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    Once all the depreciation has been fully billed and paid by the Government does ownership of the asset transfer to the Government? Or does the Government own the assset as soon as the contractor purchases it and starts using it to perform the contract?


    1. The following FAR references quoted in pertinent part are applicable to this response.


    FAR 45.107(a)(1)..., the Contracting Officer shall insert the clause at 52.245-1, Government Property, in— (i) All cost reimbursement, time-and-material, and labor-hour type solicitations and contracts.


    FAR 52.245-1 -- Government Property


    (a)  Definitions. As used in this clause—


    “Contractor-acquired property” means property acquired, fabricated, or otherwise provided by the Contractor for performing a contract, and to which the Government has title.


    “Government property” means all property owned or leased by the Government. Government property includes both Government-furnished and Contractor-acquired property. Government property includes material, equipment, special tooling, special test equipment, and real property.


    (e) Title to Government property.


        (3) Title under Cost-Reimbursement or Time-and-Material Contracts or Cost-Reimbursable contract line items under Fixed-Price contracts.


      (ii) Title to all other property, the cost of which is reimbursable to the Contractor, shall pass to and vest in the Government upon—


                (A) Issuance of the property for use in contract performance;

                (B) Commencement of processing of the property for use in contract performance; or

                (C) Reimbursement of the cost of the property by the Government, whichever occurs first.


      (iii) All Government-furnished property and all property acquired by the Contractor, title to which vests in the Government under this paragraph (e)(3)(iii) (collectively referred to as “Government property)”, are subject to the provisions of this clause.


    2. Because this is a cost type contract, we assume that pursuant to FAR 45.107(a)(1)(i), the contract contains the clause at FAR 52.245-1, Government Property. Based on the information provided in the Background statement, we also assume that the “depreciation expense” is being charged directly to the contract, as opposed to being charged as an indirect cost that is being allocated to two or more cost objectives (i.e., contracts).


    3. In accordance with the terms and conditions of the contract, namely clause FAR 52.245-1, paragraph (e)(3)(ii)(A), the property in question (i.e., the capital asset) becomes Government-owned property as soon as the contractor starts using this asset to perform the contract.


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