Contract Property - Managing NIH Property in the possession of contractors

Furnishing Government Property to Contractors:

The National Institutes of Health’s (NIH) general policy is to require contractors furnish all property necessary to perform Government contracts (FAR 45.102). Contracting Officers may provide property to contractors only when it is clearly demonstrated:

1. To be in the Government’s best interest;
2. That the overall benefit to the acquisition significantly outweighs the increased cost of administration, including ultimate property disposal;
3. That providing the property does not substantially increase the Government’s assumption of risk; and
4. That government requirements cannot otherwise be met (FAR 45.102).

A contractor’s inability or unwillingness to supply its own resources is not sufficient reason for the furnishing or acquisition of property.

Acquisition

The Contracting Officer (CO) is the only NIH official who can authorize the purchase and use of Government property under a contract. The CO has the authority to obligate the Government, modify the contract and approve the provision for providing property to contractors. The CO will perform a screening (through the Contract Property Section) to determine if the property need can be satisfied utilizing assets within the agency prior to the acquisition.

The Decision Making Process:

Property acquisitions are business decisions that fall within the purview of the Contracting Officer responsible for the effort. Please note that these decisions are made from a business standpoint, not a technical one. While it may be a company’s assertion that a piece of property is needed for performance of a contract and agreed to by a project or technical officer, it may or may not be appropriate for the Government to fund or to furnish the item. Ultimately, it is the CO's decision to authorize and approve organizations to obtain property for use in the performance of contracted services.

Approved Acquisition Request:

When the request is approved, the CO will make a modification to the contract to add Government Furnished Property (GFP), or issue a Contracting Officer's Authorization (COA) for the procurement of Contractor Acquired Property (CAP). For GFP, the CO will notify the Property Administrator to initiate a property transfer. Once the transfer is completed the property can be transferred to the contractor. If the property is to be acquired as CAP, a COA is issued and the contractor may acquire the property with contract funds. After receipt of the property, the contractor is required to maintain property in accordance with FAR 52.245-1.

Contractors’ Property Management System:

The NIH Contract Property Section is responsible for conducting analysis of the contractor’s property management policies, procedures, practices, and system once the CO has decided to furnish Government property to the contractor. The contractor must have a system to manage (control, use, preserve, protect, repair and maintain) Government property in its possession. The PA will notify the contractor in writing regarding their submitted property management system and its compliance.

Property Management System Analysis (PMSA):

The Federal Acquisition Regulation, 45.105(a) states “the agency responsible for contract administration shall conduct an analysis of the contractor’s property management policies, procedures, practices and systems”. At the NIH, the Industrial Property Management Specialist within the Contract Property Section of the Property Managenent Branch is the Property Administrator (PA) responsible for conducting this analysis. The PMSA can be conducted as a limited PMSA (desk audit) or a standard PMSA (site visit).

1. Conduct a systematic review and evaluation of an institution’s internal property management system that is utilized for the protection, preservation, accounting and control of Government property. This review is conducted via teleconference between the PA(s) and the contractor's Government property representative.
2. Review the contractor’s property management system to ensure the policies and procedures used to control, preserve and safeguard Government equipment complies with contractual requirements (FAR 45.105(b)). This analysis will be based on the contractor’s ability to use voluntary consensus standards and industry leading practices and standards to manage Government property in their possession (see FAR 11.101; FAR 52.245-1(b)(1)).

1. Planning, developing, and performing a property management system analysis and audit in accordance with GAO-03-673G, Government Auditing Standards (“The Yellow Book”). Audit planning includes conducting a risk analysis by process; establishing audit objectives with stakeholders; determining confidence levels, and data collection methods; scheduling audit visits; and coordinating support.
2. Researching, evaluating, and determining the adequacy of the contractor’s property management system, including internal audit processes, procedures, and results in accordance with FAR 9.104-1(e).
3. Making recommendations for corrective action and continuous improvement in accordance with FAR 1.102-4(e) and FAR 52.245-1(g)(3).

Loss:

The contractor is required to promptly report any lost, damaged or destroyed equipment. Property "loss" means unintended, unforeseen or accidental loss, damage or destruction to Government property that reduces the Government’s expected economic benefits of the property. Property loss includes, but is not limited to:

1. Items that cannot be found after a reasonable search.
2. Theft; damage resulting in unexpected harm to property requiring repair to restore the item to usable condition, normal maintenance actions.
3. Destruction resulting from incidents that render the item useless for its intended purpose or beyond economical repair.

Property loss does not include purposeful destructive testing, obsolescence, normal wear and tear or manufacturing defects. When a NIH government-title contractor controlled property loss occurs, an investigation of the contractor’s Property Management System is initiated to determine causality; assess if the loss was caused by deficiencies in the contractor’s property management system, in which case the PA shall notify the Contracting Officer. The Contracting Officer may hold the contractor liable for property loss when the property loss results from willful misconduct or lack-of-good faith on the part of contractor’s managerial personnel (FAR 52.245-1(h)(1)(ii)).

Reporting Government Titled Property:

A physical inventory of NIH titled property must be conducted by September 30th and results submitted by October 31st of each year. The inventory must include Government-titled property items acquired or furnished under the contract. Following the physical inventory, contractors must prepare and submit NIH form “Report of Government Owned, Contractor Held Property” to the Contract Property Section. Contractors that have no government-titled property in their possession must submit a negative report using the same NIH form.

Disposal:

In disposing of government property, the Government may elect to exercise any of the following options: Property transfer, donation, abandonment, and return to inventory.

Property Contract Closure:

At the end of the contract performance period, the PA must complete property contract closure procedures. The property administrator:

1. Ensures property disposal and resolutions of all loss cases and any other property issues related to the contract,
2. Receives the final inventory from the contractor, and
3. Issues a NIH 488 for the official contract file.

Definitions:

Contractor acquired property - property acquired, fabricated, or otherwise provided by the Contractor for performing a contract, and to which the Government has title.

Government furnished property - property in the possession of, or directly acquired by, the Government and subsequently furnished to the Contractor for performance of a contract.

Government property - all property owned by or leased to the Government or acquired by the Government under the terms of the contract. It includes both Government-furnished property and contractor-acquired property.

Property – all tangible property, both real and personal.