Can such thresholds be established/is this allowable under VCSs/ILPs?
This is a GREAT question and in an area that is often misunderstood. Your question -- Can a threshold be established/is this allowable under VCSs/ILPs?
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Technical answer – Only if a clause allows it!
Now, that is sorta’ a wishy-washy answer – but to get the complete answer I have to walk you through some other concerns first.
First – since you are dealing with Government Property (GP) in the possession of a contractor (Based upon the context of your question) I have to assume that this GP is under the stewardship of a contractor – and that contract has the Government property clause of FAR 52.245-1. This clause establishes the contractor’s responsibilities towards our GP in their possession. These responsibilities include, but are not limited to, establishing a Property Management System in compliance with the clause – and applying either the requirements of appropriate Voluntary Consensus Standards (VCS) or industry leading practices (ILP). [Note – And I must assume that you are referring to two VCSes from ASTM International:
E2811 – 1 Standard Practice for Management of Low Risk Property (LRP) and
E2131 – 09, Standard Practice for Addressing and Reporting Loss, Damage, or Destruction of Tangible Property.]
Good! We have then a contractual requirement – the GP Clause.
And a secondary requirement imposed through the GP clause of either VCSes or ILPs (Which are not specifically called out – as the contractor may select and apply any VCS or ILP so long as it is appropriate to the Process and Outcome being addressed within the Property Management System).
So, the question and the CRUX of the matter then is, "Which has or takes precedent?"
Quite clearly, through a concept called "order of precedence" (And even its CLAUSAL APPLICATION, FAR 52.215-8) the GP clause has precedent over the VCS! The GP clause establishes for certain item – a VERY SPECIFIC GOVERNMENT REQUIREMENT. And unless a lessening of these requirements is stated in the clause – they CANNOT be lowered – which is what the contractor is requesting to do – based upon your question.
The GP clause of FAR 52.245-1(f) requires the reporting of all instances of loss, theft, damage or destruction. Paragraph (f)(1)(vi) states, "Unless otherwise directed by the Property Administrator, the Contractor shall investigate and promptly furnish a written narrative of all incidents of loss, theft, damage or destruction to the property administrator as soon as the facts become known or when requested by the Government." Notice that the words used are "ALL INCIDENTS…"
Quite clearly there is no threshold established in the contractual clause requirement.
So, at this step in our analysis – the simple answer is NO!!! The contractor cannot establish a threshold under which he/she does not have to report any loss, theft, damage or destruction of GP.
Now, to be fair in providing an answer to this question – I need to go a little further and address a relatively NEW clause relating to the issue of LOSS of Government Property. That is the new DFARS clause found at DFARS 252.245-7002 – entitled, "Reporting Loss of Government Property" dated FEB 2011.
In this clause we are now provided a definition of "Loss" –which includes the above referenced terms, i.e., Loss, theft, damage or destruction – subsuming them all under the term LOSS.
And here is where there IS an allowance for SOME application of a threshold. The DFARS clause adds an application of Sound Business Practice through the following statement found in paragraph (b)(2) of the clause which states:
"Unless otherwise provided for in this contract, the requirements of paragraph (b)(1) of this clause do not apply to normal and reasonable inventory adjustments, i.e., losses of low-risk consumable material such as common hardware, as agreed to by the Contractor and the Government Property Administrator. Such losses are typically a product of normal process variation."
So, we see here for MATERIAL, that is of a LOW RISK nature, then NORMAL INVENTORY ADJUSTMENTS need NOT be reported. But, to emphasize – this applies ONLY to material and only to normal inventory adjustments. If material was DESTROYED due to a fire – that is NOT a normal inventory adjustment. If material was of a precious metal nature – that would NOT be a low risk property. If the item was classified as Special Tooling, or Special Test Equipment or Equipment – these items are NOT material – so the above allowance, again, would NOT apply! AND – the application of this inventory adjustment process for low-risk consumable material must be AGREED to be the Government Property Administrator and the Contractor.
Lastly, under paragraph (4) the DFARS clause reiterates the reporting requirement stating, "This reporting requirement does not change any liability provisions or other reporting requirements that may exist under this contract."
Bottom line – though I understand the contractor’s desire to be relieved of the responsibility of NOT reporting LOSS of Government property under a certain threshold – that is NOT an allowance, VCS notwithstanding, under the FAR GP clause – EXCEPT for low-risk consumable material – as AGREED to by both PA and Contractor!