Article

Contractor Business Systems Series: Part 3 – Contractor Property Management System

calendar iconAugust 13, 2024

Contributors: Christopher Morris, Senior Associate

If you find yourself responding to a solicitation with Federal Acquisition Regulation (FAR) 52.245-1 or Defense Acquisition Regulation Supplement (DFARS) 252.245-7003 Contractor Property Management System Administration, your company will need to have and implement a property management plan if you are awarded the contract. The property management plan will require you to demonstrate that you possess adequate policies to achieve the outcomes listed in FAR 52.245-1(f).

The property management plan will need to outline when your company receives government furnished property (GFP) that your staff is capable of initiating property management and maintaining the processes, systems, procedures, records, and methodologies necessary for effective and efficient control of government property throughout the performance of the contract. In this regard, government property includes not only GFP but also contractor-acquired property to which the government obtains title as described in FAR 52.245-1. However, see FAR 52.245-1 Alt I for an exception to this title vesting rule.

10 Elements of Property Administration

To demonstrate the ability to successfully manage government property, you will need comprehensive internal property management policies with documented processes for the 10 elements of property administration listed in FAR 52.245-1(f)(1)(i) through (x). In doing so, you may employ customary commercial practices, voluntary consensus standards, or industry-leading practices and standards that provide for an effective and efficient government property management system that is necessary and appropriate for the performance of the contract (except where inconsistent with law or regulation). The ten elements are:

  1. Acquisition: In this regard, keep in mind the requirements of FAR 52.244-5 and -6 as they may apply to the acquisition of contractor-acquired property.
  2. Receipt: The performance schedule of the contract is predicated on the government providing GFP in a timely manner and in a condition suitable for its intended use. If it is not, you may be entitled to an equitable adjustment to the contract price.
  3. Records
  4. Physical Inventory
  5. Sub-contractor Control: Ensure that subcontractors are aware that the property you provide to them is government property and that they are not permitted to place any incumbrance on the property.
  6. Reports
  7. Relief of Stewardship and Liability: If government property is lost, damaged, or destroyed, you will only be held liable for such loss, damage, or destruction as provided in FAR 52.245-1.
  8. Utilization
  9. Maintenance: Be sure to factor the maintenance of government property in the price you propose for the contract. Similarly, some jurisdictions may impose a tax on you for possessing or using government property. This should be considered in pricing the contract.
  10. Property Closeout

For a more detailed discussion of these elements, see FAR 52.245-1.

Common Items Included in Property Manuals

  1. Policy, responsibility, definitions, list of acronyms
  2. Level of frequency for internal reviews, surveillance, self-assessments, or audits
  3. Roles and responsibility for personnel who oversee shipping and receiving functions
  4. Process for handling discrepancies incident to shipping
  5. Storage locations for government property including contractor-acquired property, and sensitive property
  6. Various mechanisms for initiation of movement of property (e.g., request forms, emails, phone calls, government requests)
  7. Process for identifying contracts approaching closeout and for determining whether any excess property exists
  8. Process for disposal of all excess property upon contract completion
  9. Subcontractor(s) responsibility for property in their possession

If your company has this requirement in your contract some of the common pitfalls include:

  1. No designated personnel responsible for maintaining (and updating) a Property Management Plan
  2. Lack of process or timeline for developing corrective actions based on findings in self-assessments
  3. Lack of defined timeline from receipt of inventory to updating inventory records in the accounting system
  4. Lack of defined process for the resolution of non-conforming goods received
  5. Lack of tracking movement of property that is initiated via phone calls
  6. Lack of process for segregation of duties during physical inventory counts
  7. Lack of procedures for segregating government property and contractor property

GFP Guidebook

Be aware that DCMA has a guidebook for government contract property administration. Although this guidebook applies to DCMA employees and is not a regulation binding on contractors, it is advised that you become familiar with the guidebook. Familiarity will help you understand what DCMA is looking for when it evaluates your property management system.

Your Guide Forward

Cherry Bekaert’s Government Contracting industry advisors are well-versed in business systems requirements and complex control environments. If you have any questions specific to your situation, we are readily available to discuss them with you.

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