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  • Question

    Under the above scenarios, would allowing a subcontractor to perform maintenance on a piece of Government Tooling, or, lift a piece of Government Owned Property (all taking place inside the Prime Contractor's facility) constitute "providing" or "furnishing" Government Property to a subcontractor for the performance of a contract and to satisfy the requirements of the Property Clause and liability issues. Would the (Sub)contracts have to have the Property Clause in them.


    Answer

    WOW – a Great question because it calls into play a number of intricacies not normally addressed in the Government property clause of FAR 52.245-1 nor the policies supporting it, i.e., FAR part 45, nor even any guidance put out by the Department of Defense through the Property guidebook (http://www.acq.osd.mil/dpap/pdi/pc/docs/Property_Guidebook.docx).  So we really have to address a number of issues regarding your question(s).
     
    First – The Prime contractor has within its contract the applicable liability provisions via the Government Property Clause, i.e., FAR 52.245-1 and specifically, if the contractor has the LIMITED risk of loss – Paragraph (h).  So first we are assuming that this is a situation where the Government bears the risk of loss in the majority of cases.
     
    Second – where a Prime provides Government property to a SUBCONTRACTOR to USE in performing the work under the Prime contract/Subcontract – then there are additional requirements for the Prime to act.  Specifically:
    1.  Under paragraph (b) we see, “(2) The Contractor's responsibility extends from the initial acquisition and receipt of property, through stewardship, custody, and use until formally relieved of responsibility by authorized means, including delivery, consumption, expending, sale (as surplus property), or other disposition, or via a completed investigation, evaluation, and final determination for lost property. This requirement applies to all Government property under the Contractor's accountability, stewardship, possession or control, including its vendors or subcontractors (see paragraph (f)(1)(v) of this clause).  As well as (3) The Contractor shall include the requirements of this clause in all subcontracts under which Government property is acquired or furnished for subcontract performance.”
    2.  Under Paragraph (f) we see, “(v) Subcontractor control. (A) The Contractor shall award subcontracts that clearly identify items to be provided and the extent of any restrictions or limitations on their use. The Contractor shall ensure appropriate flow down of contract terms and conditions (e.g., extent of liability for loss of Government property).  And, (B) The Contractor shall assure its subcontracts are properly administered and reviews are periodically performed to determine the adequacy of the subcontractor's property management system.”
    3.  And a few other references not germane to this discussion.
     
    So, with that said – when Government Property (GP) is provided by the prime to the sub – we, the Government, expect it to be properly managed.  And via the flowdown of the GP Clause requirements – the sub will need to establish and maintain a Property Management System along with all of the other requirements of the GP Clause.
     
    Wow!!! – Does apply then to your scenario?
    In my humble opinion, if it did I do not believe that this work would EVER get done!!!
     
    So let’s clarify your situation with a few statements of fact:
     
    1.  The GP will remain in the PRIME Contractor’s possession at all times.
    2.  The Work is going to be done AT the PRIME Contractor’s location.
    3.  The “subcontractor” is not USING the GP to perform – rather the purpose of the subcontract is to perform maintenance or repair on that item of GP.
     
    With that said, the application of the Government property clause, with all of its commensurate requirements e.g., establish system, create records, perform physical inventories, would appear to be inappropriate.
     
    But, I have to assume that the award of this type of SERVICE contract with a subcontractor would be on a competitive basis – and awarded on a fixed price basis (See the extensive discussion of SERVICE contracting under FAR Part 37 – and the specificity provided under 37.105.  [Note – if it is NOT a fixed price contract, then ignore this paragraph.]  As such, in the competitive world most service companies carry their own insurance.  It is the PRIME contractor’s responsibility to ensure that proper TYPE of contract is used – See FAR Part 44 – and for you, coming out of DoD, see DFARS 244.3 and 252.244-7001, the new Purchasing System  business system rule applicable to DoD Contracts.
     
    So, if this was a COMPETITIVE COMMERCIAL SUBCONTRACT – I would expect the reasonably prudent contractor, operating in a competitive environment, to address the possible issue of damage of the property, the Government property, by the subcontractor  BEFORE the award of the contract. 
     
    If the FAR were to attempt to address EVERY possible scenario – well, the reg would be ten times bigger than it is.  Rather, we, the Government, expect the contractor to act in a reasonable fashion – using competitive practices in the applicable situations.
     
    So, summation…
      NO, we do NOT expect the contractor to flow down the GP clause.
      YES, we DO expect the contractor to use GOOD COMMERCIAL PRACTICE in this situation, i.e., ensure that under this Fixed Price competitive type arrangement that the prime awards the contract to responsive, responsible subcontractor and apply the APPROPRIATE COMPETITIVE terms and conditions.

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