S1-100

Part 1-Introduction
General.

(a) This Manual sets forth the basic requirements to be followed by contractors in establishing and maintaining control over Government property provided pursuant to the terms of contracts with the Department of Transportation. To the extent of any inconsistency between this Manual and the terms of the contract under which the Government property is provided the terms of the contract will govern. The contractor shall be directly responsible for and accountable for all Government property in accordance with the provisions of the contract, including property provided under such contract which may be in the possession or control of a subcontractor.

(b) Pursuant to the terms of a contract, the Government may acquire a lien or title to property upon the making of partial, advance, or progress payments to the contractor. Property to which the Government has acquired a lien or title solely as a result of such payments will not be subject to the provisions of this Manual. When lien or title is acquired solely as a result of such payments, the provisions of the partial, advance, or progress payments clauses will apply, including any modifications to such clauses as may be contained in the contract.

(c) The contractor shall establish and maintain a system (in accordance with the provisions of this Manual) to control, protect, preserve, and maintain all Government property. This system shall be reviewed and, if satisfactory, approved in writing by the assigned Property Administrator. The contractor shall maintain and make available such records as are required by Part 3 of this Manual and must account for all Government property until relieved of responsibility therefor in accordance with Part 2 of this Manual. Liability for loss, damage, or excessive use of property in a given instance will necessarily depend upon all the circumstances surrounding the particular case and must be considered and determined in ac

cordance with the provisions of the contract. The contractor shall furnish all necessary data to substantiate any request for discharge from responsibility.

(d) The contractor shall require any of his subcontractors who are provided Government property under the prime contract to comply with the provisions of this Manual. Procedures for assuring subcontractor compliance shall be included in the contractor's approved property control system.

(e) In the event any portion of the contractor's property control system is found to be inadequate upon review by the Property Administrator, any necessary corrective action shall be accomplished by the contractor prior to approval of the system.

(f) When Government property is disclosed to be in the possession or control of the contractor but not provided in accordance with the provisions of any contract, the contractor shall, as promptly as possible, (1) record such property according to the established property control procedure, and (2) furnish the Property Administrator with all known circumstances and factual data pertaining to its receipt and a statement as to whether there is a need for retention of such property.

(g) The Contractor shall report to the Property Administrator all Government property in excess of the amounts needed to complete full performance under the contract pursuant to which it was provided, or other existing contracts which authorize the use of such property, within 30 days after disclosure of the condition. S1-101 Definitions.

As used in the Manual: (a) "Accessory item" means an item which facilitates or enhances the operation of equipment but which is not essential for its operation, such as remote control devices.

(b) "Auxiliary item" means an item without which the basic unit of equipment cannot operate, such as motors for pumps and machine tools.

(c) "Capital property" means real property and capitalized equipment.

(d) "Capitalized equipment" means personal property of a nonexpendable nature having a unit acquisition cost of $200 or

more.

(e) "Custodial records" means written memoranda or identifying checks of any description or type used to control items issued from tool cribs, tool rooms, stockrooms, etc., such as requisitions, issue hand receipts, tool checks, stock record books, etc.

(f) "Discrepancies incident to shipment" means all deficiencies incident to shipment of Government property to or from a contractor's facility whereby differences exist between the property purported to have been shipped and the property actually re

ceived. Such deficiencies include, but are not limited to, loss, damage, destruction, improper status and condition coding, error in identity or classification, and improper consignment.

(g) "Educational or other nonprofit organization" means any corporation, foundation, trust, or other institution operated for scientific or educational purposes, not organized for profit, not any part of the net earnings of which inures to the profit of any private shareholder or individual.

(h) "Government property" means all property, both real and personal, owned by or leased to the Government or acquired by the Government under the terms of a contract. However, the term "Government property" does not include property to which the Government has acquired a lien or title solely as a result of partial, advance, or progress payments. Government property includes both Government-furnished property and contractor-acquired property as defined below:

(1) Government-furnished property is property in the possession of, or acquired directly by, the Government and subsequently delivered or otherwise made available to the contractor.

(2) Contractor-acquired property is property procured or otherwise provided by the contractor for the performance of a contract, title to which is vested in the Government.

(i) "Individual item record" means a separate card for or document utilized to account for one item of property.

(j) "Material" means property which may be incorporated into or attached to an end item to be delivered under a contract or which may be consumed or expended in the performance of a contract. It includes, but is not limited to, raw and processed material, parts, components, assemblies, and small tools and suppplies which may be consumed in normal use in the performance of a contract. It also includes items of a nonexpendable nature with a unit acquisition cost of less than $50, unless the Government has designated any such items to be classified as noncapitalized equipment.

(k) "Noncapitalized equipment" means personal property of a nonexpendable nature having a unit acquisition cost of $50 or more but less than $200, and other items of personal property regardless of cost when so designated by the Government.

(1) "Nonexpendable" means items of Government personal property which:

(1) Have a unit acquisition cost of $50.00

or more;

(2) Have a life expectancy of one year or more;

(3) Retain their identity when put into use; and

(4) Are not consumed in the performance of work on the contract.

(m) "Property account" means the official records of the Government property provided to a contractor which are established and maintained under the provisions of this Manual. Separate property accounts will be maintained on an individual contract basis.

(n) "Property Administrator" means the individual designated, in writing, by appropriate authority to administer the contract requirements and obligations relative to Government property. He is an authorized representative of the Contracting Officer. When a specific individual has not been disignated as Property Administrator, the Contracting Officer is the Property Administrator.

(o) "Provide" as used in the context of such phrases as "Government property provided to the contractor" and "Governmentprovided property," means either to furnish, as in "Government-furnished property," or to acquire, as in "contractor-acquired property."

(p) "Real property" for purposes of accounting classification means:

(1) Land and right therein;
(2) Ground improvements;
(3) Utility distribution systems;
(4) Buildings; and

(5) Structures.

(q) "Salvage" means property which because of its worn, damaged, deteriorated or incomplete condition, or specialized nature, has no reasonable prospect of sale or use as serviceable property without major repairs or alterations, but which has some value in excess of its scrap value.

(r) "Scrap" means property that has no reasonable prospect of being sold except for the recovery value of its basic material content.

(s) "Stock record" means a perpetual inventory form of record which shows, by nomenclature, the quantities received and issued and the balances on hand.

(t) "Utility distribution system" means a system (including distribution and transmission lines, substations, and installed equipment forming an integral part of the system), by which gas, water, steam, electricity, sewage, or other utility services are transmitted between:

(1) Outside of the building or structure in which the services are used, and

(2) The point of origin or disposal, or the connection with some other system. S1-102 Segregation or Commingling of Government Property and Contractor's Property.

Ordinarily, Government property, particularly material, should be segregated and kept physically separate from contractorowned property at all times. However, when advantageous to the Government and consistent with the contractor's authority to

use such property, the property may be commingled;

(1) When the Government property is clearly identified and recorded as Government property; or

(2) When scrap of a uniform nature is produced from both Government-owned and contractor-owned materials and physical segregation is impracticable, or when scrap produced from Government-owned materials is insignificant in consideration of the cost of segregation and control; or

(3) When otherwise approved by the Property Administrator.

S1-103 Written Property Control Procedures.

It is normal contractor practice to provide for the control of property by means of written procedures that communicate the organization's standards, techniques, and instructions to operational personnel for uniform application. However, depending on the number of contractor employees and the nature, quantity, and value of the property, a contractor may not have a need for written procedures for effective management of Government property. Immediately after the award of an initial contract involving property, the contractor shall forward to the Property Administrator the name, title, address, and telephone number of the contractor's representative to contact for review and discussion of the proposed property control system. If the Property Administrator determines that written property control procedures are not required, the contractor will be so advised.

S1-104 Audit of Property Control System and Accounts.

The contractor's Government property control system and accounts will be audited by the Government as frequently as conditions warrant. 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, during the period the contractor is required to retain such records. The contractor shall make all such records, including correspondence related thereto, available to the auditors.

Part 2-Contractor's Responsibility

S1-201 Assumption of Responsibilities.

A contractor is responsible for all Government property in his possession or control in accordance with the terms of the contract, including property provided under such contract which may be in the possession or control of a subcontractor. Sources from which Government property may be furnished or acquired are as follows:

(a) Shipments from Government Activities or Other Sources. Government property may be shipped to a contractor from agencies of DOT, other Government activities, other contractors, or suppliers. For the purpose of this Manual, the contractor becomes responsible for such property upon delivery of the property into his custody or control. The Government will furnish the contractor with copies of documents necessary to permit the contractor's property records to accurately reflect the transaction.

(b) Direct Purchase by the Contractor. For purposes of property control within the scope of this Manual, it will be considered that property purchased by the contractor, for which reimbursement is to be requested, becomes Government property upon its receipt by the contractor. However, this provision will not be deemed to alter or modify contractual provisions relating to passage of title. Direct purchases will be subject to a determination by the contracting officer that the items are allocable to the contract involved and are reasonably necessary therefor.

(c) 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, will 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.

(d) 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. For purposes of property control, such property will, unless otherwise provided by the contract, be considered Government property upon acceptance of title by the Government.

S1-202 Evidence of Receipts of Government Property.

Immediately upon receipt of any Government-furnished property the contractor shall sign and return the Government transfer document to the Property Administrator. For contractor-acquired capital property, the contractor shall submit reports in accordance with S1-203 of this Manual.

S1-203 Report of Property Purchased or Fabricated.

As a condition to reimbursement of costs incurred in the purchase or fabrication of capital property, the contractor shall submit itemized reports of such purchases or fabrications. Each item shall be adequately described, including unit cost. Reports shall be provided by the contractor not later than the time he submits his application for payment (public voucher) for the property. Upon request of the Government, the contractor shall submit supporting data for any material cost or noncapitalized equipment included in the voucher. S1-204 Discrepancies Incident to Shipment. (a)

Government-Furnished Property. When overages, shortages, or damages are discovered upon receipt of Government-furnished property, the contractor shall provide a statement of the condition and the apparent causes to the Property Administrator. When the quantity or description of property received by a contractor differs from the quantity or description denoted as shipped on the Government transfer document, only that quantity, or property, actually received shall be recorded on the official records of the contractor.

(b) Contractor-Acquired Property. The contractor shall take all actions necessary to adjust shortages, overages, or damages in shipment of contractor-acquired property from a vendor or supplier except in those instances where the shipment has moved via Government bill of lading and carrier liability is indicated. in the latter event, the contractor shall report the instance in accordance with paragraph (a) of this section. S1-205 Relief from Responsibility.

Subject to specific instructions of the Contracting Officer, and unless otherwise provided for in the contract, the contractor will be relieved of his property control responsibility for Government property by the following:

(1) Consumption of Property in the Performance of the contract. To the extent that the Property Administrator determines that property has been consumed or expended for proper purpose and in reasonable amounts in the performance of the contract;

(2) Shipment of Government Property from a Contractor's Facility. When Government property is shipped from the contractor's facility (except when shipment is to a subcontractor or other location of the contractor) pursuant to the instructions of the Contracting Officer or the Property Administrator;

(3) Retention by the Contractor. When the contractor retains, with Contracting Officer approval, Government property for which the Government has received consideration;

(4) Sale of Property. For Government property sold pursuant to instructions of the Contracting Officer or the Property Administrator, provided that proceeds from such sale have been received by or credited to the Government;

(5) Determination by the Contracting Officer. For Government property which is lost, damaged, destroyed, or consumed in excess of that normally anticipated in a manufacturing, processing, or research operation, and for which the Contracting Officer has determined the extent of liability, if any, of the contractor; Provided, That:

(i) Such determination is furnished to the contractor in writing;

(ii) The Government has been reimbursed where required by the determination; and

(iii) Proper disposition of property rendered unserviceable by damage has been accomplished, and appropriate cross-reference is recorded on the determination as to the shipping documents or other documents evidencing disposal; and

(6) Transfer of Title. When title to equipment has been transferred to the contractor in accordance with 42 U.S.C. 1892 and thereby ceases to be Government property. However, certain obligations attach to contractor-owned property acquired with contract funds as set forth in Part 7 of this Manual. S1-206 Contractor's Liability.

(a) Property Discrepancies. 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 wear or deterioration or unjustifiable consumption in the performance of the contract.

(b) Report Requirements. The contractor shall report all cases of loss, damage, or destruction of Government property in his possession or control to the Property Administrator as soon as such facts become known or when requested by the Property Administrator. The report shall contain all factual data as to the circumstances surrounding such loss, damage, or destruction. A similar report shall be furnished when completed products or end items are lost, damaged, or destroyed while such property is in the possession or control of the contractor. Any loss that may be due to theft must be reported immediately to the local police and the nearest field office of the Federal Bureau of Investigation by the contractor or subcontractor.

(c) Subcontractor's Liability. The contractor shall require any of his subcontractors having Government property in their possession or control, which is accountable under the contract, to report to him all instances of loss, damage, or destruction of

This part establishes minimum requirements for records to be established and maintained by the contractor for Government property in his possession or control.

(a) Policy. It is the Government's policy to rely upon contractor property control records and to designate and use such records as the official contract records unless an exception has been authorized due to special circumstances. The contractor shall establish and maintain adequate control records, either manual or mechanized, in accordance with the requirements of this Manual for all Government property provided under a contract, including property provided under such contract as may be in the possession or control of a subcontractor. When the subcontractor has a property control system approved by the Government for Government property provided under the subcontractor's own prime contracts, the contractor will utilize records created and maintained in accordance with such approved system unless otherwise directed by the Property Administrator.

(b) Financial Control System. The contractor's property control system shall provide financial accounts for Government property (capital and noncapital) in the contractor's possession or control, as prescribed in S1-309(a) of this Manual. The system shall be subject to internal control standards and be supported by property records in the manner described in this Part 3.

(c) Property Records. The official records shall be kept in such condition that at any stage of completion of the work under a contract the status of Government property can be readily ascertained.

(1) Separate property records for each contract shall be maintained. Contractors shall furnish the Property Administrator with the name and title of the individual who will have cognizance over all Government property in the contractor's possession and who will be responsible for maintenance of property records.

(2) Property records of the same type which would have been established for components if acquired separately shall be established for such usable components which are permanently removed from items of Government property, as a result of modification, or otherwise.

(3) The contractor's property control system shall contain an adequate locator system or techniques to permit the location of any item of Government property within

a reasonable period of time after request therefor.

S1-301 Pricing.

Except as provided in paragraph (a) of this section, the contractor's property control system shall contain the unit acquisition price for each item of Government property recorded therein. It is a recognized practice of many contractors to record the unit acquisition price of property on other than the quantitative inventory record, thus requiring the use of supplementary records to ascertain unit prices. Under such circumstances, the supplementary records containing such information shall be identified and recognized as a portion of the official property records.

(a) Contractor-Acquired and ContractorFabricated Property. The unit acquisition price of contractor-acquired and contractorfabricated property shall be determined in accordance with the system established by the contractor in conformance with generally accepted accounting principles and consistently applied. Generally, it is desired that separate unit prices be applied to workin-process items fabricated or acquired by the contractor. However, if the contractor's accounting system is acceptable and if the maintenance of detailed cost records results in excessive accounting cost is otherwise impracticable considering all circumstances, group pricing may be used for work-in-process inventory. Processed material, fabricated parts, components, assemblies, etc., charged to the contractor's work-in-process inventory, including items in temporary storage while awaiting processing, may be considered as work-in-process for the purpose of compliance with this requirement. Nothing in the foregoing lessens the requirement for quantitative property controls for work-inprocess necessary for the proper protection of the Government's interest.

(b) Government-Furnished Property. The unit acquisition price of Government-furnished property will be determined by the Government and furnished to the contractor. Transportation and installation costs will not be considered as part of the unit price for this purpose. Normally, the unit price of Government-furnished property will be provided on the transfer document covering shipment of the property to the contractor. In the event the unit price is not provided on the document, action will be taken through the Property Administrator to obtain the information.

S1-302 Records of Material.

All Government material furnished to the contractor, as well as other material to which title has passed to the Government by reason of allocation from contractorowned stores or purchase by the contractor for direct charge to a Government contract