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  • Question

    Good day, is there an appropriate way to document contractor furnished property that will be loaned to the government which will account for custody and allows the contractor to retain title? In this instance, contractor owned test equipment/gear will be installed/used on a government vessel and the equipment will be returned to the contractor following a loan period.


    Answer

    The following response is based solely on the question and background information provided. One of the most common methods to accomplish this is through a bailment agreement. A bailment involves only a transfer of possession or custody, not of ownership, from by one party (the bailor) into the hands of another (the bailee). There are three types of bailments: (1) for the benefit of the bailor and bailee; (2) for the sole benefit of the bailor; and (3) for the sole benefit of the bailee. The duty of care that must be exercised by a bailee varies depending on the type of bailment and terms of the agreement.

    The bailment agreement should cover (but not limited to) the allowed use for the item; the term (time period) of the loan; installation/deinstallation and transportation arrangements and costs; and responsibility for liability associated with the use or loss of the property.

    Although DFARS PGI 217.75 discusses bailment, it is particular to the DoD for additional requirements related to acquisition of replenishment parts and not necessarily applicable in this case.

    Recommend you discuss with the customer and legal counsel as well as any other personnel (i.e., finance) to craft an appropriate agreement.

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