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    For an Other Transaction type contract that doesn't stipulate specific guidance in this scenario, can CAP be gifted to a subcontractor? The contractor and PM are on board, but we are trying to determine 1) if this is possible and 2) if possible, what needs to be done to transfer ownership to the subcontractor in this situation. Thanks!


    Answer

    Per Section II of the Other Transactions Guide (Nov 2018), the Government isn’t required to, and generally should not take title to physical property acquired or produced by a private party signatory to an Other Transaction (OT), except property that is identified in the agreement as a deliverable. The inclusion of “Unless otherwise stated in the Award, title to personal property acquired with agreement funds shall vest in the recipient upon acquisition...” in the agreement is consistent with the excerpt from the OT Guide. Based on the information that you provided, it appears the Government does not have title to what you referred to as Contractor-acquired property (CAP). Contractor-acquired property means property acquired, fabricated, or otherwise provided by the contractor for performing a contract and to which the Government has title. By definition CAP is property that the Government has title to. It is suggested that a determination be made as to whether the property in question is really CAP.

    The OT Guide does address property for which the Government has title. It states that property that the Government takes title to (e.g. CAP) or furnishes (i.e., GFP) is subject to the Federal Property and Administrative Services Act (Codified in various sections of 40 U.S.C and 41 U.S.C.). Property titled to the Government cannot be gifted without being screened for reutilization within the Federal Government. It must first be screened by the owning agency (e.g., the Department of Defense) for reutilization. In most cases property must be screened by the General Services Administration (GSA) to all Federal agencies for reutilization prior to being donated or sold. One exception is the donation of educationally useful equipment to an educational institution or nonprofit organization (see Executive Order 12999). However, even educationally useful equipment must be screened by the owning agency first. The Federal Property and Administrative Services Act, Subchapter II Section 483, Property Utilization, requires executive agencies to transfer or dispose of excess property in accordance with authority delegated and regulations prescribed by the Administrator (GSA). GSA maintains the Federal Management Regulation (FMR). For specific information about the disposition of personal property see FMR Part 102-36. See FMR Part 102-75 for real property disposal.

    The supplemental information provided revealed that the agreement also states supplies shall be managed in accordance with § 200.314, title to real property shall vest in the recipient subject to conditions contained in 2 CFR § 200.311, and the recipient shall dispose of real property in accordance with Agreement Officer instructions pursuant to 2 CFR § 200.311. 2 CFR § 200.312 should also be reviewed for relevance.

    § 200.312 Federally-owned and exempt property.

    (a) Title to federally-owned property remains vested in the Federal Government. The non-Federal entity must submit annually an inventory listing of federally-owned property in its custody to the Federal awarding agency. Upon completion of the Federal award or when the property is no longer needed, the non-Federal entity must report the property to the Federal awarding agency for further Federal agency utilization.

    (b) If the Federal awarding agency has no further need for the property, it must declare the property excess and report it for disposal to the appropriate Federal disposal authority, unless the Federal awarding agency has statutory authority to dispose of the property by alternative methods (e.g., the authority provided by the Federal Technology Transfer Act (15 U.S.C. 3710 (i)) to donate research equipment to educational and nonprofit organizations in accordance with Executive Order 12999, “Educational Technology: Ensuring Opportunity for All Children in the Next Century.”). The Federal awarding agency must issue appropriate instructions to the non-Federal entity.

    (c) Exempt property means property acquired under a Federal award where the Federal awarding agency has chosen to vest title to the property to the non-Federal entity without further responsibility to the Federal Government, based upon the explicit terms and conditions of the Federal award. The Federal awarding agency may exercise this option when statutory authority exists. Absent statutory authority and specific terms and conditions of the Federal award, title to exempt property acquired under the Federal award remains with the Federal Government.

    Lastly, when trying to determine whether it is permissible to “gift” property to a private entity it is strongly suggested that you contact your local counsel to ensure that you are not in violation of any laws or policies.

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