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own report of the facts of the case and his recommendation thereon. If the contract administrator is the contracting officer, or a designated representative of the contracting officer for that purpose, he will thereupon determine the contractor's liability, in accordance with the terms of the contract; otherwise he will forward the papers to the contracting office, who will make such determination. In making any such determination, consideration will be given to the reports and recommendations submitted and to any additional facts which the contractor may submit. The contractor and the property administrator shall be furnished with a written copy of such determination. copy shall be held in the files of the contract administrator.

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(ii) When inventory adjustments or usage analyses disclose consumption of property which is considered unreasonable by the property administrator, or when instances of losses, damages to, or destruction of Government property which have not been reported by the contractor, are discovered by the property administrator, he shall prepare a statement of the items and amount of loss involved. This statement shall be furnished the contractor for investigation and written justification. Further procedure shall be in accordance with that prescribed in (1) above.

(111) When end items are lost, destroyed, or damaged beyond repair while such items are in the physical possession or control of the Contractor, the action prescribed in subparagraph (1) above will be required.

(iv) Where it has been determined that the Contractor is liable to the Government by reason of the loss, damage, or destruction of Government property, a letter of advice from the Contract Administrator shall be considered a valid credit to the official Government property records, provided:

(A) When the Contractor pays by check, the letter of advice will identify the check received by number, date, and amount.

(B) When a settlement is made by offset against amounts due the Contractor on a public voucher, the letter of advice will cite the actual voucher (Form 1034) on which the deduction is made.

(C) When collection of the claim against the Contractor is to be made by the fiscal office designated for the contract, the letter of advice will have attached thereto a copy of the document used by the Contract Administrator to notify the fiscal office to effect collection.

(v) When property is rendered unserviceable by damage thereto, the letter of advice from the Contract Administrator will be considered a valid credit to the Government property account when supported by or appropriately cross-referenced to shipping documents or listing covering proper disposition of the unserviceable items.

(g) He shall take the action necessary to insure that his records of the transactions discussed in paragraph 204 below are complete.

(h) He shall review and approve the contractor's scrap procedures and records as provided in paragraph 212 of this manual. (1) He shall advise the Contract Administrator on all property matters.

204 Shipment and receipt of governmentfurnished property. In the case of Government property shipped to a contractor's plant from a military installation or from another contractor's plant, the contractor becomes responsible therefor upon delivery of the property to his plant. The shipping activity shall furnish the property administrator, who is responsible for the receiving contractor's property account, with copies of the documents necessary to permit the property account to reflect the transaction. On receipt of the property the contractor, where required, shall furnish the property administrator with documented evidence of such receipt. The property administrator shall take the action necessary to insure that his records of these transactions are complete. (See par. 203.)

205. Sources from which Government property may be furnished or acquired.

205.1 Military installations or other Contractor's plants. Government property may be shipped to a Contractor from military Installations or plants or department con

tractors.

205.2 Direct purchase by the Contractor. Direct purchases shall be subject to a determination by the Contract Administrator that the items are allocable to the contract involved and are reasonably necessary therefor. For purposes of property control within the scope of this manual, it shall be considered that property purchased by a Contractor, for which direct reimbursement is to be requested, becomes Government property upon its receipt by the Contractor. This is "Contractor-acquired" property. This provision shall not be deemed to alter or modify contractual provisions relating to passage of title.

205.3 Withdrawal from Contractor-owned stores. For purposes of property control, within the scope of this manual, property withdrawn from Contractor-owned stores, for direct charge to the contract, shall be considered Government property at the time of approval of the claim for reimbursement, or at the time of issuance for use of such property for the performance of the contract, whichever is earlier. This also is "Contractor-acquired" property.

205.4 Contract provisions, termination, contract changes. Pursuant to specific contractual provisions, or as a result of termination of a contract, or change orders issued under a contract, the Government may acquire title to property.

205.5 Advance, progress, or partial payments. Pursuant to the terms of a contract the Government may acquire title to property upon the making of advance, progress, or partial payments to the Contractor. Property to which the Government has acquired a lien or title solely as a result of

partial, advance, or progress payments shall not be subject to the provisions of this manual.

206. [Reserved]

207. Contractor's records.

207.1 General policy. In order to satisfactorily perform work under a Government contract, a contractor must maintain adequate control records for all Government property, whether furnished to or acquired by a contractor for the account of the Government. It is the Government's policy to designate and use such records as the offcial contract records, and not to maintain duplicate property control records, other than those required by paragraph 213, and other than such real property and plant equipment records as may be required by the respective departments. Exceptions to this policy may be authorized by the respective departments in special circumstances, such as where the administrative expense of maintaining Government personnel at the Contractor's plant or providing frequent official visits to the plant would exceed the cost of maintaining Government records or otherwise not to be in the best interest of the Government.

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207.2 The Contractor's property control system. The contractor's property control system shall be reviewed and approved in writing by the property administrator. any corrective action is necessary, it will be required of the contractor prior to approval. Such corrective action will normally be effected through mediation with the contractor. Where corrective action would involve substantial increased costs or where agreement as to the corrective action is not reached through mediation, the differences will be referred to the contract administrator. Consistent with the provisions of the contract, the principles and requirements stated in the subparagraphs below shall be observed by the property administrator in approving the contractor's property control system.

207.3 Records for material in stores. For material maintained by the Contractor in stocks or stores, the Contractor's property control system shall be such as to provide the following information:

(1) Contract number, or equivalent code designation.

(11) Nomenclature or description of item. (iii) Quantity received.

(iv) Quantity issued.

(v) Balance on hand.

(vi) Posting reference.

(vii) Date received or issued.

(viii) Price.

(ix) Disposition action taken. 207.4

Records for material issued directly upon receipt, for minor plant equipment, and for special tooling. For material, whether Government-furnished or contractor-acquired, issued by the contractor directly so as to be considered expended under the contract, for minor plant equipment, and for special tooling, the Government invoices,

contractor's purchase documents, or other documentary evidence of acquisition and issue, will be accepted as adequate property control records.

207.5 Records of plant equipment. (a) The contractor shall maintain individual records of each item of Government-owned plant equipment having a unit cost of $500 or more, which shall consist of the following information:

(1) Name and address of contractor (which should be printed on the record).

(ii) Federal supply code for manufacturer (Cataloging Handbooks H4-1, H4-2) and, at the option of contractor, the name and address of equipment manufacturer.

(iii) Model number of the plant equipment item.

(iv) Serial number and year built (when available).

(v) U.S. Government identification number.

(vi) Noun name of the item and the Federal Supply Classification (Cataloging Handbooks H2-1, H2-2, H2–3).

(vii) Acquisition document reference and date.

(viii) Disposition document reference and date.

(ix) Contract number under which acquired.

(x) Unit price when provided by Government, or cost (f.o.b. manufacturer) when contractor acquired.

The record may be maintained manually or by mechanized accounting methods. Notwithstanding the approval of the Contractor's Record and Property Control System, the contractor shall, with respect to plant equipment items acquired after 1 July 1961, having a unit cost of $500 or more, prepare DD Form 1342, shown in F-200.1342, at the time of acquisition or receipt. When such items become idle or excess to the needs of the contractor, the contractor shall also prepare the DD Form 1342s, shown in F-200.1342s. If changes occur in original data or supplemental data is required, a revised DD Form 1342 must be prepared by the contractor. The contractor shall retain the original of such forms and the copies shall be delivered to the property administrator who shall provide the blank DD Forms. The contractor may, at his option, use said original of DD Form 1342 as his official property record for such item.

(b) Summary stock records or the individual item records as prescribed by C-207.4 should be maintained for minor plant equipment and plant equipment costing between $200 and $500 per unit. These records or the mechanized accounting system shall contain the following information:

(1) Name and address of contractorwhich should be printed on the property record.

(ii) Noun name and Federal Supply Cisssification of the item.

(iii) Acquisition document reference and

date.

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of real property shall be as provided in paragraph 306 (d).

207.7 Separated components. Property records shall be required for any usable components which are permanently removed from items of Government property, as a result of modification, or otherwise, to the same extent as would be the case if such components had been provided separately by ! the Government; provided that the Contractor shall not be required to augment his * property control system for the purpose of recording minor plant equipment, special tooling or materials, except upon return to stocks or stores.

207.8 Custodial records. Custodial records normally should be maintained for items issued from tool cribs or the like, guard force items, protective clothing and other items issued for the use of individuals in the performance of their work under the contract. However, it is the general policy of the Government to accept for the control of Government property of the above character the same system as employed by the Contractor for his own similar property.

207.9 Consolidated stock record. Where a Contractor has more than one Government contract, under which Government property is provided, a consolidated record for materials may be authorized, provided the total quantity of any item is allocated to each contract by contract number and each requisition of property from the Contractor's stores is charged to the contract on which the property is to be used. The supporting document or issue slip shall show the contract number or equivalent code designation to which the issue is charged.

207.10 Pricing. Property records shall show a unit price for each item except for items constructed for research or development purposes by the Contractor. In the case of Contract-acquired property the price shall be determined in accordance with the system established by the Contractor in conformance with sound accounting principles and consistently applied. The unit price of Government-furnished property shall be as determined by the Government and furnished to the Contractor. 208. [Reserved]

209. Identification. Government property shall be recorded and identified by the contractor as provided in paragraph 307.

210. Segregation or commingling of Government property and contractor's property. Ordinarily Government property, particularly material, should be segregated and kept physically separate from contractor-owned property at all times. There will be occasions, however, where commingling of property would be advantageous to the Government. The property administrator should consider and arrange with the contractor plans for segregation and commingling of property. This agreement reached with respect to commingling shall be reduced to writing by the property administrator. Commingling may be allowed in the following types of cases:

(1) Where each commingling is approved by the property administrator; and

(11) Where the Government property involved is plant equipment, special tooling or minor plant equipment which is clearly identified or marked as Government property and is supported by appropriate control records.

211. Physical inventories.

211.1 Before termination or completion. It shall be the responsibility of the property administrator to review and approve the type and frequency of physical inventories to be taken. In this respect, he may accept and approve in writing the contractor's established procedures if he determines that they adequately protect the interests of the Government and are in conformity with applicable regulations.

211.2 Upon termination or completion. Upon termination or completion of a contract, a physical inventory adequate for disposal purposes shall be required of all Government property applicable to the contract in the custody, control or possession of the Contractor. Standard items that have been modified may be described as standard items, with a general description of the modification. Items that have been constructed, such as test equipment, should be described in sufficient detail to permit a potential user to determine whether they are of sufficient interest to warrant further inspection.

211.3 Inventories and selective examinations by the property administrator. (a) The property administrator may, at his discretion, join with the contractor in the taking of any inventory required to be made by the contractor.

(b) The property administrator should make selective examinations of an inventory by the contractor when he determines that such procedure is necessary to protect the interests of the Government. When selective examinations are made, they must embrace a representative number of items in the account and must adequately cover, by class and price range, all Government property involved.

211.4 Quantitative and monetary controls. As directed or required by proper au

thority, the property administrator shall require the contractor's physical inventories to be prepared on both a quantitative and monetary basis and be classified by categories such as material, special tooling, and minor equipment, plant equipment, etc.

211.5 Discrepancies. The property administrator shall proceed to adjust any discrepancies disclosed as a result of inventorying in accordance with the provisions of the contract and this Manual.

211.6 Financial control accounts. The contractor's property control system should be such as to provide semi-annually the dollar amount of Government-owned industrial facilities for each Military Department or Defense Agency, in the following classifications:

(1) Land and rights therein;

(ii) Utility distribution systems;

(iii) Buildings, structures and improvements thereto, excluding plant equipment;

(iv) Plant equipment, excluding production equipment and minor plant equipment; and

(v) Production equipment.

The contractor's accounts will be susceptible to local reconciliation in total and subtotal as to whether contractor-acquired or Government-furnished. Reports of dollar

amounts by the above classifications shall be furnished by the contractor to the property administrator upon request; but, such reports shall not be required more often than semi-annually. Bureau of the Budget No. 22-R235 has been assigned to these reports.

212. Control of scrap and salvage. Procedures for the control of scrap and salvage shall not be applicable to nonprofit research and development contracts unless the property administrator determines that the scrap or salvage is substantial in amount and that the Government is not receiving sufficient benefits from the use or disposal thereof, in which event the procedures set forth in paragraph 403 of § 30.2, shall be applied.

213. Records to be maintained by Government personnel.

213.1 Records of specific contracts where property is involved. (a) Where a contract

provides for the use of Government property a copy of the contract shall be made available or furnished to the Property Administrator.

(b) The property administrator shall maintain a record of each contract assigned to him for property administration. That record shall contain the following minimum information:

(1) Contract number and name of Contractor.

(ii) Type of contract (CPFF, fixed price, research and development, etc.)

(11) End item to be produced or services to be performed, and the points of inspection and acceptance.

(iv) Record of amendments and changes pertaining to Government property.

(v) Listing and type of all subcontracts which involve Government property.

(vi) Provisions of contract pertaining to liability of the Contractor for loss, damage or improper use of Government property. (vii) Record of Contract Administrators and dates of tenure.

(viii) Record of Property Administrators and dates of tenure.

(1x) Record of Plant Representatives (or Officers-in-Charge) and dates of tenure. (x) Record of written approval of Contractor's property control procedures.

(xi) Record of deviations granted in property procedures. (The deviations granted shall be in accordance with procedural regulations issued by each department.)

(xii) Record of property audits and inspections performed by the responsible agencies in each department.

(xiii) Records of property inspections during production and usage analyses performed;

(xiv) Record of any deficiencies found in property control and the corrective action taken.

(xv) Interim and final clearance data for Government property.

(xvi) A file of all documents evidencing receipt of Government-furnished property by the contractor where required in accordance with C-305; and

(xvii) A file containing copies of all instruments affecting relief from responsibility for Government property.

213.2 Control records to be maintained. The Property Administrator shall maintain a system of file control that will permit the ready location of any document that he is required by this manual to maintain.

213.3 Record of end items. The Property Administrator shall maintain a record of all end items produced under the contract, based upon authenticated receiving reports or processed vendors' shipping documents, as follows:

(a) When there is no lapse of time between Government inspection and acceptance of the end items and shipment from the Contractor, the records shall, as a minimum, consist of a summarization of quantities accepted and shipped. When end items are accepted by the Government and stored with the Contractor, the record shall show the quantities stored and location.

(b) Some contracts provide that end items are to be retained by the Contractor for further use under the contract. Upon acceptance of such items, they shall be considered to be "Government-furnished property" and shall be recorded by the Contractor as required by the terms of the

contract.

214. Numbering property accounts. A property account, consisting of records maintained either by a Contractor or Government personnel, shall be assigned a property

account number.

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215. Auditing property accounts. ords of Government property shall be audited by the Departments as frequently as conditions warrant. Any such audit or audits may take place at any time during the performance of the contract, upon completion or termination of the contract, or at any time thereafter. These audits will include records maintained by the contractor I and such records as may be maintained by Government personnel in connection with such property. The property administrator E and the contractor shall make all property records, including correspondence related thereto, available for inspection by the = auditors.

PART III-CONTRACTOR'S OBLIGATIONS

300. Scope of part. This part covers (1) the duties and responsibilities of the Contractor with respect to Government property, (11) the liability of the Contractor for Government property lost, damaged, or for which the Contractor is otherwise unable to account, and (iii) the obligations of the Contractor with respect to the control of Government property, both physically and administratively. This Part III of this manual is designed so that it may be incorporated by reference in the contract, as desired.

301. General. The contractor shall be directly responsible for and accountable for all Government property in accordance with the provisions of the contract. The contractor shall maintain and make available such records as are required by Part III of this Manual and must account for all Government property until relieved of responsibility therefor in accordance with the procedures as set forth hereinafter. Liability for loss, damage, or excessive use of property in a given instance will necessarily depend upon all circumstances surrounding the particular case and must be considered and determined in accordance with the provisions of the contract. The contractor shall furnish all necessary data substantiating any request for discharge from responsibility.

302. Definitions. The definitions used in Part I of this manual apply to those terms defined therein when used in this Part III of this manual or in the contract.

302.1 Contracting Officer. As used in this Part III, the term "Contracting Officer" shall include any authorized representative of the Contracting Officer acting within the limits of his authority, including the Contract Administrator and the Property Administrator, as those terms are defined in paragraphs 103.2 and 103.5 of Part I.

303. Contractor's responsibility. A Contractor shall be responsible for all Government property in his custody or control in accordance with the terms of the contract. The Contractor may be relieved of responsibility for Government property by any of the following methods, subject in any case to

specific contract provisions or specific instructions of the Contracting Officer within the scope of the contract:

(a) Consumption of property in the performance of the contract. To the extent that property has been consumed or expended for proper purposes and in reasonable amounts in the performance of the contract, the Contractor shall be relieved of responsibility for such property.

(b) Retention by the contractor. This may occur when the contract is completed or terminated, or otherwise in accordance with the provisions of the contract. The Contractor shall be relieved of responsibility for all property which has been retained by the Contractor, provided that the Government shall have approved the retention and shall have been reimbursed therefor in accordance with the terms of the contract or applicable regulations.

(c) Sale of property. The Contractor shall be relieved of responsibility for Government property sold with the approval of the Contracting Officer, in accordance with applicable regulations, provided, however, that the proceeds from such sale shall have been received by or credited to the Government.

(d) Shipment of Government property from a contractor's plant. The Contractor shall be relieved of responsibility when Government property is shipped from the Contractor's plant pursuant to the instructions of the Contracting Officer.

(e) Written advice of contracting officer. The contractor shall be relieved of responsibility for Government property lost, damaged, destroyed, or consumed, in excess of that normally anticipated in the manufacturing or processing operation, as the result of appropriate action by the contracting officer to determine the liability of the contractor: Provided, Such determination is furnished to the contractor in writing and the Government shall have been adequately reimbursed when appropriate. If the contract administrator is the contracting officer or a designated representative of the contracting officer for that purpose, he will thereupon determine the contractor's liability.

304. Contractor's liability. Subject to the terms of the contract, the Contractor may be liable when shortages of Government property are disclosed or when Government property is lost, damaged, or destroyed, or when there is evidence of unreasonable use or consumption of Government property as measured by the allowances provided for by the terms of the contract or the appropriate bill of materials.

305. Receipting for Government property. The contractor shall be required to furnish a written receipt for all, or specific classes of Government provided property only in those instances where such action is determined by the property administrator to be

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