ``Government-furnished property'' to be consistent with the Unique Identification (UID) requirements by adding the phrase ``is a subset of property in the possession of a contractor (PIPC),'' in both 45.101 and the clause at 52.245-1. Response: The Councils do not believe the additional language is necessary and does not add clarity. UID is a unique DoD initiative, and the term [[Page 27368]] PIPC is a DoD unique term, and therefore are not appropriate for inclusion in the FAR. k. Industry Leading Standard or Practice. One respondent stated that there should be a definition for ``Industry leading standard or practice'' added to the clause at 52.245-1. Response: The Councils believe that the term is a commonly used term and is meant to convey industry strategies and processes that are quantifiably and qualitatively demonstrated to be top performing. l. Information Technology Equipment. Two comments were received from one respondent stating that a definition should be added for ``Information Technology Equipment (ITE)'' in 45.101 and the clause at 52.245-1. Response: A definition of information technology exists in 2.101 and captures information technology equipment within that definition. m. Material. Two comments were received from one respondent to revise the definition of ``Material'' to be more in line with the concept that tangible personal property is either material or equipment and to remove the exclusions of special tooling, special test equipment and unique Federal property, in 45.101 and in the clause at 52.245-1. Response: The Councils believe special tooling and special test equipment are still valid classifications and the exclusion still applies. Unique Federal property may be applicable at an agency level. The term ``Unique Federal property'' was removed from the final rule language. n. Non-severable. Two comments were received from one respondent to substitute the word construction for erection in the definition of ``Non-severable'' in both 45.101 and the clause at 52.245-1. Response: The definition is revised because the Councils believe that ``construction'' provides a better description. o. Personal Property. Two respondents stated that there is no definition for ``Personal property'' and a definition should be included here. Response: The definition for Personal property can be found in 2.101. p. Property in the Possession of Contractors (PIPC). One comment was received stating there needed to be a definition for ``Property in the Possession of Contractors (PIPC).'' Response: An additional definition is not necessary because this is not a term used in the FAR. q. Plant Clearance Officer (PLCO) and Property Administrator (PA). Four comments were received from two respondents regarding revisions to the definition of ``Plant Clearance Officer'' (PLCO) and ``Property Administrator'' (PA). One respondent stated that PLCO and PA should be defined in the same place and that the word ``assigned'' should be revised to read ``appointed'' in both definitions because they both must have a certificate of appointment. One respondent stated that the revisions to the PLCO definition appear to redefine the duties of the PLCO and proposed a revised definition as ``an authorized representative of the contracting officer appointed to disposition property accountable under Government contracts.'' One respondent stated that the definition should be left as is. Response: The definitions of PLCO and PA were revised to replace the word ``assigned'' with ``appointed'' in FAR 2.101 (PLCO), 45.101 (PA) and 52.245-1 (PA). The Councils believe the proposed revision most accurately reflects the duties and authorities of the appointed individual. PLCO is defined in FAR 2.101. PA is only used in 45 and is therefore inappropriate to be defined in FAR 2.101. r. Provide. Two comments were received from one respondent recommending that the definition of ``Provide'' should be consistent with the Defense Federal Acquisition Regulation Supplement (DFARS) 245.301 definition. Response: The definition of ``Provide'' is revised in the final rule at 45.101 and 52.245-1. s. Real Property. Two comments were received from one respondent stating that the definitions for ``Real property'' should be moved from 45.101 and 52.245-1 to 2.101. Response: The Councils believe that the definition for ``Real property'' is more appropriate in Part 45 because this definition relates to property management and may conflict with the use of the term as used elsewhere in the FAR. The final rule retains the current FAR Part 45 definitions of Real property and Plant equipment. The proposed rule included a revised definition of Real property in FAR Part 45, and also deleted the definition of Plant equipment. However, upon further review, the Councils are concerned that removing the term ``Plant'' from ``Plant equipment'' may inappropriately narrow the definition of Real property. The current definition states that Real property does not include the foundations and work necessary to install plant equipment. Plant equipment is currently defined as encompassing only Personal property. However, the term ``Equipment'' can encompass both Real and Personal property. Thus, the Councils believe it is advisable to retain the current definitions of Real property and Plant equipment. However, in Section 45.000, Scope of part, the Councils believe that the term ``Property'' is more appropriate than ``Plant equipment'', i.e., the distinction between Real and Personal property is not relevant in the context of this particular section. t. Scrap. Two comments were received from two respondents stating that the proposed rule does not provide a definition of ``Scrap.'' Response: FAR Part 2 includes a definition of scrap. u. Sensitive Property. One respondent stated that the definition of ``Sensitive property'' should include sensitive and classified information. Response: A revision to the definition of ``Sensitive property'' is not necessary. The proposed rule applies only to tangible property and does apply to information such as software or intellectual property. v. Special Tooling and Special Test Equipment. Four comments were received from four respondents regarding the use of the terms ``Special Tooling (ST)'' and ``Special Test Equipment (STE)'' and the location of the definitions. One respondent stated that if the ST and STE clauses are being deleted, then the terms should be deleted as well. One respondent asked whether Part 2 was going to be revised to include the definitions of ST and STE, since it does not currently. One respondent stated that ``replacement of these items'' should be deleted from the definition of Special tooling. Response:Even though the clauses for special tooling and special test equipment are being deleted, the terms are still appropriate classifications. The definitions of ST and STE are included in the proposed rule under Part 2. The Councils agree that the phrase ``replacement of these items'' should be deleted from the special tooling definition in FAR 2.101 and has revised the definition accordingly. w. Stewardship. Two respondents stated that the revised rule should include a definition of ``Stewardship.'' Response: The Councils believe the term is a common dictionary term and does not need to be defined. x. Surplus Property. [[Page 27369]] Two comments were received from one respondent stating the definition of ``Surplus property'' should be revised in both 45.101 and 52.245-1 to state ``excess personal property not required by any Federal agency as determined by the Administrator of the General Services Administration (GSA) or as delegated.'' Response: GSA has not delegated the authority to determine that items are surplus to the Government. y. Unique Federal Property. Two comments were received from one respondent stating that ``Unique Federal property'' is a subset of equipment and the definition of ``Unique Federal property'' should be revised to replace the term ``Personal property'' with ``Equipment'' in both FAR 45.101 and the clause at 52.245-1. Response: ``Unique Federal property'' is not exclusively a subset of equipment. ``Unique Federal property'' may include equipment and other classifications of personal property. However, the definition is deleted because it is not used in the prescriptive language or in the clause. z. Voluntary Consensus Standards. One respondent stated that definition of ``Voluntary consensus standards'' should be the same as the definition in OMB Circular A-119. Response: The definition is based on the definition in OMB Circular A-119 and is tailored to the requirements of FAR Part 45. aa. Work In Progress (WIP). One comment was received regarding the addition of a definition for ``WIP,'' in both Part 45 and the clause at 52.245-1. Response: The term ``WIP'' is not used in Part 45, and therefore, there is no need to define the term. 5. Policy. a. One respondent stated that the FAR should provide a more detailed explanation of what is needed for a contracting officer to provide property. Response: FAR 45.102(b) sets forth overall requirements that must be met for contracting officers to make a determination to furnish Government property. Any further details are subject to Agency policies and procedures. b. One respondent suggested the Councils clarify the intent of the requirement that contracting officers ``provide property to contractors only when it is clearly demonstrated.'' Response: The proposed language in FAR 45.102(b) sets forth clear requirements regarding what must be demonstrated in order for contracting officers to provide Government property. To further define these requirements would hinder contracting officers' flexibility in making informed business decisions in the best interest of the Government. c. One respondent questioned how contracting officers are supposed to calculate the cost of administration etc. under FAR 45.102(b)(2). Response: Calculating the cost of administration should be considered on a case by case basis and in accordance with Agency procedures and individual contractual circumstances and requirements. d. One respondent questioned what is meant by the phrase ``increase the Government's assumption of risk'' under FAR 45.102(b)(3). Response: The Government's assumption of risk is not specifically defined since the FAR cannot predict all aspects of risk. Such aspects may include, but are not limited to, successful contract completion, loss of Government property, national security, etc. To further define these requirements would hinder contracting officers' flexibility in making informed business decisions in the best interest of the Government. e. Two respondents were concerned that the proposed rule will make furnishing property to contractors much easier administratively, and consequently will result in more Government property being furnished to contractors. Response: The language allows contracting officers, the flexibility to make appropriate business decisions regarding their contracts. This may include the provision of property, but only when it is in the best interests of the Government. f. One respondent stated that FAR 45.103 also defines Voluntary consensus standards and as such, they embrace this concept whole- heartedly. The respondent suggested that for consistency, it would make sense to use the verbiage as spelled out in FAR 11.101(c). Response: Section 11.101 provides guidance for the use of Voluntary consensus standards. To restate such guidance would be redundant. The definition of Voluntary consensus standards was added to 2.101 in the proposed rule and is based on the definition in OMB circular A-119. 6. General. a. One respondent stated that it may be difficult to estimate Government-Furnished Property (GFP) utilization over a 5 or 10-year contract period and recommended that allowances be made for revisiting the timely turn-in of excess property, where exceptional circumstances exist. Response: In order to ensure maximum practical use of the property and timely disposition of excess property, the Councils believe the final rule language found at FAR 45.103(a)(6), which requires contractors to justify retaining Government property not needed for contract performance, is necessary. It should be noted that the prescriptive language would be subject to agency procedures. b. One respondent suggested that FAR 45.103(a)(2) be divided into two separate requirements, as the subject matter is not related. Response: The Councils agree with the respondent and has revised FAR 45.103(a)(2) to make two separate requirements. As a result, proposed paragraphs (3), (4), and (5) have been renumbered in the final rule as (4), (5), and (6). In addition, the invalid reference to 45.602 has been deleted. c. One respondent questioned what possible justification could a contractor provide to substantiate keeping Government property not required for performance of a Government contract. Response: Normally Government property is returned to the Government. Contractors are required to justify retention of Government property not needed for contract performance in order to ensure maximum practical use of the property and to ensure timely disposition of excess property. There are several instances in which it is in the Government's best interest for contractors to retain Government property (e.g., future procurements and spare part procurements, medical studies and industrial readiness). 7. Industry Leading Standards and Practices. a. One respondent, with respect to 45.103, asked who sets the ``Leading Industry Standards.'' Response: An ``Industry leading'' standard is meant to convey industry strategies and processes that are both quantifiably and qualitatively demonstrated to be top performing within a given industry. b. Two respondents, with respect to the Background Section of the Federal Register Notice, stated that it is unclear how the use of commercial practices will apply to the management of Government property under Government contracts especially when contractors do not provide their own property to other contractors under their contracts. Response: Contractors are not necessarily being asked to provide processes for contractor-to-contractor relationships. Rather, contractors are being required to apply the same industry leading standards or voluntary [[Page 27370]] consensus standards that they use to manage their own property. c. One respondent stated, with respect to 45.103, that voluntary consensus standards currently in print would not be efficient to protect the Government's interest. An area that is unclear is whether contractors will be required to go to a voluntary consensus standard if for the past twenty years the contractor's property control system has met or exceeded the requirements of FAR Subpart 45.5. If contractor metrics ASTM, ISO, etc., are used by the Government to monitor contractor compliance, what precedent does the FAR, DoD Supplement, and DoD Manual have in relationship to the contractor based metric? Response: The effectiveness of Voluntary consensus standards is well established; their use is prescribed in OMB Circular 119 and in FAR Part 11. The proposed rule included the requirement for consistent application of prescribed outcomes. d. One respondent stated that the use of industry-leading standards and practices versus the previous standard of sound industrial practices imposes a hardship on small business. Response: The Councils believe that the rule allows small businesses to use industry practices instead of Government imposed standards and is therefore less burdensome. Industry leading practices are not an exclusive purview of large business. The rule balances regulation with principle-based standards that allow for minimal regulatory requirement and greater flexibility and efficiency to achieve best value for the Government. e. One respondent asks, ``How are contracting officers to be aware of industry leading practices? Will the council direct the creation of new Defense Acquisition University (DAU) courses specifically for this purpose?'' Response: The Councils believe that contracting officers are professionals in their fields of acquisition and are capable of accessing the necessary information from various sources applicable to their respective fields. The Councils will work with DAU to determine if and to what extent course revisions or new courses are required. 8. Insurance and Indemnification (FAR 31.205-19). Three respondents requested a change to the use of ``undue'' and ``theft'' in regard to FAR 31.205-19. One respondent recommended a revision of paragraph 31.205-19(e)(2)(iv) to (1) remove ``Government has determined'' and replace with the ``contracting officer has made a final determination,'' and (2) to use ``material risk'' instead of ``undue risk.'' The respondent stated that ``materiality'' is defined in FAR 30.602 (48 CFR 9903.305), and (3) remove the word ``theft.'' The respondent stated that the word ``loss'' is still listed, and theft is just one specific type of ``loss.'' The addition of the word ``theft'' here and in other parts of the re-write is redundant. Two respondents recommended that the word ``undue'' be replaced with ``material'' in FAR 31.205-19(e)(2)(iv) per the definition in 30.602, and both respondents recommended deleting the word ``theft'' as it is a subset of loss and should be deleted in FAR 31.205-19(e)(2)(iv) and in FAR 32.502-16 risk of loss. Response: The Councils disagree with the recommendation to replace the term ``Undue'' with ``Material'' and have removed the language from this Subpart. The Councils did not agree with the deletion of the word ``theft'' because it denotes a specific meaning. In addition, the Councils believe that the term ``Government'' allows the Government decision maker greater flexibility than use of the term ``final determination.'' 9. Theft. Nine comments were received from one respondent recommending omitting the word ``theft'' from various parts and clauses in the proposed rule. One respondent recommended eliminating the word ``theft'' from FAR 45.104(a). The elimination would be consistent with prior comments on damage, or destruction, of Government property. One respondent recommended eliminating the word ``theft'' from FAR 52.245-1(f)(1)(vi)(A). The following change was suggested for ``Loss, damaged, or destruction. Unless otherwise directed by the Property Administrator, the contractor shall investigate and promptly furnish to the Property Administrator, a written narrative of all incidents of loss, damage, or destruction, as soon as the facts become known or when requested by the Government. Such reports shall, at a minimum, contain the following information....'' One respondent recommended eliminating the word ``theft'' from FAR 52.245-1(f)(1)(vi)(B) and provided the suggested language as follows: ``The contractor shall take all reasonable actions necessary to protect the Government property from further loss, damage, or destruction. The contractor shall separate the damaged and undamaged Government property, place all the affected Government property in the best possible order, and take such other action as the Property Administrator directs.'' One respondent recommended eliminating the word ``theft'' from FAR 52.245-1(f)(1)(vi)(C) and provided the following suggested language: ``The contractor shall do nothing to prejudice the Government's rights to recover against third parties for any loss, damaged, or destruction, of Government property.'' One respondent recommended eliminating the word ``theft'' from FAR 52.245-1(f)(1)(x) and suggested replacing with the following language: ``The contractor shall promptly perform and report to the Property Administrator contract property closeout, to include reporting, investigating and securing closure of all loss, damage, or destruction, cases; physically inventorying all property upon termination or completion of this contract; and disposing of items at the time they are determined to be excess to contractual needs.'' One respondent recommended eliminating the word ``theft'' from FAR 52.245-1(h) and suggested language as follows: ``Contractor liability for government property. (1) Unless otherwise provided for in the contract, the contractor shall not be liable for loss, damaged, or destruction to the Government property furnished or acquired under this contract, except when any one of the following applies:'' One respondent recommended eliminating the word ``theft'' from FAR 52.245-1(h)(1)(ii) and the suggested language as follows: ``The loss, damage, or destruction, is 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 mean 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.'' One respondent recommended eliminating the words ``theft and undue'' from FAR 52.245-1(h)(1)(iii). The respondent also recommended eliminating the words ``Clear and convincing evidence,'' because the standard places an undue burden on Government contractors. The suggested change provided by the respondent is as follows: ``The contracting office has, in writing, withdrawn the Government's assumption of risk for loss, damage, or destruction, due to a determination under paragraph (g) of this clause that the contractor's property management practices are inadequate, and/or present [[Page 27371]] a material risk to the Government, and the contractor failed to take timely corrective action. If the contractor can establish that the loss, damage or destruction of Government property occurred while the contractor had adequate property management practices, or the loss, damage, or destruction of Government property did not result from the contractor's failure to maintain adequate property management practices, the contractor shall not be held liable.'' One respondent recommended eliminating the word ``theft'' from the proposed rule at FAR 52.245-1(h) and the suggested language as follows: ``The contractor assumes the risk of, and shall be responsible for, any loss, damage, or destruction, of Government property upon its delivery to the contractor as Government-furnished property. However, the contractor is not responsible for reasonable wear and tear to Government property properly consumed in performing this contract.'' Response: The Councils concluded that the word ``theft'' would not be deleted from the FAR due to the specific meaning associated with the word. 10. Responsibility and Liability. a. One respondent recommended that procedures be added at FAR 45.102 for the flow of accountability for Government- Furnished Property (GFP) from a contractor back to the Government, with the Government organization in possession of the GFP having liability for the GFP, or alternatively that clarification be added that GFP provided to a contractor is for the sole use of the contractor in meeting the requirements of the contract, and not as a repository for Government property intended for actual use by the Government. Response: Since procedures do exist in Agency directives and in individual contracts on the accountability of GFP, which is used by the Government, it is not necessary to prescribe procedures for such an event in the FAR. Liability and accountability are not synonymous and are addressed separately in the FAR. A contractor could serve as a repository for Government property, depending on contract requirements. b. One respondent asked, what does ``revoke Government's assumption of risk'' at FAR 45.104(b) entail, and why would this compel compliance? Response: Since revocation justification information would be set forth in agency procedures, it is not necessary to prescribe this information in the FAR. Revocation would compel compliance because contractors would then be financially liable for loss, damage, destruction, or theft. c. One respondent stated that FAR 45.104(b) contains two separate thoughts and recommended that it be divided into two separate paragraphs (b) revocation and (c) dealing with prime and subcontractor risk of loss relationships. Response: Paragraph is revised to reflect suggested structure. d. One respondent recommended adding or reinstating language that is substantially similar to the current FAR 45.103(c) to proposed FAR 45.104, in order to be consistent with the proposed FAR clause 52.245- 1(h). The current FAR 45.103(c) states that ``the contract may require the contractor to assume greater liability for loss of or damage to Government property than that contemplated by the Government property clauses....'' Response: The Councils believe the liability provisions in proposed FAR 45.104 are sufficient to protect the Government's interest. e. One respondent recommended that at FAR 45.105(b) the contractor rather than the Government provide the schedule for the correction of deficiencies to a contractor's management of property, since the contractor is in a better position to establish such a schedule. The respondent stated that a contractor-developed schedule would assist in correcting root causes rather than achieving a quick fix. Response: The Councils believe that a Government provided schedule is necessary to ensure the correction of contractor deficiencies that place the Government at risk, within a reasonable period. f. Two respondents recommended replacing the word ``undue'' with ``material'' in FAR 45.105(b), and change the wording to ``shall request from the contractor prompt correction of deficiencies and a schedule for their completion.'' Response: The Councils concluded that the term ``undue'' is better suited to the context of the prescriptive language. The Government must retain the right to determine the scope and schedule of any corrective actions for a contractor deficiency that puts the Government at risk. g. One respondent recommended changes to FAR 52.245-1(g)(3) to allow for resolution where the contractor does not believe direction provided by the property administrator would result in the best value for the Government. The respondent suggested replacing the word ``undue'' with ``material'' and the addition of the following sentence: ``In instances where the contractor does not concur with the corrective actions suggested by the Property Administrator, differences will be resolved with consultation with the contracting officer.'' Response: The term ``undue'' is better suited to the context of the clause. The Councils believe that it is unnecessary to specifically state that consultation with the contracting officer is required. Communication between the Government and the contractor should take place throughout contract performance. h. One respondent recommended replacing the word ``undue'' with ``material'' in FAR 45.104(b), as material can be quantified by industry writings and documents and the word undue is purely subjective Response: The term ``undue'' is better suited to the context of the clause. i. The respondent suggested adding the following language to 52.245-1(h): ``The prime contractor shall enforce for the benefit of the Government any liability that the subcontractor may have for loss, damage, destruction, or theft of Government property.'' Response: The language provided for subcontractor controls is sufficient. The prime contractor has the right to enforce remedies against their subcontractors. The Government does not prescribe prime contractor remedies. 11. Subcontractor. a. One respondent recommended that instruction to the contractor related to subcontractor control be removed from 45.501 and be added to the clause at 52.245-1(f)(1)(v). Response: The Councils revised the language in Subpart 45.5 and added language at 52.245-1(f)(1)(v). b. Two respondents recommended that the language at 52.245- 1(f)(1)(v) be revised to remove the language related to cost savings. Response: The paragraph is revised to read, ``The contractor shall award subcontracts that clearly identify assets to be provided and shall ensure appropriate flow down of contract terms and conditions, e.g., extent of liability for loss, damage, destruction or theft of Government property.'' The language related to cost savings is removed. c. Two respondents recommended language related to the flow down of the appropriate assumption for risk of loss, damage or destruction to subcontracts. One respondent questioned the effect of the language regarding flow down of risk of loss to subcontractors. Response: FAR 52.245-1(f)(1)(v) allows for flow-down to subcontractors. Limited risk of loss is added as an example. The paragraph is revised to read, ``The contractor shall award subcontracts that clearly identify assets [[Page 27372]] to be provided and shall ensure appropriate flow down of contract terms and conditions, e.g., limited liability for loss, damage, destruction or theft of Government property.'' d. One respondent stated that the language at 52.245-1(f)(1)(v)(B) was vague because it did not assign responsibility for accomplishing reviews of subcontractors and providing determinations related to those reviews. Response: The language assigns responsibility to the prime contractor for performance of subcontractors, including the performance of Government property management functions. The language provides the contractor the flexibility to determine the most appropriate method for accomplishing those reviews and obtaining subcontract compliance. e. One respondent recommended the deletion of 52.245-1(f)(1)(v)(A) and 52.245-1(f)(1)(v)(B) because methods of subcontract property management would be included in the prime's property plans. Response: Paragraph A will not be deleted but the language is revised for clarity. This language and practice protects the Government's interest. Paragraph B will not be deleted because this language and practice, as well, protects the Government's interest. 12. Contractor Property Management System. a. One respondent submitted two comments in regard to 45.105. The respondent suggested that FAR 45.105 should be renamed ``Analysis and correction of contractor's property management system'' and that notification to the contractor for the withdrawal of assumption of risk should be by certified mail. Response: The heading in FAR 45.105 is changed to ``Contractor's property management system compliance.'' This is a more meaningful heading, consistent with the spirit of the respondent's comment. Any additional requirements for certified mail notification would be addressed in Agency procedures. b. One respondent recommended that ``In areas where the FAR requires a response, a suggested time frame for responses should be stated (i.e., within 10 business days).'' Response: Specifying an exact number of days would limit flexibility. However, Agencies may require specific timeframes in their agency procedures and in accordance with specific issues. c. One respondent recommended that after initial contract award, verification of the existence of inventory systems be done by exception. Requiring routine verifications places an unnecessary additional burden on the contracting officer without a just cause to suspect the initial is faulty or not in use. Response: The respondent suggests a risk-based approach to system analysis; the proposed rule does not prohibit such an approach. Current language allows agencies maximum flexibility in conducting system analysis. d. One respondent recommended that FAR 45.105(b) be revised so that the contracting officer and not the property administrator is the official requesting/directing correction of deficiencies. Response: The Property Administrator performs the analysis of the contractor's system, and so is in the best position to request/direct the contractor on correction of deficiencies. e. One respondent recommend that the language be changed at FAR 45.105(b)(3) to state, ``other rights or remedies available to the contracting officer under the contract.'' Response: The Councils revised language at FAR 45.105(b)(3) to state ``other rights or remedies available to the contracting officer.'' In addition, FAR 45.105(b)(3) is renumbered as 45.105(b)(2) in accordance with another recommendation. f. One respondent recommended changing the wording at FAR 45.105(b) to delete the words ``shall provide'' from the phrase ``shall provide a schedule for their completion'' which would allow the contractor to propose a schedule for corrective action instead of the Government. Response: A definitive action and a schedule for completion of corrective actions are reasonable and mitigate risk to the Government. g. One respondent recommended a requirement to maintain utilization data similar to that of FAR 45.509-2(b)(2) be reinstated. Response: The current rule allows for the flexibility of data retention. FAR 45.105 allows contractors and property administrators to establish methods to ensure property is fully utilized. h. One respondent recommends adding language to provide the option for the Property Administrator to request the contractor submit (by a specific date) a corrective action plan. As written, FAR 45.105(b) requires the Property Administrator to provide the contractor with a schedule for completion of corrective action. Response: Definitive action and schedule of corrective actions needs to be defined by the Government for a contractor deficiency that puts the Government at risk. The FAR does not prohibit Property Administrators from negotiating a schedule and corrective action. i. One respondent recommends adding language in the clause at 52.245-1(b)(1), ``except where inconsistent with law or regulation'' after the words ``property management''. Response: FAR 52.245-1(b)(1) is revised to add ``except where inconsistent with law or regulation'' after the words ``property management.'' 13. Contract Price Adjustment. Three respondents made three comments recommending the deletion of ``contract price adjustment'' as one of the examples of corrective action if a contractor does not correct property management system deficiencies or suggested including enablers in the FAR clause 52.245-1 for contracting officers to effect a price adjustment. Response: FAR 45.105(b)(1) is deleted and the remaining paragraphs renumbered because it would be difficult for contracting officers to quantify a contract price adjustment associated with the failure to correct a property management system deficiency. 14. Relief of Responsibility. a. Two respondents requested addition of language that describes the conditions and circumstances under which a property administrator could grant contractors relief of accountability and responsibility. Response: Language is added to 45.105(d) and 52.245-1(f)(1)(vii)(A) to describe the conditions and circumstances under which a property administrator could grant contractors relief of accountability and responsibility. b. One respondent requested language to set a threshold for automatic relief of responsibility based on the contractor's property plan. Response: The Government intends to retain the authority to determine whether or not to grant relief of responsibility for loss, damage, destruction or theft. The Councils do not believe thresholds are advisable. The determination of relief of responsibility should be determined on a case-by-case basis. 15. Transferring Accountability. a. One respondent requested clarification and additional language for warranty of Government-furnished property acquired or fabricated initially by the contractor. Response: Language is added at 52.245-1(d) and 45.106 to provide for the inapplicability of warranties of suitability of use and timely delivery of Government-furnished property to property acquired or fabricated initially by the contractor, and subsequently transferred to another contract with this contractor. [[Page 27373]] b. One respondent requested that consideration might be given to adding guidance as to which contractor, gaining or losing, would typically absorb (or bill for) the cost of the property transfer. Response: The language as written allows flexibility. Costs for the property transfer are covered under FAR Part 31. c. One respondent stated confusion between 52.245-1(d)(4)(i) and 45.106. 52.245-1 states the contracting officer may by written notification, at any time increase or decrease the amount of Government-furnished property under this contract. FAR 45.106 states such transfer shall be documented by modification to both gaining and losing contracts. Response: The coverage in FAR 45.106 (Transferring Accountability) is the policy for transferring Government- furnished property from one contract to another. The clause at 52.245-1(d)(4)(i) provides for the increase or decrease in the amount of Government-furnished property. d. One respondent stated that requiring formal modifications to transfer property between contracts is incompatible with the FAR principle of minimizing administrative cost. The respondent has suggested that there should be another administrative mechanism to accomplish this effort more efficiently that satisfies the desired outcome. Current practice only requires a contract modification to the gaining contract. The respondent recommended the use of Wide Area Work Flow (WAWF) for such transfers. Response: A contract modification is the only authority to affect the transfer of Government property between contracts. 16. Contract Clauses. a. Two respondents made three comments that recommended clarification of the prescription and use of the clauses provided in 45.107. Respondents recommended several changes regarding the use of the contract clauses including: the concurrent use of FAR clauses 52.245-1, Government Property, and 52.245-2, Government Property Installation Operations for Services; the mandatory use of FAR clause 52.245-9, Uses and Charges, in all solicitations and contracts that furnish or authorize the acquisition of Government Property; and the recommendation to add language regarding the appropriate use of FAR clause 52.245-1 in FAR Part 12 solicitations and contracts. Response: The Councils believe that the recommended clarifications are appropriate and have revised FAR 45.107(a)(1)(iii), 45.107(b), 45.107(c), 45.107(d), and 52.245-2 to incorporate the recommended revisions. b. One respondent recommended that the language found at 45.107(d) be changed to clarify the use of Government property clauses in purchase orders for property repair. Response: The Councils agree the language should be clarified, and revised FAR 45.107(d) with some editorial changes to the respondent's recommended language. c. One respondent recommended the Government property clause not be included in all cost reimbursement, time-and-material, and labor-hour solicitations and contracts, especially in service contracts where property is not involved or where the contractor supplies all required property. Response: Due to the uncertainties involved in cost-reimbursement, time-and-material, and labor-hour contracts, and the fact that each contract has the potential for Government property, the Councils believe it is in the Government's best interest to include the Government property clause in those solicitations and contracts. d. One respondent recommended the prescriptive language at FAR 45.107(b) specifically limit FAR clause 52.245-2 to fixed price contracts. Response: The FAR clause 52.245-2 was created for use in solicitations and contracts for Installation Operation Services. This type of effort can be contracted using a fixed price arrangement or a cost-reimbursement arrangement. e. One respondent recommended a Fixed Price with Cost CLINs contract type be listed among the types of contracts because fixed price contracts may contain cost-reimbursement type contract line items. Response: The Councils believe the prescriptive language sufficiently addresses all FAR types of contracts, which are grouped into two broad categories (fixed price and cost-reimbursement). It is not necessary to name a combination of types. f. One respondent questioned where the definition of ``Simplified acquisition threshold'' could be found in the FAR. Response: The simplified acquisition thresholds are defined in FAR 2.101. g. One respondent recommended the reference to FAR 35.014 be deleted from FAR 45.107(a)(3) as it is slated for removal, as stated in Federal Register Volume 70, Number 180, dated September 19, 2005 (FAR Case 2004-025). Response: FAR 35.014 is not being deleted in its entirety, however, paragraph (e) is revised to delete references to outdated property clauses and to remove references to facilities clauses. 17. Solicitation and Evaluation Procedures. a. One respondent recommended that a clause be established, or the current clause be modified, to provide the list of requirements found at FAR 45.201(a) when it is anticipated that Government-Furnished Property (GFP) will be provided. Response: The Councils do not believe that an additional clause is necessary. The proposed FAR clause 52.245-1, paragraph (f)(1)(iii) requires the contractor to create and maintain records of all Government property, including GFP. The clause also requires the contractor to maintain certain information in the property record (paragraph (f)(1)(iii)(A)) which the Councils consider to be adequate for tracking GFP. b. One respondent recommended Contract-Acquired Property (CAP) be identified by the contractor, and contracting officer approval be obtained prior to acquiring CAP. Response: The Councils believe the proposed property rewrite is adequate and flexible enough to allow the contracting officer to establish solicitation requirements to sufficiently comply with FAR 45.102 and 45.105. Many times CAP cannot be identified at the time of award. c. One respondent recommended changes to 45.201(b) to eliminate predetermined contractual requirements, as the requirements may be counter to seeking best value. Response: FAR 45.201(b) states that ``in a competitive acquisition, solicitations should specify that the contractor is responsible for'' all costs related to making the property available for use - and it is generally in the Government's best interest to allow contractors to assess transportation, installation or rehabilitation costs. However, the language is flexible enough to allow contracting officers to adjust the requirements. 18. Use and Rental. a. One respondent recommended exclusion of Government-owned, contractor operated plants operating on a cost-plus-fixed-fee basis from rental charges. Response: The Councils agree with the recommendation to change FAR 45.301(b) to remove the exception for Government-owned, contractor- operated plants operating on a cost-plus-fixed-fee basis from rental charges. The language in the final rule is revised accordingly. b. One respondent stated FAR 45.303(b) conflicts with Cost Accounting Standards 420 and the [[Page 27374]] contractor's disclosure statement. The conflict will cause confusion and extraordinary administrative burden to the contractor and the Government as consideration for rental costs is required under FAR clause 52.245-9, Uses and Charges. Response: The Councils recognize the concern and have revised the language to preclude ``reimbursement'' rather than not permitting the costs to be ``charged.'' c. One respondent recommended deletion of FAR 45.303(c). Response: The Councils believe the language at FAR 45.303(c) is necessary because the rental charge protects the interest of the Government when independent research and development costs are allocated to commercial contracts. It should be noted that the original language is retained and relocated from 45.406(