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(3) This section shall not be construed to authorize:

(i) The acquisition of personal property by a procuring activity when such acquisition is not otherwise authorized by law;

(ii) The acquisition of personal property by a procuring activity in contravention of:

(a) Any restriction upon the procurement of a commodity or commodities;

or

(b) Any replacement policy or standard, prescribed by the President or by the Administrator of General Services pursuant to the Federal Property and Administrative Services Act of 1949 (63 Stat. 383; 40 U. S. C. 481).

(iii) The purchase or acquisition of personal property otherwise than under a consolidated purchasing or stores program or Federal Supply Schedule contract where procurement under such program or contract is required by regulations or other directives prescribed by the Administrator; Provided, That a procuring activity acquiring an item or items under and in accordance with such program or contract may sell or exchange similar items and apply the exchange allowance or proceeds of sale as provided in this section; or

(iv) The sale, transfer, or exchange of excess or surplus property in connection with the purchase or acquisition of personal property: Provided, That a procuring activity obtaining items of excess or surplus property as authorized by law may thereafter exchange or sell such items and apply the exchange allowance or proceeds of sales in accordance with this section.

(4) This section shall not apply to strategic and critical materials which have been accepted for the national stockpile.

(d) Reporting for screening. (1) All personal property (exclusive of unserviceable and obsolete items) to be sold or exchanged under the provisions of this section will be reported for screening on Standard Form 120, "Report of Excess Personal Property":

(i) The Naval Aviation Supply Office, Philadelphia, Pennsylvania (if property is aircraft, aircraft parts and components) or to

(ii) The Surplus Materials Division, Bureau of Supplies and Accounts, Department of the Navy, Washington 25,

D. C. (other reportable property), unless the exchange is proper without solicitation of bids and the need for action will not permit the waiting period required for screening prior to direct exchange.

(2) The reporting activity is authorized to submit a competent appraisal of the cash market value of an item or items reported.

(3) Each reporting form used to list items to be screened will be clearly marked with the notation, "This material for sale or exchange under provisions of General Services Administration Personal Property Management Regulation No. 6, Revised, 7 September 1951."

(e) Screening of personal property in the interest of utilization prior to sale or exchange. This paragraph sets forth the rules and procedures under which personal property will be screened prior to the application of the authority granted in this section.

(1) Items reported for sale or exchange in accordance with this section will be screened by the Naval Aviation Supply Office, Philadelphia, or by the Surplus Materials Division, Bureau of Supplies and Accounts, Department of the Navy, as the case may be, for utilization by the other two military departments, and will be offered concurrently to the General Services Administration for possible utilization by other Government agencies. Military requests for any property reported will be given first priority. A fair exchange price will be determined either by:

(i) The reporting activity, by competent appraisal of the cash market value;

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Surplus Materials Division, Bureau of Supplies and Accounts, Department of the Navy, and the General Services Administration will be limited to a period of 60 days from the date the report is forwarded to the Aviation Supply Office, or to the Surplus Materials Division, at the expiration of which time the material not utilized will be released to the reporting activity for sale or exchange.

(f) Sale. (1) The head of a procuring activity is encouraged to utilize the services of property disposal officers with respect to the sale of property.

(2) Disposition of proceeds of sales will be in accordance with applicable regulations.

SUBPART G-BAILMENTS

SOURCE: §§ 1012.701 to 1012.703 appear at 18 F. R. 3119, May 30, 1953.

§ 1012.701 General. Government personnel having knowledge of bailable property in possession of contractors without contractual coverage shall report such information to the cognizant Air Force representative.

§ 1012.702 Policy. (a) Bailment of Government property to Air Force contractors shall be kept to an absolute minimum, consistent with the best interest of the Government.

(b) Government property may be bailed only in accordance with procedures prescribed herein, and shall not be issued to a contractor by hand receipt or other informal means.

(c) Government property may be bailed only if such bailment does not adversely affect the competitive aspects of procurement.

(d) Government property shall not be bailed to a subcontractor but may be bailed to the prime contractor for use by its subcontractor: Provided, That the responsibility of the prime contractor is not lessened.

(e) Government property may be bailed only if it is not available to the contractor in the open market, or if it is so available, to the contractor within the time requirements of the Air Force.

(f) Government property shall not be bailed for the purpose of being incorporated in the end article, for the repair or maintenance of bailed property, nor if it will be expended in the performance of a contract.

(g) Government property shall not be bailed for the purpose of its maintenance,

repair, overhaul, or modification regardless of whether the contractor is required to perform ground and/or flight or other functional tests to prove such maintenance, repair, overhaul, or modification, and whether such property is currently being produced or already delivered to the Government. This does not prohibit the furnishing of such property as GFP under the prime contract.

(h) Government property shall not be bailed for the purpose of installing additional equipment in such property. This does not prohibit the bailment of property for the purpose of testing the equipment already installed.

(i) Facilities as defined in § 13.101-6 of this title shall not be bailed.

§ 1012.703 Contract provisions. Bailment agreements will not be issued unless the prime contract includes a provision therefor. The following general provisions relating to prime contract clauses are set forth for guidance:

(a) Normally, in fixed-price contracts, no reference will be made to the bailment of property unless the property is specifically listed in the prime contract. Where bailment is contemplated and a Master Bailment Agreement has been executed, the following clause is authorized for use:

an

It is contemplated by the parties hereto that the Government will loan (in addition to any property listed in this contract as to be "furnished" by the Government) to the contractor the items listed below for use in connection with the performance of this contract, and that appropriate written agreement of bailment will be entered into by and between the parties hereto for that purpose. In the event of delay or failure of the Government to loan such property, as aforesaid, the provisions of the clause of this contract entitled "Government-Furnished-Property" or "Government Property" relating to failure or delay in the furnishing of property, shall be applicable. (List items.)

(b) In those cases where it is difficult to anticipate the bailment requirements at the time of execution of the prime contract, the following alternate clause is authorized for use:

It is anticipated that the Government may lend to the contractor such Government property of the categories specified herein as may from time to time be deemed by the contracting officer to be necessary in the interest of the Government to so furnish: Provided, however, That the effect of such bailment upon the contract price

(or in the case of CPFF contracts, "fixed fee") shall be adjusted in accordance with the procedure set forth in the changes clause of this contract, and the contract amended accordingly by a Supplemental Agreement or Change Order hereto prior to the payment of contractor's final invoice under this contract. Any property bailed pursuant to this paragraph shall be made available to the contractor only for the purpose of this contract. Any property bailed pursuant to this paragraph shall be made available to the contractor only under the provisions of a separate Bailment Agreement or Agreements and this contract shall not be construed as effecting or committing the Government to the bailment of such property. (List categories.)

(c) General bailment clauses other than the one set forth in paragraph (b) of this section, may not be used in prime contracts unless such clauses provide that prior to final payment contractual recognition shall be given to the effect of such bailment upon the contract price or the fixed fee.

(d) Provisions for reimbursing the contractor for costs incurred in connection with bailed property during the period of bailment, including but not limited to furnishing fuel, lubricants, and coolants for aircraft, are matters requiring coverage in the prime contract prior to final payment and shall not be included in the bailment agreement. SUBPART H-IMPLEMENTATION OF MANUAL FOR CONTROL OF GOVERNMENT PROPERTY IN POSSESSION OF CONTRACTORS

SOURCE: 1012.801 to 1012.815 appear at 18 F. R. 6657, Oct. 21, 1953, except as otherwise noted.

INTRODUCTION

§ 1012.801 Scope. [101] This subpart implements the Manual for Control of Government Property in Possession of Contractors (§ 30.2, Part 30, Subchapter A, Chapter I of this title) referred to in this subpart as the Manual. The number in brackets after each section heading and after certain paragraphs in the text indicates the number of the paragraph in the Manual which is being implemented.

§ 1012.802 Applicability. [103] (a) Contracts which provide that records of Government property be maintained in accordance with the requirements of AFM 69-3, AFR 69-6, or WD Memo 356520-1 may be amended to provide that Government property shall be controlled in accordance with the provisions of the Manual.

(b) Compliance with the provisions of the Manual and this subchapter is mandatory on the part of the contractors and Air Force personnel, in connection with contracts, wherein the terms specifically provide for the application of the provisions of the Manual.

(c) The policy of the Department of the Air Force is that maximum efficiency and economy of operation shall be obtained by the utilization of the contractor's property records as the official Government records in connection with those contracts executed prior to the effective date of Part 13 of this title, which required the Government to maintain property control records in accordance with AFM 69-3, AFR 69-6, or WD Memo 35-6520-1. With respect to those contracts requiring compliance with AFM 69-3, AFR 69-6, or WD Memo 35-6520-1, in the control of Government property, Government personnel are not required to comply with such provisions above and beyond the requirements of the Manual, although the contractor has a continuing obligation of compliance with the directive required and specified by its contract.

(d) The prime contractor is responsible for insuring, in all subcontracts, that Government property provided to such subcontractors shall be protected, preserved, and maintained in accordance with sound industrial practice.

(e) Property shipped out for repair with no parts or material furnished and/or no significant scrap resulting therefrom, may be accounted for as a suspense item in the Military Property Account from which shipped.

(f) The provisions of the Manual do not apply to local purchase contracts for construction, repair, rehabilitation, alteration, and maintenance of structures, ground facilities or utilities at an Air Force activity. Government property furnished to contractors under such local purchase contracts shall be controlled and accounted for as provided in current directives.

[18 F. R. 6657, Oct. 21, 1953, as amended at 19 F. R. 1273, Mar. 6, 1954]

§ 1012.803 Definitions. [104] (a) Property account. The property account shall be assigned the same number as the prime contract number. Subcontract property accounts shall be assigned a number consisting of the prime contract number plus a suffix which shall

be the number of the subcontract or purchase order, as assigned by the contractor.

(b) Custodial records. Custodial records are written memoranda of any description or type, used to control items issued to plant employees from tool cribs, tool rooms, stockrooms, and so forth, such as requisitions, issue slip receipts, tool checks, stock records books, and the like. [304.1 (c)]

GENERAL PROVISIONS

§ 1012.804 Designation of property administrator. [202] (a) Property administrators serve in the capacity of an authorized representative of the contracting officer, and will be designated in accordance with § 1000.406 of this subchapter.

(b) Ordinarily, base responsible supply officers should not be assigned the additional duty of property administrator. However, when such officers are designated property administrators as an additional duty, they should be familiar with the industrial property control procedures.

(c) The contract administrator will not perform the duties of the property administrator without prior approval of the head of the procuring activity or his duly designated representative.

(d) Assistant property administrators may be appointed in accordance with § 1000.406 of this subchapter.

(e) Property administrators may be either civilian or military personnel, and shall be appointed on the basis of experience and qualification for the position.

(f) The property administrator shall not be required to post a bond unless Government property is in his care and custody and he is responsible for such property.

§ 1012.805 Duties and responsibilities of the property administrator. [203] (a) The property administrator shall be familiar with the functions of other Air Force personnel who have a duty or a responsibility in connection with Government property. These other Air Force activities include, but are not limited to, plant clearance (property disposal), quality control, and Auditor General.

(b) The property administrator shall advise the contract administrator in regard to any act of noncompliance by the contractor with regard to the contract

requirements and all obligations imposed by the Manual. The contract administrator is responsible for directing the contractor to comply with the contract requirements and the provisions of the Manual.

(c) In maintaining surveillance over the contractor's system of property controls, the property administrator shall give due consideration to the contractor's system of internal controls, and he shall conduct such examinations as shall be necessary to determine the accuracy and completeness of the contractor's records, and adequately protect the interests of the Government. Exhaustive verification and time-consuming analysis shall not be performed in connection with those operations which are considered to be commercially sound. The property administrator shall confer with the resident auditor, or other responsible audit office of the Auditor General, on accounting and audit matters, and he shall ascertain the extent to which the records, data, and reports of such audit activities can be utilized in determining the adequacy of the contractor's property controls. Ordinarily, it shall not be necessary for the property administrator to duplicate any examination or examinations made by the staff of the Auditor General.

(d) The property administrator shall utilize and rely on the assistance of Air Force personnel, such as plant clearance (property disposal), quality control, and Auditor General personnel, to ascertain whether the contractor is using property for the purposes authorized by the contract, and whether the contractor is exercising the necessary degree of care in the handling of Government property.

(e) The property administrator shall perform only those checks necessary to determine reasonableness of usage. Records of the contractor, and records of other Air Force personnel, including, but not limited to, plant clearance (property disposal), quality control, and Auditor General personnel, shall be used at all times to the extent that the property administrator shall not prepare or maintain any records which are obtainable from the contractor or other Air Force personnel indicated above. Work papers shall be kept to a minimum.

(f) The property administrator shall perform his examination of the property records through the evaluation of the contractor's internal controls, and he

shall conduct tests to determine whether the contractor's records properly reflect the status of Government property. In this connection, the property administrator will confer with Auditor General personnel to obtain information of any known deficiencies in the contractor's property control system. The property administrator shall review and consider the information and examinations of other Government personnel, and if he determines that such information and examination are adequate to comply with the requirements of the Manual and this subchapter, he shall not duplicate such examinations and the like, but will make appropriate reference thereto in his work papers.

§ 1012.806 Duties and responsibilities of the contractor. [204] See § 1012.802 (d) concerning the responsibility of the prime contractor with respect to provisions in subcontracts.

§ 1012.807 Sources from which Government property may be furnished or acquired. [205] (a) Contractual coverage. In accordance with the policy contained in Part 13 of this title, and the Manual, Government property shall be furnished to a contractor only when specifically provided for by the terms of a written contract. Any deviation from this policy shall be granted only by the prior written approval of the Director, Procurement and Production Engineering, Deputy Chief of Staff, Materiel, Headquarters USAF. When the fact is disclosed that Government property is in the possession of the contractor without contractual coverage, the property administrator shall take immediate action to return the property to the shipping organization, or obtain appropriate contractual coverage.

(b) Military installations or other contractor's plants. Property may also be acquired by an operating contractor as a result of new facility construction by other contractors under construction contracts with the Department of the Air Force or other Department of Defense agency. [205-1]

§ 1012.808 Segregation or commingling of Government property and contractor's property. [206] (a) Where a contractor is engaged in both cost plus fixed fee (CPFF) and fixed price (FP) Government contracts in one plant, such contractor, for the purposes of this section, is not considered to be engaged solely in Government work.

(b) In connection with research and development contracts involving profit or fee, the contract administrator may permit commingling, when determined not to be to the disadvantage of the Government, provided that the contractor acknowledges, in writing, liability for any losses occurring during the period the property is commingled.

(c) Any other commingling, when determined not to be to the disadvantage of the Government, may be permitted by the contract administrator, provided that the contractor acknowledges, in writing, liability for any losses occurring during the period the property is commingled.

§ 1012.809 Physical inventories. [207] The contract administrator shall utilize, to the extent possible, the services of other technical Air Force personnel, such as plant clearance (property disposal) personnel, in connection with physical inventories.

RECORDS TO BE MAINTAINED

§ 1012.810 General. [301] (a) The contractor is obligated by virtue of the provisions of the contract to maintain adequate property control records, which are designated and utilized as the official contract records. Air Force property personnel shall not maintain duplications of the official contract records, or any part thereof.

(b) The authority to grant exceptions to the policy that the contractor's records shall be designated and used as the official contract records is delegated to the Commanding General, Air Materiel Command, or his duly authorized representative, provided, however, that such representative shall not be an individual below the level of the commanding officer at an air procurement district or equivalent organization. Such exceptions, however, may be authorized, in writing only in unusual circumstances. Class or group exceptions are not authorized. Each exception authorized must relate to a specific contract, a specific invitation for bid, or specific request for proposals, and must be covered by an adequate provision in the contract clause.

(c) Generally, contractors have established procedures, methods, and controls which may be described and set forth in various manuals, documents, memoranda, and the like, or which may be in the form of a written statement

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