FAR 32.503-15—Application of Government title terms.
Plain-English Summary
FAR 32.503-15 explains how to interpret title when the Government acquires title under the Progress Payments clause and how that title interacts with other property rules. It covers whether such property becomes Government-furnished property, how the Government Property clause at 52.245-1 and the termination inventory clauses at 52.249 apply, and how contractors may handle current production scrap, transferred inventory, and excess property after contract completion. The section is designed to prevent confusion about ownership versus control: even when title vests in the Government for progress payment purposes, that does not automatically make the property Government-furnished property or eliminate other contractual requirements. In practice, the rule protects the Government’s financial interest in property financed through progress payments while still allowing ordinary business handling of scrap and controlled transfer or disposition of inventory with contracting officer approval. It also clarifies that once all contract obligations are satisfied and progress payments are fully liquidated, any remaining excess property is outside the Progress Payments clause and title remains with the contractor.
Key Rules
Progress-payment title is limited
Property to which the Government obtains title solely under the Progress Payments clause is not automatically Government-furnished property. Title under this clause affects ownership for financing protection purposes, but it does not by itself trigger every rule that applies to GFP.
Other property clauses still apply
Even though title vests in the Government under the Progress Payments clause, the acquisition, handling, and disposition of certain property are still governed by the Government Property clause at 52.245-1 and the termination inventory provisions in the 52.249 clauses. Contractors must therefore follow those clauses where they apply.
Scrap may be sold in ordinary course
The contractor may sell or otherwise dispose of current production scrap on its own initiative, even when title has vested in the Government under the Progress Payments clause. However, the contracting officer must require the contractor to credit the contract with the proceeds from that scrap disposition.
Inventory transfers need approval
If title to materials or other inventories is vested in the Government under the Progress Payments clause, the contractor may transfer those items for its own use or other disposition only if the contracting officer approves and only on the terms approved. The contractor must remove the related costs from contract performance and repay or credit the Government for the unliquidated progress payments allocable to the transferred property.
Excess property after completion belongs to contractor
If excess property remains after performance is complete and all contractor obligations are satisfied, including full liquidation of progress payments, that property is outside the scope of the Progress Payments clause. In that situation, the contractor holds title to the excess property.
Responsibilities
Contracting Officer
Determine when the Government’s title under the Progress Payments clause affects property treatment, apply the Government Property and termination inventory clauses as appropriate, approve or deny contractor requests to transfer vested inventory for other use or disposition, and require credits to the contract for scrap proceeds and other amounts owed to the Government.
Contractor
Recognize that title under the Progress Payments clause does not automatically make property Government-furnished property, follow applicable property and termination inventory clauses, obtain contracting officer approval before transferring vested inventory for its own use or other disposition, eliminate allocable costs from contract performance, repay or credit unliquidated progress payments for transferred property, and credit scrap-sale proceeds to the contract as directed.
Government
Protect its financial interest in property financed through progress payments, ensure proper application of title and inventory rules, and receive appropriate credits or repayments when scrap is sold or vested inventory is transferred or otherwise disposed of.
Practical Implications
Contractors should not assume that Government title under progress payments means the property is GFP or that they can use it freely; the governing clause matters.
Scrap can usually be sold in the ordinary course of business, but the proceeds are not the contractor’s to keep when the Government has title under the Progress Payments clause.
Any transfer of vested materials or inventory for the contractor’s own use requires contracting officer approval and careful accounting to remove allocable costs and repay or credit unliquidated progress payments.
At contract closeout, remaining excess property may revert to contractor ownership only after all obligations are satisfied and progress payments are fully liquidated; premature assumptions about ownership can create audit and property-accounting problems.
The biggest compliance risk is mixing up title, possession, and disposition rights—contractors need to track which property is subject to progress-payment title, which clauses govern it, and what credits or repayments are required before any transfer or sale.
Official Regulatory Text
(a) Property to which the Government obtains title by operation of the Progress Payments clause solely is not, as a consequence, Government-furnished property. (b) Although property title is vested in the Government under the Progress Payments clause, the acquisition, handling, and disposition of certain types of property are governed by- (1) The clause at 52.245-1 , Government Property; and (2) The termination clauses at 52.249 , for termination inventory. (c) The contractor may sell or otherwise dispose of current production scrap in the ordinary course of business on its own volition, even if title has vested in the Government under the Progress Payments clause. The contracting officer shall require the contractor to credit the costs of the contract performance with the proceeds of the scrap disposition. (d) When the title to materials or other inventories is vested in the Government under the Progress Payments clause, the contractor may transfer the inventory items from the contract for its own use or other disposition only if, and on terms, approved by the contracting officer. The contractor shall- (1) Eliminate the costs allocable to the transferred property from the costs of contract performance, and (2) Repay or credit to the Government an amount equal to the unliquidated progress payments, allocable to the transferred property. (e) If excess property remains after the contract performance is complete and all contractor obligations under the contract are satisfied, including full liquidation of progress payments, the excess property is outside the scope of the Progress Payments clause. Therefore, the contractor holds title to it.