Federal Acquisition Regulation; FAR Case 2004-025, Government Property, 27364-27397 [07-2256]

Agencies

• General Services Administration
• National Aeronautics and Space Administration
• DEPARTMENT OF DEFENSE

[Federal Register Volume 72, Number 93 (Tuesday, May 15, 2007)]
[Rules and Regulations]
[Pages 27364-27397]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-2256]


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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.

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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-

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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

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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 
F