IND 205 LESSON #2 TITLE AND GOVERNMENT PROPERTY

Transcription

1 IND 205 LESSON #2 TITLE AND GOVERNMENT PROPERTY

2 PROPERTY TLO-2: Determine how the Government may take title to property under a contract. ELOs: 1. Define title and related terms 2. Determine who has title to property under a fixedprice contract 3. Determine who has title to property under a costreimbursement contract 4. Explain the passage of title to the Government when it is purchased by the Contractor and the Contractor is entitled to be reimbursed as a direct item of cost under the contract 2

3 PROPERTY ELOs: 5. Explain the Material Management Accounting System 6. Explain how title may be transferred under the Material Management and Accounting System (MMAS) 7. Define Progress and Performance Based Payments and related terms 8. Explain title in the Progress Payments Clause at FAR and the Performance Based Payments Clause at FAR Explain how the audit could be affected by the title provisions in a contract 3

4 PROPERTY ELO #1 What is Title? It is very important to know what title is and also when the Government can take title to property under a contract. Title does not only mean absolute ownership. It also can mean possession or right or legal title. 4

5 PROPERTY ELO #1 Title as defined in Webster s Dictionary: All elements constituting legal ownership; a legally just cause of exclusive possession; the instrument (deed) that is evidence of a right; something that justifies or substantiates a claim; or an alleged or recognized right. 5

6 PROPERTY ELO #1 An established or recognized right to something A ground or basis for a claim Anything that provides a ground or basis for a claim Legal right to the possession of property Ref 6

7 PROPERTY ELO #2 The meaning of the word title is not the same for all clauses. Whether the Government has legal title, absolute ownership, or a right will depend upon its use in a specific clause. Passage of title occurs differently depending on the contract type and applicable contract clause. For example: Government Property Progress Payments Performance-Based Payments

8 PROPERTY ELO #2 FAR (e) Title to Government Property The Government shall retain title to all GFP. Title to GP shall not be affected by its incorporation into or attachment to any property not owned by the Government, nor shall GP become a fixture or lose its identity as personal property by being attached to Real Property. Government always retains title to Government Furnished Property! 8

9 PROPERTY ELO #2 FAR (e) Title to Government Property (2) Title vests in the Government for all property acquired or fabricated by the Contractor IAW the financing provisions or other specific requirements for passage of title in the contract. Under FP contracts (without financing arrangements) the Contractor retains title to all acquired property except for deliverable end items. 9

10 PROPERTY ELO #3 (3) Title under CR or T&M or CR/CLINs in FP contracts: (i) Title to all property purchased by the contractor for which the contractor is entitled to be reimbursed as a direct item of cost under this contract shall pass to & vest in the Government upon vendor s delivery of such property. 10

11 PROPERTY ELO #4 FAR defines Direct cost as any cost that is identified specifically with a particular final cost objective. Direct costs are not limited to items that are incorporated in the end product as material or labor. Costs identified specifically with a contract are direct costs of that contract. All costs identified specifically with other final cost objectives of the contractor are direct costs of those cost objectives. 11

12 PROPERTY ELO #4 A Direct Item of Cost Must Be: Reasonable Allowable & Allocable The Government will reimburse the contractor for the cost of the property purchased in accordance with contract requirements so long as it is reasonable, allowable, and allocable! 12

13 PROPERTY ELO #4 FAR Material Costs (a) Material costs include the costs of such items as raw materials, parts, subassemblies, components, and manufacturing supplies, whether purchased or manufactured by the contractor FAR Special Tooling and Special Test Equipment Costs (b) The cost of special tooling and special test equipment used in performing one or more Government contracts is allowable and shall be allocated to the specific Government contract or contracts for which acquired 13

14 PROPERTY ELO #4 So when does the Government take title for Material? The requirement falls under FAR (e)(3)(ii) Title to all other property, the cost of which is reimbursable to the Contractor, shall pass to and vest in the Government upon (A) Issuance of the property for use in contract performance; (B) Commencement of processing of the property for use in contract performance; or (C) Reimbursement of the cost of the property by the Government, whichever occurs first. 14

15 PROPERTY ELO # 5 When Does the Government take Title to Contractor Acquired Material? There are various types of Material Management Systems. What is a Material Management System? 15

16 PROPERTY ELO # 5 A Material Management System Tracks equipment and material from procurement to project consumption. Provides complete accounting for material inventory, distribution, usage and stock adjustments. Should demonstrate how and where materials are expended to perform each contract task at any stage in production. 16

17 PROPERTY ELO # 5 There is no Industry Standard for materials management Each company employs their own system(s) Can be a major system such as Oracle, SAP, and MES, or a; Simple system such as a basic excel spreadsheet Depends on the size and complexity of the company. Now, let s talk about Material Management Accounting Systems (MMAS). 17

18 PROPERTY ELO # 5 What is an MMAS System? It is a system that is more financially focused vs. item focused. Each item is viewed and tracked by quantity and cost $. Applies to only to Material or items to be consumed* Finally, it must comply with specific FAR & DFARS requirements. DFARS , MMAS DFARS , Property Loss FAR , Government Property * Caution system should be able to track complete parts that will be consumed but have independent identification. 18

19 PROPERTY ELO # Material Management and Accounting System (MMAS) 1) Material management and accounting system (MMAS) means the Contractor's system or systems for planning, controlling, and accounting for the acquisition, use, issuing, and disposition of material. Material management and accounting systems may be manual or automated. They may be stand-alone systems or they may be integrated with planning, engineering, estimating, purchasing, inventory, accounting, or other systems. 19

20 PROPERTY ELO # Material Management and Accounting System (MMAS) Cont. (1) Reasonably forecasts material requirements; (2) Valid time-phased requirements means material that is (i) Needed to fulfill the production plan, including reasonable quantities for scrap, shrinkage, yield, etc.; and (ii) Charged/billed to contracts or other cost objectives in a manner consistent with the need to fulfill the production plan. 20

21 PROPERTY ELO # Material Management and Accounting System (MMAS) Cont. a) DoD policy is for its contractors to have an MMAS that conforms to the standards in paragraph (d) of the clause at , Material Management and Accounting System, so that the system (1) Reasonably forecasts material requirements; (2) Ensures the costs of purchased and fabricated material charged or allocated to a contract are based on valid time-phased requirements; and (3) Maintains a consistent, equitable, and unbiased logic for costing of material transactions 21

22 PROPERTY ELO # 6 Government Title for Material issued under a Material Management Accounting System (MMAS) can also occur under the requirements found within: Government Property (clause) (e)(2) Fixed Price Contracts absent financing (e)(3)(ii) Title under CR or T&M or CR/CLINs in FP contracts Progress Payment Inventory (d) Title Performance Based Payment (f) Title GFP is excluded from the MMAS Remember GFP is always Government Owned! 22

23 PROPERTY ELO # 7 Purpose of Progress Payments and Performance Based Payments: Form of Financing Similar to financing a car or home It is used only with fixed-price contracts Clauses: Progress Payments Performance-Based Payments 23

24 PROPERTY ELO #7 Progress Payment Clause (d) Title. (1) Title to the property described in this paragraph (d) shall vest in the Government. Vestiture shall be immediately upon the date of this contract, for property acquired or produced before that date. Otherwise, vestiture shall occur when the property is or should have been allocable or properly chargeable to this contract. 24

25 PROPERTY ELO #7 Progress Payment Inventory Material that is purchased by the contractor in accordance with the provisions of FAR where title vests in the Government is referred to as Progress Payment Inventory. The purpose of the title provisions in the Progress Payments Clause is to: Provide the Government protection of its financial investment. The Government claims title via the clause The courts have argued both ways Yes, Government has title No, Government just has lien 25

26 PROPERTY ELO #8 Performance Based Payment Clause (f) Title. (1) Title to the property described in this paragraph (f) shall vest in the Government. Vestiture shall be immediately upon the date of the first performancebased payment under this contract, for property acquired or produced before that date. Otherwise, vestiture shall occur when the property is or should have been allocable or properly chargeable to this contract. 26

27 PROPERTY ELO # 8 27

28 PROPERTY ELO #8 The Government has been made whole by the delivery of the end item. Remember in a fixed price contract absent financing we agree on a set price for a specific item. No matter what takes place during the contract the price does not change. Title only provides the Government some insurance in the event that we are not able to collect the end item. 28

29 PROPERTY ELO # 9 Terminated Contracts When a contract is Terminated, the contractor shall transfer title and deliver to the Government: Fabricated or unfabricated parts, Work in process, Completed work, Supplies, and Other material produced or acquired Special Tooling Special Test Equipment Equipment Plans Drawings Etc. for the work terminated as directed by the Contracting Officer. 29

30 PROPERTY ELO #9 FAR (b)(6)(i) (Fixed Price) (c)(6)(i) - Termination (Cost-Reimbursement) 30

31 PROPERTY ELO # 9 Title for Software FAR Part (a) When contracting other than from GSA s Multiple Award Schedule contracts for the acquisition of commercial computer software, no specific contract clause prescribed in this subpart need be used, but the contract shall specifically address the Government s rights to use, disclose, modify, distribute, and reproduce the software. Check out Acquipedia article. cfeee-b24b-4fdd-ad7b What is the requirement to control? 31

32 PROPERTY ELO # 9 How is the contractor required to control and manage Progress Payment inventory, Performance Based inventory, software, leased vehicles, Government assets incidental to place of performance? ANS: In accordance with sound industrial practice. Since the title that the Government has on this type property amounts to a lien it is not required to be included in the Contractor s Property Management System. Does it make sense to require the contractor to record, track and dispose of this property on behalf of the Government? Why or why not? 32

33 PROPERTY ELO 9 Property Administrators have to be clear about what they are auditing Not all property in which the Government assumes title should be included. Remember FAR Part ? Only property that is covered under the Clause will be included in the Property Management System Audit. 33

34 PROPERTY ELO # Scope of part. (a) 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. (b) It does not apply to (1) Government property under any statutory leasing authority, except as to non-government use of property under (f); 34

35 PROPERTY ELO # Scope of part. (cont.) (2) Property to which the Government has acquired a lien or title solely because of partial, advance, progress, or performancebased payments; (3) Disposal of real property; (4) Software and intellectual property; or (5) Government property that is incidental to the place of performance, when the contract requires contractor personnel to be located on a Government site or installation, and when the property used by the contractor within the location remains accountable to the Government. Items considered to be incidental to the place of performance include, for example, office space, desks, chairs, telephones, computers, and fax machines. 35

36 PROPERTY TLO-2: Determine how the Government may take title to property under a contract. ELOs: 1. Define title and related terms 2. Determine who has title to property under a fixedprice contract 3. Determine who has title to property under a costreimbursement contract 4. Explain the passage of title to the Government when it is purchased by the Contractor and the Contractor is entitled to be reimbursed as a direct item of cost under the contract 39

37 PROPERTY ELOs: 5. Explain the Material Management Accounting System 6. Explain how title may be transferred under the Material Management and Accounting System (MMAS) 7. Define Progress and Performance Based Payments and related terms 8. Explain title in the Progress Payments Clause at FAR and the Performance Based Payments Clause at FAR Explain how the audit could be affected by the title provisions in a contract 40