a report as of July 31 each year, for each contract, showing the dollar amount of Government real property, capitalized equipment, and material maintained in stocks (when value is $50,000 or more) 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 when value is less than $50,000. (2) Financial property report format. [53 FR 28401, July 28, 1988] 1245.506 Identification. The requirements of FAR 45.506(b) apply to noncapitalized Government property. The requirements of FAR 45.506(c) apply to capitalized government property. 1245.508 Physical inventories. (a) Annual inventories. The contractor shall perform an annual physical inventory of the following categories of Government property in its possession or control and shall require such inventories of any subcontractors that are in possession of Government property provided under the contract: (1) Capitalized property; (2) Noncapitalized property; (3) Material maintained in stocks. (b) Reporting results of annual inventories. Within 30 days after the completion of an annual inventory, the contractor shall submit the following information to the property administrator: (1) A list, on both a quantitative 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 capitalized equipment. Subpart 1245.6-Reporting, Redistribution, and Disposal of Contractor Inventory 1245.603 Disposal methods. 1245.603–70 Plant clearance function. If the plant clearance function has not been formally delegated to another Federal agency, the contracting officer must assume all responsibilities of the plant clearance officer identified in FAR 45.6. 1245.607 Scrap. 1245.607-2 Recovering precious metals. DOT Order 4430.5, Recovery and Utilization of Precious Metals, establishes procedures for the recovery and acquisition of precious metals. 1245.608-3 Agency screening. Excess and residual contract inventory is subject to the same Departmental redistribution requirements as are prescribed for internal Departmental excess property. Accordingly, contracting officers shall assure that excess and residual contract property are screened within the Department in accordance with DOT Order 4600.1E, Redistribution of Excess Personal Property. 1245.608-5 Special items screening. Excess automatic data processing equipment shall be screened internally within the Department as required by DOT Order 4000.6A, Reassignment of Excess Automatic Data Processing Equipment. 1245.610-4 Contractor inventory in foreign countries. DOT contractor inventory located in foreign countries shall be utilized and disposed of in accordance with FPMR 101-43.5. At no additional cost to the United States, as used in this subpart, means at no increase in price for firm-fixedprice contracts or at no increase in target or ceiling price for fixed price incentive contracts (see FAR 46.707) or at no increase in estimated cost or fee for cost-reimbursement contracts. Defect, as used in this subpart, means any condition or characteristic in any supplies or services furnished by the contractor under the contract that is not in compliance with the requirements of the contract. Design and manufacturing requirements, as used in this subpart, means structural and engineering plans and manufacturing particulars, including precise measurements, tolerances, materials and finished product tests for the major system being produced. Major system, as used in this subpart, means a system or major subsystem used directly by the agency to carry out its mission(s), as defined by DOT Order 4200.14B, Major Systems Acquisition Review and Approval. This term does not include related support equipment, such as ground-handling equipment, training devices and accessories thereto; unless an effective warranty for the system would require inclusion of such items. This term does not include commercial items sold in substantial quantities to the general public as described in FAR 15.804-3(c). Performance requirements, as used in this subpart, means the operating ca pabilities, maintenance, and reliability characteristics of a system that are determined to be necessary for it to fulfill the requirement for which the system is designed. Prime contractor, as used in this subpart, means a party that enters into an agreement directly with the United States to furnish a system or a major subsystem. 1246.702 General. In addition to the considerations outlined in FAR 46.702, the following areas should be addressed by all DOT administrations in relation to the use of warranties in DOT contracts: (a) Planning is an essential step in obtaining an effective warranty and should begin early enough to address warranty requirements during the development of the item. Therefore, consideration of warranty provisions and their impact shall be included within the comprehensive acquisition planning process required by FAR Part 7 as implemented by DOT Order 4200.14B, Major Systems Acquisition Review and Approval. (b) The acquisition cost of a warranty may be included as part of an item's price when cost or pricing data will clearly define cost of the warranty to the Government, or may be set forth as a separate contract line item. (c) Each administration within DOT shall establish a tracking and enforcement system, as appropriate, to identify items covered, to provide information to Government personnel about enforcing the warranty provisions, and accumulate data relative to warranty costs. Each administration shall make an annual report to the Director of Acquisition and Grant Management, on warranty related costs and enforcement experience, no later than 60 days after the end of each fiscal year. 1246.703 Criteria for use of warranties. (a) Acquisition of warranties in the procurement of supplies that do not meet the definition of a major system (e.g., spare, repair, or replenishment parts) is governed by FAR 46.703 for all DOT administrations. Contracting officers should negotiate a warranty that meets or exceeds the requirements of section 1246.706 of this part where such warranty is advantageous and conforms to Departmental policy. (b) The use of warranties in the procurement of major systems by the United States Coast Guard is mandatory, unless a waiver is authorized. The use of warranties in major system acquisitions by DOT administrations other than the Coast Guard is voluntary. (c) Warranties should be obtained only when they are cost beneficial. In order to determine whether use of a warranty would be cost beneficial, an analysis must be performed to compare the benefits to be derived from the warranty with its acquisition and administration costs, and the contract file documented accordingly. The analysis should examine the procurement's life cycle costs, both with and without a warranty. Where possible, a comparison should be made with the costs of obtaining and enforcing similar warranties for similar supplies or services. 1246.704 Authority for use of warranties. an (a) For any contract entered into by operating administration, other than a contract entered into by the Coast Guard for major system acquisitions, the contracting officer shall determine if a warranty clause is appropriate in accordance with 1246.703(c), prior to solicitation of a requirement. If a warranty is determined to be appropriate, he/she shall document the reason for inclusion of a warranty and identify the specific parts, subassemblies, assemblies, systems or contract line items to which a warranty should apply, and shall address why the warranty is appropriate under the criteria set forth in FAR 46.703. For DOT administration, other than the Coast Guard, the policy and procedures set forth in section 1246.770 of this part for use of warranties in major system acquisitions may be used as a guideline. (b) Authority for use of warranties in the procurement of major systems by the Coast Guard is stated in section 1246.703 of this part. The policy and procedures on warranties set forth in section 1246.770 of this part are mandatory for Coast Guard. The Coast Guard shall use the procedure set forth in paragraph (a) above for including a warranty in procurements other than major system acquisitions. 1246.705 Limitations. In addition to limitations set forth in FAR 46.705, the following restrictions are applicable to all DOT contracts: (a) The Coast Guard is the only DOT administration which is authorized to include warranties in cost-reimbursement contracts for the production of major systems as required by 1246.770 of this part. (b) Any written warranty on major system acquisitions shall not apply in the case of any system or component thereof which has been furnished by the Government to a contractor except as indicated in section 1246.770-3 of this part. (c) Any written warranty obtained shall specifically exclude coverage of combat damage. 1246.706 Warranty terms and conditions. (a) In addition to those items set forth in FAR 46.706, the contracting officer, in developing the warranty terms and conditions, shall consider the following subjects, and where appropriate and cost beneficial shall: (1) Identify the affected line item(s) and the applicable specification(s); (2) Require that the line item's design and manufacture will conform to: (1) An identified revision of a toplevel drawing, and/or (ii) An identified specification or revision thereof; (3) Require that the system conforms with the specified Government performance requirements; (4) Require that all systems and components delivered under the contract will be free from defects in materials and workmanship; (5) State that in the event of failure due to nonconformance with specification and/or defects in material and workmanship, the contractor will bear the cost of all work necessary to achieve the specified performance requirements, including repair and/or replacement of all parts; (6) Require the timely replacement/ repair of warranted items and specify (7) Identify the specific paragraphs containing Government performance requirements which must be met; (8) Ensure that any performance requirements identified as goals or objectives in excess of specification requirements are excluded from the warranty provision; (9) Define what constitutes the start of the warranty period (e.g., delivery, acceptance, in-service date), the ending of the warranty (e.g., passing a test or demonstration, or operation without failure for specified time period), and circumstances requiring an extension of warranty duration (e.g., extending the warranty period as a result of mass defect correction during warranty period); (10) Identify what transportation costs will be paid by the contractor in conjunction with warranty coverage; (11) Identify any conditions which will not be covered by the warranty, other than the exclusion of combat damage; and (12) Identify any limitation on the total dollar amount of the contractor's warranty exposure, or agreement to share costs after a certain dollar threshold to avoid unnecessary warranty returns. (b) In addition, any DOT contract that contains a warranty clause must contain warranty implementation procedures, including warranty notification content and procedures, and identify the individuals responsible for implementation of warranty provisions. The contract may also permit the contractor's participation in investigation of system failures, providing that the contractor be paid at established rates for fault isolation work, and that the Government receive credit for any payments where equipment failure is covered by warranty provisions. 1246.770 Use of warranties in major system acquisitions by Coast Guard. Subsections 1246.770-1 through 1246.770-3 set forth policy and procedures for the Coast Guard to use in obtaining warranties from prime contractors when contracting for the production of a major system. Other administrations within the Department may use these procedures as guidelines for major system acquisitions. 1246.770-1 Policy. The Coast Guard shall include written warranties in all contracts with prime contractors for major system acquisitions. When drafting warranty provisions for major system acquisitions, the items listed at 1246.706 should be considered. The warranties shall meet the following requirements (as well as those specified at 1246.771): (a) For systems or components which are commercially available, such warranty as is normally provided by the manufacturer or supplier shall be obtained in accordance with FAR 46.703(d) and 46.710. (b) For systems or components provided in accordance with either design or performance requirements as specified in the contract or any modification to that contract, a written warranty of compliance with the stated requirements shall be obtained. (c) The warranty provided under paragraph (b) of this section, shall provide that in the event the major system or any component thereof fails to meet the terms of the warranty provided, the contracting officer may: (1) Require the contractor to promptly take such corrective action as the contracting officer determines to be necessary at no additional cost to the United States, including repairing or replacing all parts necessary to achieve the requirements set forth in the contract, (2) Require the contractor to pay costs reasonably incurred by the United States in taking necessary corrective action, or (3) Equitably reduce the contract price. (d) Any written warranty shall specifically exclude coverage of combat damage. 1246.770-2 Tailoring warranty terms and conditions. As the objectives and circumstances vary considerably among major system acquisition programs, contracting officers shall appropriately tailor the required warranties on a case-by-case basis, including remedies, exclusions, limitations and duration; provided such are consistent with the specific requirements of this section (see FAR 46.706). Contracting officers for major system acquisitions may exclude from the terms of the warranty certain defects for specified supplies (exclusions) and may limit the contractor's liability under the terms of the warranty (limitations), as appropriate, if necessary to derive a cost-effective warranty in light of the technical risk, contractor financial risk, or other program uncertainties. Contracting officers are encouraged to structure broader and more comprehensive warranties where such are advantageous. Likewise, the contracting officer may narrow the scope of a warranty when ap propriate (e.g., where it would be inequitable to require a warranty of all performance requirements because a contractor had not designed the system). It is the Department's policy not to include in warranty clauses any terms that require contractor liability for loss, damage or injury to third parties. 1246.770-3 Warranties on governmentfurnished property. A prime contractor for a major system acquisition shall not be required to provide the warranties specified in section 1246.770-2 of this part on any property furnished to that contractor by the United States except for defects in installation, and installation or modification in such a manner that invalidates a warranty provided by the manufacturer of the property. 1246.771 Cost benefit analysis. It is the Department's policy to ob tain warranties for a major system acquisition only when they are cost beneficial in accordance with 1246.703(c). If a specific warranty is considered not to be cost beneficial by the contracting officer, a waiver request shall be initiated under section 1246.772 of this part. 1246.772 Waiver and notification procedures. The Secretary of Transportation may waive the requirement for a written warranty for Coast Guard major acquisition systems when such waiver is in the interest of national defense or if the warranty obtained would not be |