Disposal of Federal property falls under Title 40 of the United States Code. The General Services Administration (GSA) prescribes the policies relative to disposal. The policies for disposal of Federal property can be found in 41 CFR Chapter 102 Subchapter B. There have been several questions submitted to DAU regarding disposal of Government property. One questioner wanted to know of regulations or legal precedents that address transferring or selling military hardware back to the Original Equipment Manufacturer (OEM) with the option to lease the hardware back if there is an urgent need. Policies relevant to the question are: 41 CFR Part 102-35 Disposition of Personal Property, 41 CFR Part 102-36 Disposition of Excess Personal Property, 41 CFR Part 102-38 Sale of Personal Property, and 41 CFR Part 102-39 Replacement of Personal Property Pursuant to the Exchange/Sale Authority.

In accordance with 41 CFR Part 102-38, sales must be competitive. Therefore, the sale would be opened to more than just the OEM that the owning/ holding agency has identified. If the property is currently in the possession of the Government, a negotiated sale is permitted under 41 CFR 102-38.105. A demilitarization waiver would be required if the property is subject to demilitarization or trade security controls. Proceeds from sales are to be credited to the U.S. Treasury or to the price or cost of the work (40 USC 571 and 40 USC 574). Note: interpretation of the "price or cost of work" includes credits to the contract, contractor overhead, or credit/check for sales proceeds to the Government program.

If the property is already accountable to a contract, ("contractor inventory" as defined in FAR 45.101), and the owning agency has no further need for the property, any additional screening requirements have been met, and a negotiated sale is desired, the Defense Contract Management Agency (if administering the contract) or Defense Logistics Agency Disposition Services could conduct the sale and coordinate the demilitarization waiver. If the property is hazardous or dangerous to public health and safety, it would be exempt from GSA screening.

Lastly, if the owning agency is interested in obtaining replacement property for the items being exchanged, reference 41 CFR Part 102-39, Replacement of Personal Property Pursuant to the Exchange/Sale Authority. If this method is utilized, it is suggested that a contract modification is utilized to document the exchange. Special conditions regarding the availability of the property for future Government use should be included in the sales terms and conditions. Note: Subpart C--Exchange/Sales Methods and Reports, 41 CFR 102-39.70 specifically addresses the "Supplier" aka Original Equipment Manufacturer, and the accounting restrictions on the proceeds in 41 CFR 102-39.80.

Note: 41 CFR 102-39.60--What restrictions and prohibitions apply to the exchange/sale of personal property? Unless a deviation is granted by GSA, you cannot sell a number of different types of property including: Weapons; property dangerous to public health or safety; combat material without demilitarizing it or obtaining a demilitarization waiver or other necessary clearances from the Department of Defense Demilitarization Office; and Flight Safety Critical Aircraft Parts and Critical Safety items -- unless you meet the provisions of 41 CFR 102-33.370 (exchange or sale to OEM is permitted for FSCAP and CSI).