Contractor Property Management System Procedures Review
DAU GLOSSARY DEFINITION
“Acceptable property management system” means a property system that complies with the system criteria in paragraph (c) of 252.245-7003 Contractor Property Management System Administration.
“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-furnished property” means property in the possession of, or directly acquired by, the Government and subsequently furnished to the contractor for performance of a contract. Government-furnished property includes, but is not limited to, spares and property furnished for repair, maintenance, overhaul, or modification. Government-furnished property also includes contractor-acquired property if the contractor-acquired property is a deliverable under a cost contract when accepted by the Government for continued use under the contract.
“Government property” means all property owned or leased by the Government. Government property includes both Government-furnished property and contractor-acquired property. Government property includes material, equipment, special tooling, special test equipment, and real property. Government property does not include intellectual property and software.
“Property management system” means the Contractor’s system or systems for managing and controlling Government property.
“Provide” means to furnish, as in Government-furnished property, or to acquire, as in contractor-acquired property.
“Voluntary consensus standards” means common and repeated use of rules, conditions, guidelines or characteristics for products, or related processes and production methods and related management systems. Voluntary Consensus Standards are developed or adopted by domestic and international voluntary consensus standard making bodies (e.g., International Organization for Standardization (ISO) and ASTM-International). See OMB Circular A-119
The focus of this article is the review of written contractor property management system procedures. When the Government provides Government Property to a contractor for use in contract performance, FAR 52.245-1 – Government Property must be inserted into the contract in accordance with FAR 45.107 – Clauses. The Government Property clause requires the Contractor to establish a system of internal controls (i.e. property management system) to manage (control, use, preserve, protect, repair, and maintain) Government property in its possession. The Contractor’s written property management system procedures must address the outcomes identified in FAR 52.245-1(f)(1) and their associated requirements.
- Acquisition of Property
- Receipt of GP (including Identification)
- Records of GP
- Physical Inventory
- Subcontract Control
- Relief of Stewardship Responsibility and Liability
- Utilizing GP (including Consumption, Movement, Storage, Identification of Excess)
- Property Closeout (Disposition of Property)
The agency responsible for performing contract administration must perform a Property Management System Analysis (PMSA). A PMSA is best described as a systematic objective review and evaluation of a Contractor’s property management system. A PMSA includes review and evaluation of the written procedures as well as the application of them for the purpose of determining the level of compliance with the Government Property clause, terms and conditions of the contract, any voluntary consensus standards, industry leading practices and customary commercial practices that the contractor has elected to incorporate into its property management system. PMSAs are typically performed by a Property Administrator (PA). If property administration has not been delegated to a PA, PMSAs are the responsibility of the Contracting Officer (CO). The results of a PMSA are used by the CO to determine if a contractor has an acceptable property management system. Review of the Contractor’s written property management system procedures are critical to performing a PMSA.
When reviewing written contractor property management system procedures the PA should ensure that the procedures identify pertinent details such as what outcome is being addressed, who is responsible for performance of the procedure, when certain task are performed (e.g. frequency) and the steps involved. The procedure must enable the contractor to meet the outcomes described in the Government Property clause. The written procedure should be detailed enough for contractor employees to apply them and result in current, accurate records that reflect a clear audit trail. The complexity, depth and size of contractor written property management system procedures will vary. In the case of a small contractor organization, with very little Government property, the procedures are not likely not be as complex as large contractor organizations that have a great deal of Government property in its possession and many departments involved with Government property. Regardless of the contractor’s size and the amount of Government property it possesses, the PA must review the procedures thoroughly. It is a good practice to document the procedure review. It is suggested that the requirements of FAR 52.245-1(f) be broken down into sections and the precise requirements within the sections. The next step is to identify the procedure names, numbers, pages and the procedure statements that address each requirement. See attachment for an example of a requirement taken from FAR 52.245(f)(1)(iv) Physical Inventory.
There are some tips to keep in mind when reviewing contractor property management system procedures. If you are reviewing a procedure and another document is referenced, you should include that document in your review. The same is true for any voluntary consensus standards or industry-leading practices (documented and proven best practices). You may not find all of the applicable statements or details needed in one procedure. This is particularly true for large contractors with complex property management systems. For instance, when reviewing acquisition you may not find what you are searching for in the “property management procedure.” The details may be located in the Contractor’s purchasing procedure. If you have a question about the procedures, even if it seems minor, ask the Contractor for clarification. Never assume something about the Contractor’s procedures. Lastly, remember to keep an open mind. Treat each contractor independently. Not all contractors operate the same.