32.503-15 Application of Government title terms
Source: FAR 32.503-15 on acquisition.gov
Property acquired under the Progress Payments clause is not automatically Government-furnished property, and contractors must follow specific rules for its handling, transfer, and disposition.
Overview
FAR 32.503-15 clarifies how Government title to property acquired under the Progress Payments clause is applied and managed. It distinguishes between property to which the Government obtains title solely through progress payments and Government-furnished property, and outlines the rules for handling, disposing, and accounting for such property during and after contract performance.
Key Rules
- Government Title via Progress Payments
- Property to which the Government obtains title solely by operation of the Progress Payments clause is not considered Government-furnished property.
- Handling and Disposition
- Acquisition, handling, and disposition of certain property types are governed by FAR 52.245-1 (Government Property) and FAR 52.249 (Termination Inventory).
- Scrap Disposal
- Contractors may dispose of current production scrap in the ordinary course of business, but must credit the contract for proceeds from such sales.
- Transfer or Use of Inventory
- Contractors may only transfer or use inventory titled to the Government with contracting officer approval, and must adjust contract costs and repay or credit unliquidated progress payments accordingly.
- Excess Property Post-Performance
- After contract completion and liquidation of progress payments, any excess property is no longer subject to the Progress Payments clause and title reverts to the contractor.
Responsibilities
- Contracting Officers: Approve transfers or other dispositions of Government-titled inventory; ensure contractors credit proceeds from scrap sales; oversee compliance with property clauses.
- Contractors: Properly account for and dispose of property titled to the Government; obtain approvals for transfers; credit or repay the Government as required; comply with property management clauses.
- Agencies: Ensure oversight of property management and compliance with applicable clauses.
Practical Implications
- This section ensures clear delineation of property rights and responsibilities when progress payments are involved, preventing confusion over ownership and proper accounting. Contractors must be diligent in tracking, disposing, and reporting on property to avoid improper retention or use of Government-titled assets. Common pitfalls include failing to credit proceeds from scrap sales or transferring inventory without approval.
(a) Property to which the Government obtains title by operation of the Progress Payments clause solely is not, as a consequence, Government-furnished property.
(b) Although property title is vested in the Government under the Progress Payments clause, the acquisition, handling, and disposition of certain types of property are governed by-
(1) The clause at 52.245-1, Government Property; and
(2) The termination clauses at 52.249, for termination inventory.
(c) The contractor may sell or otherwise dispose of current production scrap in the ordinary course of business on its own volition, even if title has vested in the Government under the Progress Payments clause. The contracting officer shall require the contractor to credit the costs of the contract performance with the proceeds of the scrap disposition.
(d) When the title to materials or other inventories is vested in the Government under the Progress Payments clause, the contractor may transfer the inventory items from the contract for its own use or other disposition only if, and on terms, approved by the contracting officer. The contractor shall-
(1) Eliminate the costs allocable to the transferred property from the costs of contract performance, and
(2) Repay or credit to the Government an amount equal to the unliquidated progress payments, allocable to the transferred property.
(e) If excess property remains after the contract performance is complete and all contractor obligations under the contract are satisfied, including full liquidation of progress payments, the excess property is outside the scope of the Progress Payments clause. Therefore, the contractor holds title to it.