Understanding Property Contractual Terms and Conditions

Judy Hively, CPPMNorthrop GrummanandRick Shultz, CPPM, CFJohns Hopkins APL

AGENDA

• Introductions• Why Review Contract?• Key Stakeholders• Sections of a Contract (A thru K)• Reviewing the Contract

– General Clauses– Section I, Contract Clauses

• Checklist for Government Property Oversight• Challenges• Glossary, References, Additional Links• Closing• Questions?

WHY REVIEW CONTRACT?

• Address Property Concerns Upfront

• Understand Terms and Conditions

• Look Out for the Best Interest of Your Organization

• Possible Consequences of Non-Compliance

• Increased Liability/Withholding Fee

• DFARS 252.242-7005, Contractor Business Systems (Feb 2012)• Applies to 6 systems (Accounting, EVMS, Estimating, MMAS, Property and Purchasing)• Withhold Fee can be up to 10% if multiple business systems deemed inadequate

• Reduced Award Fee

• Inadequate Customer Property Audits

• Contract Termination by Default

• Negative Performance Rating for Future Proposals

Your Organization Must

COMMUNICATE

PROGRAM MANAGER

CONTRACTS

SUBCONTRACTS

PURCHASINGSECURITY

PROPERTY ADMINISTRATOR

FINANCE

IdentifyKey

Stakeholders

GOVERNMENT CONTRACTING

SECTION A – SOLICITATION/CONTRACT FORMStandard Form 26 and Standard Form 33 • Name, Address, and Location of Issuing Activity, Including Room and Building• Contract Number/Modification or Revision Number• Date• Request for Proposal (RFP) Number• Number of pages• Requisition or Other Purchase Author• Brief Description of Item or Service• Requirement for the offeror to provide its name and complete address,

including street, city, county, state, and zip code, and electronic address (including facsimile address), if appropriate

• Other Agency-unique data such as priority ratings, security classification and similar data

• Signature blocks for the Government and the Contractor at contract

GOVERNMENT CONTRACTING

SECTION B – SUPPLIES OR SERVICES AND PRICES/COSTSThis section is critical for billing purposes. It details negotiated products and services (contract line item number - CLIN) including the agreed upon prices. Contractors must ensure they reference contract line item information when invoicing the government.

SECTION C – DESCRIPTION/SPECIFICATIONS/STATEMENT OF WORKThis section outlines the work to be performed and is technically considered to be the most critical section. The statement of work also describes the requirements (product performance) for the end item.

SECTION D – PACKING AND MARKINGThis section identifies the terms for all contract deliverables which includes: packaging requirements and identification specifications.

GOVERNMENT CONTRACTING

SECTION E – INSPECTION AND ACCEPTANCEThis section outlines the inspection process and quality assurance requirements. This includes: criteria the government will use for an acceptable product, the methodology they will use to inspect the product and the place of delivery.

SECTION F – DELIVERIES OR PERFORMANCEThis section identifies the excepted schedule of delivery. It includes: time, place and method of delivery by contract line item.

SECTION G – CONTRACT ADMINISTRATION DATEThis section presents contracting administration data that includes: required accounting and appropriation data, contract administrations information and/or instructions other than those on the contract form.

GOVERNMENT CONTRACTING

SECTION H – SPECIAL CONTRACT REQUIREMENTSThis section identifies special contract requirements that are specific to this contract and are not included elsewhere in the contract. Examples include: property related requirements, special security requirements and limited access to facilities.

SECTION I – CONTRACT CLAUSESThis section outlines the required contract clauses. Clauses include: Federal Acquisition Requirements (FAR), Agency specific FAR Supplements and/or specific Agency’s Clauses.

GOVERNMENT CONTRACTING

SECTION J – LIST OF DOCUMENTS, EXHIBITS AND OTHER ATTACHMENTSThis section lists all attachments that have been appended to the contract. These documents may clarify or further define contract requirements. Attachments could include: Contract Data Requirement Lists or lists of government furnished property.

SECTION K – REPRESENTATIONS, CERTIFICATIONS AND OTHER STATEMENTS

This section identifies any Certifications (Certs) or Representations (Reps) a contractor has to present. These signed documents establish compliance with conflict of interest and the identity of the contractor by specifying information unique to the company.

REVIEWING THE CONTRACT

• General Clauses• Search for General Words

• Property• Equipment• Furnished

• Look for Certain Terms• Deliverable• Build• Maintain

• Section I, Contract Clauses

EQUIPMENT ACQUISITON AND TITLE

(a) In accordance with 31 USC 6306 and FAR 35.014 (b), the Contracting Officer hereby grants approval to [enter name of contractor] to retain title to any non-deliverable equipment, procured for the approved task order and funded solely with RDT&E 6.1, 6.2 and/or 6.3 funds or equivalent categories of non-DoD funding. Such equipment shall be subject to the constraints of FAR 45.3 and will be subject to annual review by the ACO. The contractor shall comply with the provisions in FAR 35.014(d)(1). A list of subject equipment is required to be submitted to the Contracting Officer, with a copy to the COR, on an annual basis.

(b) If the Contractor fails to maintain an approved Purchasing system it will then be required to obtain prior approval from the ACO to acquire any items not specifically included in an approved task order, and which exceed the capitalization level established by [enter name of contractor] for financial statements of $5,000. Title to all such items of equipment, purchased with RDT&E 6.1, 6.2 and/or 6.3 funds or equivalent categories of non-DoD funding, will be determined by the ACO at the time of the approval subject to FAR 35.014(b)(3).

(c) If title to equipment is vested in the contractor, depreciation, amortization, or use charges are not allowable with respect to that equipment under any existing or future Government contract or subcontract.

(d) Undeliverable property acquired and/or accountable under Contract [enter old contract number ] is hereby transferred to Contract [enter new contract number ].

USE OF GOVERNMENT FURNISHED PROPERTY FOR UARC CONTRACTS

• In accordance with FAR 45.301, this clause sets forth the use and accountability of property either furnished or acquired under prime contracts with [enter name of contractor] for performance of current and future U.S. Government contracts and other work performed in accordance with this clause.

• [enter name of contractor] may use the property accountable under this contract in the performance of other U.S. Government contracts and performance of its Independent Research and Development (IR&D) programs in accordance with the requirements of FAR 45.301 and FAR 45.303. For purposes of 52.245-9, the parties agree that such use is on a rent-free basis.

• Costs incurred for acquisition, maintenance, repair, replacement, disposition, or other purposes in connection with the property accountable hereunder will be subject to the reimbursement provisions of the related contracts and FAR Subpart 31.2. Security requirements, if any, shall be governed by the terms and conditions of the related contracts.

Contract Section G.7, USE OF GOVERNMENT PRODUCTION AND RESEARCH PROPERTY ON A NO-CHARGE BASIS (1852.245-80) (MAR 1989) is hereby replaced in its entirety with the following:

“G.7 1852.245-80 (MAR 1989) USE OF GOVERNMENT PRODUCTION AND RESEARCH PROPERTY ON A NO-CHARGE BASIS

In performing this contract, the Contractor is authorized to use on a no-charge, noninterference basis the Government-owned production and research property provided to the Contractor under the contract(s) specified below and identified in the cognizant Contracting Officer’s letter approving use of the property. Use is authorized on the basis that it will not interfere with performance of the Government contract(s) under which the property was originally furnished. Use shall be in accordance with the cognizant Contracting officer’s approval letter. Contract No(s):NAS#:?????, NAS#-?????, and NAS#-????? (NASA Contracts)

H.4 Government Property

a. Government-Furnished Equipment. Government-furnished equipment, data, or services shall be identified in individual TOs.

b. Contractor Acquired Property. In the event the contractor is required to purchase property in the performance of this contract, compliance with the procedures of FAR Part 45.402, Government Property is required.

c. Disposition of Government Property. Thirty (30) days prior to the end of the Task Order period of performance, or upon termination of the Task Order, the contractor shall furnish to the COR a complete inventory of all Government Property in his possession under the Task Order that has not been tested to destruction, completely expended in performance, or incorporation and made a part of a deliverable end item. The COR will furnish disposition instructions on all listed property which was furnished or purchased under the Task Order.

d. Risk of Loss. The contractor assumes full responsibility for and shall indemnify the Government for any and all loss or damage of whatsoever kind and nature to any and all Government property, including any equipment, supplies, accessories, or parts furnished, while in his custody and care for storage, repairs, or services to be performed under the terms of this contract, resulting in whole or in part from the negligent acts or omissions of the contractor, subcontract, or any employee, agent, or representative of the contractor or subcontractor.

H.4 Government Property (con’t)

e. Leasing of Real and Personal Property. The Government contemplates that leases may be part of a solution offered by a Contractor, but the Government, where the Offeror’s solution includes leasing, will not be the Lessee. Under no circumstances on any Order issued under this Basic Contract shall (a) the Government be deemed to have privity-of-contract with the owner/lessor of the leased items; or (b) The Government be held liable for early termination/cancellation damages if the Government decides not to exercise an Option period under an Order unless the Contractor has specifically disclosed the amount of such damages (or the formula by which such damages would be calculated) as part of its Proposal and the Contracting Officer has specifically approved/allow such damgaes as part of the Award. The Basic Contractor strictly prohibits the use of lease-like payment arrangements, which purport to permit the Government to receive delivery of items and then pay for the full cost of the items over time, even if such arrangements are not technically a lease transaction because the is Government is not the lessee.

SECTION I – CONTRACT CLAUSES

• FAR Regulations – • FAR Part 45.101 – Government Property• FAR Part 52.245-1 (April 2012)– Government Property Clause

• Agency Supplements – • DFARS 252.211-7003 - Item Identification and Valuation• DFARS 252.211-7006 - Radio Frequency Identification• DFARS 252.211-7007 - Reporting of GFE in the DoD IUID Registry• DFARS 252.242-7004(f) - MMAS (Material Management Accounting System)• DFARS 252.242-7005 - Contractor Business Systems• DFARS 252.245-7001 - Tagging, Labeling and Marking of GFP• DFARS 252.245-7002 - Reporting Loss of Government Property• DFARS 252.245-7003 - Contractor Property Management System Administration• DFARS 252.245-7004 - Reporting, Reutilization and Disposal of Government Property• DFARS 252.228-7001 – Ground and Flight Risk• FAA 3.10.3-2 – Government Property Basic Clause

SECTION I – CONTRACT CLAUSES (CON’T)

• NASA FAR SUPPLEMENTAL CLAUSES

– 1852.245–70 Contractor Requests for Government-Provided Equipment.– 1852.245–72 Liability for Government Property Furnished for Repair or Other Services.– 1852.245–73 Financial Reporting of NASA Property in the Custody of Contractors.– 1852.245–74 Identification and Marking of Government Equipment. – 1852.245–75 Property Management Changes.– 1852.245–76 List of Government Property Furnished Pursuant to FAR 52.245–1.– 1852.245–77 List of Government Property Furnished Pursuant to FAR 52.245–2.– 1852.245–78 Physical Inventory of Capital Personal Property.– 1852.245–79 Records and Disposition Reports for Government Property with Potential Historic or Significant

Real Value.– 1852.245–80 Government Property Management Information. – 18.52.245–81 List of Available Government Property.– 1852.245–82 Occupancy Management Requirements.– 1852.245–83 Real Property Management Requirements.

CHECKLIST FOR GOVERNMENT PROPERTY OVERSIGHT

Contract Review

• Contract Number / Delivery Order Number / PO Number • Contract Description• Contract Period of Performance

• Contract Point of Contacts• Contracts Rep• Program Manager• Program Focal Point of Contact for Property

• Additional Contract Information• Contract Type – FP, T&M, CP• Government Property Clauses (i.e. 52.245-1, April 2012)• Use of Customer Property• Government Furnished Property• Material Acquisitions• Subcontractors• UID Clause• Residual Material Ownership

CHECKLIST FOR GOVERNMENT PROPERTY OVERSIGHT (CON’T)

• Consider the Ten Lifecycle Outcomes When Reviewing the Contract

1. Acquisition2. Identification/Receiving3. Records4. Physical Inventory5. Subcontractor Control6. Reporting7. Relief of Stewardship (Disposition)8. Utilization9. Maintenance10. Closeout

CHALLENGES

• Lack of Communication between GP, Contracts, Program and Supply Chain functions• Updating Contract/Accounting System as Contract Reps and/or PM’s rotate• Involve GP in Solicitation, RFP, Program Inception and/or PMR’s• Identify Program POC for Property Interface• Use of GFE on other contracts must have written authorization from customer• Subcontracts/PO’s that contain GFE• Jointly Determine Whether to Barcode Items• Complete/Reconcile Inventories• Customer Audits when or if necessary• Disposition/Transfer of Residual Material/GP• Contract Closeout of GP for Final Invoice

GLOSSARY / REFERENCES / ADDITIONAL LINKSFederal Acquisition Regulation - http://www.acquisition.gov/far/DFARS 252 - http://farsite.hill.af.mil/VFDFARA.HTMFAA - https://conwrite.faa.gov/CWClauseList.cfm?Show=Num,Title,Text,Pers,UCF,IBR&CatNum=3.10.3NASA - http://www.hq.nasa.gov/office/procurement/regs/1845.htm#45_106Agriculture (AGAR) - http://www.dm.usda.gov/procurement/policy/agar.htmlAir Force (AFFARS) - http://farsite.hill.af.mil/vfaffar1.htmArmy (AFARS) - http://farsite.hill.af.mil/VFAFAR1.HTMArmy (AFARS) Acquisition Procedures - http://www.army.mil/usapa/epubs/pdf/p70_3.pdfArmy Corps of Engineers (EFARS) - http://www.usace.army.mil/Portals/2/docs/EFARS.pdfDefense (DFARS) - http://www.acq.osd.mil/dpap/dars/dfars/index.htmEducation (EDAR) - http://www.ed.gov/policy/fund/reg/clibrary/edar.htmlEnergy (DEAR) - http://farsite.hill.af.mil/vfdoe1.htmHousing (HUDAR) - http://www.hud.gov/offices/cpo/hudar.cfmInterior (DIAR) - http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&tpl=/ecfrbrowse/Title48/48cfrv5_02.tplJustice (JAR) - http://www.justice.gov/jmd/pe/index.htmLabor (DOLAR) - http://www.dol.gov/oasam/regs/cfr/48cfr/toc_Part2900-2999/Part2900-2999_toc.htmNASA (NFS) - http://www.hq.nasa.gov/office/procurement/regs/nfstoc.htmNuclear Regulatory Commission (NRCAR) - http://www.nrc.gov/about-nrc/contracting/48cfr-ch20.htmlPrisons (BPAP) - http://www.bop.gov/business/acquisition.jspState (DOSAR) - http://www.statebuy.state.gov/dosar/dosartoc.htmTransportation (TAR) - http://www.dot.gov/ost/m60/tamtar/tar.htmTreasury (DTAR) - http://www.treasury.gov/about/organizational-structure/offices/Mgt/Pages/ProcurementPolicy-Regulations.aspx Veterans Affairs (VAAR) - http://www1.va.gov/oamm/elibrary/policy.htm

QUESTIONS?

COMMENTS?

Thank You

Judy Hivelyand

Rick Shultz