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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 Si-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 Gov. ernment 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 Gov. ernment, 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.

Real property


ized equipment


Balance beginning of period
Acquisitions during period:

Government furnished.

Contractor acquired. Dispositions during period:

Government furnished.

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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.

S1-500 General.

This part establishes minimum requirements for the physical inventory of Government property in the possession or control of the contractor.

Part 4Identification S1-400 General.

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 and Noncapitalized

Equipment. 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

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 Inven

tories. 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 these inventory reports at any time prior to Completion.

final disposition of the inventory.

(S) Immediately upon termination or comple

Dated tion of a contract, the contractor shall per

(e) Disposal of Property. Disposal of propform a physical inventory adequate for dis

erty will be directed by the Contracting Of. posal purposes of all Government property applicable to the terminated or completed

ficer, or a designated representative of the

Contracting Officer, in accordance with the contract. Further, the contractor shall

terms of the contract. The contractor shall cause each subcontractor to perform a physical inventory adequate for disposal pur

not make disposition of any property except

as so directed. poses of all Government property in the subcontractor's possession or control which Part 6Care, Maintenance, and Utilization is applicable to the terminated or conpleted S1-600 General. contract. Within 30 days after the contract's

This part establishes minimum requirecompletion or termination, unless the Con

ments as to care, maintenance, and utilizatracting Officer specifically approves an ex

tion of Government property in the possestension of time, the prime contractor shall

sion or control of the contractor. The consubmit a final inventory of Government

tractor shall be responsible for the proper property (including subcontractor property)

care, maintenance, and utilization of Govin the form and detail as prescribed below:

ernment property in his possession or con(a) Form. Separate reports are required

trol from the time of receipt of the property for Government-furnished property and for

until properly relieved of responsibility in contractor-acquired property and for each

accordance with the contract. The removal of the following property categories:

of Government property to storage, or its (1) Real Property;

contemplated transfer, shall not relieve the (2) Capitalized Equipment;

contractor of these responsibilities. (3) Noncapitalized Equipment; (4) Materials;

S1-601 Contractor's Maintenance Pro(5) Salvage; and

gram. (6) Scrap.

(a) Policy. The contractor's maintenance (b) Details Required. Each item of capital

program (which shall be approved in accordproperty must be completely identified with

ance with Part 1 of this Manual) shall be sufficient detail to permit verification by such as to provide, consistent with sound inreference to the covering reimbursement

dustrial practice and the terms of the convoucher or (if furnished by the Govern

tract, for: ment) shipping or other documents. To the

(1) Disclosure of need for the performance extent to which they apply, the following

of preventive maintenance; particulars are required for all items:

(2) Disclosure and reporting of need for (1) Commercial description, adequate for screening and disposal purposes;

capital type rehabilitation; and (2) Make, model, type, serial number, and

(3) Recording of work accomplished under National Stock Number when available;

the program. (3) Government identification number;

(b) Preventive Maintenance. Preventive (4) Quantity;

maintenance is maintenance generally per(5) Cost;

formed on a regularly scheduled basis to (6) Condition (use codes listed in Exhibit prevent the occurrence of defects and to A of this Manual); and

detect and correct minor defects before they (7) Location (contractor's facility or other

result in serious consequences. An effective site).

preventive maintenance program shall con(c) Copies Required. Three copies of the

sist of, but not be limited to, the following inventory reports shall be submitted to the

actions: Property Administrator.

(1) Inspection of buildings at such period(d) Certification. The following certifica

ic intervals as will assure detection of detetion signed by the contractor or an author

rioration and the need for repairs; ized official shall accompany each copy of

(2) Inspection of equipment at such perithe inventory schedules:

odic intervals as will assure detection of I do hereby certify as (Title) of (Name of maladjustment, wear, or impending breakContractor) that the attached inventory re

down; ports are complete and correctly list and de- (3) Regularly scheduled lubrication of scribe all items of property furnished to the bearings and moving parts in accordance contractor, or for which the contractor has with a lubrication chart or equivalent plan; been or will be reimbursed by the Govern- (4) Protection from exposure to deterioment, for use in the performance of Con- rating agents; tract No. -- which as of this date have not (5) Adjustments for wear, repair, or rebeen consumed in performance of this con- placement of worn or damaged parts and tract; and that I will immediately notify the the elimination of causes of deterioration of Contracting Officer of any change affecting associated parts;

(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 Proper

ty. 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

tractors. The contractor shall require any of his subcontractors having Government property in their possession or control adequately to care for and maintain that property and assure that it is utilized only as authorized by the contract. Procedures necessary to assure the accomplishment of this responsibility shall be included in the contractor's approved property control system. S1-604 Property Excess to Contract Re

quirements. Government property which becomes excess to contract performance requirements shall be reported to the Property Ad. ministrator within 30 days. The contractor's excess declaration shall be prepared in the same manner as prescribed in S1-503 of this Manual. Disposal of excess 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 any disposition of such property except as so directed. Part 7Passage of Title to Equipment

Under Research Contracts S1-700 General.

This part covers to the extent not otherwise provided in the contract or elsewhere in this Manual the obligations of the contractor with respect to property acquired with research contract funds, title to which has passed to him. In accordance with the provisions of 42 U.S.C. 1892, DOT is authorized to transfer title to equipment acquired with research contract funds to nonprofit institutions of higher education and to

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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New or unused property in excellent conditions. Ready for use and

identical or interchangeable with new items delivered by manufacturer or

normal source of supply. N-2 ............ New-Good.

New or unused property in good condition. Does not quite quality for N-1

(because slightly shopworn, soiled, or similar), but condition does impair

utility. N-3. New-Fair.

New or unused property in fair condition. Soiled shopworn, rusted,

deteriorated, or damaged and its utility is slightly impaired. N-4 New-Poor

New or unused property so badly soiled, rusted, mildewed, deteriorated, or

damaged, that its utility is seriously impaired. E-1

Used-Reconditioned excellent .......... Used property, but repaired or renovated and in excellent condition. E-2 Used-Reconditioned good.

Used property which has been repaired or renovated and, while still in

good usuable condition, has become worn from further use and cannot

quality for excellent condition. E-3 .......... Used-Reconditioned fair

Used property which has been repaired or renovated but has deteriorated

since reconditioning and is only in fair condition. Further overhauling

required or expected to be needed in near future. E-4 Used—Reconditioned poor

Used property which has been repaired or renovated and is in poor

condition from serious deterioration such as from major wear and tear,

corrosion, exposure to weather or mildew. 0-1 ......... Used-Usable without repairs-Ex- Property which has been slightly or moderately used, no repairs required, cellent..

and still in excellent condition. 0-2

Used-Usable without repairs, Used property, more worn than 0-1, but still in good condition with

considerable use left before any important repairs would be required. 0-3 Used-Usable without repairs—Fair.... Used property which is still in fair condition and usable without repairs;

however, somewhat deteriorated with some parts (or portion) worn and

should be replaced. 0-4.

Used-Usable without repairs, Used property which is still usable without repairs, but in poor condition

and undependable or uneconomical in use. Parts badly worn and

deteriorated. R-1 Used-- Repairs required-Excellent..... Used property, still in excellent condition, but minor repairs required

(repairs would not cost more than 10 pct of acquisition cost). R-2 .............. Used-Repairs required-Good........... Used property, in good condition but considerable repairs required. Esti

mated cost of repairs would be from 11 to 25 pct of acquisition cost. R-3 Used— Repairs required—Fair. Used property, in fair condition but extensive repairs required. Estimated

repair costs would be from 26 to 40 pct of acquisition cost. R-4 ........... Used-Repairs required-Poor .. Used property, in poor condition and requiring major repairs. Badly worn,

and would still be in doubtful condition of dependability and uneconomical to use if repaired. Estimated repair costs from 41 to 65 pct of

acquisition cost. Х Salvage.

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. S Scrap....

Property that has no reasonable prospect of being sold except for the

recovery value of its basic material content.

(Sec. 205(c), 63 Stat. 389; 40 U.S.C. 486(c), 10 U.S.C. 2301-2314) (42 FR 45268, Sept. 8, 1977)

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