PGI 245.402-70  Policy.

(1)  Title vests in the Government for all property acquired or fabricated by the contractor in accordance with specific requirements for passage of title in the contract. Oversight and visibility of this Government property, therefore, is limited to reviews and audits of contractor accounting and property management systems. Ad-hoc contractor generated reports of contractor-acquired property used by government personnel for "property accountability" can result in duplicate accountability records, inefficient operations, and increased program costs, and are discouraged.

(2)  Contractor-acquired property items not anticipated at time of contract award, or not otherwise specified for delivery on an existing line item, shall be delivered to the Government on a contract line item. The value of that item shall be recorded at the original purchase cost or best estimate. Unless otherwise noted by the contractor at the time of delivery to the Government, the placed-in-service date shall be the date of acquisition or completed manufacture, if fabricated.

(3)  Upon delivery and acceptance by the Government of contractor-acquired property items, and when retained by the contractor for continued use under a successor contract, these items become GFP. The items shall be added to the successor contract as GFP by contract modification.

(4)  Individual contractor-acquired property items should be recorded in the contractor's property management system at the contractor's original purchase cost or best estimate.

(5)  Financial/accounting treatment shall be in accordance with DoD Financial Management Regulations, DoD 7000.14-R, volume 4, chapter 6.

(6)  To the extent that contractor-acquired material that is excess to the needs of the accountable contract is required on follow-on or other contracts, the costs of such property shall be credited to the losing contract; the gaining contract shall be debited accordingly. This supports the FAR 31.205-26 policy that material costs should be borne by the contract that consumes material when materials are required for specific contracts. This also complies with the requirements of DFARS clause 252.242.7004, Material Management Accounting Systems, requiring a material management and accounting system. This process applies only to contractor-acquired material. It does not apply to other contractor-acquired property, i.e., equipment, special tooling or special test equipment, or GFP.

(7)  Contractor "credit-debit" systems and material management accounting systems do not involve or require contractual modifications for the transfer of material by credit as they are internal contractor accounting transactions. However, such systems should be reviewed for efficacy and efficiency by the DoD component responsible for contract administration.

(8)  All other contractor inventory that is excess to the needs of the contract shall be disposed of in accordance with FAR subpart 45.6.

(9)  References: DoD Instruction 5000.64; FAR part 45 and its associated clauses; and FAR part 31; and DFARS clause 252.242-7004.