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    My command has recently imposed a surveillance requirement for Contract Property. In this case, the term surveillance requires auditing action s in addition to the regular PMSA that will be performed on a continual basis through-out each year. There is no language in the contract that requires the contractor to avail themselves to these additional audits and or surveillance. There is no property specific clause that requires the performance of surveillance.


    No, FAR 52.215-2 (Audit and Records – Negotiation) does not impose a requirement for the Contractor of establish a Property Management System or any requirements to audit property management processes.  FAR 52.215-2 is only intended for the purposes of establishing fair and reasonable prices with Contractors for services and products acquired by the U.S. Government. 

    If the Contractor has been issued Government Furnished Property or by contract has been provided authorization to acquire property on behalf of the Government for the performance of a contract, then FAR 45.107 requires the Contracting Officer to insert clause 52.245-1(Government Property Clause) & 52.245-9 (Use and Charges Clause) or 52.245-2 (Installation Operation Services). The appropriate way to impose Property Management System requirements is with the inclusion of these clauses and/or special requirements language, (e.g., H Clause, Statement of Work, etc.) within the contract, specifically calling out what the Contractor will be responsible for performing.

    The suite of Business System Rule clauses include the Contractors Property Management System; however, each Business System Rule clause has its own purpose and it would be in error to assume that they are all alike or are interchangeable.  DFARS 252.242-7005 (Contractor Business Systems) defines the term “Acceptable Contractor Business System”, identifies the six (6) Contractor Business Systems, describes the Contracting Officers requirements for significant deficiencies, payment withholds, and the corrective action process.  DFARS 252.245-7003 (Contractor Property Management System Administration) defines the term “Acceptable Contractors Business System”, identifies the system criteria, and the requirement to follow the significant deficiency process outlined in DFARS 252.242-7005. 

    If there are no clauses included in the contract then the Contractor is under no obligation to establish a Property Management System and perform “surveillance of contract property”.  All the appropriate clauses must be incorporated into the contract.  Each clause has a specific purpose and must be used together in order to levy the Business Requirements on the contractor. Not to mention DFARS 242.7000 specifically calls out the prescriptions for the use of each clause when applicable. In simple terms here is how each work hand-in-hand:

    FAR 52.245-1 provides the specific requirements for the contractor to establish a Property Management System for the control, use, preserve, protect, repair, maintain and dispose of Government Property.

    DFARS 252.245-7003 imparts three important principles; it defines and identifies the Property Management System as part of the Business System and notifies the contractor that their Property Management System must comply with all the system criteria within FAR 52.245-1(f). 

    Assuming both those clauses are included in the contract, and the Contractor fails to comply with FAR 52.245-1 & DFARS 252.245-7003 then the remedies under DFARS 252.242-7005 may be imposed in the case of a significant deficiency determination made by the Contracting Officer.  Without the FAR 52.245-1 & DFARS 252.245-7003 the Business System Rule itself is ineffective in regards to a Property Management System since there is no criteria or requirement for the contractor to perform property management responsibilities.

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