Defense Federal Acquisition Regulation Supplement: Use of the Government Property Clause (DFARS Case 2015-D035), 18161-18163 [2019-08481]

Agencies

• Defense Acquisition Regulations System
• DEPARTMENT OF DEFENSE

[Federal Register Volume 84, Number 83 (Tuesday, April 30, 2019)]
[Rules and Regulations]
[Pages 18161-18163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08481]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Part 245

[Docket DARS-2016-0035]
RIN 0750-AJ11


Defense Federal Acquisition Regulation Supplement: Use of the 
Government Property Clause (DFARS Case 2015-D035)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Final rule.

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SUMMARY: DoD is issuing a final rule amending the Defense Federal 
Acquisition Regulation Supplement (DFARS) to expand the prescription 
for using the Federal Acquisition (FAR) Government property clause.

DATES: Effective April 30, 2019.

FOR FURTHER INFORMATION CONTACT: Ms. Kimberly Bass, telephone 571-372-
6174.

SUPPLEMENTARY INFORMATION:

I. Background

    DoD published a proposed rule in the Federal Register at 81 FR 
73002 on October 21, 2016, to amend DFARS 245.107(1)(i) to require the 
use of FAR clause 52.245-1, Government Property, in all purchase orders 
for repair, maintenance, overhaul, or modification of Government 
property, regardless of the unit acquisition cost of the items to be 
repaired. One respondent submitted comments in response to the proposed 
rule.

II. Discussion and Analysis

A. Summary of Significant Changes From the Proposed Rule

    There are no changes from the proposed rule.

B. Analysis of Public Comments

1. Support for Continued Discretionary Use of the FAR Clause
    Comment: The respondent recommends that DFARS 245.107 be left ``as 
is'' and that contracting officers should insert FAR clause 52.245-1 
into purchase orders for repair based on the type and cost of property 
to be repaired.
    Response: A determination for when provisions and clauses are used 
is driven primarily by the goods or services being procured and the 
type of contract being contemplated. Tying the use of FAR 52.245-1 to 
only some forms of Government-furnished property (GFP) and not others 
would be impractical given the variety of property classes, types, 
values, uses, and conditions. Discretion, in the case of inserting FAR 
clause 52.245-1 in purchase orders for repair, has led to inconsistent 
treatment of GFP. Moreover, the discretionary use of FAR 52.245-1 has 
been shown to drive process inconsistency, compromise accountability, 
and promote nonstandard processes. This complicates the administration 
of contracts, particularly upon contract closeout when proper 
disposition and adjudication of remaining Government property is 
crucial.
2. Training for Contracting Officers
    Comment: The respondent also stated that appropriate training 
should be provided to contracting officers on use of the Government 
property clause, rather than require a blanket prescription that fails 
to incorporate materiality.
    Response: The purpose of this rule is to achieve greater 
accountability of GFP, decrease the risk of misuse or loss of 
Government property, and mitigate potential ownership issues. As stated 
previously, tying the use of FAR clause 52.245-1 to a specific property 
class or type would be impractical given the variety of property types, 
values, uses, and conditions. By extension, training contracting 
officers on the potential materiality of asset types relative to the 
use FAR clause 52.245-1 would be unrealistic and ultimately exacerbate 
the accountability gap this rule seeks to close.
3. Impact to Small Business
    Comment: The respondent states the rule would adversely impact 
small business participation in repair, maintenance, and calibration 
activities, and that small businesses would be required to implement 
costly property systems to comply with the Government

[[Page 18162]]

property clause and associated DFARS clauses invoked by its use.
    Response: Many small businesses that do business with the Federal 
Government have well-established property management systems by virtue 
of existing purchase orders for repair or other contracts that contain 
FAR clause 52.245-1. Further, many of the requirements contained in FAR 
52.245-1, e.g., receiving reports, discrepancy reports and property 
records, are typical commercial practices, and so not unduly 
burdensome. For example, customary commercial practice is to create 
receiving reports and keep records for incoming assets regardless of 
the source of such assets. In addition, the policy at FAR 45.103(b) 
permits contractors to use their own existing property management 
procedures, practices, and systems to account for and manage Government 
property.
4. Need for Further Analysis by DoD
    Comment: The respondent states that DoD should perform further 
analysis to ensure that its proposal is cost effective, and that the 
Government should ensure that cost savings from greater tracking of 
Government property included in contracts that meet the simplified 
acquisition threshold outweighs the increased cost of repair and 
possible contracting delays.
    Response: This rule is part of a larger DoD effort to resolve DoD's 
material weakness relative to Government furnished property and 
accountability of assets is an important part of audit readiness.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule applies to purchase orders awarded for repair, overhaul 
or maintenance of equipment, including, commercial items and 
commercially available off-the-shelf items. This includes purchase 
orders awarded under FAR part 12 procedures, where the value of repair, 
overhaul or maintenance services is at or below the simplified 
acquisition threshold. This rule does not apply to contracts for the 
acquisition of supplies, to include commercial items and commercially 
available off-the-shelf items.

IV. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993. This rule is not a major rule 
under 5 U.S.C. 804.

V. E.O. 13771

    This final rule is not subject to E.O. 13771, because this rule is 
not significant under E.O. 12866.

VI. Regulatory Flexibility Act

    A final regulatory flexibility analysis has been prepared 
consistent with the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
and is summarized as follows:
    The objective of this rule is to strengthen the management and 
accountability of Government-furnished property (GFP) by amending the 
Defense Federal Acquisition Regulation Supplement (DFARS) to require 
that Federal Acquisition Regulation (FAR) clause 52.245-1, Government 
Property, be incorporated in all DoD purchase orders involving repair, 
maintenance, overhaul, or modification of Government property. This 
rule is necessary because the current language at FAR 45.107 provides 
an exception whereby contracting officers can choose not to include the 
clause in purchase orders for repairs of GFP, when the unit acquisition 
cost of Government property to be repaired does not exceed the 
simplified acquisition threshold (SAT). Acquisition value alone, 
however, is not an indicator of the criticality or sensitivity of the 
property. As an example, the acquisition cost of individual items of 
firearms, body armor, night-vision equipment, computers, or cryptologic 
devices may be below the SAT, but the accountability requirements for 
these items are fairly stringent. Omission of the Government property 
clause in purchase orders for repairs of these types of items increases 
the risk of misuse or loss of the property and could call into dispute 
their ownership.
    There were no significant issues raised by the public in response 
to the initial regulatory flexibility analysis.
    This rule will apply to small businesses that are awarded purchase 
orders for repair of Government property, where such purchase orders 
did not previously contain FAR clause 52.245-1. According to data 
available in the Federal Procurement Data System for fiscal year 2015, 
DoD awarded 735 purchase orders involving the repair of Government 
property at or below the SAT to 530 unique vendors, of which 328 
(approximately 56% percent) were small businesses.
    Entities affected by this rule would be required to prepare a 
property record and receiving report for the GFP provided. 
Additionally, entities would be required to acknowledge receipt of 
assets in the Wide Area WorkFlow system. The professional skill sets 
required are those of mid-level administrative personnel.
    DoD did not identify any significant alternatives to the rule that 
would have less impact on small businesses and still achieve 
accountability of GFP and resolve potential risks of loss or disputes 
for the ownership of property acquired with Government funds.

VII. Paperwork Reduction Act

    This rule contains information collection requirements that have 
been approved by the Office of Management and Budget under the 
Paperwork Reduction Act (44 U.S.C. chapter 35). This information 
collection requirement has been assigned OMB Control Number 0704-0557, 
entitled DFARS Part 245; Use of the Government Property Clause for 
Repair of Government-furnished Property.

List of Subjects in 48 CFR Part 245

    Government procurement.

Jennifer Lee Hawes,
Regulatory Control Officer, Defense Acquisition Regulations System.

    Therefore, 48 CFR 245 is amended as follows:

PART 245--GOVERNMENT PROPERTY

0
1. The authority citation for part 245 continues to read as follows:

    Authority: 41 U.S.C. 1303 and 48 CFR chapter 1.


0
2. Amend section 245.107 by--
0
a. Removing paragraph (6);
0
b. Redesignating paragraphs (1) through (5) as paragraphs (2) through 
(6), respectively; and
0
c. Adding a new paragraph (1).
    The addition reads as follows:


245.107  Contract clauses.

    (1)(i) In lieu of the prescription at FAR 45.107(d), use the clause 
at FAR 52.245-1, Government Property, in all purchase orders for 
repair, maintenance, overhaul, or modification of Government property 
regardless of the unit acquisition cost of the items to be repaired.

[[Page 18163]]

    (ii) For negotiated fixed-price contracts awarded on a basis other 
than submission of certified cost or pricing data for which Government 
property is provided, use the clause at FAR 52.245-1, Government 
Property, without its Alternate I.
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[FR Doc. 2019-08481 Filed 4-29-19; 8:45 am]
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