The Government frequently provides property or permits a contractor to acquire property for use on its contracts. Government property is all property owned or leased by the Government and includes both Government Furnished and Contractor Acquired Property. Sometimes, these terms are used interchangeably, albeit incorrectly.
Government Furnished Property (GFP) is defined as property in the possession of or directly acquired by the Government and subsequently furnished to the Contractor for performance of a contract. Contractor Acquired Property (CAP), on the other hand, is property acquired, fabricated, or otherwise provided by the contractor for performing a contract and to which the Government has title. Whereas GFP was provided to the contractor, CAP has never been “held” by the Government – meaning the Government never physically or legally owned the property and then transferred it to the contractor. CAP may also be consumed as part of a deliverable. If CAP is subsequently provided to a successor contract after inspection and acceptance, it becomes GFP. Both GFP and CAP are managed by the contractor and require a property system capable of managing the property.
Titling of the property varies between GFP and CAP. Title to GFP always vests to the Government. The Government retains title to all GFP until properly disposed of, as authorized by law or regulation. Title to CAP is much more complicated and is driven by factors such as contract type and financing provisions. In order to acquire CAP, there has to be a valid reason for the acquisition, it must be a direct charge to the contract and the contractor must provide supporting documentation.
All contracts are some form of either fixed price or cost reimbursement. Under fixed price contracts, the contractor retains title to all property acquired by the contractor for use on the contract, except for property specifically identified as a deliverable end item. In that scenario, title for CAP would then convey on the delivered end item. Under cost reimbursement contracts, title is vested upon issuance of the material, commencement of processing the material or its use or reimbursement of its cost – whichever comes first.
The leasing of Government property is different than the acquisition of property. If a contractor leases property, it does not become Government property as the contractor is bound by the terms and conditions of the lease and the landlord retains title. If the Government leases property and then furnishes it to the contractor, then the contractor must manage it as Government Property. The contractor is responsible to the Government and the Government is, in turn, responsible to the landlord.
Government Property can be very confusing and there are significant ramifications for not complying with the regulations – and the ramifications don’t necessarily happen immediately. To learn more about Government property, reviewing the Guidebook for Contract Property Administration (https://www.acq.osd.mil/dpap/ccap/cc/jcchb/Files/Topical/Property/guides/Guidebook for Contract Property Administration_April 2012.pdf) is a good place to start as well as reviewing FAR Part 45, FAR Clauses 52.245-1 and 52.245-9, and the Agency Supplements.