Can Contractor Acquired Material remain as Contractor Acquired Material if transferred at full acquisition Cost to the USG if the monies is transferred from the gaing contract to the losing contract for the sdame program? Which clause would be the possibility if the MMAS does or does not apply?
There are a number of issues relevant to this question; each requiring explanation and clarification.
Bottom line up front:
There are several issues embedded within this question:
1. Transfers of contractual accountability from one contractor to another. These are contractual actions, requiring modifications to both the gaining and losing contract (references: FAR 45.6 and DoD PGI 245 PGI 245.103-71, “Transferring Government property accountability”). Only the Government Contracting Officer can initiate contractual transfers of accountability—and only when in the best interests of the Government.
2. FAR 52.245-1, paragraph (j) (I) (i) contains an allowance for debit/credit transfers of CAP (material only) when the material is needed on another contract. Debit/credit transactions are financial accounting transactions, not transfers of accountability under FAR 45.106; by extension, contract modifications are not used to accomplish debit/credit transfers. Under this scenario, the material is not transferred; the costs of material are transferred. Upon completion of the debit/credit transaction, the Government still has title upon completion of the debit/credit transaction; and the contractor’s entitlement to be reimbursed as a direct item of cost has not changed. Title of the CAP vests with the Government inherently under the debited contract via the contracting officer’s approval of the debit/credit transaction.
3. Material Management Accounting System (MMAS)
Within DoD, MMAS (as set forth in DFARS 252.242-7004) operationalizes many aspects material requirements planning to include debit/credit and loan/pay scenarios. The MMAS establishes a “systems” approach for the planning, controlling, and accounting for material. So the MMAS is critical to answering your question. Under the MMAS the contractor is allowed to move material amongst and between Government contracts and even commercial work – so long as they meet the ten “criteria” (Paragraph d) set forth in the MMAS clause. In regard to your question this paragraph of the clause includes three criteria critical to this “system:”
1. Maintain a consistent, equitable, and unbiased logic for costing of material transactions… and
2. The system should transfer parts and associated costs within the same billing period.
3. Ensure that costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements….
Discussion. The MMAS DOES NOT require a contract modification to either the losing or the gaining contract. Rather, the Government is made “whole” by receiving back all of its funds, its monies that it was originally charged for this material through the crediting of its costs. These costs are then debited to the gaining contract or work effort. In essence the material’s costs are credited back to the first contract and then debited to the next using/consuming contract or work. So, yes, CAP of the material classification may remain the same classification – CAP of the material classification.
Under The contractor, through its MMAS, may act independently of the Government, i.e., they do not need to ask approval for these actions – crediting and debiting of material and the costs and its movement between contracts. It is a tacit approval provided by the systems approach to the MMAS.
In your background information you state, “Also the Contractor believes that
Contractor Acquired Material is not the property of the USG.” I would respectfully disagree with the contractor. Since you state that these were COST REIMBURSEMENT type contracts – so long as the contractor is entitled to the reimbursed for the material as a direct charge (FAR 52.245-1(e)(3), it is Contractor Acquired property which is Government Property (FAR 52.245-1(a) Definition of Both Government property and Contractor Acquired Property).
Lastly, as part of the MMAS Question you state, “The problem is that for borrow/payback techniques it is a little unclear if it can be done on a massive amount of material transfer.” The “loan/payback” portion of the MMAS is applicable in limited situations and first, requires ACO Approval – and second, DOES NOT REQUIRE the CREDITING OF THE COSTS. In other words, the monies stay with the first contract, but the material moves to the second contract or using vehicle. (Note: this material under the MMAS may go to Cost Reimbursement contracts, Fixed Price Contracts, even commercial work)Under the loan/payback process there is the expectation that the physical property will be replaced upon the next receipt of material into the MMAS.
Loan/payback transactions under MMAS should NOT be confused with contractual transfers of accountability (either CAP or GFP), which require a CONTRACT MODIFICATION. In such cases, the costs for the material REMAIN with the originally acquiring contract. Such transfers require contract modifications to both he the gaining and losing contract (references: FAR 45.6 and DoD PGI 245 PGI 245.103-71, “Transferring Government property accountability”). It is in THIS situation, outside of the MMAS, where the
Upon transfer, CAP becomes Government Furnished Property (GFP) under the new accountable contract.
While the contractor may act independently under the MMAS – Only the Government may authorize the TRANSFER of Government property (Both CAP and GFP) via a Contract Modification.
There are numerous discussions of the MMAS under the DAU Ask a Professor site – https://dap.dau.mil/aap/pages/default.aspx, where you posted your question. Do a search for MMAS at this site and you will find a rich resource for answers!
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