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Tom Ruckdaschel Office of the Under Secretary of Defense (Acquisition, Technology and Logistics) Property & Equipmen

Overview of FAR Case 2004-025 National Contract Management Association World Congress. Tom Ruckdaschel Office of the Under Secretary of Defense (Acquisition, Technology and Logistics) Property & Equipment Policy Office April 25, 2007. Discussion Topics. Problem/purpose

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Tom Ruckdaschel Office of the Under Secretary of Defense (Acquisition, Technology and Logistics) Property & Equipmen

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  1. Overview of FAR Case 2004-025 National Contract Management Association World Congress Tom Ruckdaschel Office of the Under Secretary of Defense (Acquisition, Technology and Logistics) Property & Equipment Policy Office April 25, 2007

  2. Discussion Topics • Problem/purpose • Historical Perspective • Background • Highlights • Top 10 things every Contracting officer should know about Government Property

  3. Problem/Purpose • Problem: current FAR (property) language is well over 50 years old; contains inconsistent, often conflicting language; is at odds with modern materials management and technology • Purpose: revise the FAR (Property Management) requirements to create an approach that fosters efficiency, innovation, and creativity

  4. Background • Original Proposal: 1994 • DoD assembled a team to address Government and industry concern regarding contract property • Effort moved along; public hearings were held, but no real consensus was achieved

  5. Background (cont.) • Second Proposal: 2000 • Another team established • Again, no real consensus was achieved; the legalities and complexities revealed deep divisions between Government and Industry

  6. Background (cont.) • Third Proposal: FAR Case 2004-025 • A new vision—based on: • FAR Guiding Principles; and • A deep commitment to making it happen • Lessons learned • Broad spectrum of subject matter experts sought • Large outreach campaign

  7. Background (cont.) • Proposed Rule published Sept 19, 2005 • Public comment period ended Nov. 19, 2005 • Over 300 comments received, ranging from small tweaks to extensive recommendations • Approx. 90% of comments accepted; no “show stoppers” • Final Rule now pending

  8. Today’s FAR • Primary Clauses: 52.245-2 or 52.242-5 • Ancillary Clauses: 52.245-1 (Property Records); 52.245-3 (Identification); 52.245-4 [Short Form]; and 52.245-19 (Government Property Furnished) [As Is] • Other Clauses: 52.245-17 (Special Tooling), 52.245-18 (Special Test Equipment), Various Facilities Clauses

  9. Highlights of the Proposed Rule • Over 80% of current FAR (property) language eliminated, including 14 clauses; • One basic Government property clause for all contractor requirements • Greater justification for furnishing GP • Part 45 is now strictly limited to requirements placed upon the Government

  10. Highlights (cont.) • More than 20 FAR sections (Parts) affected • Contractor managed self-assessment programs • No more property control system approvals

  11. The Process Contract Clause • Acquisition • Receipt • Records • Physical Inventory • Sub-contractor control • Reports • Utilization • Maintenance • Contract close-out “Contractors shall develop property management plans and systems, at the contract, program, site or entity level that reflect their efforts to obtain best value” See ASTM Standard E-2219 Systems Analysis Systems Analysis Performed by DoD Property Administrator Performance Outcomes Data Elements See ASTM Standard 2279-03 System Corrected, etc.

  12. Top Ten Things Every Contracting Officer Should Know About GP • What is Government Property • When to use the property clause • “Providing” Government Property • When, Why • Contractor/Government responsibilities • Solicitation Requirements and Evaluation • Unique Item Identification • Responsibility and Liability • Property Disposal

  13. 1) What is Government Property? • Government Property is: • Real Property • Equipment • Special Tooling • Special Test Equipment • Repairables and; • Material • Government Property is not: letting a contractor use Government office space (telephones, fax machines, PCs)

  14. 2) When to use the Property Clause • 52.245-1 – Government Property • Used in: • All cost-reimbursement, time and material, and labor hour type solicitations and contracts • All fixed-price solicitations and contracts when the Government will provide Government Property • All Contracts or modifications awarded under FAR Part 12 procedures where Government Property that exceeds the simplified acquisition threshold • Note: Service contracts for repair are not excluded--they still require the property clause!

  15. 2) When to use the Property Clause (cont.) • Note: the Clause 52.245-1 has two Alternates: • ALTERNATE 1: used in contracts with adequate price competition, i.e., Fixed Price, i.e., “Plain Vanilla” contracts Why? Different liability provision. For such contracts, the contractor is liable for loss, damage, destruction, theft • ALTERNATE 2: used in contracts involving basic or applied research at non profit institutions of higher education or non profit organizations involved in scientific research Why? Different title vesting provisions (statutory)

  16. 2) When to use the Property Clause (cont.) • 52.245-2 - Government Property (Installations Operation Services) • Used in service contracts to be performed on a Government installation when Government-Furnished property will be provided • This Clause provides for the initial provisioning of property; the Government is not responsible or repair or replacement

  17. 3) When to Provide Government Property? • “Contractors are ordinarily required to furnish all property necessary to perform Government contracts.” (FAR 45.102) • Notable exceptions • For Repair • Standardization of the end item • Expedite production • Long-lead time

  18. 4) Why Provide Government Property? • 45.102 Policy “Contracting officers shall 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 procurement 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.” SIGNIFICANT CHANGE

  19. 5) Contractor Responsibilities • 52.245-1 Government Property “The Contractor shall have a system to manage (control, use, preserve, protect, repair and maintain Government property in its possession.” “The Contractor shall initiate and maintain the processes, systems, records, and methodologies necessary for effective control of Government property…consistent with voluntary consensus standards and/or industry-leading practices and standards for Government property management.”

  20. Voluntary Consensus Standards The Federal Acquisition Regulations (FAR) Part 11 describes agency needs and addresses the use of Voluntary Consensus Standards in writing the government's requirements. OMB Circular A-119 and the FAR mandate the use of voluntary consensus standards in lieu of government-unique standards. The use of existing standards provides substantial cost benefits for the government.

  21. e.g., Voluntary Consensus Standards • ISO 9000 “Generic” -- applicable to any organization, large or small, product or service, Government or industry • Identification of Processes • Written procedures, etc., ability to audit • ASTM International • 14 Standards applicable to Property Management

  22. 6) Government Responsibilities • 45.105 Analysis of Contractor’s Property Management System a) “The agency responsible for contract administration shall conduct an analysis of the contractor’s property management policies, procedures, practices, and system b) The property administrator shall notify the contractor in writing when the contractor’s property management system does not comply with contractual requirements, and shall request prompt correction of deficiencies…” Failure to take corrective action may result in: - Revocation of the Government’s assumption of risk - Other rights and remedies available to the Contracting Officer

  23. 6) Government Responsibilities (cont.) • The Contracting Officer can revoke the Government’s assumption of risk when contractor’s property management practices are inadequate or present an undue risk to the Government • This is equivalent to the old concept of “withdrawing” the approval of a contractor’s property control system • Major change: the Government will no longer “approve” a contractor’s property control system

  24. 7) Solicitation Requirements and Eval. “The contracting officer shall insert a listing of the Government property to be offered in all solicitations where Government-furnished property is anticipated (see FAR 45.102). The listing shall include at a minimum - OLD REQUIREMENT BUT… PROVIDES GREATER SPECIFICITY IN THE DATA REQUIRED ON THE PART OF THE GOVERNMENT

  25. 7) Solicitation Requirements and Eval. (cont.) (1)The name, part number and description, manufacturer, model number, and National Stock Number (if needed for additional item identification tracking and/or disposition); (2) Quantity/unit of measure; (3) Unit acquisition cost; and (4) Unique-item identifier or equivalent (if available and necessary for individual item tracking). (5) A statement as to whether the Property is to be furnished in an “as is” condition and instructions for physical inspection.”

  26. 7) Solicitation Requirements and Eval. (cont.) “The solicitation shall describe the evaluation procedures to be followed, including rental charges or equivalents and other costs or savings to be evaluated,and shall require all offerors to submit the following information with their offers: CO MUST DESCRIBE EVALUATION PROCEDURES IN REGARD TO GP CO MUST ALSO INCLUDE IN SOLICITATION A REQUEST FOR INFORMATION - EACH CO IS GOING TO NEED TO CRAFT CONTRACTUAL LANGUAGE TO ACCOMPLISH THIS.

  27. 7) Solicitation Requirements and Eval. (cont.) “A list or description of all Government property that the offeror or its subcontractors propose to use on a rent-free basis. The list shall identify the accountable contract under which the property is held and the authorization for its use (from the contracting officer having cognizance of the property).”

  28. 7) Solicitation Requirements and Eval. (cont.) “The dates during which the property will be available for use (including the first, last, and all intervening months) and, for any property that will be used concurrently in performing two or more contracts, the amounts of the respective uses in sufficient detail to support prorating the rent.”

  29. 7) Solicitation Requirements and Eval. (cont.) “The amount of rent that would otherwise be charged in accordance with the clause at 52.245-9, Use and Charges.”

  30. 7) Solicitation Requirements and Eval. (cont.) “The voluntary consensus standard or industry leading practices and standards to be used in the management of Government property, or existing property management plans, methods, practices, or procedures for accounting for property.” SIGNIFICANT NEW REQUIREMENT • CONTRACTOR WILL BE REQUIRED TO PROVIDE A PROPERTY MANAGEMENT PLAN, NOTE – WE ARE NOT ASKING CONTRACTORS TO SUBMIT THEIR PROCEDURES!!!

  31. 7) Solicitation Requirements and Eval. (cont.) “When use of property on more than one contract is anticipated, any additional instructions to the contractor regarding property management, accountability, and use, not addressed in FAR Clause 52.245-1, Government Property, should be specifically addressed in the statement of work on the contract providing property.” AGENCIES MAY IMPOSE OTHER PROPERTY RELATED REQUIREMENTS. THESE MUST BE SPELLED OUT IN THE SOW! e.g., Army, Navy, Air Force Regs., ARMS ACT issues for the Army Ammo Plants, GOCO requirements, etc.

  32. 7) Solicitation Requirements and Eval. (cont.) “The contracting officer shall consider any potentially unfair competitive advantage that may result from the contractor possessing Government property. This shall be done by adjusting the offers by applying, for evaluation purposes only, a rental equivalent evaluation factor.” LONG ESTABLISHED GOVERNMENT POLICY AND REQUIREMENT

  33. 7) Solicitation Requirements and Eval. (cont.) “The contracting officer shall ensure the offeror’s property management plans, methods, practices, or procedures for accounting for property are consistent with the requirements of the solicitation.” NEW REQUIREMENT WHILE IN THE PAST THIS WAS AN IMPLICIT REQUIREMENT IT IS NOW A SPECIFIC TASK IMPOSED UPON THE CO. CO NEEDS TO BE AWARE OF THE PA’s AVAILABILITY TO ASSIST!

  34. 8) Unique Item Identification • Policy for Unique Identification (UID) of Tangible Items – New Procurements, Major Modifications, and Reprocurements of Equipment and Spares, dated July 29, 2003 • IUID Legacy Policy, Memorandum dated December 23, 2004 • ACAT 1D Program Implementation Plans (June 2005) • All remaining Program Implementation Plans (January 2006) • Final IUID DFARS Rule published April 22, 2005 • Amended June 2005

  35. 8) Unique Item Identification (cont.) • GFP IUID Policy, Memorandum dated May 12, 2005 • Directs expansion of WAWF to capture property transfers • Directs expansion of IUID Registry for electronic GFP management • Proposed DFARS published March 21, 2006, comment period closed May 22, 2006 [Case 2005-D015] • Publication as an interim rule is forthcoming • Note: IUID effort for managing GFP began in FY2006 and is still underway. To date, Registry contains: 983 contracts with GFP, 246 contractors, and 108,643 GFP items registered. Total items in registry to date: 1.3 M.

  36. 9) Responsibility and Liability • 45.104 – Responsibility and Liability of Government Property • Generally, contractors are not held liable for loss, damage, destruction, or theft of Government, under the following types of contracts: • Cost - reimbursement contracts • Time and Material contracts • Labor-hour contracts • Fixed-price contracts awarded on the basis of submission of cost and pricing data • No change in policy. The Government acts as a sell insurer. In other words, the Government assumes the risk • Exception: i.e., “Plain Vanilla” fixed price contracts

  37. 10) Disposal FAR 45.6 provides explicit policy on disposal of property excess to contract requirements These requirements on based on statute FOLLOW THEM! It’s not worth a career

  38. Questions or Comments?

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