For a Firm Fixed Price contract with cost share, who owns the CAP?
Very interesting question. To answer your question, due to the type of contract the contractor owns the property once final delivery is made; however, to fully understand why, we need to first visit the FAR definition of Cost-Sharing Contract.
FAR 16.303 Cost-sharing contracts.
(a) Description. A cost-sharing contract is a cost-reimbursement contract in which the contractor receives no fee and is reimbursed only for an agreed-upon portion of its allowable costs.
(b) Application. A cost-sharing contract may be used when the contractor agrees to absorb a portion of the costs, in the expectation of substantial compensating benefits.
Having been able to obtain a little more detail my understanding is that the contractor is providing contractor owned technology for use in the performance of the contract. In addition, the contractor plans on acquiring assets during the performance of the contract. Finally, the type of contract being awarded is a Cost Share FFP contract with financing.
Let’s start with addressing the contract type. According to the FAR there is no definition for a Cost Share FFP. Only a Cost Reimbursement Cost –Sharing contract which I have listed above. Paragraph (a) specifically calls out Cost-sharing contract as cost-reimbursement. The premise is that the contractor is reimbursed only for an agreed upon portion of allowable costs. The reimbursement portion of this type of contract is why title vests in the Government for any allowable assets acquired for performance of the contract and charged as a direct item of costs.
In an FFP contract all assets acquired during the performance of the contract are owned by the Contractor. Unless of course there is financing such as Performance Based Payments such as in your situation. The financing requirement for Title under Performance Based Payments fall within FAR 52.232-36 (f)(1).
FAR 52.232-36 (f) Title.
(1) Title to the property described in this paragraph (f) shall vest in the Government. Vestiture shall be immediately upon the date of the first performance-based payment under this contract, for property acquired or produced before that date. Otherwise, vestiture shall occur when the property is or should have been allocable or properly chargeable to this contract.
What this means is that the Government “only” places a lien on any assets or materials purchased during the performance of a contract as a “protectionary lien” in order to recoup cost in the event of a contract termination. However, once delivery of the end item is made the Government releases the lien and the items become Contractor owned.
The contract you identified within your question is simply FFP with financing. The cost share portion will simply be work statement language clarifying the contractor’s contribution to the end item. The only way that the Government can take absolute ownership of any assets purchased under the contract is to identify the assets as an end item on the contract.
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