THE “ NEW” GOVERNMENT PROPERTY REGULATORY CHANGES

1. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

2. THE “NEW” GOVERNMENT PROPERTY REGULATORY CHANGES Presented By: Dr. John I. Paciorek, CPPM, CF 937-781-1042 john.paciorek@dau.mil Dr. Douglas N. Goetz, CPPM, CF 937-781-1077 douglas.goetz@dau.mil Defense Acquisition University NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

3. PRESENTATION OUTLINE: • BACKGROUND • HIGHLIGHTS & BENEFITS • GOALS & SIGNIFICANT CHANGES • ANALYSIS OF POLICY and REGULATION • ANALYSIS OF THE NEW FAR CLAUSE REQUIREMENTS • DoD PROPERTY MANUAL NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

4. BACKGROUND Much of the current FAR language pertaining to Government Property is over 50 years old. It needed to be updated to current standards and practices consistent with the changes that have occurred in technology and management practices. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

5. BACKGROUND The current trend maximizes the use of newer technologies including commercially available components, equipment and techniques. Examples: Enterprise Resource Planning, relational databases, UID, RFID, ISO, Six Sigma, etc. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

6. HIGHLIGHTS/BENEFITS This proposed rule: Combines the requirements of FAR Sub part 45.5 and the clauses at: 52.245-2, 52.245-5 and 52.245-19 into a single Government Property Clause. It deletes these clauses: 52.245-1,- 3 and -4; as well as 52.245-17 & 52.245-18. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

7. HIGHLIGHTS/BENEFITS The proposed rule also sanctions the use of voluntary consensus standards (VCS) & industry leading practices (ILP) for managing Government Property. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

8. HIGHLIGHTS/BENEFITS This rule also introduces a new property clause designed for military base and installation level contracts awarded under the OMB circular A-76. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

9. GOALS OF PROPOSED RULE A major change to the FAR is the introduction of the use of Commercial Standards and Industry Leading Practices into the property management process, where applicable, and to the maximum extent possible. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

10. GOALS OF PROPOSED RULE -Best value for the Government -Principle based standards that allow for lean approaches & greater flexibility, efficiency, customer satisfaction -Shift the management of GP from a prescriptive, regulation based system to process oriented using sound business judgment. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

11. GOALS OF PROPOSED RULE -Update and clarify terminology -Leverage existing resources with new technologies and applications -Limit the amount of GP furnished to Contractors -Create a modern performance based policy -Maximize continuous improvement NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

12. POLICY 45.102 Contractors are ordinarily required to furnish all property necessary to perform Government contract. Contracting Officers must comply with the requirements of this section and reduce the amount of Government Property furnished to Contractors. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

13. PART 45 Government Property 45.102-Policy: COs shall provide property to Contractors only when it is clearly demonstrated to be in the Government’s best interest…& when Government requirements cannot otherwise be met. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

14. PART 45.102 GOVERNMENT PROPERTY -Contractor’s inability or unwillingness to supply its own resources is not a good reason to provide GP -COs shall obtain consideration, e.g. rent, for additional GP that is provided after contract award NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

15. 45.103 General LEADING INDUSTRY STANDARDS (a) Agencies shall: (1) Ensure contractors use voluntary consensus standards (see FAR Part 11.101 (c )) and/or industry-leading practices & standards to manage Government property in their possession. NEW! NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

16. FAR 11.101 (c) IAW OMB Circular A-119, “Federal Participation in the Development & Use of Voluntary Consensus Standards and in Conformity Assessment Activities,” agencies must use voluntary consensus standards, when they exist, in lieu of Government unique standards, except where inconsistent with law or otherwise impractical. VCS NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

17. 45.103 General • Agencies shall: (1) Allow & encourage the use of voluntary consensus standards and/or industry leading practices. (2) Eliminate (as much as possible) any competitive advantage a prospective Contractor may have by using GP. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

18. 45.103 General (3) Ensure maximum practical reutilization of Contractor Inventory for Government purposes. (4) Require Contractors to use GP in their possession to the maximum extent possible. NOTE: EXCESS GOVERNMENT PROPERTY NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

19. 45.103 General (5) Charge appropriate rentals for GP (6) Require Contractors to justify retaining GP when not needed and to declare it excess when no longer needed NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

20. 45.103 General Agencies will not generally require contractors to establish property management systems that are separate & apart from a contractor’s own established procedures & practice. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

21. 45.104 Responsibility & Liability for Government Property The Government typically self-insures against LDDT for Government Property. The CO may revoke the Government’s assumption of risk when the PA determines that the Contractor’s property management practices are inadequate…. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

22. 45.105 Analysis of the Contractor’s Property Management System (a) The CO or the representative assigned the responsibility of Property Administrator shall ensure the contractor’s PMS complies with the Government property clauses of the contract. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

23. 45.105 Analysis of the Contractor’s Property Management System (b) The PA shall notify the contractor in writing when its PMS does not comply with contractual requirements (inadequate, undue risk to Gov., etc.) and shall request prompt correction of deficiencies and a schedule for completion. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

24. 45.105 Analysis of the Contractor’s Property Management System (c) If the contractor does not correct the deficiencies IAW the schedule, the CO shall notify the contractor, in writing, that failure to correct the problem(s) may result in: 1 Withdrawal of Government assumption of LDDT 2 Other actions….(?) NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

25. 45.106 Transferring Accountability Government property shall be transferred (from one contract to another) only when firm requirements exist under the gaining contract (see FAR 45.101). Such transfers shall be documented by modifications to both gaining & losing contracts. NEW and Old! NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

26. 45.107 GP Clauses The C.O shall insert the clause at 52.245-1 for: • All Cost-Reimbursement, Time & Material, & Labor Hour contracts. • Fixed-Price solicitations and contracts when the Government will provide Government property. • Contracts initially awarded under FAR Part 12 procedures where GP that exceeds the simplified acquisition threshold…is furnished or where the Contractor is directed to acquire property… NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

27. 45.107 GP Clauses • 52.245-1 GP Clause • 52.245-1 ALT I: FP for competitive contracts (Full Risk of Loss) • 52.245-1 ALT II: CR for the conduct of basic or applied research at nonprofit institutions of higher education or nonprofit organizations for scientific research. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

28. 45.107 GP Clauses 52.245-2 GP for base operating or installation services contracts 52.245-4 Liability for GP 52.245-9 Use & Charges 52.245-17 ST for fixed price negotiated contracts; RTTST; or ST not identifiable at time of award 52.245-18 STE Clause (Deleted – Useless!) DELETED NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

29. GP Facilities Clauses 52.245-7 GP Consolidated Facilities 52.245-8 Liability for Facilities 52.245-10 GP Facilities Acquisition 52.245-11 GP Facilities Use DELETED NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

30. OLD -- Optional Property-Related Clauses for Facilities Contracts 52.245-12 Contract Purpose (Nonprofit Ed Institutions) 52.245-13 Accountable FAC (Nonprofit Ed Institutions) 52.245-14 Use of Gov’t Facilities 52.245-15 Transfer of title to Facilities 52.245-16 Facilities Equipment Modernization ALL DELETED NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

31. 45.201 General • COs shall insert in all solicitations a listing of GP to be offered (where GFP is anticipated) per FAR 45.101 • Contractor will ordinarily assume all costs associated with transportation, installation, rehabilitation • Evaluation procedures shall be described: rental charges NEW! NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

32. 45.201 General • Contractors shall submit plans and procedures for Property Management with their offers/proposals. NEW! NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

33. 45.301 Authorizing Rentaland/or Use of GP • Contractors are authorized to use GP only on the contract where it was provided (c) Contractors must obtain the authorization of the Contracting Officer in order to use Government Property on other contracts. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

34. 45.301 Rent-Free Use Rent-Free Use normally applies to GP which will be used on the contract where it was provided or in a GOCO or for future mobilization or production CO may authorize rent free use for research, development, or educational work Same NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

35. 45.302 Contracts with Foreign Governments or International Organizations Requests by, or for the benefit of foreign governments or international organizations to use GP shall be processed IAW agency procedures. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

36. 45.403 Use of GP on Independent R & D Programs The CO may authorize a contractor to use GP on an independent research & development program, if— Such use will not conflict with primary use of the GP AND Government receives consideration, i.e., RENTAL CHARGE NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

37. 45.401 Title to GP • Government has and retains title to all GFP until properly disposed of per law or Reg. • Contractor retains title to all property acquired by the contractor under a FP contract. • Government has title to all property under a CR contract • PPI is not considered “Pure GP” TITLE NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

38. THE GOVERNMENT PROPERTY CLAUSE52.245-1 NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

39. 52.245-1 (a) Definitions • Definitions: (new) Equipment means a tangible article of personal property that is complete in-and-of itself, durable, nonexpendable, and needed for the performance of a contract. NEW! NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

40. 52.245-1 (a) Definitions Property, means all tangible property, both real and personal. Provide, means to furnish existing GP or to allow the Contractor to acquire property for the Government under this contract. Same NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

41. 52.245-1 (a) Definitions Unique Federal Property, means Government owned personal property that is peculiar to the mission of an agency, e.g., military or space property. Unique Federal Property excludes MAT, STE, ST, RP, and Equipment. NEW and Old! NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

42. 52.245-1 (b) Property Management (1) The contractor shall manage (control, use, preserve, protect, repair & maintain) GP in its possession consistent with voluntary consensus standards for property management (except where inconsistent with law), or in the absence of such standards, industry-leading practices & standards for property management-adequate for the performance of this contract, as determined by the PA. NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

43. 52.245-1 (b) Property Mgmt (2) The contractor shall include the requirements of this clause in all subcontracts where GP is furnished or acquired for subcontractor performance. (3) PPI is not subject to these requirements NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

44. 52.245-1 (c) Use of GP The Contractor shall use GP (GFP and CAP) only in the performance of this contract unless otherwise provided in this contract or as approved by the CO. Same NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

45. 52.245-1(d) GFP • The Government shall deliver to the Contractor the GFP described in the schedule, specifications, appendix, or attachment to the contract. • The Government shall retain title to all GFP. Title shall not be affected by incorporation into or attachment to any property not owned by Gov’t Same NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

46. 52.245-1(d) GFP The GFP will be suitable for contract performance and will be delivered to the contractor by the dates stated in the contract. If it is not, the CO may consider an equitable adjustment to the contract. Same NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

47. 52.245-1(d) GFP (3)(iii) The Government may, at its option, furnish property in an “AS-IS” condition. In such cases, the Government makes no warranty…Any repairs, replacement, and/or refurbishment shall be at the contractors expense. Same NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

48. 52.245-1(d) GFP (4)(i) The CO may by written notice, at any time: (A) Increase or decrease the amount of GFP under this contract. (B) Substitute other GFP for the property previously furnished… (C) Withdraw authority to use property. NEW and Old! NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

49. 52.245-1 (e) Title to CAP Title to CAP purchased by the contractor under a CR Type contract shall pass to the Government upon: (i) vendor or supplier delivery (ii) issuance of the property for use in contract performance (iii) commencement of processing (iv) reimbursement of cost by the Government whichever 1st Same NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management

50. 52.245-1 (f) Contractor Plans & Systems Contractors shall develop property management plans and systems at the contract, program, site or entity level that reflect their efforts to obtain best value. Such plans and systems shall enable the followingoutcomes: NEW and Old! NCMA World Congress 2006 : Achieving High Performance in Global Business: Leadership, Outsourcing, & Risk Management