FAR 45.101—Definitions.
Plain-English Summary
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.
Key Rules
Government property is broadly defined
Government property includes all property owned or leased by the Government, including both Government-furnished property and contractor-acquired property. The definition expressly includes material, equipment, special tooling, special test equipment, and real property, but excludes intellectual property and software.
Title and possession matter
Several definitions turn on whether the Government has title, whether the contractor possesses the item, and whether the item exceeds contract needs. Contractor inventory includes Government-titled property in the contractor’s possession that is excess to contract needs, property the Government may take over under changes or termination, and excess Government-furnished property.
Equipment is distinct from material
Equipment is a tangible, durable, nonexpendable item that is functionally complete for its intended purpose and not ordinarily consumed or incorporated into another item. Material, by contrast, is consumed, expended, or loses its identity through incorporation into an end item.
Property categories drive accountability
The definitions distinguish Government-furnished property, contractor-acquired property, material, equipment, special tooling, special test equipment, and real property so the correct management, recordkeeping, and disposition rules can be applied. Misclassification can lead to incorrect inventory treatment, reporting, or disposal actions.
Loss has a specific meaning
Loss of Government property means unintended, unforeseen, or accidental loss, damage, or destruction that reduces the Government’s expected economic benefit. It includes missing items, theft, damage, and destruction, but excludes purposeful destructive testing, obsolescence, normal wear and tear, and manufacturing defects.
Sensitive and precious items need special control
Sensitive property includes items that pose public safety or security risks if lost or stolen, such as weapons, explosives, controlled substances, radioactive materials, hazardous materials, and precious metals. These items generally require heightened physical security, control, and accountability.
Administrative roles are defined
The Property Administrator is the authorized representative of the contracting officer responsible for administering Government property requirements in the contractor’s possession, and contractor’s managerial personnel are the officials with supervisory authority over the contractor’s business or major operations. These definitions help identify who has authority and responsibility for property management and compliance.
Special terms affect disposition and reuse
Cannibalize, demilitarization, nonseverable property, production scrap, discrepancies incident to shipment, and unit acquisition cost are defined to support decisions about reuse, destruction, shipment reconciliation, scrap handling, and valuation. These terms are important when determining whether property can be reused, must be rendered unusable, or must be recorded at a particular value.
Responsibilities
Contracting Officer
Use these definitions when drafting and administering property-related contract clauses, determining whether property is Government property or contractor inventory, and deciding when to assign property administration responsibilities. The contracting officer also relies on these definitions to resolve ownership, excess property, loss, and disposition issues.
Property Administrator
Apply the definitions to oversee contractor property management systems, evaluate property records, and administer Government property requirements in the contractor’s possession. The Property Administrator must distinguish among property types, assess losses and discrepancies, and ensure sensitive or special property is properly controlled.
Contractor
Identify, classify, record, safeguard, and report property using the definitions in this section. The contractor must maintain property records, distinguish Government-furnished property from contractor-acquired property and material, protect sensitive property, and recognize when items become excess, lost, scrap, or subject to demilitarization or cannibalization controls.
Subcontractor
Follow the same property distinctions and accountability expectations when holding Government-titled property or property subject to flowdown requirements. Subcontractors must support accurate shipment, inventory, and loss information for property under their control.
Agency
Establish procedures for appointing Property Administrators and for managing Government property consistent with these definitions. Agencies also determine internal controls for sensitive property, precious metals, and other special categories.
Practical Implications
Correct classification is critical: whether an item is equipment, material, Government-furnished property, contractor-acquired property, or contractor inventory changes how it is tracked, valued, and disposed of.
The definition of loss is narrower than ordinary business use of the word; normal wear, obsolescence, and planned destructive testing are not losses, so contractors should not report them as such.
Sensitive property and precious metals require stronger controls, so contractors should expect tighter storage, access, inventory, and reporting requirements for those items.
Shipment discrepancies and excess property issues often arise from poor records or weak receiving controls, so contractors should reconcile shipping documents, receipts, and property records promptly.
Misunderstanding title can create compliance problems, especially when contractor-acquired property becomes Government property or when Government-furnished property exceeds contract needs and becomes contractor inventory.
Official Regulatory Text
As used in this part- Cannibalize means to remove parts from Government property for use or for installation on other Government property. Contractor-acquired property means property acquired, fabricated, or otherwise provided by the contractor for performing a contract and to which the Government has title. Contractor inventory means- (1) Any property acquired by and in the possession of a contractor or subcontractor under a contract for which title is vested in the Government and which exceeds the amounts needed to complete full performance under the entire contract; (2) Any property that the Government is obligated or has the option to take over under any type of contract, e.g. , as a result either of any changes in the specifications or plans thereunder or of the termination of the contract (or subcontract thereunder), before completion of the work, for the convenience or at the option of the Government; and (3) Government-furnished property that exceeds the amounts needed to complete full performance under the entire contract. Contractor’s managerial personnel means the contractor’s directors, officers, managers, superintendents, or equivalent representatives who have supervision or direction of- (1) All or substantially all of the contractor’s business; (2) All or substantially all of the contractor’s operation at any one plant or separate location; or (3) A separate and complete major industrial operation. Demilitarization means rendering a product unusable for, and not restorable to, the purpose for which it was designed or is customarily used. Discrepancies incident to shipment means any differences ( e.g. , count or condition) between the items documented to have been shipped and items actually received. Equipment means a tangible item 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. Equipment does not include material, real property, special test equipment or special tooling. Government-furnished property means property in the possession of, or directly acquired by, the Government and subsequently furnished to the contractor for performance of a contract. Government-furnished property includes, but is not limited to, spares and property furnished for repair, maintenance, overhaul, or modification. Government-furnished property also includes contractor-acquired property if the contractor-acquired property is a deliverable under a cost contract when accepted by the Government for continued use under the contract. Government property means all property owned or leased by the Government. Government property includes both Government-furnished property and contractor-acquired property. Government property includes material, equipment, special tooling, special test equipment, and real property. Government property does not include intellectual property and software. Loss of Government property means unintended, unforeseen or accidental loss, damage, or destruction of Government property that reduces the Government’s expected economic benefits of the property. Loss of Government property does not include occurrences such as purposeful destructive testing, obsolescence, normal wear and tear, or manufacturing defects. Loss of Government property includes, but is not limited to- (1) Items that cannot be found after a reasonable search; (2) Theft; (3) Damage resulting in unexpected harm to property requiring repair to restore the item to usable condition; or (4) Destruction resulting from incidents that render the item useless for its intended purpose or beyond economical repair. Material means property that may be consumed or expended during the performance of a contract, component parts of a higher assembly, or items that lose their individual identity through incorporation into an end-item. Material does not include equipment, special tooling, special test equipment or real property. Nonseverable means property that cannot be removed after construction or installation without substantial loss of value or damage to the installed property or to the premises where installed. Precious metals means silver, gold, platinum, palladium, iridium, osmium, rhodium, and ruthenium. Production scrap means unusable material resulting from production, engineering, operations and maintenance, repair, and research and development contract activities. Production scrap may have value when re-melted or reprocessed, e.g. , textile and metal clippings, borings, and faulty castings and forgings. Property means all tangible property, both real and personal. Property Administrator means an authorized representative of the contracting officer appointed in accordance with agency procedures, responsible for administering the contract requirements and obligations relating to Government property in the possession of a contractor. Property records means the records created and maintained by the contractor in support of its stewardship responsibilities for the management of Government property. Provide means to furnish, as in Government-furnished property, or to acquire, as in contractor-acquired property. Real property See Federal Management Regulation 102-71.20 (41 CFR 102-71.20). Sensitive property means property potentially dangerous to the public safety or security if stolen, lost, or misplaced, or that shall be subject to exceptional physical security, protection, control, and accountability. Examples include weapons, ammunition, explosives, controlled substances, radioactive materials, hazardous materials or wastes, or precious metals. Unit acquisition cost means- (1) For Government-furnished property, the dollar value assigned by the Government and identified in the contract; and (2) For contractor-acquired property, the cost derived from the contractor’s records that reflect consistently applied generally accepted accounting principles.