Monitoring the Contractor's Use of Government Property

How does the COR monitor the contractor's use of government property?

The COR can monitor the contractor's use of government property by:

Conducting physical inventories of GFP and how it is being used at the contractor's work site


Reviewing the contractor's preventive maintenance program.

In what cases might the CO ask the COR to investigate and resolve government property problems?

To ensure that the use of government property complies with the government property clause in the contract, and is in accordance with sound industrial practices, the COR may be required by the CO to investigate and resolve the following problems:

Reported loss, damage, or destruction (LDD) of government property. Generally, contractors are not held liable for loss, theft, damage or destruction of government property under the following types of contracts:

Cost reimbursement contracts

Time and material contracts

Labor hour contracts

Fixed price contracts awarded on the basis of submission of certified cost or pricing data.

The CO may revoke the government's assumption of risk when the property administrator determines that the contractor's property management practices are inadequate and/or present an undue risk to the government.

A prime contractor that provides government property to a subcontractor may not be relieved of any responsibility to the government that the prime contractor has under the terms of the prime contract.

The COR may be asked to evaluate and document evidence that indicates that government property has been lost, damaged, or destroyed. The

COR should:

Identify the extent to which the contractor is liable for LDD

Prepare written conclusions on the extent and value of the LDD, including:

- Proposals from the contractor to repair, replace, or otherwise mitigate damage

- Government estimates or audit reports of the damages or loss

- The government's position on the amount of damages and remedy

- An opportunity for the contractor to present additional facts and the contractor's position on the LDD.

Issue the contractor a written demand for payment or make any equitable adjustment for the repair of property when the government has assumed the risk.

Reported unauthorized use of government property. The COR may be required to investigate and resolve reports of unauthorized use of government property. The COR should:

Determine whether there has been unauthorized use

Evaluate and document any evidence of unauthorized use that is discovered

Provide the contractor with an opportunity to present additional facts and its position

Assess the contractor for the contract clause amount, if it is determined that unauthorized use has taken place.

When may government property be commingled with the contractor's property?

Normally, government property is to be kept physically separate from contractor-owned property. However, when advantageous to the government and agreeable to the contractor's management, government property may be commingled with the contractor's property. The COR should check with the CO, agency policy, or the property administrator to determine when commingling is permitted.

Monitoring the Disposition of Government Property

When government property is no longer needed, what should the

COR do?

The COR should refer to FAR Subpart 45.6 and, if assigned the responsibility, assist the plant clearance officer in ensuring that the contractor:

Discloses excess contractor inventory

Prepares inventory disposal schedules

Corrects inventory disposal schedules that are not accurate or complete

Documents the inventory disposal schedule.

When the contract is completed, the government may:

Request that the contractor deliver government property back to the government

Request that the contractor deliver government property to another government contract site

Dispose of the property.

When disposing of property, the government may choose one of the following options (listed in preferred priority order):

Allow the contractor to purchase or retain the government property at cost

Return the property to the suppliers

Use the property within the government

Donate the property to eligible entities (e.g., schools, charitable organizations)

Sell the property

Donate the property to other public agencies (e.g., state and local governments)

Abandon the property.

Once the method of disposition is determined, the CO or the plant clearance officer may request the COR's assistance in:

Preparing funding requirements for disposition, if applicable

Providing information to support the disposition modification; if the government decides to allow the contractor to retain GFP at cost or to purchase GFP, the government will then modify the contract price to reflect the contractor's purchase of inventory

Resolving reported property disposal problems.


What should the COR do if he or she suspects that fraud or other civil or criminal offenses have been committed during the performance of the contract?

The COR's monitoring duties place him or her in a position to potentially observe misconduct, including civil or criminal offenses and fraud.

If the COR suspects that the contractor has committed such an offense, the COR must:

1. Assist the CO in briefing the contractor on the COR's suspicions

2. Identify and report any suspicions to responsible officials

3. Provide additional information to the CO and others, as requested.

To whom should the COR report any suspicions of fraud or other civil or criminal offenses?

The COR should report suspicions of fraud or other illegal activity to "responsible officials." The CO is a responsible official; others might include legal counsel, requiring activity officials, the Inspector General (IG), and the Department of Labor (for labor law violations). The COR must be alert; he or she must report any suspicions (conclusive evidence of illegal activity is not needed), and he or she must cooperate with all investigative officials who might be involved in the case. It is essential that the COR keep the CO informed of any suspicious contractor behavior.

Should the COR investigate his or her suspicions of fraud or other illegal activity?

The first and foremost duty of the COR is to report any suspicionsthe COR should not try to become a private investigator! Investigation is not the COR's responsibility and is certainly not his or her area of expertise.

How are postaward orientation conferences used to brief the contractor on, and prevent, fraud or other civil or criminal offenses?

Normally, a briefing on fraud will be included in the postaward orientation conference (see Chapter 5). These briefings are intended to reduce the chances of violation of laws out of ignorance. Remember that government personnel may also be involved in fraudulent or criminal conduct.

What constitutes a violation of a federal statute during contract performance?

Violations of federal statutes by both contractor and government personnel during contract performance can include:

False statements

False claims

Conspiracy to defraud


Illegal gratuities

Conflicts of interest under criminal statute (18 U.S.C 208), which prohibits a government employee's participation, in an official capacity, in any matter in which the employee has a financial interest.

What are some typical indicators of fraud?

Typical indicators of fraud (i.e., grounds for reasonable suspicion) include:

False invoices

Cost mischarging on cost reimbursement contracts

Falsification of records and test results

Product substitution

False or misleading technical progress reports.

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