FAR 45.1—Subpart 45.1

Definitions.

FAR 45.101 is the definitions section for the Government property rules in FAR Part 45, and it supplies the vocabulary used throughout the part so contractors, contracting officers, and property administrators apply the same standards. It defines key terms covering property types and status, including cannibalize, contractor-acquired property, contractor inventory, Government-furnished property, Government property, material, equipment, property, real property, sensitive property, precious metals, production scrap, nonseverable property, and loss of Government property. It also defines roles and administrative concepts such as contractor’s managerial personnel, Property Administrator, property records, and provide, along with special concepts like demilitarization and discrepancies incident to shipment. These definitions matter because they determine who owns what, what must be tracked, when property becomes excess or lost, what security and accountability controls apply, and how contractors must manage, report, and dispose of property under a contract. In practice, this section is the foundation for property clauses, property administration, inventory control, loss reporting, and disposition decisions across supply, manufacturing, maintenance, and research contracts.

Policy.

FAR 45.102 sets the baseline policy for when the Government should, and should not, furnish property to contractors for use in performing federal contracts. It establishes the general rule that contractors are ordinarily expected to provide their own property, then limits Government-furnished property to situations where the contracting officer can clearly show it is in the Government’s best interest, the overall acquisition benefit outweighs the added administrative and disposal costs, the Government’s risk is not materially increased, and the requirement cannot otherwise be met. The section also makes clear that a contractor’s lack of resources or unwillingness to supply them is not, by itself, a valid reason for the Government to provide property. It creates an exception for contracts involving repair, maintenance, overhaul, or modification, where the paragraph (b) justification standard does not apply. Finally, it restricts installing or constructing Government property on contractor-owned real property in a way that makes it nonseverable, unless the head of the contracting activity determines that the action is necessary and in the Government’s interest. In practice, this section is about disciplined use of Government property, avoiding unnecessary Government ownership and management burdens, and ensuring property decisions are justified by mission need rather than convenience.

General.

FAR 45.103 sets the basic policy framework for how agencies should manage Government property in the hands of contractors. It covers six core topics: encouraging the use of voluntary consensus standards and industry-leading practices for property management, reducing any competitive advantage from access to Government property, maximizing reutilization of contractor inventory for Government needs, requiring contractors to use Government property already on hand to the greatest practical extent, charging rent when Government property is used on a non-rent-free basis, and requiring contractors to justify keeping Government property and declare it excess when it is no longer needed. It also addresses how agencies should structure contractor property management systems, stating that agencies generally should not require a separate system just for Government property if the contractor already has established procedures for contractor-owned property. In practice, this section is about efficiency, fairness, and stewardship: it aims to prevent unnecessary Government property accumulation, avoid giving contractors an unfair edge, and make sure property is used, reused, and disposed of responsibly. For contractors, it means they should expect to integrate Government property into their normal property controls rather than build a completely separate compliance structure, unless the contract or circumstances require otherwise. For contracting officers and property administrators, it provides the policy basis for decisions about property use, rental, retention, and excess declarations.

Responsibility and liability for Government property.

FAR 45.104 explains who bears the risk of loss when Government property is furnished to or used by contractors, and how the Government decides whether to seek recovery. It covers the general rule that contractors are usually not liable for loss of Government property under cost-reimbursement, time-and-material, labor-hour, and certain fixed-price contracts awarded on certified cost or pricing data; the contracting officer’s authority to revoke that risk assumption when the property administrator finds the contractor’s property management system noncompliant; the rule that a prime contractor remains responsible to the Government even when it passes Government property to a subcontractor; the process for determining contractor liability and the form of recovery after a loss; and the requirement to deposit restitution into the Treasury as miscellaneous receipts unless another statute says otherwise. In practice, this section sets the baseline for allocating risk, but it also makes clear that poor property controls can shift that risk back to the contractor. It is important because Government property losses can create significant financial exposure, contract administration disputes, and audit findings, and because the recovery method must be handled consistently with fiscal law.

Contractors’ property management system compliance.

FAR 45.105 explains how the Government monitors and enforces contractor compliance with a property management system when Government property is involved. It covers the agency’s duty to analyze the contractor’s property management policies, procedures, practices, and systems; how often that analysis must occur; the property administrator’s obligation to notify the contractor in writing when the system does not meet contractual requirements; the requirement to request prompt correction and a contractor corrective action plan with a schedule; and the contracting officer’s role if deficiencies are not corrected. It also addresses the consequences of continued noncompliance, including possible revocation of the Government’s assumption of risk for loss of Government property and other available rights or remedies. Finally, it explains how the property administrator determines whether a reported loss is a Government-assumed risk and, depending on that determination, either grants relief of stewardship responsibility and liability or asks the contracting officer to hold the contractor responsible and liable. In practice, this section is the enforcement bridge between property administration reviews and the legal consequences that follow when a contractor’s property system is weak or when Government property is lost.

Transferring accountability.

FAR 45.106 addresses when and how Government property may be moved from one contract to another, and what happens to that property after the transfer. It covers the threshold requirement that the gaining contract must have a firm need for the property, the need to document the transfer through contract modifications to both the losing and gaining contracts, the change in property status once transferred, and the special rule that certain Government-furnished property warranties do not apply when contractor-acquired property is later transferred to another contract with the same contractor. In practice, this section is meant to prevent casual or unsupported shifting of property between contracts, protect the Government’s accountability records, and ensure the receiving contract has a legitimate requirement for the asset. It also clarifies that once property is transferred, it is treated as Government-furnished property for the gaining contract, which affects administration, accountability, and risk allocation. For contractors and contracting officers, the section is important because it controls how property is reallocated, how records must be updated, and whether warranty protections apply after transfer.

Contract clauses.

FAR 45.107 tells contracting officers when to include the Government property clauses in solicitations and contracts, and which version of the clause to use. It covers the basic Government Property clause at 52.245-1, including when to use Alternate I and Alternate II, the special Government Property (Installation Operation Services) clause at 52.245-2 for certain fixed-price service contracts on Government installations, and the Use and Charges clause at 52.245-9 whenever 52.245-1 is included. It also explains when a Government property clause is not required for purchase orders for property repair if the Government property being repaired is at or below the simplified acquisition threshold and no other Government property is furnished. In practice, this section is a clause-selection rulebook: it helps the contracting officer match the contract type, the source and amount of Government-furnished property, and the nature of the work to the correct property-management terms. The practical significance is substantial because the chosen clause determines the contractor’s property responsibilities, accountability, use rights, charges, and risk allocation for Government-owned or Government-furnished property.