FAR 45.402—Title to contractor-acquired property.
Plain-English Summary
FAR 45.402 explains when title to contractor-acquired property passes to the Government and when it stays with the contractor. It covers two major contract environments: fixed-price contracts, and cost-reimbursement/time-and-materials contracts. The section also ties title passage to financing provisions, other contract-specific title clauses, deliverable end items, and the special treatment of items the contractor will keep using after Government inspection and acceptance. In practice, this rule determines who owns property, who bears risk and accountability, how property must be recorded in the contract, and whether an item must be treated as Government-furnished property (GFP) through a contract modification. It is a core property-management rule because title affects control, disposition, reimbursement, and the contractor’s ability to use, retain, or dispose of the property after performance.
Key Rules
Title follows contract terms
Title vests in the Government when the contract’s financing provisions or other specific title-passage requirements say it should. The contract language controls, so agencies and contractors must look first to the contract rather than assuming a default rule.
Fixed-price default rule
For fixed-price contracts, if there are no financing provisions or other title-passage requirements, the contractor keeps title to property it acquires for use on the contract. The main exception is property identified as a deliverable end item, which is not treated as contractor-owned working property.
Retained deliverables become GFP
If a deliverable item will be kept by the contractor for use after Government inspection and acceptance, it must be made accountable to the contract by modification and listed as Government-furnished property. This ensures the item is tracked under the contract property system even though the contractor continues to use it.
Cost-type and T&M title rule
Under cost-reimbursement and time-and-materials contracts, the Government acquires title to all property for which the contractor is entitled to reimbursement. Title passes because the Government is paying for the property through allowable contract costs, subject to the property clause at 52.245-1.
Reimbursement drives ownership
For cost-type and T&M contracts, the key question is whether the contractor is entitled to reimbursement for the property. If the cost is reimbursable under the contract, title generally vests in the Government under the clause referenced in the regulation.
Responsibilities
Contracting Officer
Include clear financing provisions or other title-passage terms when the Government intends title to pass at a specific time. Ensure deliverable items the contractor will retain after acceptance are made accountable to the contract by modification and listed as GFP, and apply the correct title rule based on contract type.
Contractor
Determine whether property acquired or fabricated for the contract is Government-owned or contractor-owned based on the contract terms and type. Properly account for items that become GFP, and do not assume ownership of reimbursable property under cost-type or T&M contracts merely because the contractor purchased it.
Agency/Property Administrator
Track and administer property in accordance with the contract’s title provisions and the property clause. Verify that items subject to Government title are recorded, controlled, and reported correctly, including items retained by the contractor for post-acceptance use.
Practical Implications
Title determines who owns the property, who controls it, and how it must be managed in the property system; getting this wrong can create audit, accountability, and disposition problems.
On fixed-price contracts, contractors often retain title to working property unless the contract says otherwise, so parties should not automatically treat all purchased items as Government property.
On cost-reimbursement and T&M contracts, reimbursable property usually becomes Government-owned, so contractors should expect tighter property accountability and documentation.
A common pitfall is failing to modify the contract when a deliverable item will remain with the contractor after acceptance; without that step, the item may not be properly accountable as GFP.
Another frequent issue is assuming title passes only when an item is physically delivered; under this section, title can pass earlier or differently depending on financing provisions, reimbursement entitlement, and contract language.
Official Regulatory Text
(a) Title vests in the Government for all property acquired or fabricated by the contractor in accordance with the financing provisions or other specific requirements for passage of title in the contract. Under fixed-price type contracts, in the absence of financing provisions or other specific requirements for passage of title in the contract, the contractor retains title to all property acquired by the contractor for use on the contract, except for property identified as a deliverable end item. If a deliverable item is to be retained by the contractor for use after inspection and acceptance by the Government, it shall be made accountable to the contract through a contract modification listing the item as Government-furnished property. (b) Under cost type and time-and-material contracts, the Government acquires title to all property to which the contractor is entitled to reimbursement, in accordance with paragraph (e)(3) of clause 52.245-1 .