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    Are we allowed to release GFP so it can be used on a direct to commercial sale? What is the process of getting GFP declassified? What would be the process to properly disposition GFP after a contract has been closed out?


    Answer

    The situation you described is interesting and has several issues embedded within it.  There is a classified item of GFP that WAS accountable to a Foreign Military Sales (FMS) contract that included FAR 52.245-1 Government Property and FAR 52.245-9 Use and Charges.  The FMS contract was closed without ensuring that the GFP was properly dispositioned.  The GFP is still in the possession of the contractor.  The FMS contract customer, RSAF, has submitted a letter to the U. S. Government requesting USE of the GFP for a direct commercial sale between them and the contractor.

    I’m going to begin by answering your last question “What would be the process to properly disposition GFP after a contract has been closed out?”


    As mentioned above, the FMS contract included FAR 52.245-1, which states in paragraph (b)(1), “The Contractor shall have a system of internal controls to manage (control, use, preserve, protect, repair and maintain) Government property in its possession. The system shall be adequate to satisfy the requirements of this clause. In doing so, the Contractor shall initiate and maintain the processes, systems, procedures, records, and methodologies necessary for effective and efficient control of Government property.”  Paragraph (b)(2) states:


    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).


    FAR 52.245-1(f)(1)
    identifies the outcomes for which contractors shall establish and implement property management plans, systems, and procedures.  To answer your question regarding disposition, FAR 52.245-1(f)(1)(vii) Relief of stewardship responsibility and FAR 52.245-1(f)(1)(x) Property closeout will be the focal points.  FAR 52.245-1(f)(1)(vii)(C) states, 

    (C) Unless the contract provides otherwise, the Contractor shall be relieved of stewardship responsibility and liability for property when—
    (1) Such property is consumed or expended, reasonably and properly, or otherwise accounted for, in the performance of the contract, including reasonable inventory adjustments of material as determined by the Property Administrator;
    (2) Property Administrator grants relief of responsibility and liability for loss of Government property;
    (3) Property is delivered or shipped from the Contractor’s plant, under Government instructions, except when shipment is to a subcontractor or other location of the Contractor; or
    (4) Property is disposed of in accordance with paragraphs (j) and (k) of this clause.
     
    Given the contract did not provide otherwise, the GFP should have been disposed of in accordance with paragraphs (j) Contractor inventory disposal and (k) Abandonment of Government property, of the Government Property clause.  
    FAR 52.245-1(f)(1)(x) Property closeout states, “The Contractor shall promptly perform and report to the Property Administrator contract property closeout, to include reporting, investigating and securing closure of all loss of Government property cases; physically inventorying all property upon termination or completion of this contract; and disposing of items at the time they are determined to be excess to contractual needs.”  Plainly stated, all Government property issues, to include disposition, are to be resolved by the contractor upon contract completion or termination and reported to the Government Property Administrator.

    Now, let’s move on to your second question “What is the process of getting GFP declassified?  You must seek declassification instructions from the Original Classification Authority (OCA).  The OCA must make declassification determinations for all classification decisions.  For more information please see
    DoDM 5200.45 “Instructions for Developing Security Classification Guides.”


    Keep in mind that the responses above relate to Government property accountable to a contract.  This leads me to a point that cannot be stressed enough.  GOVERNMENT PROPERTY IN THE POSSESSION OF A CONTRACTOR MUST BE ACCOUNTABLE TO A CONTRACT for which there is a firm requirement for the property. 


    With that said, let’s address the remaining question.  You asked “Are we [the U. S. Government] allowed to release GFP so it can be used on a direct to commercial sale?  Given the property is accountable to a contract and that by “release” you mean USE, the U. S. Government may allow Government property to be used on a direct commercial sale.  However, there are two conditions that must be met:   

    (1)  Authorization for contractor use of the property must be obtained from the contracting officer and
    (2)  The contractor must pay applicable rental charges in accordance with FAR 52.245-9 Use and Charges.
    FAR 52.245-9 states,
    (b) Use of Government property. The Contractor may use the Government property without charge in the performance of—
    (3) Other work, if the Contracting Officer specifically authorizes in writing use without charge for such work and
    (d) General.
    (2) The Contractor shall not use Government property for nongovernmental purposes, including Independent Research and Development, until a rental charge for real property, or estimated rental charge for other property, is agreed upon. Rented property shall be used only on a non-interference basis.
     
    FAR Policy states:
    45.301 -- Use and Rental.
     
    This subpart prescribes policies and procedures for contractor use and rental of Government property.
     
    (f) In exchange for consideration as determined by the cognizant contracting officer, the contractor may use Government property for commercial use. Prior approval of the Head of the Contracting Activity is required where non-Government use is expected to exceed 25 percent of the total use of Government and commercial work performed.
     
    DFARS 245.302 Contracts with foreign governments or international organizations states:
     
    (1) General.
    (i) Approval. A contractor may use Government property on work for foreign governments and international organizations only when approved in writing by the contracting officer having cognizance of the property. The contracting officer may grant approval, provided—
    (A) The use will not interfere with foreseeable requirements of the United States;
    (B) The work is undertaken as a DoD foreign military sale; or
    (C) For a direct commercial sale, the foreign country or international organization would be authorized to contract with the department concerned under the Arms Export Control Act.
    (ii) Use charges.
    (A) The Use and Charges clause is applicable on direct commercial sales to foreign governments or international organizations.
    (B) When a particular foreign government or international organization has funded the acquisition of property, do not assess the foreign government or international organization rental charges or nonrecurring recoupments for the use of such property.
    (2) Special tooling and special test equipment.
    (i) DoD normally recovers a fair share of nonrecurring costs of special tooling and special test equipment by including these costs in its calculation of the nonrecurring cost recoupment charge when major defense equipment is sold by foreign military sales or direct commercial sales to foreign governments or international organizations. “Major defense equipment” is defined in DoD Directive 2140.2, Recoupment of Nonrecurring Costs on Sales of U.S. Items, as any item of significant military equipment on the United States Munitions List having a nonrecurring research, development, test, and evaluation cost of more than $50 million or a total production cost of more than $200 million.
    (ii) When the cost thresholds in paragraph (2)(i) of this section are not met, the contracting officer shall assess rental charges for use of special tooling and special test equipment pursuant to the Use and Charges clause if administratively practicable.
    (3) Waivers.
    (i) Rental charges for use of U.S. production and research property on commercial sales transactions to the Government of Canada are waived for all commercial contracts. This waiver is based on an understanding wherein the Government of Canada has agreed to waive its rental charges.
    (ii) Requests for waiver or reduction of charges for the use of Government property on work for foreign governments or international organizations shall be submitted to the contracting officer, who is authorized to approve the requests in consultation with the appropriate functional specialist. 

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