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or otherwise, shall be recorded in accordance with the contractor's property control system, as follows:

(a) Material Issued Directly Upon Receipt.

(1) Fixed-Price Contracts. In the case of Government-furnished material which is issued directly by the contractor upon receipt so as to be considered consumed under the contract, the documents evidencing receipt and issue maintained by the contractor will be accepted as property control records.

(2) Cost-Type Contracts. For material, whether Government-furnished or contractor-acquired, issued by the contractor directly so as to be considered consumed under the contract, the Government invoices, contractor's purchase documents, or other documentary evidence of acquisition and issue will be accepted as adequate property records.

(b) Material Maintained in Stocks. 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;

(2) Nomenclature or description of item (including National Stock Number when available);

(3) Quantity received;

(4) Quantity issued;

(5) Balance on hand;

(6) Posting reference;

(7) Date received or issued;

(8) Unit price; and

(9) Disposition action taken.

(c) Consolidated Stock Record. When a contractor has more than one Government contract under which Government material is provided, a consolidated record for material may be authorized by the Property Administrator; Provided, The total quantity of any item is allocated to each contract by contract number and each requisition of material from contractor-owned stores is charged to the contract on which the material 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.

(d) Custodial Records. Custodial records shall be maintained for sensitive items, tool crib items, guard force items, protective clothing, and other items for the use of individuals in the performance of their work under the contract.

S1-303 Records of Noncapitalized Equipment.

Except where individual item records are necessary for effective control, calibration, or maintenance, summary stock records may be maintained for noncapitalized equipment. The contractor's property con

trol system shall be such as to provide the following minimum information:

(1) Contract number or equivalent code designation;

(2) Noun name of the item;

(3) Manufacturer and model/part number (including National Stock Number when available);

(4) Quantity received; (5) Balance on hand;

(6) Posting reference and date of transaction;

(7) Unit price;

(8) Location; and

(9) Disposition.

In addition, where appropriate as determined by the Property Administrator, the serial number and/or Government identification number for each item shall be recorded in a permanent manner in the property records and, upon disposition, lined out or otherwise deleted from the record.

S1-304 Records of Capitalized Equipment. (a) Item Records. The contractor shall maintain individual item records (manual or mechanized) of each item of Governmentowned capitalized equipment which will provide the following minimum information:

(1) Name of the equipment manufacturer; (2) Manufacturer's model/part number (including National Stock Number when available);

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(8) Disposition document reference and date;

(9) Contract number of equivalent code designation; and

(10) Unit price. (Unit price will be reduced when accessory and auxiliary items are permanently separated from the basic item of capitalized equipment.)

(b) Record of Accessory and Auxiliary Equipment. Accessory and auxiliary equipment with is attached to or otherwise a part of an item of capitalized equipment or has been acquired for use in connection with a specific item shall be recorded on the record of the item of capitalize equipment. In the event the accessory or auxiliary item is not attached to, a part of, or acquired for use with a specific item of capitalized equipment, it shall be recorded as indicated in S1-303 or S1-304(a) of this Manual. S1-305 Records of Real Property.

The contractor shall maintain a continuous itemized record of the description, location, acquisition cost, and disposition of all

Government real property including unimproved real property, all alterations, and all construction, whether acquired by purchase, lease, or otherwise. The foregoing records shall be complete, show the original cost of the property and improvements and the cost of changes and additions thereto, and be appropriately classified as indicated in S1-101 (f) of this Manual.

S1-306 Records of Scrap and Salvage.

Unless the Property Administrator has determined that such records are not necessary, the contractor shall maintain records of all scrap and salvage generated.

(a) Records of Scrap. The contractor's property control system shall be such as to provide the following minimum information:

(1) Contract number, if practicable, or equivalent code designation;

(2) Scrap classification (material content); (3) Quantity on hand;

(4) Unit of measure;

(5) Posting reference and date of transaction; and

(6) Disposition.

(b) Records of Salvage. The contractor's property control system shall be such as to provide the following minimum information:

(1) Contract number, if practicable, or equivalent code designation;

(2) Nomenclature or description of item (including National Stock Number, if available);

(3) Quantity on hand;

(4) Posting reference and date of transaction; and

(5) Disposition.

S1-307 Records of Related Data and Infor

mation.

The contractor shall maintain property control and accountability in accordance with sound business practice with respect to manufacturing or assembly drawings, installations, operations, repair, or maintenance instructions, or other similar data and information provided to the contractor by the Government. Other requirements set forth in this Manual are not applicable to such property unless specified in the contract or required by the Property Administrator. S1-308 Records of Completed Products.

The contractor shall maintain a record of all completed products produced under the contract as follows:

(a) When there is not any lapse of time between Government inspection and acceptance of the completed products and shipment from the contractor's facility, the records shall, as a minimum, consist of a summary of quantities accepted or shipped. When end items are accepted by the Government and stored with the contractor awaiting shipment, the record shall identify

quantities stored, location, and disposition action.

(b) On contracts which provide that completed products are to be retained by the contractor for further use under the contract, or other contracts, such items shall be considered Government-furnished property upon acceptance and shall be recorded as prescribed in this part.

(c) When completed products are returned to a contractor under the terms of a warranty clause, the contractor shall, as a minimum, maintain a record by contract setting forth a description of the items involved, quantities received and returned to the Government, and such other pertinent data as may be required to permit determination that a proper accounting for all property has been made.

S1-309 Financial Control Accounts and

Reports.

(a) Control System. The contractor's property control system shall be such as to provide at any time for each contract the dollar amount of Government property for which he is accountable in the following classifications:

(1) Real property;

(2) Capitalized equipment;

(3) Noncapitalized equipment; and (4) Material maintained in stocks.

The contractor's accounts shall be susceptible to reconciliation in totals and subtotals as to whether contractor-acquired or Government-furnished.

(b) Financial Property Reports. The contractor shall prepare a report as of July 31 each year, for each contract, showing the dollar amount of Government real property and capitalized equipment in the possession of the contractor and his subcontractors. Reports shall be prepared in the format shown below and shall be furnished to the Property Administrator not later than September 15 each year. Subcontract reports shall be consolidated with prime contract reports. The contractor shall certify that the reports have been reconciled and are in balance with the contract property records. If specifically requested by the Property Administrator, the contractor shall submit similar reports for Government noncapitalized equipment and material maintained in stocks.

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This part establishes minimum requirements for the identification and marking of Government property in the possession or control of the contractor. The contractor shall identify and record all Government property promptly upon receipt, except as may be exempted by this part, and it shall remain so identified. Assigned Government property identification numbers shall be recorded on all applicable receiving documents, shipping documents, disposal documents, and any other documents pertaining to the property control system. Such markings shall be removed or obliterated from the property involved when Government ownership is terminated. S1-401 Material

Equipment.

and

Noncapitalized

All Government material and noncapitalized equipment shall be identified as Government property except in those cases where:

(1) Material or noncapitalized equipment of the same type at the same location is not owned by the contractor, his employees, or other contracting agencies;

(2) Adequate physical control is maintained over sensitive items, tool crib items, guard force items, protective clothing, and other items issued for use by individuals in the performance of their work under the contract;

(3) Property is of bulk type or by its size or general nature of packing or handling precludes adequate markings; or

(4) The property is segregated and kept physically separate from contractor-owned property at all times.

S1-402 Capitalized Equipment.

(a) Equipment Identification. Unless already marked in compliance with these instructions, all Government capitalized equipment shall be marked by the contractor

with a Government identification number except: when the size or nature of the equipment makes it impracticable, or the equipment is accessory or auxilliary and attached to or otherwise a part of an item of capitalized equipment and is required for its normal operations, in which case such item shall be entered and described on the record of the equipment to which it is attached or of which it is otherwise a part. Identification shall be effected by affixing a num

bered decal direct to the equipment, or, when practicality dictates, by using indelible ink, acid, or electric etch, steel dies, or any other legible, permanent, conspicuous, and tamper proof method which will identify the equipment with the Government number assigned.

(b) Position of Markings or Identification. Identification shall be affixed on the main body of the item, not on a removable part. For practical purposes, identification should be placed where it is conspicuous and readily visible without requiring the item to be moved and where it will not interfere with the functioning, especially if it is a sensitive instrument. If the manufacturer's identification plate or label is in a readily accessible position, a position immediately above or below it is preferable to any other.

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S1-501 Annual Inventories.

The contractor shall perform an annual physical inventory of the following categories of Government property in his possession or control and shall require such inventories of any subcontractors that are in possession of Government property provided under the contract: (1) Capital property; (2) noncapitalized equipment; and (3) material maintained in stocks. The contractor's procedures for the performance of annual physical inventories constitute a necessary part of the contractor's property control system. For the purposes of this Manual, inventory consists of sighting, tagging or marking, describing, recording, and reporting the property involved, and reconciling the inventory results with the property records.

S1-502 Reporting Results of Annual Inventories.

The contractor shall promptly submit to the Property Administrator information as follows:

(1) A list on both a quantitiative and monetary basis of all discrepancies disclosed by the inventory in each category of Government property;

(2) A signed statement that physical inventory of Government property under the contract was completed on a specified date and that the contractor's official property records were found to be in agreement with the physical inventory except for the discrepancies noted; and

(3) If specifically requested by the Property Administrator, a list of all items of capital property.

S1-503 Inventories Upon Termination or Completion.

Immediately upon termination or completion of a contract, the contractor shall perform a physical inventory adequate for disposal purposes of all Government property applicable to the terminated or completed contract. Further, the contractor shall cause each subcontractor to perform a physical inventory adequate for disposal purposes of all Government property in the subcontractor's possession or control which is applicable to the terminated or conpleted contract. Within 30 days after the contract's completion or termination, unless the Contracting Officer specifically approves an extension of time, the prime contractor shall submit a final inventory of Government property (including subcontractor property) in the form and detail as prescribed below: (a) Form. Separate reports are required for Government-furnished property and for contractor-acquired property and for each of the following property categories: (1) Real Property;

(2) Capitalized Equipment;

(3) Noncapitalized Equipment; (4) Materials;

(5) Salvage; and

(6) Scrap.

(b) Details Required. Each item of capital property must be completely identified with sufficient detail to permit verification by reference to the covering reimbursement voucher or (if furnished by the Government) shipping or other documents. To the extent to which they apply, the following particulars are required for all items:

(1) Commercial description, adequate for screening and disposal purposes;

(2) Make, model, type, serial number, and National Stock Number when available;

(3) Government identification number; (4) Quantity;

(5) Cost;

(6) Condition (use codes listed in Exhibit A of this Manual); and

(7) Location (contractor's facility or other site).

(c) Copies Required. Three copies of the inventory reports shall be submitted to the Property Administrator.

(d) Certification. The following certification signed by the contractor or an authorized official shall accompany each copy of the inventory schedules:

I do hereby certify as (Title) of (Name of Contractor) that the attached inventory reports are complete and correctly list and describe all items of property furnished to the contractor, or for which the contractor has been or will be reimbursed by the Government, for use in the performance of Contract No. which as of this date have not been consumed in performance of this contract; and that I will immediately notify the Contracting Officer of any change affecting

these inventory reports at any time prior to final disposition of the inventory.

(S)

Dated

(e) Disposal of Property. Disposal of property will be directed by the Contracting Officer, or a designated representative of the Contracting Officer, in accordance with the terms of the contract. The contractor shall not make disposition of any property except as so directed.

Part 6-Care, Maintenance, and Utilization S1-600 General.

This part establishes minimum requirements as to care, maintenance, and utilization of Government property in the possession or control of the contractor. The contractor shall be responsible for the proper care, maintenance, and utilization of Government property in his possession or control from the time of receipt of the property until properly relieved of responsibility in accordance with the contract. The removal of Government property to storage, or its contemplated transfer, shall not relieve the contractor of these responsibilities. S1-601 Contractor's

gram.

Maintenance

Pro

(a) Policy. The contractor's maintenance program (which shall be approved in accordance with Part 1 of this Manual) shall be such as to provide, consistent with sound industrial practice and the terms of the contract, for:

(1) Disclosure of need for the performance of preventive maintenance;

(2) Disclosure and reporting of need for capital type rehabilitation; and

(3) Recording of work accomplished under the program.

(b) Preventive Maintenance. Preventive maintenance is maintenance generally performed on a regularly scheduled basis to prevent the occurrence of defects and to detect and correct minor defects before they result in serious consequences. An effective preventive maintenance program shall consist of, but not be limited to, the following actions:

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(6) Removal of sludge, chips, and cutting oils from equipment which will not be used for a period of time; and

(7) Proper storage and preservation of accessories and special tools furnished with an item of capitalized equipment but not regularly used with it.

(c) Capital Type Rehabilitation. The contractor's maintenance program shall be such as to provide for the disclosure and reporting of the need for major repair, replacement, and other rehabilitation work for Government property in the possession or control of the contractor.

(d) Records of Maintenance. The Contractor's maintenance program shall provide for records sufficient to disclose the maintenance actions performed and deficiencies discovered as a result of inspections.

S1-602 Utilization of Government Property.

The contractor's procedures shall be adequate to assure that Government property will be utilized only for those purposes authorized in the contract.

S1-603 Property in Possession of Subcon

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other nonprofit organizations whose primary purpose is the conduct of scientific research. This statutory authority is implemented by express provision in the Special Provisions of contracts with eligible institutions and organizations permitting the Contracting Officer to transfer to the contractor title to equipment acquired with research contract funds at any time during the term of the contract or upon its completion or termination. The contract will reserve the right to require the contractor to transfer title of equipment costing $1,000 or more per unit to the Government, or to a third party named by the Government, at any time prior to final payment under the contract.

S1-701 Conditions of Transfer.

In research contracts with eligible institutions and organizations, the Contracting Officer may, upon his own initiative or upon the request of the contractor, transfer title to equipment at any time during the term of the contract or upon its completion or termination. All transfers of title must be based upon a written determination by the Contracting Officer that transfer with respect to the specific items of equipment is consistent with the best interests of the Department. Until such time as title has been transferred, the property shall be administered and controlled as Government property in accordance with Parts 1 through 6 of this Mannual. Upon transfer, such equipment ceases to be Government property, however, the transfer of title is subject to the terms and conditions of the contract and this Part 7.

S1-702 Contractor's Obligations.

Although equipment ceases to be Government property when title to it is vested in or transferred to the contractor, nonetheless the following obligations attach to the property and the contractor agrees to such obligations by accepting title thereto:

(1) Utilization. The contractor agrees to use the property for the benefit of research under the contract and any extensions or successor contracts thereto and to continue to use such property for the benefit of research of interest to the Government;

(2) Charges with Respect to the Property. The contractor is not permitted to charge for any depreciation, amortization, or use with respect to such equipment under any Government contract, any Government grant, or any subcontract under a Government contract;

(3) Transfer of Title to Government. With respect to each item of equipment having a unit acquisition cost of $1,000 or more, the contractor's ownership rights are qualified by the contractor's express agreement to transfer title to any such items to the Government, or to a third party designated by

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