annually. Bureau of the Budget Report Control Symbol No. 22-R232 has been assigned to the reports required under (a) and (b).

(vi) Materials accounted for under an approved multicontract cost and material control system.

304.8 Financial accounting requirements for multicontract cost and material control systems. Whenever a multicontract cost and material control system is authorized, the contractor's financial accounts must include all material, including Government-furnished material in the system. Specifically, his accounting system must be adequate to: (1) Provide on a complete and timely basis a clear "audit trail" from costs of materials acquired for each contract to materials used or disposed of on each contract;

(11) Reflect separately for Governmentfurnished and contractor-acquired material in stores (except work in process) the inventory balances as affected by receipts, issues, adjustments and other dispositions;

(iii) Determine unit costs for each identiflable part, component, subassembly, assembly, end item and contract item;

(iv) Calculate amounts for cost reimbursements and progress payments during the life of the contract by applying or allocating such unit costs developed through each stage of work in process to contract items for the requirements of each contract; and

(v) Insure that when material furnished by one procuring activity is used on a contract of another procuring activity, the furnishing activity receives credit for such material.

305. Numbering property accounts. A property account, consisting of records main;tained either by a Contractor or Government personnel, shall be assigned a property account number.

PART IV-MISCELLANEOUS PROVISIONS

401. Identification. All Government propgerty shall be recorded and identified as such by the contractor promptly upon receipt, and it shall remain so identified so long as it remains in the custody, control or possession of the contractor.

(a) Extent of identification. (1) As a general rule, all Government material and minor plant equipment shall be identified as Government property except in those cases where:

(1) No materials or minor plant equipment of the same type at the same location are owned by the contractor, his employees, or other contracting agencies;

(11) Adequate physical control is maintained over 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;

(111) Property is of bulk type or by its general nature of packing or handling precludes adequate marking, as may be determined by the property administrator; and

(iv) Where property is commingled, as authorized by 206 of this section.

(2) Government-owned special tooling shall be marked with the designation of the Military Department responsible for funding and control of such tooling, as follows: Army-"USA", Navy-"USN", Air Force"USAF", and Defense Supply Agency"USD", unless it is determined that such marking will damage the special tooling or is otherwise impracticable. Marking and identification procedures may be expanded by the Department having cognizance over the tooling to include end item reference, drawing number, and such other information as may be desired in a given case.

(3) Unless already marked in accordance with these instructions, all Governmentowned plant equipment, including industrial reserve plant equipment, shall be marked by the contractor with a Government identification number, except minor plant equipment; or when the size of the equipment or nature of the material for which it is made makes it impracticable, and in which case such item will be assigned 8 Government identification number for record purposes, which number shall be shown in the plant equipment property records; or the equipment is accessory or auxiliary and attached to or otherwise a part of an item of plant equipment and is required for its normal operation (see 304.3(a) of this section), 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. Once a Government identification number has been affixed to an item of plant equipment, the identification will be permanent and will not be changed so long as the equipment remains under the control of the same Military Department (but see (4) below). Identification shall be effected by affixing a metal, fibre, plastic, or other plate directly to the equipment; by using indelible ink, acid or electric etch, steel dies, or any other legible, permanent, conspicuous, and tamper-proof method. Identification shall consist of the following markings:

(1) An indication of Government-ownership and of the Military Department responsible for funding and control of the plant equipment, as follows: Army-"USA", Navy-"USN", Air Force "USAF", and Defense Supply Agency-"USD"; however, the identification "U.S." property shall not be charged solely to conform to the provisions of this paragraph.

(11) A two-part identification number, furnished by the Government, consisting solely of numerals except as provided in (111) below. The first part shall be the property account number, and the second part shall be a serial number. In case plant equipment furnished by the Government is already identified as property of a Military Department, no change shall be made in the markings, except as provided in (4) below.

(iii) In the case of items included within a standard Departmental registration system, for example, automotive, construction, or weight-handling equipment, application for a proper registration number will be made to the cognizant Department, which number shall be used in lieu of any other identification number.

(4) Government identification markings shall be removed prior to sale or scrapping. The markings so removed shall be shown on the appropriate documents involved. In the case of a transfer of funding and control responsibilities to other Military Departments, new Government identification markings, in accordance with the requirements of (2) or (3) above, may be affixed upon receipt of the equipment by the receiving Military Department.

(b) Recording Government identification numbers. Assigned Government property identification numbers will be recorded on all applicable receiving documents, shipping documents, and any other documents pertaining to the property accounts.

402. Contractor's responsibility and liability.

402.1 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 Contract Administrator within the scope of the contract:

(a) 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 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, terminated or otherwise amended during the performance 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 pursuant to the instructions of the Contract Administrator, 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 Contract Administrator.

(e) Written advice of Contract Administrator. 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 Contract Administrator 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.

402.2 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.

(a) The property administrator will require the contractor to report to him in all cases of loss, damage, or destruction of Government property in his possession, as soon as such fact becomes known. The property administrator will forward such report to the contract administrator, together with his own report of the facts of the case and his recommendations 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 officer, 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. A copy shall be held in the files of the contract administrator.

(b) 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 subparagraph (a) above.

(c) When completed products or end items are lost, destroyed, or damaged beyond repair while such property is in the physical possession or control of the Contractor, the action prescribed in subparagraph (a) above will be required.

(d) 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:

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

(ii) When 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.

(iii) 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.

(e) When property is rendered unserviceable by damages 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.

402.3 Shipment and receipt of Government-furnished 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 I 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 transac>tion. 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 pars. 203 and 204.) 403. Control of scrap and salvage.

403.1 Sources. Scrap originating from Government Property includes, but is not 1 limited to, the following:

(a) Cutting and processing waste, such as chips, cuttings, borings, turnings, short ends, circles, trimmings, clippings, and remnants.

(b) Spoiled partially manufactured materials, parts and assemblies, including parts and assemblies damaged in handling or installation.

E (c) Materials and supplies and small tools and special equipment, when worn out or damaged beyond repair, used packaging materials, and nonreusable containers.

(d) Unusable materials generated in the performance of overhaul or conversion contracts.

403.2 Salvage. A salvage procedure shall be established by the Contractor whereby all Government Property that can be salvaged shall be recovered and returned to Government stock.

403.3 Approval of scrap procedure by the property administrator. The property ad

ministrator shall review and approve the contractor's procedures relating to the physical control of scrap and records relating thereto. The property administrator shall periodically assure by actual inspection and selective examinations that the approved procedures are effectively carried out. If the property administrator determines that corrective measures are necessary to protect the Government's interests, he shall so advise the contractor and the contractor shall take necessary corrective action. 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 contractor administrator.

403.4 Minimum essential requirements of Contractor's scrap procedures. The Contractor's scrap procedures must include the following:

(a) Appropriate inspection and study to determine the possibility of reworking or converting for use the scrap resulting from operations under the contract.

(b) Prompt accumulation of all scrap generated and storage thereof under adequate protection.

(c) Recording the scrap data on appropriate records to provide the basis for control by weight or other unit of measure.

(d) Sorting of scrap, including the segregation of the various metals to prevent contamination.

(e) Recording of scrap shipments out of the plant.

403.5 Segregation of scrap and salvage. Where the Contractor is engaged in work involving both Government-owned and Contractor-owned materials from which scrap of a uniform nature is produced, the physical segregation of Government-owned and Contractor-owned scrap and salvage may be impracticable. In such cases, the Contract Administrator shall require proration of such basis as will result in equitable recovery by the Government.

404. Auditing property accounts. Records 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 and such records as may be maintained by Government personnel in connection with such property. The property administrator and the contractor shall make all property records, including correspondence related thereto, available to the auditors.

[25 F.R. 14328, Dec. 31, 1960, as amended at 27 F.R. 11665, Nov. 27, 1962; 28 F.R. 12575, Nov. 23, 1963; 29 F.R. 2844, Feb. 29, 1964; 29 F.R. 6940, May 27, 1964; 29 F.R. 14835. Oct. 31, 1964; 29 F.R. 14836, Oct. 31, 1964; 30 F.R. 1764, Feb. 9, 1965]

§ 30.3 Appendix C-Manual for control of Government property in possession of nonprofit research and development contractors.

PART I-INTRODUCTION

100 Scope of manual. This Manual sets forth basic requirements to be observed by the Departments of the Army, Navy and Air Force, for establishing and maintaining control over Government property furnished to or acquired by contractors in the case of research and development contracts with educational or other nonprofit organizations, provided such contracts are executed on a nonprofit basis.

101 Reserved.

102 Applicability of manual. Subject to paragraph 100 above, this Manual applies to all types of contracts, leases, and bailments, pursuant to which Government property is furnished to or acquired by a contractor.

103 Definitions. As used in this Manual, the following terms have the meanings shown:

103.1 "Educational or other nonprofit organization" means any corporation, foundation, trust, or institution operated for scientific or educational purposes, not organized for profit, no part of the net earnings of which inures to the profit of any private shareholder or individual.

103.2. "Contract administrator" means the individual duly designated by appropriate authority in the Military Departments to administer the contract. In the case of the Army, Air Force, and the Defense Supply Agency, this is a contracting officer; and in the Navy, the authorized representative of the contracting officer having administrative cognizance over the contract.

103.3 "Government property" means all property owned by or leased to the Government, or acquired by the Government under the terms of a contract, except that property to which the Government has acquired a lien or title solely as a result of partial, advance or progress payments shall not for the purpose of this Manual be classified as Government property. With this exception, Government property includes both Governmentfurnished property and contractor-acquired property, as defined below:

(a) "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; and

clude both Government-furnished propert and contractor-acquired property.

103.4 Classification of Government prop erty. The terms "classify" and "classific tion" as used herein with reference to Go ernment property refer to the grouping property into different categories having dif ferent incidents. For purposes of thi Manual, Government property shall classified in five categories, defined follows:

(a) "Real property" means lands, build ings, structures, improvements and appur tenances thereto. It does not include plant equipment as defined in subparagraph (b). below.

(b) "Plant equipment" means persona property of a capital nature (consisting machinery, equipment, furniture, vehicles machine tools, and accessory and auxiliary items, but excluding special tooling) used or capable of use in the manufacture of sup plies or in the performance of services or for any administrative or general plant purpose.

(c) "Minor plant equipment" means a item of plant equipment having a unit valu of less than $200.00 and other plant equip ment, regardless of cost, when so designated by the Government.

(d) "Material" means property which ma be incorporated into or attached to, an end item to be delivered under a contract o 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, small tools and supplies which may be consumed in normal use in the performance a the contract.

and

(e) "Special tooling" means all jigs, dies fixtures, molds, patterns, special taps, spe cial gauges, special test equipment, other special equipment and manufacturing aids and replacements thereof, acquired or manu factured by the contractor for use in the performance of a contract, which are of such a specialized nature that, without substan tial modification or alteration, their use is limited to the production of such supplies or parts thereof, or the performance of such services, as are peculiar to the needs of the Government. The term does not include (1) items of tooling or equipment acquired by the contractor prior to the contract, or replacements thereof, whether or not altered or adapted for use in the performance of the contract, (11) consumable small tools, or (iii) general or special machine tools, or similar capital items.

103.5 "Property administrator" means the Government representative responsible to the contract administrator for reviewing and approving the contractor's property control procedures, for examining the records maintained by the contractor of Government property, for making usage analyses of Government property, and for the maintenance

of such Government property records as are required by this Manual.

103.6 "Property account" means the official records of the Government property provided to a contractor by a Department, which are established and maintained under the provisions of this Manual. Separate property accounts will be maintained either on an individual contract basis or contractor basis.

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

103.8 "Salvage" means property which is recovered for further use or 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. 103.9

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

PART II-GOVERNMENT ADMINISTRATIVE

PROVISIONS

200. Scope of part. This part sets forth (1) the duties and responsibilities of Government representatives charged with the control of Government property (11) the sources from which Government property may be received or acquired, and (iii) the instructions to Government representatives for the control of Government property, both physically and administratively.

201. Duties and responsibilities of the ConItract Administrator with respect to the control of Government property. (a) The function of the Contract Administrator with respect to the control of Government property is to insure that the Contractor complies with the provisions of the contract and this manual pertaining to Government property and that the Government's interests therein are fully protected at all times. He shall require the Contractor to (1) exercise reasonable care and proper usage of all Government property, (11) establish and maintain adequate records therefor, and (iii) maintain controls that will assure the recording of all debits and credits to the property record as hereinafter defined.

(b) It is incumbent upon the Contract Administrator to familiarize himself with the provisions of this manual and the contract involved.

(c) He shall require the Contractor to correct all deficiencies in complying with * the provisions of the contract and this manual pertaining to Government property. & (d) He shall take proper action with respect to recommendations of the Property Administrator relating to usage or control of Government property.

(e) He shall make appropriate written findings with respect to the Contractor's liability for Government property lost, dam

aged, destroyed, or unreasonably consumed, as may be required by this manual.

202. Designation of property administrator. (a) A property administrator shall be designated for each Government contract involving Government property. In appropriate cases the contract administrator may be assigned the additional duty of property administrator. An assistant property administrator may be appointed for specific contracts. The property administrator will not be required to post a bond by virtue of the duty as property administrator.

(b) It is the policy of the Department of Defense that a single property administrator shall be designated for all Department of Defense contracts performed at one location by a contractor. Within each Military Department, responsibility for the direction, administration and review of the property administration interchange program shall be assigned to a single office at the Department level. This office, designated to direct and administer the program, shall have the following responsibilities:

(1) Implementation of pertinent Department of Defense directives, instructions and regulations.

(2) Review of field contract administration activities for compliance with Department of Defense and Departmental directives pertinent to the property administration interchange program.

(3) Resolution of intra-departmental interchange problems.

(4) Resolution of inter-departmental interchange problems.

(c) Property administration interchange agreements shall be negotiated only by those offices administering current contracts or orders with the contractors. Property administration interchange agreements shall be effected at the field level between representatives of the procuring activities having contract administration responsibility. In formulating such agreements, the following factors, among others, shall be considered.

(1) Comparative value and types of Government property in the possession of the contractor and the Government property yet to be provided under Government contracts. (2) Existence of a resident property administrator or accessibility of an itinerant property administrator.

(3) Other contract administration functions which may have a bearing on property administration such as quality control, industrial mobilization planning and audit cognizance.

(d) Based on the above factors, when two or more offices are equally concerned, with property administration at a contractor's location, that office which has contracts or orders that indicate the greatest continuous duration of future interest in Government property shall be given primary consideration for property administration cognizance. When all contracts or orders of the Department designated to perform property administration have been completed