The use of Government Furnished Property (GFP) can have its benefits, but the clause “52.245-1 Government Property” is a long and complex read. The decision to use government property usually is the government’s, not the contractor’s. There are various terms used which can be confusing at times. Government property usually is referring to equipment, tooling or other tangible property used in the performance of a contract. When the contract is finished, that property is returned to the government. Government material usually is talking about property that is consumed during the contract and can’t be returned or is returned as part of an end product. A good example would be a special material that is incorporated into a delivered item.
The government will offer property as a means to reduce cost of contract performance. If a tool exists, why pay for the purchase of a new tool? The same applies to material. The government may have already purchased materials or can leverage other programs to reduce cost. This material will be offered to companies competing for contracts.
If a company has the use of government property, the clause requires that the company have a system that can track and manage the property in its possession. Losing government property can get you in trouble big time. Therefore, having a system that can track material is paramount, especially if you have multiple contracts using different types of or the same property.
Once you receive the material it is important to assess the materials condition and make sure it is working order. Any problems should be reported to the government for two reasons. First any property that can’t be use will affect your company’s ability to perform on that contract. The government has responsibility to provide useable material. Second if damaged and not reported, then your company could be held liable for the cost to repair. All government property is to be returned in the same condition it was received at the start of the contract.
To help understand I will go through some examples. First your company has an employee that has a brilliant idea and develops the flux capacitor (FC). After going through the arduous process of getting the government to buy your FC, a contract is let for installation of the FC into a black box for use on a government airplane. The government will send you the black boxes for the FC to be installed into and a test device to make sure it will work. Both of those become government property under your company’s control. The black boxes will be modified so they will be the deliverable under the contract. The test device will need to be returned upon completion of the contract in working order.
Another example is when the government hire personnel to support them and the people need computers to complete their work. The government may require you to use only computers that have the security software to interface with government networks. The government will provide the “seat” and your company will have to keep track of the hardware associated with those seats. Support for those seats should come from the government. Upon completion, the seats are returned to the government.
If your company has to provide the computers, it is not GFP. However, if your company chooses to direct charge the purchase of those computers to the contract, the computers are government property at the end of the contract and are to be given to the government. If your company chooses not to direct charge but include that cost in overhead, then the computers are your company’s to keep.
The use of GFP has benefits to both parties. But as with all government contracting it requires effort to manage that property.