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Breakout Session Eric Saindon, Deputy Director, DCMA, Government Property Rich Culbertson, Manager Asset Management, L PowerPoint Presentation
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The New FAR Part 45: Government Property, What’s in it for Me?. Breakout Session Eric Saindon, Deputy Director, DCMA, Government Property Rich Culbertson, Manager Asset Management, Lockheed Martin Date November 8, 2007 Time 2:10 PM.

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The New FAR Part 45: Government Property, What’s in it for Me?

Breakout Session

Eric Saindon, Deputy Director, DCMA, Government Property

Rich Culbertson, Manager Asset Management, Lockheed Martin

Date November 8, 2007

Time 2:10 PM

far case 2004 025 government property
After several attempts and over fifteen years the final rule was published May 15, 2007 – effective June 14, 2007

Significant Government/ Industry effort

FAR Case 2004-025 Government Property
far case 2004 025 highlights
Over 80% of the FAR (property) language was eliminated, including 18 of 19 clauses (e.g. STE, ST, Facilities);

New: 52.245-1 Government Property Clause

Unchanged: 52.245-9 Use and Charges Clause and 45.6 Disposition

22 of 53 FAR sections (Parts) have been affected;

Largest FAR change since inception

FAR Case 2004-025 Highlights
background
The FAR property language was over 50 years old

Contained inconsistent, conflicting & obsolete guidance

Was at odds with modern materials management technology such as Enterprise Resource Planning, relational databases, unique item identification, radio frequency tags, bar-coding, and the general trend toward commercialization of components

Was not compatible with acquisition reform (i.e., does not allow an environment that fosters efficiency, creativity, and innovation)

In the early 1990s and 2002, a complete rewrite of the FAR was initiated, Part 45 (Government Property), and its associated clauses --Consensus was not achieved

* Tom Ruckdaschel

Background*
guiding principles used
Minimize the amount of guidance and avoid issuing regulations unless there is a compelling need to do so; avoid unnecessary or duplicative guidance.

Do not impose non-value added steps to the procurement process such as: imposing unnecessary costs, inhibiting good business practices, or imposing unnecessary actions, reports, reviews, approval/review levels, clauses/provisions, thresholds, or signatures.

*From T Ruckdaschel

Guiding Principles Used*
goals
Provide a framework within which performance outcomes allow for conformity when necessary — and flexibility when needed to achieve best value for the Government

Balance the use of prescriptive regulations that provide consistent outputs with principle-based standards that allow for lean approaches and greater flexibility, efficiency, best value and customer satisfaction

Create an oversight culture where empowered professionals can apply guiding principles, risk management and sound business judgment

Goals*
background and significance
Federal Property and Administrative Services Act of 1949 ---

The purpose of this … is to provide the Federal Government with an economical and efficient system for… (1) Procuring and supplying property (2) Using available property. (3) Disposing of surplus property….”

Change Drivers:

Consensus Standards

Technology, including using commercial over unique military

Approach to achieve higher quality and continuous process improvements

Capability Maturity Models

Lean and Six Sigma

Acquisition Reform …FAR Principles expressed in FAR Part 1; Low Value Property Deviations

CFO Act of 1990 and subsequent US Government accounting standards

BACKGROUND AND SIGNIFICANCE
far case 2004 025 government property1
Industry comments were due and submitted (AIA under CODSIA) November 18, 2005; main concerns:

Title

Access to Records

“As Is” Property

Main concerns resolved!

Overall -- 40 respondents with 287 comments

FAR Case 2004-025 Government Property
implementation of the new far government property rule
Shay D. Assad Memo October 26, 2007

Guidance provided:

If in the best interest of the Government – use Block Change

New Clause 52.245-1, delete old -2,-5,-19

“permissible … no change to contract price or funding.”

“Implementation of the New FAR Government Property Rule …”
far case 2004 025 highlights1
No more property control system approvals

Requires contractor self-assessment programs

Reporting Significant findings

Government oversight remains

FAR Case 2004-025 Highlights
far case 2004 025 highlights new
FAR 52.245-1 Government Property

Applies to fixed priced and cost plus contracts

Includes Limited Risk of Loss

Alternate I – Full Risk of Loss

Applies to fixed priced contracts where cost or pricing data is not required (The threshold for obtaining cost or pricing data is $650,000, unless an exception applies…FAR 15.403 -4(a)(1))

FAR 52.245-2 Government Property Installation Operation Services

FAR Case 2004-025 Highlights – New
far case 2004 025 highlights2
“45.000 Scope of part.

This part prescribes policies and procedures for providing

Government property to contractors, contractors' management and use of Government property, and reporting, redistributing, and disposing of contractor inventory. It does not apply to property under any statutory leasing authority, (except as to non-Government use of property under 45.301(f)); to property to which the Government has acquired a lien or title solely because of partial, advance, progress, or performance-based payments (e.g. FAR 52.232-16); to disposal of real property; or to software and intellectual property.”

FAR Case 2004-025 Highlights
far case 2004 025 highlights3
Definitional changes –

“Equipment means a tangible asset that is functionally complete for its intended purpose, durable, nonexpendable, and needed for the performance of a contract. Equipment is not intended for sale, and does not ordinarily lose its identity or become a component part of another article when put into use.”

Resolves reporting of Parent/Child items

FAR Case 2004-025 Highlights
far case 2004 025 highlights4
Definitional changes –

Agency Peculiar Property term eliminated

FAR Case 2004-025 Highlights
far case 2004 025 highlights same
45.102 -- Policy.

(a) Contractors are ordinarily required to furnish all property necessary to perform Government contracts.

(c) The contractor’s inability or unwillingness to supply its own resources it not a sufficient reason for the furnishing or acquisition of property;

In what respect is (a) true? – Cost Plus, Fixed Priced, Production, Service Contracts

FAR Case 2004-025 Highlights – Same
far case 2004 025 highlights new1
52.245-1(f) Contractor plans and systems.

(2) The Contractor shall establish and maintain Government accounting source data, as may be required by this contract, particularly in the areas of recognition of acquisitions and dispositions of material and equipment.

The Cost Accounting Standard CAS 402 defines direct/ indirect cost -- these definitions have not changed

FAR Case 2004-025 Highlights - New
far case 2004 025 highlights same1
US Code, Title 41, Sec. 422 established the Cost Accounting Standards (CAS) Board.

Provides the Cost Accounting Standards have

“the full force and effect as law”

are not “subject to the regulations that are established by another executive agency that differ from such standards with respect to the measurement, assignment and allocation of such cost.”

Government agencies within their guidance or contracts should not make requirements that differ from the Cost Accounting Standards.

FAR Case 2004-025 Highlights – Same
far case 2004 025 highlights same2
US Code, Title 41, Sec. 422 established the Cost Accounting Standards (CAS) Board.

Provides the Cost Accounting Standards have

“the full force and effect as law”

are not “subject to the regulations that are established by another executive agency that differ from such standards with respect to the measurement, assignment and allocation of such cost.”

Government agencies within their guidance or contracts should not make requirements that differ from the Cost Accounting Standards.

FAR Case 2004-025 Highlights – Same

The guidance in the Cost Accounting Standards, Disclosure Statement and GAAP are determiners.

sec implements internal control provisions
FOR IMMEDIATE RELEASE 2003-66

Washington, D.C., May 27, 2003 —

“Management's Report on Internal Control over Financial Reporting…

The new rules implementing Section 404 of the Act will define the term "internal control over financial reporting" to mean

a process designed by, or under the supervision of, the registrant's principal executive and…, to provide reasonable assurance regarding the reliability of financial reporting…in accordance with generally accepted accounting principles and includes those policies and procedures that pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets …;

provide reasonable assurance that transactions are recorded as necessary …. in accordance with generally accepted accounting principles, and receipts and expenditures… are being made only in accordance with authorizations of management…; and

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,use or disposition of the registrant's assets that could have a material effect on the financial statements.”

http://www.sec.gov/news/press/2003-66.htm

SEC Implements Internal Control Provisions
far case 2004 025 highlights new2
“45.103 General. (a) Agencies shall-- (1) Allow and encourage contractors to use voluntary consensus standards (see 11.101(c)) and industry-leading practices and standards to manage Government property in their possession;”

(OMB Circular A-119 establishes policies on Federal use and development of voluntary consensus standards in conformity with Pub. L. 104-113, the “National Technology Transfer and Advancement Act of 1995”)

FAR Case 2004-025 Highlights – New
far 52 245 1 contract
52.245-1(f) Contractor plans and systems.

Contractors shall establish and implement property management plans, systems, and procedures at the contract, program, site or entity level to enable the following outcomes:

(i) Acquisition of property

(ii) Receipt of Government property

(iii) Records of Government property

(iv) Physical inventory

(v) Subcontractor control

(vi) Reports

(vii) Relief of stewardship responsibility

(viii) Utilizing Government property

(ix) Maintenance

(x) Property closeout

FAR 52.245 -1(CONTRACT)
far case 2004 025 highlights expectations
A new framework resulting in more effective, economical and efficient operations.

Will stimulate the drive for best value by:

Greater up front planning

Common corporate practices and infrastructure

Use of Consensus Standards

Greater emphasis on the contributions of the acquisition team (Government/Industry)

Recognition of materiality

Greater flexibility in change management with the adoption of consensus standards and industry-leading practices

Asset managers and property administrators having more knowledge and business acumen

Systems evaluated more on performance and level of process maturity rather than satisfactory/unsatisfactory

FAR Case 2004-025 Highlights – Expectations
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For official FAQs: http://www.acq.osd.mil/dpap/dars/far.htmlYour questions????