DCMA GUIDEBOOK FOR GOVERNMENT CONTRACT PROPERTY ADMINISTRATION

DCMA GUIDEBOOK

FOR GOVERNMENT

CONTRACT PROPERTY

ADMINISTRATION

Rev2 August 2022

An overview of DCMA’s contract property

administration requirements and analysis

techniques

TABLE OF CONTENTS

PREFACE ......................................................................................................................................... 3

Purpose ......................................................................................................................................... 3

Summary of Changes. ............................................................................................................. .....3

Overview ...................................................................................................................................... 3

CHAPTER 1: PROCESS ............................................................................................................... 6

1.0. Review New Contracts ........................................................................................................ 6

2.0. Accept Assignment of Contracts ......................................................................................... 8

3.0. Issue Contract Deficiency Report ...................................................................................... 10

4.0. Support Property Administration Delegations .................................................................. 10

5.0. Contract Property Administration Files ............................................................................. 13

6.0. Accept Assignment of New Contractors ........................................................................... 14

7.0. Schedule Property Management System Analysis ........................................................... 16

8.0. Plan Property Management System Analysis .................................................................... 19

9.0. Conduct Property Management System Analysis ............................................................ 23

10.0. Prepare Reports ................................................................................................................ 31

11.0. Update Contractor Property Administration System ...................................................... 33

12.0. Determine and Assign Contractor Future Performance Risk .......................................... 33

13.0. Issue Corrective Action Requests/Monitor Corrective Action ....................................... 36

14.0. Ensure Contractor Reporting of Property Loss .............................................................. 40

15.0. Evaluate Contractor Responsibility and Liability ........................................................... 41

16.0. Perform Property Administration Closeout .................................................................... 46

17.0. Special Considerations .................................................................................................... 47

CHAPTER 2: PROPERTY MANAGEMENT SYSTEM ANALYSIS (PMSA)

ELEMENTS JOB AIDS ................................................................................................................ 52

PMSA Element 1 - Written Procedures ..................................................................................... 52

PMSA Element 2 - Contractor Self Assessment ....................................................................... 56

PMSA Element 3 - Acquisition ................................................................................................. 59

PMSA Element 4 - Receiving .................................................................................................... 63

PMSA Element 5 - Discrepancies Incident to Shipment .......................................................... 67

PMSA Element 6 - Identification .............................................................................................. 69

PMSA Element 7 - Records ....................................................................................................... 72

PMSA Element 8 - Receipt and Issue System ........................................................................... 77

PMSA Element 9 - Physical Inventory ...................................................................................... 79

PMSA Element 10 - Subcontractor Awards and Flow Down ................................................... 83

PMSA Element 11 - Subcontractor Reviews ............................................................................ 86

PMSA Element 12 - Reports ..................................................................................................... 88

PMSA Element 13 - Relief of Stewardship ............................................................................... 91

PMSA Element 14 - Utilization ................................................................................................. 94

PMSA Element 15 - Declaration of Excess............................................................................... 96

PMSA Element 16 - Consumption ............................................................................................ 99

PMSA Element 17 - Movement .............................................................................................. 102

TABLE OF CONTENTS

PMSA Element 18 - Storage .................................................................................................... 104

PMSA Element 19 - Storage Commingling ............................................................................ 106

PMSA Element 20 - Maintenance ........................................................................................... 108

PMSA Element 21 - Disposal .................................................................................................. 111

PMSA Element 22 - Property Closeout ................................................................................... 114

GLOSSARY-ABBREVIATIONS .............................................................................................. G.1

Office of Primary Responsibility .............................. DCMA Government Contract Property Center

Original Publication ....................................................................... March 2020, Rev 1 October 2020

Releasability ................................................................................................ Cleared for public release

Approved by ............................. Robert E. Brown, Director, Government Contract Property Center

____________________________

Robert E. Brown

Director, Government Contract Property

Center

BROWN.ROBERT.EDWARD.1097471858

Digitally signed by BROWN.ROBERT.EDWARD.1097471858

Date: 2022.08.09 12:51:49 -04'00'

CHAPTER 1 – PROCESS

PREFACE

Purpose. This Guidebook provides a process summary to DCMA personnel for consistent

oversight of contractor property management systems, and is intended to promote consistency in

the methodology and analysis techniques employed by DCMA.

This Guidebook also provides detailed information to facilitate understanding and execution of a

property management system analysis (PMSA).

Unless otherwise noted, the responsible party for the processes identified herein is the cognizant

Property Administrator (PA) or Industrial Property Management Specialist (IPMS). Use of the

job position title “PA” is inclusive of the IPMS unless explicitly stated otherwise. The title

Administrative Contracting Officer (ACO) is inclusive of Divisional Administrative Contracting

Officer (DACO) and Corporate Administrative Contracting Officer (CACO).

Summary of Changes. Revision 2 to this Guidebook includes various administrative edits, and

provides updated direction and clarification on the following topics:

• Provides clarification that the presence of Government property qualifies as a high risk

condition for workload acceptance. As such, DCMA will accept contracts that are

considered mission work, regardless of the dollar value of the contract, if there is a

requirement for Government property.

• Adds references to templates created since the last revision of this Guidebook.

• Provides updated guidance regarding the level of detail expected in PMSA reports to the

ACO. These changes have eliminated the need for the Government Contract Property

Group PMSA Panel process.

• Added processes designed to provide a clean audit trail for those transactions that are to

be tested under upcoming Financial Improvement and Audit Remediation (FIAR)

testing.

• Removed references to the Property Loss eTool, which has been decommissioned.

• Provides an updated interpretation of the loss reporting requirement in cases where it is

unknown whether the contractor will be reimbursed for a Government property loss.

• Removed some background information in order to streamline Chapter 2.

• Provides additional clarification on the treatment of contract property that a contractor

sends to another corporate division.

Overview. Within DoD, when a contract contains DFARS 252.245-7003, “Contractor Property

Management System Administration,” DCMA has the authority to review the contractor’s

property system applying the criteria of DFARS 252.245-7003(c). DFARS 252.245-7003(c)

states, “The Contractor’s property management system shall be in accordance with paragraph (f)

of the contract clause at Federal Acquisition Regulation 52.245-1.” FAR 52.245-1(f) thus

imposes the criteria for a contractor property management system that provides for effective and

efficient management and control of Government property. The ACO, DACO, or CACO will

determine whether to approve or disapprove the contractor’s property management system based

on the results of a standard or limited PMSA conducted by the PA. (For purposes of this

Guidebook, “ACO” refers to the DCMA ACO, DACO, or CACO.)

CHAPTER 1 – PROCESS

System Access: The FAR 52.245-1 contract clause provides the Government the right to

access to the property and records needed to perform a PMSA. With respect to access to perform

a PMSA, FAR 52.245-1(g) “Systems analysis,” states:

(1) The Government shall have access to the Contractor’s premises and all Government

property, at reasonable times, for the purposes of reviewing, inspecting and evaluating

the Contractor’s property management plan(s), systems, procedures, records, and

supporting documentation that pertains to Government property. This access includes all

site locations and, with the Contractor’s consent, all subcontractor premises. (2) Records

of Government property shall be readily available to authorized Government personnel

and shall be appropriately safeguarded.

DCMA examines subsets of some of the outcomes listed within FAR 52.245-1(f) because there

are imbedded requirements that require separate populations of data and transactions for

effective and comprehensive testing. This Guidebook refers to each subset as a PMSA element.

There are 22 elements, and they are listed below. Additional guidance for each is located in

Chapter 2 of this Guidebook.

REQUIREMENT/OUTCOME

PROPERTY CLAUSE

REFERENCE

ADDITIONAL CLAUSE

REFERENCE

WRITTEN PROCEDURES

FAR 52.245-1(f)(1)

FAR 52.245-1(b)(1)

CONTRACTOR SELF

ASSESSMENT

FAR 52.245-1(b)(4)*

ACQUISITION

FAR 52.245-1(f)(1)(i)

FAR 52.216-7

RECEIVING

FAR 52.245-1(f)(1)(ii)

-DISCREPANCIES

INCIDENT TO SHIPMENT

FAR 52.245-1(f)(1)(ii)

-IDENTIFICATION

FAR 52.245-1(f)(1)(ii)

RECORDS

FAR 52.245-1(f)(1)(iii)(A)

DFARS 252.211-7007

RECEIPT AND ISSUE

SYSTEM

FAR 52.245-1(f)(1)(iii)(B)

PHYSICAL INVENTORY

FAR 52.245-1(f)(1)(iv)

SUBCONTRACTOR

AWARDS AND FLOW DOWN

FAR 52.245-1(f)(1)(v)(A)

SUBCONTRACTOR

REVIEWS

FAR 52.245-1(f)(1)(v)(B)

REPORTS

FAR 52.245-1(f)(1)(vi)

DFARS 252.211-7007

RELIEF OF STEWARDSHIP

FAR 52.245-1(f)(1)(vii)(B)

DFARS 252.245-7002

UTILIZATION

FAR 52.245-1(f)(1)(viii)(A)

-DECLARATION OF

EXCESS

FAR 52.245-1(f)(1)(viii)(A)

-CONSUMPTION

FAR 52.245-1(f)(1)(viii)(A)

-MOVEMENT

FAR 52.245-1(f)(1)(viii)(A)

CHAPTER 1 – PROCESS

* Although this is not a criterion under DFARS 252.245-7003(c), during a PMSA the PA reviews

whether the contractor complies with this contractual requirement.

-STORAGE

FAR 52.245-1(f)(1)(viii)(A)

-STORAGE COMMINGLING

FAR 52.245-1(f)(1)(viii)(B)

MAINTENANCE

FAR 52.245-1(f)(1)(ix)

PROPERTY CLOSEOUT

FAR 52.245-1(f)(1)(x)

-DISPOSAL

FAR 52.245-1(f)(1)(x)

DFARS 252.245-7004

CHAPTER 1 – PROCESS

1.0. REVIEW NEW CONTRACTS.

1.1. The PA will review each new contract consistent with the direction located in

DCMA-MAN 2501-01, Contract Receipt and Review, within 30 calendar days of receipt to

determine if the contract contains a contract property requirement as defined in DoDI 4161.02,

“Accountability and Management of Government Contract Property.” If Government property is

anticipated, PAs must accept assignment of property administration in accordance with

Paragraph 2.1 of this Guidebook.

1.2. Prior to acceptance of a contract for administration, the PA must ensure that the

contractor will need Government property to perform the contract. In many cases, this will be

clear (e.g., there is a GFP attachment, or the contract cannot be performed without the

acquisition of Government property), but in other situations the need for property oversight is

less clear.

1.2.1. Example. A FAR 16.601 time-and-materials contract for engineering or

support services is required to have the property clauses incorporated, based solely on the pricing

arrangement of the contract, but in many cases the contractor will only be billing for labor hours

and potentially travel. In cases where the clauses are required based on contract pricing

arrangement, but no property is anticipated, the PA must not accept the contract for

administration.

1.2.2. If there is any question of whether property is required for contract

performance, the PA is expected to contact the Procurement Contracting Officer (PCO) at the

buying office to determine whether property is anticipated. If the PCO is nonresponsive, the PA

should enlist the assistance of the cognizant ACO.

1.3. The PA must ensure contracts contain appropriate terms and conditions, including FAR

and DFARS clauses relevant to the Government property expected to be furnished or acquired.

Relevant contract clauses follow:

• Mandatory clauses

o FAR 52.245-1, “Government Property” or its alternates. Note: only one version

of the clause may be included in a contract

o FAR 52.245-9, “Use and Charges”

o DFARS 252.211-7007, “Reporting of Government Furnished Property”

o DFARS 252.245-7001, “Tagging, Labeling and Marking of Government

Furnished Property”

o DFARS 252.245-7002, “Reporting Loss of Government Property”

o DFARS 252.245-7003, “Contractor Property Management System

Administration”

o DFARS 252.245-7004, “Reporting, Reutilization, and Disposal”

CHAPTER 1 – PROCESS

• Other clauses that may be applicable:

o FAR 52.251-1, “Government Supply Sources”

o FAR 52.245-2, “Government Property Installation Operation Services”

o DFARS 252.223-7002, “Safety Precautions for Ammunition and Explosives”

o DFARS 252.223-7007, “Safeguarding Sensitive Conventional Arms,

Ammunition, and Explosives”

o DFARS 252.228-7001, “Ground and Flight Risk”

o DFARS 252.242-7005, “Contractor Business Systems”

1.4. In reviewing new contracts, the PA must attend to:

1.4.1. Potentially inappropriate provision of Government-furnished property (GFP) or

contractor-acquired property (CAP) such as common office items or any Government

property listed as an exception at FAR 45.000(b), “Scope of part.”

1.4.2. Contracts where a deliverable end-item will be accepted at origin, and delivery to

a separate destination is not required, (Free on Board (F.o.b.) Origin).

1.4.2.1. If a deliverable item is identified in the contract as FOB origin inspection

and delivery, sometimes referred to as shipped-in-place, the deliverable item could become

GFP, and be subject to FAR 52.245-1. If the PCO intends for the items to be GFP, then

52.245-1 and any associated clauses must be included or added to the contract, and the

property would need to be added to a contract.

1.4.2.2. The PA will determine whether the Government has imposed a property

storage requirement on the contractor for items that have not been designated as GFP. The

PCO needs to ensure that the contract includes the appropriate terms and conditions relevant

to the type, scope, and duration of storage. The contract must include necessary funding

(requiring the contractor to store the property at no cost is not appropriate, even if the

contractor agrees to the arrangement), a clear statement identifying that the items are not

GFP, and an appropriate liability provision.

1.4.2.3. The PA is expected to engage with the PCO to ensure that any items of

Government property that are FOB origin inspection, shipped-in-place are treated

appropriately by issuing a contract deficiency report (CDR) if needed. A CDR would be

required if FAR 52.245-1 and the associated clauses need to be added to the contract, or if

the contract imposes an unfunded storage requirement.

1.4.3. Period of performance dates, to plan for expeditious property disposition and

contract closeout.

1.4.4. Contracts with a place of performance that is overseas or in a combat theater for

specialized contractual and technical terms and conditions, country-to-country agreements,

host nation requirements, memorandums of agreement, and treaties. Refer to DFARS

Subpart 225.3, “Contracts Performed Outside the United States.”

CHAPTER 1 – PROCESS

1.4.5. GFP attachments. Refer to DFARS PGI 245.103-72, “Government furnished

property attachments to solicitations and awards.” Nonstandard attachments may require that

a CDR be issued. PAs are required to review all GFP attachments.

1.4.6. Nonstandard Government property contract clauses. Refer to 41 U.S.C. 1304(a),

“Repetitive Nonstandard Contracts Clauses Discouraged.”

1.4.7. Contracts with place of performance on a military base or non-core work which is

typically not accepted for property administration. Refer to DFARS 242.202, “Assignment

of contract administration” and DCMA workload acceptance procedures.

1.4.8. An indication that sensitive property will be acquired or furnished.

1.4.9. Inclusion of DFARS clause 252.242-7004, “Material Management and

Accounting System” in the contract.

1.4.10. Section H special contract provisions related to property.

1.4.11. Disposition instructions included in the contract.

1.4.12. Special instructions in regards to Government property furnished for repair.

1.4.13. Property incidental to place of performance (e.g., desks, chairs, computers,

printers, etc.).

1.5. PAs will review and accept support delegations from DoD and Federal civilian agencies

(e.g., National Aeronautical and Space Administration (NASA)) in accordance with DCMA

workload acceptance procedures and signed agreements.

2.0. ACCEPT ASSIGNMENT OF CONTRACTS.

2.1. PAs must accept assignment of property administration for the following contract

types, instruments, and conditions, with the potential exception of contracts that are non-mission

work for DCMA:

• Fixed-price contracts where property will be furnished to the contractor.

• Fixed-price contracts with cost-reimbursable contract line items.

• Contracts and purchase orders with property furnished for repair, maintenance,

overhaul, or modification. The exception based on unit acquisition cost for purchase

orders for repair detailed at FAR 45.107(d), is superseded by DFARS 245.107(1)(i)

for DoD contracts.

• Cost-reimbursement and time-and-materials contracts (except when it is clear no

property will be furnished or acquired). PAs must verify whether CAP is anticipated

for contracts involving only engineering services, research, or study efforts. Engage

with the PCO to gain insight if the contract and statement of work are unclear

whether there is a need to acquire property to perform the contract.

CHAPTER 1 – PROCESS

• Top-level base indefinite-delivery indefinite-quantity contracts (IDIQs) where

property will be furnished or acquired.

• Delivery and task orders awarded under IDIQ contracts where property will be

furnished or acquired, if the order appears in the PA’s workload for contract receipt

and review.

• Delivery orders awarded under Basic Agreements and Basic Ordering Agreements

(FAR Subpart 16.7) or Blanket Purchase Agreements (FAR Subpart 13.3) where

property will be furnished or acquired. The Basic Agreements or Basic Ordering

Agreements are not standalone contracts and Government property may only be

issued to the order award level.

• Letter contracts (FAR 16.603-2) are typically (though not always) awarded as cost-

reimbursement contracts, with specific terms and conditions, including pricing

arrangements, definitized at a later date.

• Nonprocurement instruments (grants, cooperative agreements, and other transactions)

where property is involved, when DCMA is delegated administration.

2.2. For DCMA mission work, the presence of Government property on a contract meets

the risk threshold for the high value/high risk workload acceptance gate. PAs must not reject

contracts with Government property due to dollar thresholds. See DFARS 242.202,

“Assignment of contract administration,” and the Resource Page for DCMA MAN 4502-02,

“Workload Acceptance” for more information regarding mission vs. non-mission work for

DCMA.

2.3. If a PA believes that a contract is not mission work as described in DFARS 242.202

and the Resource Page for DCMA MAN 4502-02, “Workload Acceptance,” the PA will engage

with their CMO’s Workload Acceptance Liaison (WAL) to request that the contract be reviewed

for workload acceptance criteria.

2.4. If a PA is directly contacted by a buying command office with a request for property

only support for either mission or non-mission work, the PA will engage with their First Level

Supervisor and Regional Director. Regional Directors are the GCPG’s WALs.

2.5. PAs must use the Contract Property Administration System (CPAS) eTool, which is

tied to the Mechanization of Contract Administration Services (MOCAS) to identify and accept

assignment of property administration.

2.5.1. PAs will accept assignment by selecting a contract that meets the

conditions described in paragraph 2.1. of this Guidebook, on the CPAS contract

acceptance tab, updating the receipt date, and selecting “Accept” in the action field.

2.5.2. If a contract has erroneously been assigned for review, and property is not

anticipated, the PA will delete the MOCAS special provision code “E” through CPAS by

selecting the “Do Not Accept” option under the same CPAS contract acceptance tab.

2.6. PAs who determine that a contract without anticipated property had previously been

accepted will delete the special provision code “E” through MOCAS. Conversely, the PA will

CHAPTER 1 – PROCESS

add the special provision code “E” if a contract that had not previously been accepted is modified

to provide GFP. For MOCAS entry direction, see MOCAS Guides on DoD365.

2.7. Classified property. PAs must review the DD Form 254, “Department of Defense

Contract Security Classification Specification,” if included in the contract, to determine if

classified property is involved. Refer any classified effort to DCMA Special Programs

(DCMAS) by elevating to the first level supervisor, who will further elevate to the Regional

Director for reassignment.

2.8. PAs will document their contract review actions using the automated Integrated

Workload Management System (IWMS) Contract Review Checklist Tool. PAs must ensure that

they indicate in the general comments section of the IWMS Contract Review Checklist if they

are not accepting a contract that includes the appropriate property clauses due to a lack of

anticipated Government property (as described in paragraphs 1.2 and 2.1).

2.9. PAs are expected to verify that contract acceptance actions taken in CPAS lead to

updates within MOCAS. PAs will do this by verifying that changes are processed by reviewing

MOCAS Submit History in CPAS after submitting an acceptance transaction in CPAS. Possible

reasons for a MOCAS submit failure include: scheduled updates where the system is down for

processing (nightly, monthly, and end-of-year), an expired MOCAS password, input of the

wrong MOCAS password into CPAS, incorrect geographic MOC selected for the CAGE code,

MOCAS account revocation (due to inactivity), and PA attempts to perform transactions within

CPAS while logged into MOCAS. If contract acceptance fails for one of the reasons above, the

PA is expected to correct the underlying issue, or await system availability, and resubmit the

transaction.

3.0. ISSUE CONTRACT DEFICIENCY REPORT.

3.1. PAs must issue CDRs via the CDR tool within the Procurement Integrated

Enterprise Environment (PIEE) suite of tools for contracts lacking appropriate clauses, standard

property attachments, or required terms and conditions. Refer to DFARS PGI 204.270-2(c),

“Contract Deficiency Reports.”

3.2. PAs will notify the PCO of the deficiency in writing if the use of the CDR tool is not

appropriate or available. Retain documentation of this notification to the PCO where use of the

CDR tool is not appropriate. If the CDR tool was temporarily not available, process the CDR in

the CDR tool when it becomes available. Document the date of original notification to the PCO

in the notes field when submitting the CDR in the tool.

4.0. SUPPORT PROPERTY ADMINISTRATION.

4.1. PAs should be aware that there are a number of different business arrangements that

the PA may encounter when performing contract property administration. While some

contractors will have their entire operation in one facility, others will have alternate locations

under the same property management system. A contractor’s written procedures for the property

management system, and practices, may apply across a number of business units or divisions.

CHAPTER 1 – PROCESS

Those property management systems may therefore fall under the same contractor business

system, meaning a DACO or CACO will determine whether to approve the property

management system under DFARS 252.245-7003, “Contractor Property Management Systems

Administration,” and where included in contracts held by the contractor, whether to take

withholds as provided under DFARS 252.242-7005, “Contractor Business Systems.”

In other circumstances, contractors may have subcontracted to receive assistance in performing

the work required for their prime contract from a separate legal entity, which could be a

corporate division that is incorporated separately, and, for example, is registered as a different

business concern in the State where the business concern is incorporated and in the System for

Award Management (SAM). The prime contractor is responsible for performing oversight of its

subcontractors.

Types of relationships that are eligible for DCMA support property administration, as further

defined below in the “Definitions”:

1) Alternate location

2) Subcontractor

3) Corporate divisions that are separate legal entities

4) Corporate divisions that are not separate legal entities

Definitions:

Alternate location- is a separate physical work site of the prime contractor. Since it is part of

the prime contractor's business and property system, alternate locations do not require contractor

consent for DCMA GCPG support delegations. The GP at alternate locations should be included

in all applicable PMSA populations for the prime. PAs should not perform a separate PMSA.

Subcontractor- means any supplier, distributor, vendor, or firm that furnishes supplies or

services or for a prime contractor or subcontractor. Subcontractors are separate business entities

from the prime contractor. The Government does not have privity of contract with the

subcontractor. As such, the prime contractor is responsible for providing oversight of the

subcontractor. DCMA support property administration should be only requested when in

alignment with FAR 42.202 (e)(2) and (f). DCMA support property administration requires

prime contractor consent and refusal should be elevated to the PA’s first level supervisor. If the

first level supervisor agrees, the issue should be elevated to the ACO for resolution.

Corporate divisions that are separate legal entities- require the prime contractor provide

oversight of the GP at those locations. GP at those locations would be subject to the PMSA

requirements for Subcontractor Control testing (i.e., appropriate flowdown and periodic

reviews).

Corporate divisions that are not separate legal entities- are considered an extension of the

prime contractor and do not require contractor consent for DCMA support property delegations.

The GP accountable to the prime’s contracts at those locations should be included in all of their

applicable PMSA populations. PAs should not perform a separate PMSA.

CHAPTER 1 – PROCESS

4.1.1. In circumstances where a corporate division or business unit at an alternate

location is not a separate legal entity, the PA will ensure that the contractor is aware that any

noncompliances identified at the alternate location will be treated as noncompliances in the

prime contractor’s Property Management System. Accordingly, the prime contractor will be

responsible for implementing any required corrective actions for PMSA noncompliances at

alternate locations.

4.1.2. Any PMSA deficiencies or property business system disapproval will

apply to the prime contractor, and will require correction of any deficiencies at alternate

locations. Government contract property at a prime contractor’s alternate locations is part of the

contractor’s property management system, and should not be treated any differently than

property located at the main facility. Because of this, the PA will include all property and

transactions performed by the other location in the population for all applicable elements when

performing a PMSA.

4.1.3. The PA will ensure that the prime contractor includes all property provided

to, or acquired by, any other business units or divisions that are part of the same legal entity as

the contractor in its Contractor Self Assessment. Additional information to assist the PA in

determining whether another division is a separate legal entity is located in Subcontractor

Awards and Flow Down and Subcontractor Reviews in Chapter 2 of this Guidebook.

4.2. Prime contractor PAs will request DCMA support property administration

delegations within the Product Data Reporting and Evaluation Program (PDREP) Delegation

application when surveillance is required at contractor alternate locations, to include other

divisions. Another DCMA PA in the local commuting area for the alternate location should

provide DCMA support property administration for the PMSA. Support delegations will be

issued to the first level supervisor that oversees the area that includes the alternate location,

unless a local PA is already assigned to the contractor, to allow the first level supervisor to

determine workload assignment. If there is no PA within local commuting distance, the

respective first level supervisors, and Regional Director(s) will coordinate to determine whether

an on-site review is required, and if so, whether it makes more sense for the prime PA or the

assigned support PA to travel.

4.3. The prime contractor’s PA must:

4.3.1. Ensure support delegation requests include a sufficient level of detail (e.g.,

types of property, scope of surveillance, duration, special or unique requirements, and presence

of sensitive property). The description of the scope of surveillance must clearly identify whether

the support property administration PA will be performing a one-time PMSA assist (for those

samples at the alternate location that will be incorporated into the prime PA’s PMSA) or whether

the support property administration PA will incorporate the prime contractor’s population into

their PMSA population. Prime and support property administration PAs will coordinate at the

beginning of each fiscal year (FY) to ensure that each is aware of when the review will occur so

the results can be incorporated into the prime’s PMSA.

CHAPTER 1 – PROCESS

4.3.2. Ensure that they are only delegating oversight of those property elements

that the prime contractor does not retain to a support PA. If the prime contractor retains

oversight of elements of property administration (e.g., maintaining the stewardship records,

performing physical inventories) those elements will be tested by the PA for the prime contractor

as part of the overall populations for those elements. Samples that require on-site validation

(e.g., Records), would be delegated to a support PA as a one-time assist. Prime PAs will ensure

that prime contractors that elect to do this are only retaining oversight of elements that they can

directly control. For example, a prime contractor cannot retain oversight of storage at a

subcontractor’s facility.

4.3.3. Obtain prime contractor consent to support property administration when

property administration involves oversight and surveillance of a subcontractor using a

delegation. Prime contractor consent is not required for the contractor’s alternate locations.

Refer to FAR Subpart 45.5, “Support Government Property Administration.” If the prime

contractor does not consent, and the PA believes that support property administration is needed

in order to protect the Government’s interests, the PA will elevate their concerns to their first

level supervisor and Regional Director.

4.3.4. Accept the Business System Analysis Summary and Audit Report for a

PMSA performed at a subcontractor facility as an indication of the health of the subcontractor’s

property management system. Note that the performance of support property administration by

DCMA does not alleviate the prime contractor’s responsibility to manage its subcontractor.

4.3.5. Incorporate the supporting PA’s findings concerning the alternate location

in their PMSA.

4.4 Support PAs must accept or reject delegations within 10 calendar days of receipt of

the delegation request within the PDREP Delegation application. Rejections must be

coordinated with the supporting PA’s first level supervisor and include a written rationale, (e.g.,

workload, subcontractor location vs. alternate location that does not meet the requirements of

FAR 42.202(2)). If the prime and supporting PA disagree regarding the proper scope and

methodology of the proposed delegation, they will elevate the issue to their respective first level

supervisor and Regional Director for resolution.

4.5. Support PAs will perform the delegation in accordance with the agreement reached

with the prime PA, and will provide all required documentation to support the results reported to

the prime PA. The prime PA is responsible for loading any support documentation to the PMSA

file in CPAS. When there is a delegation for property located at a subcontractor that also holds

DoD prime contracts, that property will be included in the total populations used by the PA at the

subcontractor location to perform their regular PMSA. Copies of the Business System Analysis

Summary and Audit Report will be provided to the prime PA upon PMSA completion.

5.0. CONTRACT PROPERTY ADMINISTRATION FILES.

5.1. PAs will establish and maintain electronic files within the Integrated Workload

Management System (IWMS) or CPAS at the contractor Commercial and Government Entity

CHAPTER 1 – PROCESS

(CAGE) code level to retain documentation and results of various surveillance and oversight

activities by contractor site. Examples of files to be loaded in IWMS include:

• Copies of audits and inspections performed by other Defense components (e.g.,

Defense Contract Audit Agency (DCAA), Defense Counterintelligence and Security

Agency (DCSA)).

• Records of site visits and meetings with the contractor (other than those specific to

conducting a PMSA).

• Relevant general correspondence and documentation not tied to a single contract.

• Relevant documentation and correspondence directly related to a contract will be

loaded in the IWMS contract file, rather than the CAGE level file. This includes

outside audits and final property closeout letters from the contractor, indicating that

all property closeout actions have been completed and that there is no longer any

property accountable to a contract, as well as final inventory waivers as appropriate.

5.2. PAs must establish a PMSA File. PMSA files are required for each completed PMSA.

PAs will use CPAS to upload required documents. The following documentation is required to

be included, at a minimum, for each contractor:

• PMSA notification letter.

• Standard PMSA Data Call, populated by the contactor, for standard PMSAs.

• Documentation supporting the performance of contract review and correspondence.

• Risk assessments and PMSA plans, level of oversight determinations regarding

processes/elements waived or determined as not applicable.

• Procedure review findings and correspondence.

• ACO and PCO correspondence.

• Audit Reports.

• Business System Analysis Summary. Note that only final documents may be loaded.

Draft Audit Reports and Business System Analysis Summaries are not to be included

in the file.

• Work papers (e.g., sampling plans, narratives, worksheets). Note that PAs are only

expected to upload a single example document for each type of supporting

documentation for compliant samples. All supporting documents for samples

identified as defects must be uploaded to support findings of noncompliance.

• Internal memoranda (e.g., from ACOs, or from functional specialists).

• 3x22 chart detailing when each of the elements was last reviewed.

6.0. ACCEPT ASSIGNMENT OF NEW CONTRACTORS.

6.1. Within 10 calendar days of acceptance of property administration for a contract

awarded to a new contractor (one that has not previously had a property management system

with DCMA oversight), the PA must perform the actions described in the following paragraphs.

As a reminder, prior to contract acceptance the PA must ensure that the contractor will be

receiving Government property in order to perform the contract as described in paragraphs 1.2

CHAPTER 1 – PROCESS

and 2.1. Written procedures must not be requested from contractors that are unlikely to have a

property requirement. Accordingly, the PA must:

6.1.1. Recommend a post-award orientation conference to the ACO, if warranted,

including a rationale and suggested type and scope of the post-award orientation conference.

Post-award conferences may be appropriate for new contractors receiving Government property

for the first time, or for existing contractors who are awarded a new contract that is significantly

different from previous contracts in the type and scope of property management that will be

required (e.g., first cost-type contract, after only having GFP provided, or moving from R&D to

a production environment.)

6.1.2. Send a standard letter of introduction advising the new contractor of its

contractual responsibilities. The letter should also request that the contractor provide a copy of

its property management policies and procedures and names of appropriate points of contact.

PAs will allow the contractor 15 calendar days to provide written property management

procedures. If the contractor does not provide procedures within 15 calendar days, the PA must

notify the contractor in writing, advising that failure to provide acceptable procedures may

trigger contractual remedies. The PA may allow the contractor a maximum of 15 additional

calendar days to provide written property management procedures. PA will upload the letter of

introduction, and any subsequent communication to the contractor regarding failure to provide

procedures, to the PMSA tab in CPAS.

6.1.3. If the contractor fails to provide written property management procedures after a

total of 30 calendar days, the PA will:

6.1.3.1. Document in a Business System Analysis Summary report that the

contractor failed to provide written property management procedures or otherwise demonstrate

that it has established and implemented property management plans, systems, and procedures as

required by FAR 52.245-1(f)(1), despite having been provided two opportunities to do so. Note

that a contractor’s statement that procedures are proprietary, does not satisfy the contractual

requirement to provide them to the PA.

6.1.3.2. Forward the Business System Analysis Summary report to the ACO.

This becomes the basis for the ACO to make a business system determination as required by

DFARS 252.245-7003.

6.1.3.3. Document the action in CPAS as a completed PMSA. Procedure reviews

will only be considered a completed PMSA for new contractors in situations where the

contractor has failed to provide procedures, or when the provided procedures are unacceptable as

written. If the contractor has received Government property, the reanalysis will include all

applicable elements, in addition to verification that the contractor has corrected or established

their written procedures.

6.1.4. Review the contractor’s property management policies and procedures, and notify

the contractor of acceptability within 25 calendar days of receipt using the standard procedure

review template letters.

CHAPTER 1 – PROCESS

6.1.4.1. Note that PAs must be cautious about using language that could be

confused with a system status determination. While a PA can determine whether a

contractor’s procedures are acceptable or unacceptable as written, the PA does not

approve or disapprove those procedures.

6.1.4.2. PAs must factor in and adjust written procedure review timelines for

short delivery schedules or periods of performance.

6.1.4.3. PAs must coordinate with the relevant functional specialist for input on

any portions of the contractor’s written procedures that impact more than one functional

area, (e.g., Plant Clearance for disposal or scrap procedures, or Safety for sensitive

property).

6.1.5. If the contractor’s procedures are unacceptable as written, the PA must notify the

contractor in writing, advising that the procedures are unacceptable and that failure to provide

acceptable procedures may result in the Government’s pursuit of contractual remedies. The PA

may grant additional time, not to exceed 15 calendar days, for the contractor to resubmit. If

resubmitted procedures are still unacceptable, the PA will:

6.1.5.1. Document the deficiency in a Business System Analysis Summary

report.

6.1.5.2. Forward the Business System Analysis Summary and PMSA Audit

Report to the ACO. The only element that needs to be addressed in the Audit Report is Written

Procedures. This becomes the basis for the ACO to make a business system determination as

required by DFARS 252.245-7003.

7.0. SCHEDULE PMSA.

7.1. PAs must complete an initial PMSA (standard or limited) no more than 12 months

after a new contractor first receives Government property. The initial PMSA should be

performed at least 90 days after the contractor receives property in order to ensure that there are

a sufficient number of transactions to test.

7.2. PAs will choose the one of the following as the appropriate PMSA type for all

contractors based on comprehensive analysis of factors and the associated risk:

7.2.1. Standard PMSA. A standard PMSA requires entrance and exit

conferences, detailed testing, and formal examination of contractor processes related to its

property management system. A standard PMSA may be conducted entirely on-site at a

contractor’s facility, or may be performed remotely for those elements that do not require visual

in-person verification of the property. The only elements that cannot be tested remotely are

Identification, Records, Storage Commingling, Storage, and potentially Utilization.

CHAPTER 1 – PROCESS

7.2.2. Limited PMSA. A limited PMSA permits less formal testing methods and

techniques and is appropriate only for low risk contractors. A limited PMSA will include a

review of contractor responses to questions covering each required element of a contractor’s

property management system, interviews with contractor personnel, and detailed on-site testing

of select processes, if necessary. A limited PMSA may be performed remotely or on-site. The

PA must consider risk level and quantity and value of property. If a limited PMSA reveals

deficiencies, the PA may visit the contractor to resolve issues or expand the scope of the review

by conducting a standard PMSA. A limited PMSA requires an exit briefing, which may be

conducted via telephone.

7.3. If sensitive property is involved, the PA must complete the initial PMSA within 6

months of receipt of the sensitive property. The initial PMSA should be performed at least 90

days after the contractor receives property in order to ensure that there are a sufficient number of

transactions to test. Additionally, the PA must conduct annual reviews of the elements of

Written Procedures, Receiving, Discrepancies Incident to Shipment, Records, Physical

Inventory, Declaration of Excess, Consumption, Storage, Storage Commingling, and Disposal

regardless of risk rating. Limited PMSAs are not appropriate for testing the contractor’s

management of sensitive property, as a limited review does not provide the level of oversight

needed to determine whether the contractor’s controls and processes are sufficient. A PA who

has a contractor with sensitive property that is otherwise low risk, could use a limited PMSA to

test all elements other than those that require a separate population for sensitive property. The

element of Records, Storage, and Storage Commingling for sensitive property must be tested on-

site, however the other elements may be tested remotely. See paragraph 17.2 of this Guidebook

for more detail on administration of sensitive property.

7.4. PAs must base all other PMSA schedules on the risk rating, and ensure that all

applicable 22 elements are reviewed at least once every 3 years, unless otherwise approved in

writing, on a case-by-case basis, by the cognizant Regional Director for low risk contractors:

7.4.1. High Risk. Perform a standard PMSA at least annually until such time as

the contractor improves to at least a moderate risk level and the PA determines that the status of

the contractor’s system justifies a reduced level of oversight. High risk contractors may have

some elements that are lower risk. Moderate risk elements must be reviewed at least once every

2 years. Low risk elements must be reviewed at least once every 3 years.

7.4.2. Moderate Risk. Perform a standard PMSA as frequently as conditions

warrant, but at least once every 2 years. Itinerant PAs will review all applicable elements once

every 2 years.

7.4.3. Low Risk. Perform a limited PMSA once every 3 years. Because all

elements must be reviewed at least once every 3 years regardless of risk, a PA may not waive

any applicable elements for a contractor on a triennial schedule.

7.4.4. PMSAs for contractors with NASA contracts are scheduled using the

following considerations. This direction applies to all new and existing NASA delegations

regardless of whether Section B: Special Considerations for Major Contractors is delegated.

CHAPTER 1 – PROCESS

7.4.4.1. When a contractor has both DoD contracts and NASA contracts,

and is rated low risk based on DCMA’s criteria, PMSAs will be scheduled once every three

years.

7.4.4.2. When a contractor has only NASA contracts (no other DCMA

administered contracts), and no single contract has more than $1M of Government property

accountable to it, the contractor would be subject to a PMSA schedule frequency based on the

applied DCMA risk criteria.

7.4.4.3. When a contractor has only NASA contracts (no other DCMA

administered contracts), and at least one of those contracts has more than $1M of Government

property accountable to it, DCMA will perform a PMSA every two years.

7.5. PAs must schedule PMSA due dates in CPAS using the following guidance;

7.5.1. The PA will review all assigned property system CAGE codes in the 4th

Quarter of the FY to determine which contractors will require a PMSA in the following FY.

Review the most recent 3x22 chart, detailing when each of the 22 elements was last reviewed.

All applicable elements must be reviewed at least once every 3 years, based on risk (high risk

elements must be reviewed annually, moderate risk every 2 years). PAs must also consider

whether a contractor’s property system includes other CAGE codes utilizing a single property

management system, at the same or alternate locations, in order to ensure that the PMSAs

performed are all inclusive, and to limit the amount of duplicate work performed.

7.5.2. The PA will create a schedule of PMSA due dates for the next FY no later

than September 5 for approval by the first level supervisor, ensuring distribution of workload

throughout the year. No PMSAs will be scheduled for completion in the month of September.

7.5.3. The PA will report all anticipated TDY requirements for the next FY to the

first level supervisor by September 5 along with the proposed schedule for planning purposes.

7.5.4. The PA will update the Contract Property Administration System (CPAS)

to reflect the schedule for the following FY by September 20 of each year to populate the FY

baseline.

7.5.4.1. Once the baseline schedule is established, all schedule changes

must be approved by the first level supervisor with a copy to the Regional Director. Schedule

updates that result in a PMSA being performed less frequently than required by paragraph 7.4.

must be approved in writing by the cognizant GCPG Regional Director. Any schedule changes

that cross fiscal years must be approved in writing by the cognizant GCPG Regional Director.

7.5.4.2. The PA will update CPM Record Notes upon approval of a

schedule change to indicate the date that the change was approved, and by whom. The PA will

also upload a copy of the written approval to the current PMSA tab.

CHAPTER 1 – PROCESS

7.5.4.3. The PMSA Schedule Date is used to document PMSAs that have

been rescheduled from the initial PMSA Due Date.

7.6. Resident PAs must schedule reviews of each applicable element in accordance with

the risk rating. Additional considerations that the PA must take account of in scheduling reviews

of property management elements include, but are not limited to:

7.6.1. Ensuring that all elements are reviewed at least once every three years,

with high risk elements reviewed at least annually, moderate risk elements reviewed at least once

every two years, and low risk elements reviewed at least every three years. Elements identified

as noncompliant in a previous PMSA must still be reviewed on the risk based schedule in order

to identify any new noncompliances, even if the contractor’s corrective actions are not yet

complete.

7.6.2. Reviewing sensitive property as required by paragraph 7.3. of this Guidebook.

7.6.3. Because CPAS is not configured to record when all 22 elements are

scheduled for review, resident PAs must document the month and year each element is scheduled

for review in a PMSA Plan, upload it to the current PMSA tab in CPAS, and annotate the PMSA

Record screen indicating which PMSA portfolio contains the PMSA schedule. The 3x22 chart

populated at the end of the last PMSA, along with a risk revalidation, will provide a clear

indication of which elements must be reviewed.

8.0. PLAN PMSA. The PMSA is a systematic, objective review and evaluation of a

contractor’s property management system to determine whether it provides effective and

efficient management and control of Government property in compliance with applicable

Government property clauses, and contractual provisions. The required frequency and type of

PMSA is determined by evaluating several factors.

8.1. PAs must plan each PMSA and reanalysis to ensure the analysis:

• Addresses Government property accountable to all contracts administered by, or

delegated to, DCMA,

• Includes all applicable elements of property management as determined by the

risk to the Government of each, and

• Tests sufficient quantities of items or transactions to yield results that may be

generalized to the system as a whole.

8.2. PMSA planning reduces the risk that the PA’s findings or conclusions may be

inaccurate or incomplete as a result of factors such as insufficient or inappropriate evidence (e.g.,

incomplete populations, source documents that do not apply to the element being tested, etc.),

inadequate process (e.g., incorrect sample sizes, failing to go to second sample when required,

populations of non-like items, etc.), intentional omissions, or misleading information due to

misrepresentation or fraud (contractor-provided evidence that either does not support the

conclusion the PA is being asked to reach, or evidence that a contractor has intentionally

modified or fabricated).

CHAPTER 1 – PROCESS

8.3. The nature and extent of PMSA planning will vary from contractor to contractor.

Because of the great diversity of contractors, contracts, property management systems, etc., no

single PMSA planning process can be applied across the board for every PMSA. However, there

are certain minimal elements that are applicable to every contractor and that PAs will include in

planning each PMSA:

8.3.1. Contract Review and Reconciliation. The PA will:

8.3.1.1. Review the contracts and all delegations administered by DCMA,

to which Government property is accountable, in order to define the scope of the PMSA. Ensure

that all contracts requiring oversight are assigned in CPAS, and that all accountable property is

included in the PMSA. The contract review will alert the PA to those contracts that are cost-

type, thus making it likely that acquisition of property might be applicable. If the contract

indicates that sensitive property will be furnished or acquired, the PA must review Written

Procedures, Receiving, Discrepancies Incident to Shipment, Records, Physical Inventory,

Declaration of Excess, Consumption, Storage, Storage Commingling, and Disposal annually and

use a 97% confidence level sampling plan to evaluate the contractor’s management of sensitive

property. The element of Records, Storage, and Storage Commingling for sensitive property

must be tested on-site; however the other elements may be tested remotely. Additional guidance

regarding sensitive property is located in paragraph 17.3 of this Guidebook.

8.3.1.2. Verify that the list of contracts in CPAS is complete by comparing the

list with a report pulled from MOCAS that indicates “contracts-by-contractor” administered by

DCMA. PAs will annotate those reports to document their review. PAs will use MOCAS to

take assignment of any contracts with anticipated Government property that are not listed in

CPAS. If a contractor has multiple CAGE codes under a single property management system,

ensure that all contracts with Government property accountable to all applicable CAGE codes

are included.

8.3.1.3. If the contractor has more than $100M of Government property

accountable to contracts administered by DCMA, the PA will also review all DoD contracts

issued to the contractor’s CAGE code that are not administered by DCMA to identify contracts

with Government property for inclusion in the population of all Government property when

testing the elements of Records and Physical Inventory. These actions are required in order to

comply with the DoD Memorandum, “Strengthening Oversight of Government Furnished

Property as Part of Property Management System Analyses” signed on December 16, 2019 by

Ellen M. Lord, Undersecretary of Defense for Acquisition and Sustainment. A copy of the

memo and associated implementation guidance can be found on the GCPG team page on the

DoD365 website. These DoD contracts can be found in the EDA application in PIEE.

8.3.1.4. Request a list of contracts with accountable Government property

administered by DCMA from the contractor, and verify that the contractor’s list matches the

PA’s list. If the contractor has more than $100M of Government property accountable to

contracts administered by DCMA, the PA will also request a list of all DoD contracts with

accountable Government property that are not administered by DCMA, and verify that the list

matches the additional contracts identified in EDA. Note that PAs must not provide the

CHAPTER 1 – PROCESS

contractor with a list of contracts prior to receiving the contractor’s list. Requesting the

contractor’s list is necessary in order for DCMA to ensure that the contractor’s property

management system incorporates all contracts that it should. When gaps are identified, the PA

will review GFP lists and public vouchers to ensure that the contract listing is complete by

identifying furnished property, as well as property that was purchased by the contractor as a

direct item of cost under the contract. When reviewing cost vouchers, PAs must be aware that

contractors will not always break out equipment and material explicitly; rather contractor

acquired property will occasionally be labeled as an “other direct cost” or “ODC.” If the

voucher does not separate property from ODCs, the PA will request that the contractor explain

what their ODCs consist of. After reconciliation of contract lists, the PA will update CPAS as

required.

8.3.2. Information Gathering. The PA will:

8.3.2.1. Ensure the validity of the Government property population and sample

sizes, and that all applicable elements are reviewed, by requesting accurate and current data

relating to the quantity and value of each type of Government property in the contractor’s

possession. The PA will request that the contractor’s property management organization provide

the total line items and dollar values using the Standard PMSA Data Call template for standard

PMSAs, or the Limited Questionnaire for limited PMSAs. The PA will not request the

contractor to report the quantity and value of each type of Government property on a contract-

by-contract basis. The contractor is under no contractual requirement to do so. Therefore,

requesting this information may be construed as a constructive change to the contract, resulting

in increased cost to the Government. DCMA PAs do not have authority to make constructive

changes to contractual requirements. PAs can, however, request that the contractor identify

property classification and sensitivity, because that information is necessary for the selection of

samples in performance of the PMSA (e.g., separate samples for sensitive property, material only

for consumption).

8.3.2.2. Request populations that encompass the maximum number of items or

transactions that share common traits. Population descriptions for each of the 22 PMSA

elements are included in chapter 2 of this Guidebook. The PA will ensure that population

requests are consistent with contractual requirements.

8.3.2.3. PAs must also ask the contractor to report whether they have Military

Standard Requisitioning and Issuance Procedures (MILSTRIP) property, sensitive property,

Government property not accountable to a contract, and any other information relevant to the

performance of a PMSA.

8.3.2.4. If the PA finds that a contractor has not received anticipated Government

property prior to the PMSA, the PA will perform the following actions:

8.3.2.4.1. Obtain a statement, in writing, from the contractor that the

contractor has not yet acquired or received Government property.

CHAPTER 1 – PROCESS

8.3.2.4.2. Verify that statement by reviewing public vouchers via Wide

Area Work Flow (WAWF) to ensure no Government property was acquired.

8.3.2.4.3. Email the PCO to verify that the contractor has not received any

Government-furnished property. If the PCO verifies this information verbally, rather than in

writing, document the conversation in a memorandum for the record.

8.3.2.4.4. Review the GFP Position Report in the EDA application located

in PIEE for any GFP the contractor has already received.

8.3.2.4.5. The PA will upload documentation demonstrating completion

of the tasks identified above in CPAS under the PMSA Record tab for the current fiscal year.

The PA will then populate the scheduled, results, and comments fields, will add a completed

date, and set the PMSA status field to “Closed.” Finally, the PA will create a new PMSA tab and

schedule the PMSA for the next fiscal year.

8.3.2.5. If the PA finds that the contractor does not currently have Government

property on hand at the time of the scheduled PMSA, the PA will determine whether it has had

property in the past year and has at least one active contract with ongoing property requirements.

The PA should then consult with the contractor to determine if GP will be acquired/furnished

within the next 6 months. The PA should complete new risk assessment based upon the

information and discuss rescheduling the PMSA with their first level supervisor. If the first level

supervisor concurs with PMSA rescheduling, the rationale should be documented and submitted

to the cognizant Regional Director for approval. PMSA extensions must adhere to the frequency

intervals permitted by this Guidebook (i.e., nothing over 4 years will be permitted).

8.3.3. Identification of PMSA Elements for Review. The PA will:

8.3.3.1. Ensure that each applicable element is reviewed at least once every three

years, based on risk. Triennial reviews are only appropriate for low risk elements. Additionally,

if any elements are identified as special focus areas by the Business Operations Center Director,

those must be included in the PMSA plan. A review of the 3x22 chart populated at the end of

the last PMSA will provide this information. If the 3x22 chart is missing, the PA is responsible

for reviewing previous PMSA records to determine when each of the elements was tested last,

and populating the chart for the file as part of the planning process.

8.3.3.2. Review findings, noncompliances, and significant deficiencies cited in

prior PMSAs. The PA will focus on identifying repeated deficiencies, trends, or related

weaknesses.

8.3.3.3. For a reanalysis, only the specific noncompliance within an element will

need to be tested, unless the reanalysis is for a new contractor that failed to provide acceptable

procedures, as described in paragraph 6.1.3.3.. Because the reanalysis tests the success of the

corrective action plan’s implementation, only transactions that occur after the corrective actions

are completed would be included in a reanalysis only population. If the reanalysis is performed

concurrently with a scheduled PMSA, and the element is due to be reviewed based on risk, a full

CHAPTER 1 – PROCESS

population will be reviewed and assessed. In this circumstance, the PA will consider only the

specific noncompliance from the previous PMSA in determining whether or not successful

corrections have been made. Any new noncompliances will be addressed under the current year

PMSA.

8.3.4. The PA must obtain input from the Plant Clearance Officer (PLCO). PLCOs

sometimes encounter situations in which the contractor fails to comply with disposal instructions

or is unable to submit accurate inventory schedules, and find there is little the PLCO can do to

compel compliance. Because this may mean that the contractor is not in compliance with FAR

52.245-1(f)(1)(x), PAs are expected to contact the PLCO assigned to the contractor and

determine whether there are any problems involving disposal, particularly those involving

contractor compliance. Memoranda, emails, or appropriate annotations on the team PMSA Plan

form (if any) may be used to document that the PA has obtained input from the PLCO.

8.3.5. At least 30 days before the PMSA is scheduled to begin, the PA will provide the

ACO with written notification that a PMSA will be performed and request any information that

may be applicable in evaluating the contractor’s property management system.

8.4. PAs must upload all planning files and support documents (e.g., evidence of contract

review, rationale for element selection, input from PLCO) in the PMSA Planning Documentation

folder in the appropriate PMSA Portfolio in CPAS. Resident PAs are expected to upload

planning documentation no later than October 10th of each year for the current fiscal year

PMSA. Itinerant PAs may upload at PMSA completion along with the rest of their PMSA

portfolios.

9.0. CONDUCT PMSA.

9.1. The PA must identify elements and populations for review and testing as described

below.

9.1.1. Identify elements to review. Each applicable element below must be

reviewed/tested based on the documented risk rating using the methodologies described in

Chapter 2 of this Guidebook.

• Adequacy of written procedures

• Contractor self assessments

• Acquisition

• Receiving

• Identification

• Discrepancies Incident to Shipment

• Records

• Receipt and issue system (when approved)

• Physical inventory

• Subcontractor awards and flow down

• Subcontractor reviews

CHAPTER 1 – PROCESS

• Reports

• Relief of Stewardship

• Utilization

• Declaration of excess

• Consumption

• Movement

• Storage

• Storage commingling

• Maintenance

• Disposal

• Property closeout

9.1.2. Identify the appropriate population/universe for sampling purposes as

described in chapter 2 of this Guidebook. PAs must ensure that populations are correctly

identified and complete in order to obtain accurate PMSA results.

9.1.2.1. A population or universe is a compilation of records, requisitions,

property items, reports, or documents with common characteristics, encompassing the maximum

number possible within an element.

9.1.2.2. Generally, each of the elements require separate populations, and

occasionally, a single element may require multiple populations.

9.1.2.3. Only those documents, records, assets, or actions associated with

contracts that are administered by DCMA, or that have valid delegations in place, are included in

testing populations. For contractors with over $100M of Government contract property

accountable to contracts administered by DCMA, the Records and Physical Inventory

populations will include all contract property accountable to DoD contracts, regardless of

administration.

9.1.3. Since different confidence levels are used to test sensitive and non-

sensitive populations, the elements of Written Procedures, Receiving, Discrepancies Incident to

Shipment, Records, Physical Inventory, Declaration of Excess, Consumption, Storage, Storage

Commingling, and Disposal cannot be combined and must be tested separately. The PA must

use a 97% confidence level when testing sensitive property for those elements, and a 90%

confidence level for all other populations.

9.2. Establish Sampling Plan. The PA must:

9.2.1. Determine the appropriate sampling methodology for the element being

examined. Refer to chapter 2 of this Guidebook for procedures.

9.2.2. Use statistical sampling methods wherever possible for standard

PMSAs. Judgment and purposive sampling may be used when the situation warrants. The

CHAPTER 1 – PROCESS

PA will document and fully explain the rationale for using judgmental or purposive sampling

in the Audit Report.

9.2.2.1. Judgment sampling is used for select areas, items or actions

based on the reviewer’s professional judgment. The PA will only use judgment sampling

when the population does not lend itself to statistical sampling because there are a restricted

number of items in the population with the targeted qualities being tested.

9.2.2.2. Purposive sampling also uses professional judgment to select

sample areas, items or actions involving credible, known or suspected deficiencies.

Purposive sampling may include statistical sampling of a subset of a larger population.

9.2.3. Incomplete populations are those that do not include all items that share

common characteristics. While the PA may select an incomplete population as a purposive

sample in cases where there are known or suspected defects in a subset of a population,

results of that purposive sample cannot be generalized to the system as a whole. Because of

this, an analysis that includes a complete population for each element must be tested at least

once every three years, based on risk, to ensure that the DoD has an accurate assessment of

the health of the contractor's property management system.

9.2.4. For most population ranges, the double sampling plan requires the PA to

continue with a second sample if the number of defects is greater than zero but fewer than the

number required to reject the population as noncompliant to contractual requirements.

Reviewing a second sample under these circumstances is mandatory, not optional. A sample set

may have defects identified for multiple data elements; for example, while performing a Records

review, the PA might find that some samples are in the incorrect location, and others have the

incorrect quantity on record. The PA will only reject the population if the quantity of any one

type of defect meets or exceeds the rejection threshold.

9.2.4.1 The PA must finish testing the first sample set even if the reject

defect level is reached before testing all samples.

9.2.4.2. The PA does not need to test a second sample set if the required

defect level is reached upon completion of the first sample set. If the required defect level is

reached partway through the second sample, the PA may stop at that point.

9.2.5. If a second sample set is required by the DoD double sampling plan, but is

not selected and tested, the PA must document his or her rationale justifying this decision and

upload the documentation of the decision into the CPAS eTool. Failure to select and test a

second sample may invalidate the PMSA findings.

9.3. PAs will select an appropriate confidence level (see table 1 below):

9.3.1. A 97% confidence level, meaning 97% confidence of rejecting lots having

10% or more defects, should be used when a high degree of accuracy is required (e.g., when

CHAPTER 1 – PROCESS

testing record accuracy of sensitive property items as defined by FAR 45.101, and further

described in Table 61 of Volume 10 of DoD 4100.39-M as having a Control Item Inventory

Code (CIIC) for Sensitive Items. See paragraph 17.2.). A 97% confidence level is also used to

test the elements of Records and Physical Inventory for all Government property accountable to

contracts issued by DoD for those contractors with over $100M of Government property

administered by DCMA.

9.3.2. A 90% confidence level (90% confidence of rejecting lots having 10% or

more defects) is suitable in most cases.

CHAPTER 1 – PROCESS

9.4. PAs will draw the maximum number of transactions or attributes possible for any

population.

9.4.1. When testing transactions (material requisitions, for example), the

population/universe must consist of the total number of transactions that occurred within the past

year (365 days), or the transactions that occurred subsequent to completion of the contractor’s

corrective actions for reanalysis.

CHAPTER 1 – PROCESS

9.4.2. When testing attributes, the PA must assure that the population universe

consists of the total number of items (e.g., storage areas, documents, records, or property items)

to be examined.

9.5. PAs will exercise judgment when furnishing pre-selected samples to the contractor

prior to arriving on-site. Although this reduces cost and time, the PA must ensure the integrity of

the PMSA and findings in order to accurately assess the health of the contractor’s property

management system. Under no circumstance will a PA provide the Records sample in advance

of arriving at a contractor’s facility to test that element. For large contractors with multiple

locations, it is acceptable to provide a redacted sample listing that does not provide enough

information to identify the sample item, but does indicate the building or room. This allows the

contractor to ensure that it has the appropriate support personnel available, without negatively

impacting the integrity of the PMSA.

9.6. PAs will allow enough time for contractors to provide support documentation for

samples, but not so much time that the contractor is able to perform an analysis and implement

remedial actions before the PA has an opportunity to review.

9.7. Perform Standard PMSA. If the PA determines that a standard PMSA is required

based on risk, the PA will notify the contractor in writing at least 30 calendar days prior to

starting the PMSA, and invite participation from contractor managerial personnel. If the

contractor requests, the PMSA can begin sooner than 30 days after the notification letter is sent,

(e.g., to accommodate workflow or personnel issues). The notification letter should identify the

scope of the review, identify the elements to be tested, incorporate the Standard PMSA Data Call

Template to request the appropriate populations for those elements with an expected submission

date, and identify the timeline for completion of the PMSA. Additionally, the PA will provide a

notification of the PMSA to the ACO at least 30 days prior to the PMSA and request any

information applicable to evaluating the contractor’s property management system.

9.7.1. PAs will conduct an entrance conference supported by a slide show

presentation. As part of the entrance conference, the PA will:

9.7.1.1. Maintain a sign-in roster of attendees and minutes of discussion

held. If the entrance briefing is performed remotely, an email from the contractor listing

attendees is acceptable in place of a sign-in roster.

9.7.1.2. Establish a mutual understanding with the contractor regarding

the audit processes and sampling procedures anticipated to be used. The PA will inform the

contractor that the Government reserves the right to adjust the audit and sampling as necessary.

9.7.1.3. Discuss the status of outstanding Corrective Action Requests

(CARs), contractor proposed changes to its property management system, deficiencies identified

through contractor self-assessments/internal reviews, any related corrective actions undertaken

by the contractor, and inform the contractor of any issues or initiatives related to Government

property.

CHAPTER 1 – PROCESS

9.7.1.4. Advise the contractor that daily out-briefs will be conducted to

summarize the efforts and findings of the day. If there are any deficiencies identified, the PA

will not indicate whether the deficiency meets the DFARS 252.245-7003 criteria for a

“significant deficiency,” since the ACO must make that determination.

9.7.1.5. Upload entrance briefing documentation in CPAS.

9.7.1.6. Resident PAs may hold a combined entrance and exit conference

in September of each year to summarize the findings of all reviews performed during the fiscal

year, and address the status of any outstanding deficiencies and corrective actions. This

conference will also identify the elements of property management that will be reviewed in the

upcoming fiscal year, inform the contractor of any issues or initiatives relating to Government

property, and provide the contractor the opportunity to discuss any issues related to Government

property. Additionally, the resident PA will hold exit conferences upon the completion of each

element to keep the contractor informed and provide timely feedback. PAs must not comment

on whether a deficiency is a “significant deficiency” nor offer an opinion on the property system

status, both of which determinations are exclusively within the authority of the warranted ACO.

9.7.2. PAs must execute and document the testing of elements in accordance with

the PMSA plan. PAs may modify the plan’s implementation as necessary, but are expected to

document the rationale behind any changes.

9.7.2.1. The PA must maintain work papers with descriptive and

quantitative data that supports the contractual requirements under review. Note that “YES" or

''NO" answers are not descriptive and quantitative data. They are conclusions, which are not

acceptable without evidence. PAs will use the approved worksheets and associated guidance in

chapter 2, documenting the required data, but may add additional data, as applicable.

9.7.2.2. The work papers must provide clear, factual evidence sufficient to

allow a third party to replicate the findings.

9.7.2.3. The PA must upload all work papers and supporting

documentation in CPAS in the appropriate portfolio prior to submitting the Business System

Analysis Summary and Audit Report to the first level supervisor for review. Resident PAs will

upload documentation at the conclusion of the review of each element prior to submitting the

Business System Analysis Summary and Audit Report to the first level supervisor for review.

9.7.3. Analyze the Defects. The PA must:

9.7.3.1. Analyze the defects from both a quantitative, (using established

statistical sampling tables’ acceptance and rejection rates for set populations), and a qualitative

(impact and materiality) perspective. Statistical sampling requires that the double sampling plan

be followed completely in order to draw conclusions regarding the statistical significance of any

defects identified. A noncompliance is considered to be statistically significant if the number of

defects identified exceed the threshold identified in the double sampling plan to reject the

population. A noncompliance with the terms and conditions of the contract based on a

CHAPTER 1 – PROCESS

statistically significant number of defects in a sample is a deficiency that requires correction,

regardless of its impact and materiality. Noncompliances based on a statistically significant

number of defects require correction to the population, rather than to the selected samples only.

These noncompliances must be reported in the Business System Analysis Summary and Audit

Report.

9.7.3.2. Review appropriate source and supporting documents pertaining

to each element.

9.7.3.3. Ensure alignment of testing and sampling results with the

contractor’s written procedures.

9.7.4. Conduct an exit conference. Upon completion of the on-site PMSA, the

PA must utilize a slide show presentation to summarize the activities and daily out-briefs held

with contractor personnel, and:

9.7.4.1. Invite contractor managerial personnel and the ACO to attend.

9.7.4.2. Maintain a sign-in roster of attendees.

9.7.4.3. Discuss findings, recommendations, and concerns identified

during the course of the PMSA, and any contractor actions taken to correct deficiencies. PAs

will ensure that any recommendations made could not be construed as constructive changes to a

contract. PAs must not comment on whether a deficiency is significant nor offer an opinion on a

determination of the property system status, both of which are solely within the authority of the

warranted ACO.

9.7.4.4. Ensure that a written record of the activities of the exit conference

is established, and retained in the PMSA file.

9.8. Performance of a Limited PMSA. PAs must ensure that the level of review is

sufficient to determine the adequacy of the contractor’s property management system. If the PA

determines that a limited PMSA is appropriate based on risk, no formal entrance briefing is

required; however, the PA must:

9.8.1. Send the standard “Limited PMSA Questionnaire” to the contractor, which

covers questions for each applicable element of the contractor’s property management system.

Use of this standard questionnaire is mandatory. The questionnaire is located on the GCPG

Team page on the DoD365 website in the template library. PAs will ensure that they use the

current version of the questionnaire.

9.8.2. Conduct telephone interviews with contractor personnel to supplement the

contractor’s responses to the questionnaire. The PA must ensure that the level of review is

sufficient to determine the adequacy of the contractor’s property management system.

CHAPTER 1 – PROCESS

9.8.3. Verify results of the interviews by obtaining and assessing samples of

relevant documents and data, (e.g., purchase orders, receiving logs, and records for all applicable

property types). While statistical sampling is not required, the PA must view and assess the

compliance of documents that are representative of those produced by the contractor’s system.

9.8.4. Notify the contractor of potential findings as they are identified during the

PMSA. PAs must not comment on whether a deficiency is significant nor offer an opinion on a

determination of the property system status, both of which fall under the authority of the

warranted ACO.

9.8.5. Depending on the extent or potential significance of findings, PAs may

need to expand the scope of review to a standard PMSA. If expansion of the review is

contemplated, the PA must coordinate with their first level supervisor.

9.8.6. Analyze the defects. (refer to paragraph 9.7.3.)

9.8.7. Conduct an exit conference, which may be accomplished via telephone,

with relevant contractor personnel to discuss the findings, recommendations and concerns

identified during the course of the PMSA, and any contractor actions taken to correct

deficiencies. PAs will ensure that contractor managerial personnel and the ACO are invited to

the exit conference. PAs may not comment on whether a deficiency is significant nor offer an

opinion on a determination of the property system status, both of which are exclusively within

the authority of the warranted ACO.

9.8.8. Document the record. Establish a written record of the activities of the exit

conference and retain in the PMSA file.

10.0. PREPARE REPORTS.

10.1. PAs will prepare a PMSA Audit Report.

10.1.1. The PA must use the current Audit Report template located in the

template library within the GCPG Team page on DoD365 to describe:

• The populations used to test each element reviewed

• The size of the population

• The type of sample reviewed

• The size of the sample

• The method used to select the sample

• The confidence level used, if applicable

• The quantitative and qualitative information obtained for elements with identified

noncompliances

• The information provided by contractor personnel for elements with identified

noncompliances

CHAPTER 1 – PROCESS

10.1.2. PAs must document their analysis, thoroughly describe their findings

when noncompliances are identified, and indicate whether each element that was reviewed

complies with contract requirements. An explanation and written analysis is required to support

all of the PA’s determinations of noncompliances in the Audit Report, regardless of whether a

standard or limited PMSA was performed.

10.1.3. First level supervisors will review and sign all PMSA Audit Reports,

certifying that the report adequately describes the PMSA and its findings, that testing methods

were sufficient to analyze the effectiveness of the property management system, and support the

findings and conclusions. The PA must not send their Business System Analysis Summary or

Audit Report to the ACO until the PA’s supervisor has concurred with their conclusions.

10.1.4. Resident PAs will complete Audit Reports throughout the year as

elements are tested, and will provide them to the DACO or CACO along with the Business

System Analysis Summary within 30 days after review of the element is completed. Each Audit

Report will address only the results of the current elements reviewed in the body of the report.

The results of the reviews for elements that have been previously reviewed and reported within

in the fiscal year will only be addressed in the table of elements. The PA will create and

maintain a portfolio in CPAS that contains all Audit Reports and Business System Analysis

Summaries issued throughout the fiscal year.

10.2. Prepare a Business System Analysis Summary. The Business System Analysis

Summary is an internal DCMA document that is intended to assist the ACO in identifying

significant deficiencies in the contractor’s property management system in accordance with

DFARS 252.245-7003. The PA must not release the Business System Analysis Summary to

anyone other than the ACO, as this is a pre-decisional document providing technical advice.

Upon completion of a PMSA, and in addition to the Audit Report, the PA must:

10.2.1. Prepare a Business System Analysis Summary, using the Business

System Analysis Summary template located on the GCPG Team page on DoD365 in the

template library. The PA will assure the Business System Analysis Summary provides a clear

description of the elements the PA reviewed and detailed results, such that the ACO can use the

Business System Analysis Summary to determine the significance of any deficiencies.

10.2.2. PAs will forward the Business System Analysis Summary and Audit

Report to the ACO within 30 calendar days after an exit conference with the contractor for both

standard and limited PMSAs. Resident PAs will forward their reports to the ACO within 30

days of completion of each element review.

10.2.2.1. The date the Business System Analysis Summary is sent to the

ACO is considered the PMSA completion date for CPAS. Further, the date on the Business

System Analysis Summary must match the date that the reports are provided to the ACO.

10.2.2.2. The PA must load all documentation, including workpapers, into

CPAS before submitting the Audit Report and BSAS to the first level supervisor and prior to the

completion date. In no case is it permissible for a PA to backdate a PMSA completion date in

CHAPTER 1 – PROCESS

CPAS. This requirement to load documentation into CPAS applies for Resident PAs as elements

are completed throughout the year as well. CPAS should be current, containing all support

documentation prepared to date.

10.3. PAs must populate the 3x22 chart documenting when each of the 22 elements was

reviewed last, and upload the chart to the PMSA tab in CPAS. This chart must be loaded prior to

submission of the Audit Report and Business System Analysis Summary to the first level

supervisor.

10.3.1. Please note that the chart is designed to capture the last full review of

each element. Purposive or other reviews that only test a subset of the population do not

fully address the requirement to test each applicable element at least once every 3 years

(based on risk).

10.3.2. Example. If a PA only tested sensitive records, the records of all other

Government property still needs to be tested on the appropriate cycle based on risk (refer

to paragraph 12.5). If a partial review is performed, that must be clearly identified on the

3x22 chart.

11.0. UPDATE CONTRACT PROPERTY ADMINISTRATION SYSTEM OF RECORD

IN ACCORDANCE WITH DESK INSTRUCTIONS.

12.0. DETERMINE AND ASSIGN CONTRACTOR PERFORMANCE RISK.

12.1. The PA must determine and define any risk the contractor’s property management

system poses to the Government, and the level of that risk. PAs must focus on those risks

relating to Government property that the Government can influence. In cases where the PA does

not have the expertise or information to identify and evaluate particular risks, PAs must seek the

assistance of other functional specialists. At a minimum, for every contractor, PAs must

consider the risk that there will be shortcomings in the contractor’s property management system

that will materially affect the ability of DoD officials to rely upon information produced by the

system. To determine performance risk, the PA must:

12.1.1. Identify potential unfavorable future events (what could go wrong). PAs

may consider issues identified in previous PMSAs, the experience level of the contractor’s

workforce, the contractor’s location, and the nature of the business as factors that could result in

unfavorable future events.

12.1.2. Determine the likelihood of those events occurring. For example, the

likelihood of a hurricane hitting a coastal area is much greater than that of one hitting the

Midwest.

12.1.3. Estimate the consequence of those events (potential impact to the

Government if the event occurs). The amount, value, and nature of the property (e.g., sensitive,

hazardous, AA&E) are all relevant in assessing the consequence of the risk. The criticality of the

contract to which the property is accountable is among other relevant factors.

CHAPTER 1 – PROCESS

12.2. Assign risk rating. The PA must assign a risk rating after the PMSA’s completion

and no later than 10 calendar days after the ACO’s final determination regarding approval or

disapproval of the contractor’s property management system, or receipt of acceptable procedures

from a new contractor. If there is a disagreement between the PA and the first level supervisor

regarding the appropriate risk level to assign, the first level supervisor will elevate the

disagreement to the Regional Director for a final decision. When the property management

system contains sensitive property, the PA will perform an additional supplemental risk

assessment annually, addressing the sensitive Government property. If the risk has not changed

since the last PMSA, the PA can note that the risk is still accurate with no changes, and sign the

existing risk assessment with the new date to document the risk revalidation. In all cases, PAs

must ensure that their risk assessments document:

• Risk level for the property management system.

• Risk level for each of the applicable 22 property elements.

• Risk level for elements tested separately for sensitive property will be

documented separately. Note that a contractor with sensitive property could have

an overall property management system that is low risk, with the exception of the

sensitive property.

• The data or information supporting the identified risk level.

• The known and projected impact on contract performance or on Government

property stewardship.

• The estimated timeframe within which any projected impact may be realized.

12.2.1. High Risk. Factors that may indicate a rating of High risk is appropriate for a

property management system include one or more of the following:

• Significant deficiencies identified.

• Level III CAR(s) issued.

• Disapproved property management system.

• ACO has withdrawn assumption of risk.

• Undocumented, inconsistent, or incomplete processes.

• Pattern of questionable, incomplete, or non-existent procedures.

• Data indicating the contractor’s potential inability to meet contractual

requirements (cost, schedule or performance issues).

• Recurring excessive loss of Government property.

• Dramatic increase in losses over previous years.

• Unauthorized use or acquisition of Government property.

• Investigations or findings of fraud, waste, and abuse.

• Disallowance of acquisition costs.

• Public safety or national security concerns.

• Poor internal controls.

• Pattern of non-responsiveness to requests for information.

• Inventory balance discrepancies which cause schedule delays.

• Value of accountable Government property exceeds $100M.

CHAPTER 1 – PROCESS

12.2.2. Moderate Risk. Factors that may indicate that a rating of Moderate risk is

appropriate for a property management system include the following:

• Contractor’s lack of experience with furnished or acquired Government property

(new contractor), or procedures and a property management system that are not

fully developed.

• New or changing conditions to a currently approved property management system

that pose a degree of uncertainty.

• A previously high risk rating with all corrective actions completed but insufficient

implementation period to demonstrate low risk.

• Deficiencies (other-than-significant deficiencies) as determined by the PA (level

II CAR issued) against 1 or more of the 22 property elements.

• Established procedures that require testing or improvement.

• Data indicating contractor’s potential inability to meet contractual requirements.

• Increased losses of Government property over previous years.

• Unresolved deficiencies.

• Poor internal controls.

• Value of accountable Government property: $25M - $99.9M.

12.2.3. Low Risk. Factors that may indicate that a rating of Low risk is

appropriate for a property management system include:

• Compliant controls in all of the applicable property elements within the past 3

years.

• No incidents of excessive Government property loss, unauthorized use, or

inappropriate acquisitions.

• Data indicating contractor’s ability to meet property-related contractual

requirements.

• Strong internal controls and continuous improvement focus.

• No deficiencies or property CARs issued.

• Value of accountable Government property: less than $25M.

12.3. Revalidation of risk. A revalidation is a limited, periodic check to ensure that the

most recently assigned risk rating is still valid. The PA will confirm the original risk level

determination or, if factors indicate a change, will conduct a new risk assessment and assign a

new risk level determination. The PA must revalidate assigned risk as often as conditions

warrant, but no less frequently than annually for all assigned contractors. The annual

revalidation must be performed at the beginning of the FY, and be completed no later than

October 30

, with the documentation uploaded into the next PMSA tab in CPAS.

12.4. The PA will upload risk assessment documentation and risk assessment completion

dates in CPAS. Risk assessments tied to the current PMSA will be loaded in the current PMSA

Tab. The PA will load risk revalidations and out-of-cycle risk assessments in the next scheduled

CHAPTER 1 – PROCESS

PMSA record Tab. Risk Assessments and revalidations will be documented using the template

located on the GCPG page in DoD365.

12.5. PMSA frequency will be based on risk assessments and the result of risk

revalidation (refer to paragraph 8.0). The PA may need to assess some elements more frequently

than others due to element-specific risk. Additionally, the PA may need to test sensitive property

on a different cycle than non-sensitive property if a contractor has a low or moderate overall

system risk. All high risk elements need to be assessed at least annually, moderate risk elements

at least every two years, and low risk elements at least every three years. Noncompliances

identified within a contractor’s property management system, even in situations where there is an

active corrective action plan for one or more elements, are not an acceptable reason for the PA to

delay performance of a PMSA that is due to be performed based on risk.

12.6. Occasionally, an element that had previously not been applicable will become

applicable: e.g., a contractor that had previously only had firm-fixed-price contracts is awarded

a cost-type contract for which they will be acquiring property; or a contractor that had previously

not had any subcontractor awards will need to award a subcontract with Government property.

In those circumstances, the PA may need to perform a PMSA earlier than originally planned, in

order to ensure that elements that had previously been identified as not applicable are tested

within a year of becoming applicable. The 3x22 chart must be used by PAs to ensure that all

elements are addressed.

13.0. ISSUE CORRECTIVE ACTION REQUESTS/MONITOR CORRECTIVE

ACTIONS. FAR 52.245-1(g)(3) states:

Should it be determined by the Government that the Contractor’s (or subcontractor’s)

property management practices are inadequate or not acceptable for the effective

management and control of Government property under this contract, or present an undue

risk to the Government, the Contractor shall prepare a corrective action plan when

requested by the Property Administrator and take all necessary corrective actions as

specified by the schedule within the corrective action plan.

Additional DoD contract clause requirements for corrective action plans for property

management system noncompliances are set out in DFARS 252.245-7003(e), which states:

If the Contractor receives the Contracting Officer’s final determination of significant

deficiencies, the Contractor shall, within 45 days of receipt of the final determination,

either correct the significant deficiencies or submit an acceptable corrective action plan

showing milestones and actions to eliminate the significant deficiencies.

PAs are required to follow the policy implementation in DCMA-MAN 2303-01, “Surveillance”

for both contractual noncompliances and business system noncompliances.

13.1. Contractual noncompliances can be discovered at any time, both during and outside

of the PMSA process. Only the ACO can determine a PMSA noncompliance to be a significant

deficiency (a level III or IV CAR). The PA, however, is responsible for issuing CARs to the

CHAPTER 1 – PROCESS

contractor for those noncompliances that do not meet the threshold of the definition of

‘significant’ (level I or II) once the ACO has made their determination.

13.2. If the PA receives notification of a suspected noncompliance from an outside

source, (e.g., other DCMA functional specialist, buying office, contractor CSA results), the PA

must first verify the existence of that noncompliance. Keep in mind that individuals not trained

in property administration may not be able to correctly identify a contractual noncompliance

related to property management. Additionally, not all noncompliances involving Government

property are related to the contractor’s property management system. PAs will provide

assistance to other functional specialist as necessary, but will only issue CARs for

noncompliances with FAR 52.245-1 and related contract property clauses.

13.3. Regardless of whether a noncompliance is discovered during a regularly scheduled

PMSA or at another time, the PA must include the details of the noncompliance in the Audit

Report and Business System Analysis Summary. PAs will draft a Level III CAR for the ACO to

accompany the reports if the ACO indicates that there are any deficiencies likely to be

considered significant. See DCMA-MAN 2303-01, which is referenced above, for DCMA

procedures to follow when issuing CARs. If the findings were discovered outside of a PMSA,

and the contractor was not scheduled to have a PMSA that year, the PA will generate a new tab

for the current fiscal year to document any newly-identified noncompliances.

13.3.1. PAs may issue a level I CAR only for deficiencies that are not potentially

significant and that the contractor corrected immediately, or that were fully corrected during the

PMSA. A PMSA may not be held open solely to allow the contractor additional time to correct

such a deficiency. If any additional corrective actions remain for the contractor to complete

when the PA performs the exit conference, the CAR issued to the contractor must be a level II or

higher. The PA must verify that any contractor corrective actions that are performed during the

PMSA are sufficient to correct the immediate deficiency, as well as prevent recurrence (e.g., the

contractor performed a physical inventory, and had the documentation to support the inventory;

however the contractor failed to provide the inventory report to the PA. As a corrective action,

the contractor provided the report of physical inventory results, and initiated an automated

reminder to do so in the future). For a deficiency identified based on a statistically significant

number of defects identified during statistical testing (i.e., the number of defects exceeded the

threshold to reject the lot based on population size), the corrective action must apply to the

population as a whole and may not be limited to the defective samples only. Generally, a

contractor will not be able to correct a statistically significant deficiency during the PMSA,

unless the contractor has a very small quantity of Government property. In all cases, the

corrective actions must be sufficient to not only correct the current defects, but to also to prevent

recurrence of the noncompliance.

13.3.2. PAs will issue Level II CARs only after the ACO has made a final

Property Business System determination that there are no potentially significant deficiencies. If

both potentially significant deficiencies and non-significant deficiencies are identified during the

property business system review, the PA will issue a Level II CAR for the non-significant

deficiencies after the ACO issues an initial determination letter. Resident PAs may coordinate

CHAPTER 1 – PROCESS

informally with the ACO to receive concurrence regarding potential significance for findings

reported on interim Business System Analysis Summaries.

13.3.3. PAs will issue a single CAR for all noncompliances of the same

significance. For example, if a contractor has one deficiency that was completely corrected

during the PMSA, six noncompliances determined by the ACO to be nonsignificant, and one

significant deficiency, the contractor would receive one level I CAR, one level II CAR

addressing each of the deficiencies identified, and one draft level III CAR.

13.3.4. PAs will reference any active CAR by including the associated CAR

number in the Notes field on the CPM screen in CPAS.

13.4. Review Contractor Corrective Action Plans.

13.4.1. PAs support ACOs in reviewing contractor corrective action plans

submitted in response to level III/IV CARs. PAs must monitor corrective actions as contractors

implement those corrective actions, and evaluate the effectiveness of the contractor’s corrective

action plan.

13.4.2. PAs review contractor corrective action plans for level II CARs in

accordance with the guidance in DCMA-MAN 2303-01, “Surveillance.” Proposed corrective

action plans that do not adequately address the noncompliance will be rejected, and the

contractor will be required to submit an updated plan. If the contractor’s proposed corrective

action plan implementation timeframe exceeds 90 calendar days, and the contractor is unable or

unwilling to shorten their correction timeframe, the PA will notify their first level supervisor

who will elevate the matter to the cognizant GCPG Regional Director for visibility. Timely

implementation of corrective actions, and testing of those corrections, is imperative to protect the

Government against unnecessary risk.

13.4.3. PAs will upload corrective action plans submitted by the contractor, as

well as documentation regarding CAP acceptability to the PDREP CAR application.

13.4.4. PAs will make monthly status updates for all outstanding CARs in the

PDREP CAR application.

13.4.5. PAs will pursue CAR escalation in accordance with the guidance in

DCMA-MAN 2303-01, “Surveillance” in circumstances where the contractor fails to submit an

adequate CAP, or fails to implement an acceptable corrective action plan.

13.5. All level II and higher CARs require testing by the PA to verify that the contractor

has effectively implemented any proposed corrective action plan, and that the implementation of

the plan is sufficient to both correct the immediate deficiency, and to prevent recurrences of the

same noncompliance. PAs must validate correction of Level I CARs before closing the CAR.

CARs may not be closed prior to testing by the PA to validate that the contractor has

successfully implemented the corrective action. Prior to closing a CAR, a PA must also seek

CHAPTER 1 – PROCESS

concurrence from the first level supervisor that the PA’s testing was sufficient to support such a

determination.

13.5.1. The extent of the PA’s reanalysis will vary based on the circumstances

and nature of the initial finding. The PA will use statistical testing in all cases where it would be

appropriate for testing the same element in a regularly scheduled PMSA. See chapter 2 of this

Guidebook for guidance on testing methodology.

13.5.2. In all cases, the PA must validate successful implementation of corrective

actions as soon as possible after the contractor reports that corrective actions have been fully

implemented. Validation of correction of deficiencies identified in CARs take precedence over

all other PA work duties.

13.5.2.1. For transactional elements, the PA should only perform an

assessment after there are sufficient transactions to test. This will generally occur at least 90

calendar days, but no more than 120 calendar days, after the contractor reports that its corrective

action plan has been completed. Because the reanalysis tests the success of the corrective action

plan’s implementation, only transactions that occur after the corrective actions are completed

will be included in a reanalysis population, unless the reanalysis is performed concurrently with

a regularly scheduled PMSA. For those deficiencies identified in a level II CAR, the PA must

perform the reanalysis within 180 calendar days of issuance of the ACO’s final determination.

The PA will work with their first level supervisor to obtain written approval from the Regional

Director if there are circumstances that prevent a reanalysis from being performed within the

aforementioned timeframe. If it is unlikely that the contractor will have sufficient transactions to

support an assessment in a reasonable amount of time after completion of the contractor’s

corrective action (for example, the finding is in an element that is not currently applicable to the

contractor’s property management system), the PA may perform the verification based on

whether there is a reasonable expectation that the corrective actions taken would likely prevent

further deficiencies. If the element becomes applicable in the future, the PA must test the

element during the next scheduled PMSA.

13.5.2.2. For elements that are not tested based on transactional data, the

PA must validate the success of the corrective actions as soon as possible upon notification from

the contractor that those corrective actions have been fully implemented.

13.5.2.3. The PA must document validation of successful implementation

of corrective actions in an Audit Report and Business System Analysis Summary, and provide

them to the ACO upon completion, regardless of whether the initial finding of noncompliance

was discovered during a PMSA. The PA will load all files, to include work papers and other

support documentation, in CPAS under the associated reanalysis tab. If the ACO elects not to

send an updated notification letter after the completion of a reanalysis to a contractor with only

nonsignificant deficiencies, the PA will use the date that the CAR is closed as the results notified

date on the PMSA reanalysis tab in CPAS.

13.5.2.4. The PA must notify the ACO if additional deficiencies or

unsatisfactory implementation of the contractor’s corrective action is identified. The PA will

CHAPTER 1 – PROCESS

document this determination in an Audit Report and Business System Analysis Summary, and

provide these business system reports to the ACO. All files, to include work papers and other

support documentation are to be loaded in CPAS under the associated reanalysis tab, and a

second reanalysis tab will be generated. If the contractor fails to successfully implement

corrective actions, the PA will pursue escalation of the CAR following the procedures set out in

DCMA Manual 2303-01, “Surveillance.”

13.6. If a contractor identifies a deficiency in the property management system during its

self assessment, and takes appropriate and effective corrective action, the PA will not issue a

CAR unless the PA later determines that the contractor’s corrective action is ineffective. That

said, a contractor may not use self-identification of a deficiency to circumvent the Contractor

Business System process. If the contractor fails to notify the PA of a deficiency until after the

contractor has received the PMSA notification letter, the PA will include that deficiency in their

Audit Report and Business System Analysis Summary.

13.7. PAs must document CARs using the CAR module in the Product Data Reporting

and Evaluation (PDREP) application, and are expected to upload all relevant documentation,

(e.g., the contractor’s root cause analysis and corrective action plan and written communication

regarding the acceptability of that corrective action plan), as attachments within the tool. When

documenting a CAR for a noncompliance that is not contract specific, the PA will enter the

prime contract with the largest dollar value in the “Contract Number” field, include the

statement, “See attached listing for additional contract numbers associated with this CAR” in the

“Executive Summary” field, and then upload a list of all contracts included in the PMSA as an

attachment to the CAR. If a contractor has fewer than 10 contracts with property administered

by DCMA, the PA may enter the contracts using the “Add Contract” feature, rather than

uploading a list. Additionally, PAs will provide status updates within the tool at least once every

30 days. PAs must not delete previously entered comments.

13.8. The PA will recommend that the ACO revoke the contractor’s limited risk of loss

in circumstances when the ACO has disapproved the contractor’s property management system,

using the template located on the GCPG page on the DoD365 website.

14.0. ENSURE CONTRACTOR REPORTING OF PROPERTY LOSS. Property loss

reporting includes losses of any kind, including damage and those property losses that occur

under contracts containing DFARS 252.228-7001, “Ground-and-Flight Risk Clause (GFRC).”

When the contract contains the GFRC and the Government Flight Representative (GFR) or

alternate has determined liability and provided the recommendation to the ACO, the PA must

ensure the Property Loss Function in the PIEE GFP Module is properly updated.

14.1. Unless otherwise approved in writing by the PA, contractors are required to

investigate, disclose, and report all incidents of Government property loss as soon as the facts are

known.

14.1.1. The PA may determine that it is in the Government’s best interest to

allow for an alternate reporting schedule, and agree to contractor reporting on a regularly

scheduled basis, such as monthly or quarterly, except for losses involving sensitive property.

CHAPTER 1 – PROCESS

PAs may not approve contractor reporting of recognized losses less frequently than quarterly.

The PA must approve a contractor’s alternate reporting schedule (i.e., other than as soon as the

facts are known) in writing. The PA will ensure that the contractor clearly addresses the

circumstances, defining property and classes of property, subject to reporting on an alternate

schedule, in its property management procedures.

14.1.2. If the contractor is allowed to report the loss of low risk property on a less

frequent basis, the PA must closely track those losses to look for trends and to ensure that there

is no increase in the amount of property lost in excess of what would be anticipated if the losses

were not reported on an alternate schedule.

14.1.3. With the exception of normal and reasonable inventory adjustments, as

agreed to by the contractor and the PA in accordance with DFARS 252.245-7002 “Reporting

Loss of Government Property,” PAs may not excuse contractors from reporting property loss

regardless of the property value. Contractor reporting is required for all incidents of property

loss, to include those that may be considered workmanship damage (i.e., damage to Government

property that reduces the Government’s expected benefit, and does not fall under the category of

manufacturing defects). These losses must be reviewed by the PA so that the PA has visibility of

any trends. Additionally, adjudicating these losses ensures that the contractor is accurately

identifying root causes and mitigating potential future losses appropriately. When suspected

workmanship damage occurs to aircraft and DFARS 252.228-7001 is included in the contract,

the PA will consult with the GFR, the cognizant ACO, and their assigned legal counsel.

14.1.4. PAs must ensure that contractors provide the required information

prescribed at FAR 52.245-1(f)(1)(vii)(B)(1) through (12) in the Property Loss Function in the

PIEE GFP Module, regardless of reporting frequency. Contractors must be able to support all

data included in property loss reports, to include acquisition value, repair cost, and any other

proposed intrinsic values that the contractor would like the PA to consider.

14.2. PAs must report all incidents of property loss:

14.2.1. To DCMA-DCS (Security Division) and Defense Counterintelligence and

Security Agency (DCSA) when Government property contains, or potentially contains, sensitive

or classified data.

14.2.2. To DCMA-DCS, DCSA, and the appropriate law enforcement agency,

when Government property contains arms, ammunition, or explosives.

15.0. EVALUATE CONTRACTOR RESPONSIBILITY AND LIABILITY FOR

PROPERTY LOSS.

15.1. The PA must evaluate property loss reports from the contractor upon receipt, and

within 10 days reject cases that do not:

CHAPTER 1 – PROCESS

15.1.1. Involve property that meets the FAR 52.245-1(a) definition of

Government property and the DFARS 252.245-7002 definition and reporting criteria for loss of

Government property.

15.1.2. Contain required information identified in FAR 52.245-1(f)(vii)(B)(1)

through (12), and source documents to support the data. Each line item of loss must be reflected.

It is not appropriate for a contractor to state that they have “1 Lot of various items,” because this

does not allow for IUID to be updated or for future updates to be made in the event that items are

later located.

15.2. Insufficient information in contractor property loss report. PAs must inform the

contractor in writing, clearly describing which information is insufficient, and provide the

contractor with a suspense for resubmittal. PAs will monitor the contractor’s response to ensure

the loss is correctly reported, and will follow up with the contractor if they do not meet the

timeframe identified in the rejection. Additionally, if the reported loss does not meet the

definition and reporting criteria for “loss of Government property,” as defined in FAR 45.101,

PAs must inform the contractor in writing of the reason for the rejection and have the contractor

withdraw the case.

15.3. Within 90 calendar days of receipt of an acceptable property loss report from the

contractor, the PA must:

15.3.1. Review the contract terms and conditions to determine whether the

contract specifies that the risk of loss is assumed by the Government or the contractor. If one or

more subcontractors contributed to or caused the loss, the PA will assess the extent of

subcontractor responsibility and liability. The PA will consider whether the loss occurred at the

subcontractor, and review the terms and conditions flowed down in the subcontract agreement

(e.g., if the prime contractor flowed down full risk of loss in the subcontract, the prime contractor

would be expected to enforce those terms and conditions, and secure reimbursement to be passed

on to the Government).

15.3.2. Evaluate the facts concerning any payment the contractor may receive or

be entitled to receive for the loss from a third party, including whether the loss is covered by

insurance or the contractor was (or expects to be) otherwise reimbursed. If the contractor

expects to be reimbursed, then the PA must ensure that the contractor pursues that

reimbursement.

15.3.2.1. Potential Insurance Coverage Or Other Reimbursement.

Whether a loss is covered by insurance or whether the contractor will be otherwise reimbursed

may be in doubt for a considerable period of time. For example, an insurance claim may be in

dispute or the subject of litigation. In cases where the contractor is expected to receive

reimbursement, but that reimbursement has not yet been received, the PA should reject the loss

case until the contractor has either secured reimbursement or determined that there will be no

reimbursement. The PA will encourage the contractor to ensure that all facts regarding the loss,

to include the potential for reimbursement are known prior to submission of a formal loss report.

CHAPTER 1 – PROCESS

15.3.2.2. The Government does not have privity of contract with

subcontractors. Accordingly, the Government cannot hold a subcontractor liable for the loss of

Government property under the terms of the prime contract. All liability determinations are

made based on the terms and conditions of the prime contract. Regardless of whether the prime

has flowed down full or limited risk of loss to a subcontractor, the prime contractor, as part of its

contractual responsibility to assure its subcontracts are properly administered, is responsible for

investigating all losses, determining whether the subcontractor is liable, ensuring the

subcontractor takes appropriate corrective action and, if appropriate, requiring the subcontractor

to reimburse the prime for the loss.

15.3.2.2.1. If the prime contractor fails to take timely, effective,

good faith efforts to enforce the liability provision in its subcontracts, the cognizant PA for the

prime contract will submit a Business System Analysis Summary (BSAS) and Audit Report to

the ACO identifying the deficiency as a failure to assure that subcontractors are properly

administered.

15.3.2..2. If the subcontract does not have any provision

addressing liability for loss, the cognizant prime contractor PA should seek the advice of

assigned legal counsel to determine whether the prime contractor has a reasonable expectation of

reimbursement from the subcontractor.

15.3.3. The PA will determine if property loss was caused by deficiencies in the

contractor’s property management system, (e.g., if the contractor is not screening for excess

property, and therefore has property on-hand that is not required for contract performance, and

regularly reports losses that do not require repair or replacement, those losses could be traced to

their failure to declare and dispose of excess property in a timely manner). If the loss stems from

issues in the contractor’s property management system, the PA will document the

noncompliance in accordance with paragraph 13 of this Guidebook.

15.3.4. If DFARS 252.228-7001, “Ground and Flight Risk,” is in the contract,

and the property loss occurred to an aircraft in the open (as defined in DFARS 252.228-7001),

the PA must forward the case to the GFR or alternate for adjudication. The GFR or alternate is

responsible for making a liability recommendation to ACO.

15.4. If the PA concludes, after application of the contract terms and conditions to the

facts, that the risk of loss is assumed by the Government, the PA must relieve the contractor of

responsibility and liability in writing, consistent with Certificate of Appointment authority, and

provide the ACO with a copy of that determination. PAs will note that relief of responsibility is

only appropriate in situations where the contractor is no longer in possession of the property. If

the property remains in the possession of the contractor, (i.e., damaged property, or residual

destroyed property), only relief of liability will be granted, as the contractor is responsible for

disposing of the property in accordance with the terms and conditions of the contract. An IPMS

does not have a Certificate of Appointment, and would therefore need to have a PA make the

liability determination to relieve a contractor for loss of Government property or make the

recommendation to the ACO that the contractor be held liable for the loss.

CHAPTER 1 – PROCESS

15.5. If the PA determines, based upon the criteria identified in FAR 52.245-1(h), that

the potential property loss was a risk imposed upon the contractor, the PA must recommend one

of the following alternatives to the ACO in writing using the Property Loss Liability

Recommendation Letter Template:

• Hold the contractor fully or partially responsible and liable for the property’s unit

acquisition cost. If replacement is required, and the cost to replace the property

exceeds the unit acquisition cost, the PA will recommend the contractor be held

responsible for the higher liability amount;

• Authorize the contractor to repair or replace the property;

• Determine a form of consideration appropriate for the circumstances.

15.6. PAs will maintain data integrity within the Property Loss Function in the PIEE

GFP Module to document results of evaluations, analyses, investigations, recommendations and

ACO determinations. PAs will regularly upload relevant support documentation (emails,

memoranda, letters), and are responsible for entering status updates on a monthly basis until the

case is completed and closed. ACO and GFR status updates may be made directly within the

Property Loss Function in the PIEE GFP Module or via email. It is, however, ultimately the

PA’s responsibility to ensure that all updates are documented in the Property Loss Function in

the PIEE GFP Module. For contractors that do not have a contractual requirement to use the

Property Loss Function in the PIEE GFP Module, the PA may need to enter the loss report on the

contractor’s behalf. PAs must not upload any sensitive or proprietary information to the

Property Loss Function in the PIEE GFP Module.

15.6.1. PAs must upload all relevant support documentation relating to the PL

case. Minimum documentation to be loaded includes the Property Loss MFR, the Property Loss

Checklist, a Property Loss Liability Recommendation Letter (if applicable), and any relevant

emails or documents provided by the contractor. All documentation must be completed and

loaded to the Property Loss Function in the PIEE GFP Module upon the PA’s determination to

either relieve the contractor of liability or recommend that the ACO hold the contractor liable.

The PA will enter the ACO’s contact information in the PL case to ensure that the ACO receives

automated email notifications regarding status changes.

15.6.2. If the ACO concurs with the PA’s recommendation of liability, the PA

will also upload the demand letter and any evidence of restitution and close the loss case within

10 calendar days of receiving the documentation from the ACO in the Property Loss Function in

the PIEE GFP Module.

15.7. Acquisition Cost, Liability Value, Repair Cost, And Government And Contractor

Portions. Accurately reflecting the appropriate dollar values in the correct fields is imperative

for the Government Contract Property Group’s data integrity, and ability to produce useful and

reliable information for our customers. The liability value depends on the type of loss, and

whether the item needs to be replaced. If replacement is needed, this would be the cost to

replace; if the item is damaged and requires repair, this would be the repair cost.

CHAPTER 1 – PROCESS

15.7.1. In all cases, the contractor is expected to provide support for applicable

values. Acquisition cost must be documented using an invoice, receipt, purchase order, GFP list,

or similar documentation. Proposed repair costs need to be supported by the contractor.

Additionally, if the contractor believes that the intrinsic value of an item is less than the initial

acquisition cost, this position needs to be supported. If the contractor’s position is not

convincing, the PA need not accept it. PAs will keep in mind that the intrinsic value could be

greater than the acquisition cost, depending on the circumstances and current or future need. The

PA will use the appropriate intrinsic value as the liability value, and will include it with any

liability recommendations forwarded to the ACO.

15.7.2. The Government and contractor portions must add up to the liability value

for each item, and must be updated for each line item before relieving the contractor of

stewardship and/or responsibility, or recommending liability. The amount assessed field is

mandatory when recommending liability, and must equal the liability value. If an ACO

ultimately holds a contractor liable for a different amount than recommended, the PA must

update the amount assessed before closing the loss case.

15.9. The PA will determine whether a property loss was caused by deficiencies in the

contractor’s property management system. If that is the case, the PA will issue a CAR,

following the guidance in paragraph 13 of this Guidebook. Deficiencies in the contractor’s

system may have been previously documented, or they could be uncovered as a result of the

property loss investigation. For example, the PA must pay special attention to whether the

contractor regularly identifies losses of property that does not require repair or replacement.

This is an indicator of a potential weakness in the contractor’s Declaration of Excess process.

15.10. PAs will monitor and document the performance of contractor corrective actions

resulting from property loss cases, exercising good judgment in determining the nature and

extent of the appropriate review process. Infrequent losses of low value property may require

nothing more than a review of the contractor’s proposed corrective action to confirm it is

appropriate and adequate. Losses of high value property, recurring losses, and those indicative of

deficiencies in the contractor’s property management system will require more extensive reviews

and more formal documentation. Such reviews may also require the PA to make site visits. In

all cases, the PA will ensure that:

15.10.1. The corrective action taken or proposed is appropriate and adequate,

15.10.2. The contractor performs the corrective action, and

15.10.3. The corrective action was effective and will prevent recurrence.

15.11. The PA will not keep a property loss case open solely because corrective action

has not been completed if the PA has determined that the proposed corrective actions are likely

to be successful. If the proposed corrective actions are not expected to correct the conditions that

led to the loss, the PA will require the contractor to resubmit an acceptable corrective action.

CHAPTER 1 – PROCESS

15.12. The PA must ensure proper disposition is completed for any property that remains

after a liability determination has been made. Relief of liability and stewardship for damaged or

destroyed property does not change title to that property. If the contractor is not repairing the

property for further use under the contract, then the PA must ensure that the contractor reports

the property to the Plant Clearance Capability in the PIEE GFP Module.

15.13. Property Found After Relief is Granted. The contractor is required to report when

any GP that had previously been reported as lost is later found. The PA will re-open the loss

case, and update the item that was found with the found date, quantity found, and any change to

the intrinsic value of the loss case, if all items were not found upon receipt of such a report. The

PA will consult with the ACO and the ACO’s assigned legal counsel to determine a course of

action if property for which the contractor has been held liable is later found.

16.0. PERFORM PROPERTY ADMINISTRATION CLOSEOUT.

16.1. PAs will perform contract property closeout actions when contract performance is

complete, which generally aligns with the final delivery date, and after verification and

completion of:

• Proper disposition of all accountable property by the contractor, including plant

clearance resolution;

• Adjudication by the Government of any outstanding property loss cases;

• Termination of Document Control Number, if applicable for contracts delegated from

other Government agencies;

• Receipt and verification of final physical inventory results, unless waived in writing

by the PA;

• Receipt of a property close out notification in writing from the contractor stating that

all closeout actions are complete, and that there is no residual property accountable to

the contract. PAs will upload the close out notification from the contractor in IWMS.

16.2. PAs must conduct MOCAS property administration closeout within 10 calendar

days of receipt of property closeout notification from the contractor via the CPAS eTool.

Clicking on the CPAS “Close Contract” icon within the “Contract History Page” on the

contractor’s main CPM screen will generate a MOCAS R9 “55” code, indicating property

administration is closed. PAs are expected to verify that contract closeout actions taken in CPAS

lead to updates within MOCAS. PAs can do this by verifying that changes are processed by

reviewing MOCAS Submit History in CPAS after submitting a closeout transaction in CPAS.

Possible reasons for a MOCAS submit failure include the following: scheduled updates where

the system is down for processing (nightly, monthly, and end-of-year), expired MOCAS

password, wrong MOCAS password input into CPAS, incorrect geographic MOC selected for

the CAGE code, MOCAS account revocation (due to inactivity), and PA attempts to perform

transactions within CPAS while logged into MOCAS. If contract closeout fails for one of the

reasons above, the PA is expected to correct the underlying issue, or await system availability,

and resubmit the transaction.

CHAPTER 1 – PROCESS

16.3. Prior to closing property administration in CPAS for a contractor’s property

management system, PAs will pull a MOCAS report to ensure that there are no DCMA

administered contracts with potential property administration requirements without an associated

55 remark. The 55 remark in MOCAS is used to indicate that all property closeout actions have

been completed on a contract. This ensures that there are no contracts that should have been

accepted for administration that still require oversight.

16.4. PAs will review their workload in CPAS at least monthly to identify contracts

nearing their final scheduled delivery and production completion dates. For those contracts that

have passed the final delivery date indicated in MOCAS, the PA will send the contractor a

request for status indicating the contract number or numbers, and referencing the closeout

requirements identified in FAR 52.245-1(j)(3). As a reminder, it is the contractor’s

responsibility to have a process in place to identify contracts nearing completion, and proactively

begin closeout actions in order to meet the closeout timeframes described within 52.245-1(j). If

a contractor is relying on the PA to tell the contractor when to initiate closeout actions, the

contractor’s property management system is not adequate to satisfy the requirements of FAR

52.245-1.

16.5. If the contractor does not perform property closeout activities in accordance with

its procedures and within the timeframes identified in FAR 52.245-1(j)(3), the PA will issue a

CAR requiring correction regardless of whether the delays are identified during a PMSA, unless

the following exception applies:

16.5.1. If the PA identifies that a contractor is retaining property for more than 60

days past the contract’s final delivery date (or 30 days beyond when the property was identified

as excess to the needs of a contract), and that contractor is able to show that they have

proactively and regularly contacted the PCO to a request a transfer of property to another

contract, the PA will assist the contractor with getting resolution. Proactive and regular

communication means upon discovery, and at least once within the 30 days prior to identification

by the PA.

16.5.2. Upon the PA’s identification of contracts for which property closeout

actions are being delayed by lack of PCO response, the PA will elevate the issue to their First

Level Supervisor for further elevation to the cognizant Government Contract Property Group

Regional Director. The Regional Directors will then contact the buying commands to request

resolution. During this process, the PA will not request corrective actions from the contractor for

property closeout for any affected contract, unless other noncompliances exist. If the contractor

cannot perform property closeout activities within a reasonable amount of time after the FDD for

reasons outside of the contractor’s control that result in a need to retain the property for ongoing

work that must be performed under the contract, the PA will document the delay rationale in

CPAS CPM comments PAs will remove comments when the closeout status changes.

17.0 SPECIAL CONSIDERATIONS.

17.1. Grants and Other Agreements: Grants and other agreements will be administered

according to the terms and conditions included in those agreements, and the relevant regulations

CHAPTER 1 – PROCESS

referenced therein. The most common regulation for grants and other agreements is the DoD

Grant and Agreement Regulations (DoDGARs). Additional guidance is located in DCMA-MAN

2501-08, “Grants, Cooperative Agreements, and Other Transactions.” PAs will document their

reviews in the same manner used for other PMSAs, utilizing the standard Business System

Analysis Summary and Audit Report templates, adjusting references as necessary.

17.2. Sensitive Property:

17.2.1. FAR clause 52.245-1(a) defines sensitive property as:

. . . property potentially dangerous to the public safety or security if stolen, lost,

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 waste, or precious metals.

17.2.2. Table 61 of Volume 10 of DoD 4100.39-M further designates sensitive

property by providing for the assignment of a Controlled Item Inventory Code (CIIC) to sensitive

items. If the Government property does not have a CIIC, as described below, it is not considered

sensitive for the purposes of property oversight, and the PA will not be include the property in

the sensitive populations when performing a PMSA. The item codes are as follows:

• Highest Sensitivity (Category I) - Nonnuclear missiles and rockets in a ready-to-

fire configuration (for example, Hamlet, Redeye, Stinger, Dragon, LAW, and

Viper) and explosive rounds for nonnuclear missiles and rockets. This category

also applies in situations where the launcher (tube) and the explosive rounds,

though not in a ready-to-fire configuration, are jointly stored or transported.

• High Sensitivity (Category II) - Arms, ammunition, and explosives.

• Moderate Sensitivity (Category III) - Arms, ammunition, and explosives.

• Low Sensitivity (Category IV) - Arms, ammunition, and explosives.

• Highest Sensitivity (Category I) - Arms, ammunition, and explosives with a

physical security classification of Secret.

• Highest Sensitivity (Category I) - Arms, ammunition, and explosives with a

physical security classification of Confidential.

• High Sensitivity (Category II) - Arms, ammunition, and explosives with a

physical security classification of Confidential.

• Category C - Moderate Sensitivity (Category III) and Low Sensitivity (Category

IV) - confidential arms, ammunition, and explosives.

• Category Q - An item that is a drug or other substance determined by the

Administrator, Drug Enforcement Administration, Department of Justice, to be

designated Schedule Symbol III, IV, and V as defined in the Controlled Substance

Act of 1970. Other items requiring secure storage.

• Category R - Precious metals, a drug or other controlled substance designated as a

Schedule I or II item in accordance with the Controlled Substance Act of 1970.

Other selected sensitive items requiring storage in a vault or safe.

• Category $ - Identifies Nuclear Weapons Use Control (UC) Ground Equipment

which is CIIC unclassified but may require special controls. Use Control Ground

CHAPTER 1 – PROCESS

Equipment is described as recorders, verifiers, adapters, power supplies, cables,

programmers, monitors, controllers, code processors, power converters,

computers and data modules which perform a Nuclear Weapon Use Control

Function.

17.2.3. When a contract identifies sensitive property, or such property is reported

by the contractor, PAs will perform annual reviews of Written Procedures, Receiving,

Discrepancies Incident to Shipment, Records, Physical Inventory, Declaration of Excess,

Consumption, Storage, Storage Commingling, and Disposal. The reviews of Records, Storage,

and Storage Commingling must be performed on-site. All other reviews may be performed

remotely.

17.2.4. PAs will conduct a standard PMSA no later than 6 months after sensitive

property is initially received by a contractor.

17.2.5. The on-site review requirement for sensitive property may be waived by

the cognizant Regional Property Director based on recommendation from the PA’s first level

supervisor. Any waiver must be in writing, and uploaded to the current PMSA tab in CPAS.

Waivers must be renewed each year. It is recommended, however, that PAs enlist the assistance

of other functional specialists to assist in the on-site portion of the review rather than request a

waiver, because the annual review requirement is based on the additional risk that sensitive

property poses.

17.3. Approving Receipt and Issue in Lieu of Formal Records (R&I): PAs have the

authority to allow a contractor to use an R&I system in place of formal property records for

Government material in accordance with FAR 52.245-1(f)(1)(iii)(B). Contracts that include

DFARS 252.242-7004, “Material Management and Accounting System” (MMAS) cannot be

granted R&I approvals.

17.3.1. Prior to approving an R&I system, PAs will require that the contractor

provide written procedures that clearly identify how the contractor will document receipt,

issuance, and use of the material within its system. The procedures must also address how and

when material that was issued, but not used, will be identified and added to the contractor’s

formal records. As a reminder, if a contractor is purchasing material from a vendor that requires

minimum purchase quantities that exceed the quantity that the contractor requires, the procedures

must describe how the contractor will create a formal record and document the transaction. If

there are any limitations to the types of material that will be included in the R&I system, the

procedures must define those limitations as well. PAs will note that the R&I system requires

documentation of the actual use of the material in order to be acceptable.

17.3.2. The PA will ensure that the contractor’s procedures clearly identify how

the contractor defines immediate consumption. In order to qualify as immediate, the material

would need to be consumed in less time than it would take to create a formal record. In most

cases, this will be within 5 business days.

CHAPTER 1 – PROCESS

17.3.3. All approvals for R&I will be in writing, signed by a PA with a

Certificate of Appointment, and issued only on a contract-by-contract basis. Blanket approvals

are not allowed.

17.3.4. R&I is not appropriate for production environments, and therefore PAs

may not approve R&I requests for production contracts.

17.4. Waiving the Final Inventory Requirement: PAs have the authority to waive the

final inventory that contractors are required to perform upon contract completion or termination

in accordance with FAR 52.245-1(f)(1)(iv).

17.4.1. PAs will require contractors who wish to have their final inventory

waived to make the waiver request in writing. The PA must only approve waivers in writing,

and the waiver approval must be signed by a PA with a Certificate of Appointment and the first

level supervisor documenting concurrence. PAs are expected to coordinate with the cognizant

PLCO prior to approving a waiver.

17.4.2. Waivers will only be considered for contractors that currently have

approved property management systems, with no outstanding findings of noncompliance in the

elements of Records or Physical Inventory. Additional considerations that PAs should take

account of in reviewing waivers include how recently the last physical inventory was performed,

overall property loss rates, and whether the property is being transferred to a follow-on contract.

Additionally, PAs will not waive final inventories of sensitive Government property.

17.5. Memorandums of Agreement (MOA): PAs will adhere to the terms and conditions

included in any duly signed MOA or direction from Office of the Secretary of Defense. All

active MOAs will be located on the DoD365 website and the Resource Page for DCMA-MAN

2301-01 “Contractor Business Systems.”

17.6. Contractor Scrap Procedures: PAs will coordinate with the PLCO when reviewing

contractor scrap procedures to ensure that the scrap disposal processes, methods, and practices

allow for effective, efficient, and proper disposition of scrap property. Those procedures must

describe how the contractor physically segregates scrap within its storage, along with

descriptions of any special safeguards for sensitive property. If the contractor commingles

commercial and Government scrap, the contractor’s procedures must describe how the proceeds

of scrap sales are divided. Additionally, the procedures must describe how the contractor will

select scrap vendors, and how the contractor will document the crediting of the proceeds of a

scrap sale (i.e., what documentation is provided to prove that payments have been applied

appropriately). PAs will also coordinate with the PLCO when testing the element of Disposal to

ensure that any concerns that the PLCO has related to disposal of scrap are addressed.

17.7. Rent-free Non-interference Use of Government Property: Occasionally, a PCO

will authorize a contractor to use special tooling, special test equipment, or equipment on a

Government contract other than the contract to which it is accountable on a rent-free non-

interference basis. This means that the owning contract always has first priority in the event that

both contracts have conflicting requirements. In these situations, PAs are expected to review the

CHAPTER 1 – PROCESS

use authorizations to determine whether responsibilities are clearly defined. For example, the

agreement should address how any required maintenance is handled and funded, as well as

address potential losses (e.g., if the property is damaged while being used on the contract it is not

accountable to, which contract covers repair costs). PAs will engage with the PCO in

circumstances where the rent-free non-interference use agreement is ambiguous.

17.8. Administration of NASA Contracts: PAs will perform property administration for

delegated NASA contracts with the terms and conditions of the delegation and the Business

Operations Center NASA Business Practice SOP. Additionally, the following conditions apply:

17.8.1. PAs will be aware that the DFARS does not apply to NASA contracts, as

NASA is not a DoD Agency.

17.8.2. PMSAs for NASA contractors with $1M or more in NASA owned

contract property will be performed at least once every 2 years, even if the contractor is

otherwise considered to be low risk.

17.8.3. Unless the contractor has only NASA contracts, the PA will not select

separate NASA only populations to test for any element other than Reports. For the element of

Reports, NASA 1018 forms are a separate population from DoD reports.

17.8.4. Upon completion of a PMSA that includes delegated NASA contracts, the

PA will upload a copy of the Audit Report to the NASA Electronic Submission System (NESS)

under the PMSA Documents tab, and add all requested information under the PMSA Summary

and Outcomes tabs. PAs will not provide the Business System Analysis Summary. PAs will not

generate a Business System Analysis Summary when the contractor has only NASA contracts, as

there is no DCMA ACO with cognizance over the acceptability of the property management

system.

17.8.5. PAs will investigate and adjudicate losses of NASA owned Government

contract property accountable to delegated contracts, and relieve the contractor of stewardship

and liability if appropriate under the terms and conditions of the contract. All documentation, to

include the contractor’s relief request, any memorandums supporting the determination to relieve

the contractor, and a copy of the relief document, will be loaded into the NESS Contracts under

the Document tab within 90 days of receipt of an acceptable loss report from the contractor. If

the contractor should be held liable under the terms and conditions of the contract, the PA will

provide that recommendation in writing to the NASA Contracting Officer, with a copy to the

NASA Industrial Property Officer. Recommendations to hold the contractor liable will include

all documentation that the NASA Contracting Officer would need to make that determination,

and must also be provided within 90 days of receipt of an acceptable loss report from the

contractor. The PA will provide an interim/informal status of the investigation and adjudication

activities to the IPO by email on a monthly basis until complete.

17.9. Contractor Notifications of Need for Capital Rehabilitation or Replacement of

Government Property. PAs will forward any contractor requests for capital rehabilitation or

replacement of Government property to the assigned ACO.

CHAPTER 2 – PMSA ELEMENT JOB AIDS

CHAPTER 2 – PMSA ELEMENT JOB AIDS 1

PREFACE 3

When evaluating the following elements of property control, PAs will follow the 5

procedures and practices described below to perform testing. The PA will use workpapers to 6

document the analysis and provide support for all conclusions and findings. Files will include 7

worksheets for each element tested, samples of each type of documentation reviewed, and all 8

supporting documentation detailing any defects identified. 9

When sensitive property is involved, PAs will perform annual reviews of the elements of 11

Written Procedures, Receiving, Discrepancies Incident to Shipment, Records, Physical 12

Inventory, Declaration of Excess, Consumption, Storage, Storage Commingling, and Disposal as 13

they apply to sensitive items. The elements of Identification, Records, Storage Commingling, 14

Storage, and potentially Utilization must be tested on-site; all others may be tested remotely. 15

PMSA ELEMENT 1 – WRITTEN PROCEDURES 18

REQUIREMENT: 20

FAR 52.245-1 (f), Contractor plans and systems. 21

(1) Contractors shall establish and implement property management plans, systems, and 22

procedures at the contract, program, site, or entity level to enable the following outcomes: 23

FAR 52.245-1(b), Property management. 24

(1) … the Contractor shall initiate and maintain the processes, systems, procedures, 25

records, and methodologies necessary for effective and efficient control of Government 26

property. 27

BACKGROUND: 28

Written procedures are the blueprint the contractor uses to establish its property 29

management system. In the procedures, the contractor identifies who will do what, when, how, 30

and possibly where to perform an action to control Government property. Contractor personnel 31

should be able to refer to the procedures for guidance and direction for all Government property 32

management tasks. In turn, the procedures provide PAs the criteria by which they will evaluate 33

contractors’ performance and compliance. 34

In order to be considered compliant, procedures must address all applicable contractual 36

requirements, including outcomes (i) through (x) at FAR 52.245-1(f)(1). General policy 37

statements or expressions of intent such as, “The company will comply with all contractual and 38

regulatory requirements regarding the acquisition of Government property” are not acceptable, as 39

this language does not provide direction to the contractor’s workforce describing how those 40

goals will be achieved. Specific directions for procedures for each element of property control 41

are addressed below under each Property Management System Analysis (PMSA) element. 42

CHAPTER 2 – PMSA ELEMENT JOB AIDS

Pursuant to FAR 52.245-1(b)(1), “The Contractor may employ customary commercial 43

practices, voluntary consensus standards, or industry-leading practices and standards that provide 44

effective and efficient Government property management that are necessary and appropriate for 45

the performance of this contract (except where inconsistent with law or regulation).” 46

While the Government Property Clause does not explicitly require a contractor’s 48

procedures to address timeframes for the performance of certain actions, FAR 52.245-1(b)(1) 49

does require the contractor to, “…initiate and maintain… methodologies necessary for effective 50

and efficient control of Government property.” When the timeliness of a particular action is 51

relevant or when the performance of an action has an impact on the maintenance of current 52

records, timeframes are essential for effective and efficient control of Government property. 53

Instead of requiring specific timeframes, the clause uses terms such as “promptly” and 55

“periodically.” Contractors should not simply repeat those terms in their procedures, but specify 56

measurable timeframes to comply with the Government Property Clause. Rather than require the 57

same timeframe for all contractors, application of the Government Property Clause requires that 58

each contractor identify timeframes specific to its situation. The timeframes should be 59

reasonable and suitable for the contractor’s facility, the type of work performed, the 60

classification of property the contractor manages, while lending itself to testing. Reasonable and 61

appropriate timeframes will vary by contract performance requirements and the contractor’s 62

internal processes. 63

Objective, measurable timeframes ensure consistency in contractor performance and in 65

evaluation during a PMSA or a Contractor Self-Assessment. Timeframes provide guidance for 66

those responsible for performing the actions, and a standard for those evaluating that 67

performance. PAs will apply FAR 52.245-1 and other contract terms and conditions, and 68

evaluate whether minor, technical violations of a standard are evidence that Government 69

property is at increased risk, or that the contractor’s property management system is not 70

effectively and efficiently controlling Government property. 71

PAs will ensure that contractor procedures specify timeframes defined by the contractor, 73

for those actions for which timeliness is relevant, or when the performance of an action impacts 74

the accuracy of the records. For example, if a contractor fails to receive property in a timely 75

manner, its records will not be current or accurate, which could impact contract performance. 76

The PA will review the procedures to determine whether the proposed timeframes are reasonable 77

for the actions to be performed. Reasonable and appropriate timeframes will vary by 78

performance requirements; however, PAs are expected to keep in mind the requirement in FAR 79

52.245-1 that records enable a complete, current, auditable record of all transactions, and 80

consider whether the timeframes in the contractor’s written procedures adhere to that standard. 81

Generally, PAs should be looking for reasonable timeframes for the following activities: 83

o Receipt of Government property to include marking of the item as Government 85

owned and the establishment of records upon receipt, 86

o Posting transactions to the record, 87

o Performing maintenance actions, 88

CHAPTER 2 – PMSA ELEMENT JOB AIDS

o Reporting GFP into IUID, 89

o Performing, recording, and disclosing physical inventory results, 90

o Performance and completion of CSA actions, to include reporting results and 91

requesting and performing corrective actions, 92

o Posting of movement transactions, 93

o Recognition, investigation, disclosure, and reporting of loss of Government 94

property, including losses that occur at subcontractor or alternate site locations, 95

o Physically inventorying all property upon contract termination or completion, 96

o Identification, disclosure, reporting, and disposal of property that is excess to 97

contractual needs, 98

o Performing closeout actions and reporting contract property closeout to the PA, 99

o Performing reviews to determine the adequacy of subcontractors’ property 100

management systems, and 101

o Any other actions for which timeliness is relevant or which has an impact on the 102

timely updating of contractor records. 103

104

105

OBJECTIVE: The PA will determine if the contractor’s written procedures: 106

• Promote the outcomes at FAR 52.245-1(f)(1)(i-x); 107

• Address any other contractual requirements relating to Government property; 108

• Provide for adequate control, use, preservation, protection, repair, and maintenance of 109

Government property; and 110

• Effectively and efficiently control Government property. 111

112

POPULATION: Typically, the population is all of the contractor’s written property 113

management procedures. 114

115

The exceptions to this rule are for resident PAs and others who audit large property management 116

systems on a continuous basis over a year or more. Those PAs may choose to evaluate the 117

relevant provisions of the contractor’s procedures concurrent with the review of the related the 118

element. 119

120

Another exception is the annual review of the provisions in the written procedures that apply to 121

sensitive items. The population for such a review would be limited to those procedures. 122

123

Finally, when performing a reanalysis of written procedures, only those procedures identified as 124

being noncompliant would be reviewed. 125

126

SOURCE DOCUMENTS: The contractor’s written property management procedures. 127

128

SUPPORT DOCUMENTS: Contracts to which Government property is accountable and any 129

voluntary consensus standards that are incorporated by reference in the contractor’s procedures. 130

131

SAMPLING: Except as discussed above under “Population” PAs will review 100% of the 132

written procedures. If procedures are reviewed on a continual basis, PAs will review 100% of 133

CHAPTER 2 – PMSA ELEMENT JOB AIDS

the procedures at least once every three years. PAs will ensure that they are reviewing the most 134

current procedure. 135

136

TESTING CONSIDERATIONS: 137

• Determine whether the contractor’s procedures describe the tasks to be performed in 138

sufficient detail so that the responsible contractor employee knows what to do and how to 139

do it. 140

• Verify that the procedures establish reasonable timeframes for those actions for which 141

timeliness is relevant or when the performance of an action has an impact on the 142

timeliness of record updates needed enable complete, current, and auditable records. PAs 143

are expected to engage with the contractor any time that the procedural timeframes are 144

not sufficient to enable effective and efficient control of Government property, and 145

expose the Government to unreasonable risk. 146

• A separate population of all procedures relating to the control of sensitive property that is 147

accountable to contracts administered by DCMA will be used for determining the 148

adequacy of written procedures for sensitive items. If the contractor does not maintain 149

separate procedures for managing sensitive property, ensure that adequate controls for 150

sensitive property are addressed in the overall written procedures. 151

• When sensitive property is involved, PAs will perform annual reviews of the elements of 152

Written Procedures, Receiving, Discrepancies Incident to Shipment, Records, Physical 153

Inventories, Declaration of Excess, Consumption, Storage, Storage Commingling, and 154

Disposal as they apply to sensitive items. 155

156

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 157

NONCOMPLIANCES: 158

• Address whether the procedures describe the tasks to be performed in sufficient detail so 159

that the responsible employee knows what he or she has to do and how and when they are 160

to do it. 161

• Report whether the contractor's procedures for sensitive property are specific and 162

detailed, particularly with regard to the receipt, protection, physical security, periodic 163

inventories, and the immediate reporting and thorough investigation of inventory 164

shortages or losses. Also, discuss whether the procedures are in sufficient detail to reflect 165

special, additional or increased safeguards relating to the acquisition, identification, 166

receipt, records, physical inventory, reports, storage, movement, consumption, utilization, 167

maintenance, subcontractor control, and disposition of sensitive property. 168

• If the contractor has arms, ammunition, and explosives (AA&E) discuss whether the 169

procedures require that the contractor report the loss, theft, damage, or destruction of 170

AA&E immediately by telephone or personal contact to the cognizant DCMA-DCS 171

(Security Division) and Defense Counterintelligence and Security Agency (DCSA) 172

Agent-In-Charge, the Federal Bureau of Investigation Office, Bureau of Alcohol, 173

Tobacco and Firearms, the local police, the PA, and other city and state officials as 174

appropriate. The procedures must require that any loss, theft, damage, or destruction of 175

AA&E be confirmed in writing as soon as possible. The PA will ensure that the 176

contractor has a process to report other sensitive item losses immediately by telephone or 177

personal contact to the PA and confirm them in writing as soon as possible. 178

CHAPTER 2 – PMSA ELEMENT JOB AIDS

PMSA ELEMENT 2 – CONTRACTOR SELF ASSESSMENT 179

180

REQUIREMENT: 181

FAR 52.245-1(b)(4)*, Property management: 182

The Contractor shall establish and maintain procedures necessary to assess its property 183

management system effectiveness and shall perform periodic internal reviews, 184

surveillances, self assessments, or audits. Significant findings or results of such reviews 185

and audits pertaining to Government property shall be made available to the Property 186

Administrator. 187

BACKGROUND: 188

A self assessment process that discovers deficiencies, identifies the root causes, and 189

implements effective corrective action, indicates a healthy property management system. 190

191

Contractor self assessments typically fall under two constructs: 192

193

1. Formal/structured. Based on: 194

• Generally Accepted Government Audit Standards, 195

• DCMA’s traditional approach, 196

• Maturity models—with appropriate process-oriented criteria, 197

• Metrics and statistical process control techniques, or ISO process reviews. Note: 198

ISO audits, internal or external, do not fulfill this requirement, as they do not 199

typically address all of the process requirements set forth in the FAR clause, FAR 200

52.245-1, 201

• International Standards for the Professional Practice of Internal Auditing (Institute 202

of Internal Auditors), or 203

• A combination of the above. 204

205

2. Informal 206

• Less structured; less complex 207

• Walk-throughs 208

• Interviews or discussions with personnel 209

• Double checking property records and documentation 210

211

Contractor self assessments may range from simple reviews or validations to highly 212

complex audits and assessments, depending on the complexity of the contractor’s property 213

management system. It is recognized that small business concerns typically will not have as 214

sophisticated, detailed, and extensive a self assessment program as large business contractors. 215

The PA must use good judgment to ensure that the program provides sufficient oversight of the 216

effectiveness of the contractor’s property management system without needlessly burdening the 217

contractor. If the CSA is not detailed enough to identify potential deficiencies within a 218

contractor’s property management system, then it is not compliant with the Government Property 219

FAR clause requirements. 220

221

222

CHAPTER 2 – PMSA ELEMENT JOB AIDS

If a contractor identifies a deficiency in the property management system during its self 223

assessment and takes appropriate and effective corrective action, the PA will not issue a CAR 224

unless the PA later determines that the contractor’s corrective action is ineffective. That said, a 225

contractor may not use self-identification of a deficiency to circumvent the Contractor Business 226

System process as described in DCMA-MAN 2301-01 “Contractor Business Systems.” If the 227

contractor fails to notify the PA of a deficiency until after the contractor has received the PMSA 228

notification letter, the PA will include that deficiency in the PA’s Audit Report and Business 229

System Analysis Summary. 230

231

* Although this is not a criterion under DFARS 252.245-7003(c), during a PMSA the PA reviews 232

whether the contractor complies with this contractual requirement. 233

234

235

PROCEDURES: 236

The contractor’s self assessment program as set forth in the contractor’s property 237

management system should address each of the applicable Government Property FAR 52.245-1 238

clause mandated property management life-cycle processes. 239

• The PA will determine whether the contractor’s written procedures adequately address: 240

o The review, surveillance, self assessment, or audit methodologies to be used (e.g., 241

Generally Accepted Auditing Standards (GAAS), Maturity Models, Metrics and 242

Statistical Process Control). 243

o The frequency of the review, surveillance, self assessment, or audit, and how that 244

frequency is determined (e.g., risk based). PAs must ensure that the frequency of 245

review of all applicable elements is sufficient to protect the interests of the 246

Government. Generally this would equate to a maximum interval of 3 years, 247

which aligns with the review frequency used by DCMA for low risk elements. 248

o Each of the 22 elements of property management that are applicable to the 249

contractor’s property management system. Note that the contractor is not 250

obligated to directly reference the 22 elements. The contractor may instead refer 251

to the 10 outcomes, or divide the required processes in another manner. 252

o The support documentation and audit evidence required. 253

o The requirement for the PA to be notified of significant findings or results of 254

reviews, surveillances, self assessments, or audits pertaining to Government 255

property, including the contractor’s definition of a significant finding or result. 256

o A clear definition of what the contractor considers to be a significant finding. 257

o The reporting requirements and timely distribution of audit and assessment 258

reports. 259

o The corrective action requirements. 260

OBJECTIVE: The PA will determine whether the contractor maintains procedures and 261

performs periodic internal reviews, surveillances, self assessments, or audits that are sufficient 262

for the both the contractor and the PA to assess the effectiveness of the contractor’s property 263

management system. In accordance with FAR 52.245-1, the contractor must make significant 264

CHAPTER 2 – PMSA ELEMENT JOB AIDS

findings or results of such reviews and audits pertaining to Government property available to the 265

PA. 266

267

POPULATION: The last contractor self assessment performed for each applicable element. 268

This population is used in order to ensure that the contractor is testing all applicable elements in 269

accordance with its procedures. 270

271

SOURCE DOCUMENTS: Self assessment report or other means used by the contractor to 272

document the findings and conclusions of its self assessment. 273

274

SUPPORT DOCUMENTS: Supporting documents for this element include: the contractor’s 275

workpapers, metrics data, and any other documentation used by the contractor in arriving at its 276

findings and conclusions. 277

278

SAMPLING: For both standard and limited PMSAs, PAs will thoroughly review the report or 279

other means used by the contractor to document its findings and conclusions. PAs will use 280

judgmental sampling to review the support documentation the contractor used in arriving at its 281

findings and conclusions. The purpose of the judgmental review is to ensure the contractor used 282

quantitative and qualitative information in evaluating its property management system, and 283

whether that information supports the contractor’s findings and conclusions. 284

285

TESTING CONSIDERATIONS: 286

• When, and how frequently, the contractor performed reviews, surveillances, self 287

assessments, or audits of its property management system. 288

• The method the contractor used to perform the reviews. 289

• How the contractor documented the review, including the contractor’s report and the 290

documentation (e.g., workpapers) supporting the report. 291

• The elements of property management reviewed. 292

• Deficiencies identified and any corrective action taken. 293

• Whether the contractor’s process is sufficient to identify significant findings or results, 294

and make them available to the PA. 295

296

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 297

NONCOMPLIANCES: 298

• Address whether the contractor performs self assessments of its property management 299

system at the time scheduled and in the manner described in its procedures. 300

• Describe and analyze whether the self assessment was sufficient to assess the 301

effectiveness of the property management system. 302

• Describe how and whether the contractor made any significant findings or results 303

available to the PA. 304

305

306

307

CHAPTER 2 – PMSA ELEMENT JOB AIDS

PMSA ELEMENT 3 – ACQUISITION 308

309

REQUIREMENT: 310

FAR 52.245-1(f)(1)(i) Acquisition of Property. “The Contractor shall document that all property 311

was acquired consistent with its engineering, production planning, and property control 312

operations.” 313

314

BACKGROUND: 315

The element of Acquisition applies to actions taken by the contractor to obtain 316

Government property. Broadly speaking, contractors may take such actions in two ways: 317

318

• By acquiring property under cost-type, time-and-material, or fixed-price contracts with 319

cost reimbursement CLINS provided the contractor is entitled to be reimbursed for the 320

cost of the property as a direct item of cost. This is generally referred to as contractor-321

acquired property, or “CAP” 322

• By acquiring Government-furnished property (GFP) via MILSTRIP. 323

324

Contractors may acquire property in several different ways: 325

326

• The contractor may issue a purchase order to a supplier or vendor and purchase the 327

property. 328

• Fabricating items in‐house. 329

• Issuing items from contractor‐owned stores/stock and stockrooms for use on the 330

contract. 331

• A credit-debit transaction transferring accountability from one contract to another. 332

333

Typically, when a contractor needs property to perform a contract, the contractor submits 334

a requisition to its purchasing department. If the contractor determines that acquiring the 335

requisitioned item is consistent with the contractor’s policy and procedures, the item is purchased 336

from vendors or suppliers by use of a purchase order. Alternatively, contractors may use 337

material transfer documents to transfer material from the contractor's own stock to Government 338

stock for use on the contract. Less frequently, contractors use petty cash vouchers or credit cards 339

for very small, infrequent purchases. The contractor’s purchasing system must include the 340

necessary controls to assure that quantities purchased are reasonable according to the contract 341

type and scope, that documentation is adequate and consistent, and that performance of 342

acquisition actions is timely. 343

344

345

PAs will review FAR Part 31 for regulations related to acceptable costs that may be 346

charged to a contract. This FAR part describes the requirements for allowability, allocability, 347

and reasonableness of charges. 348

349

Cost Accounting Standards are the set of rules regarding cost accounting for Government 350

contracts, and are promulgated by the Cost Accounting Standards Board. Certain contractors 351

and subcontractors are required to comply with Cost Accounting Standards. Contracts subject to 352

Cost Accounting Standards apply a requirement upon the contractor to disclose in writing, and 353

CHAPTER 2 – PMSA ELEMENT JOB AIDS

follow consistently, cost accounting practices. The Disclosure Statement is how the contractor 354

discloses its accounting practices to the Government, including how the contractor charges 355

specific types of costs. For example, like items, purchased for use in like manner, must be 356

charged in the same way. PAs must have access to, read, and understand contractors’ Disclosure 357

Statements to effectively evaluate contractors’ property management systems. 358

359

Contractors are ordinarily required to possess their own general-purpose equipment for 360

the performance of Government contracts. The Government may furnish equipment to 361

contractors only as specified as in FAR 45.102. Under cost-reimbursement type contracts, 362

contractors may only acquire equipment, where title vests in the Government, when that action 363

is consistent with their Cost Accounting Standards Disclosure Statement or Generally Accepted 364

Accounting Principles. See Cost Accounting Standards 402 and 404. This is an area where 365

PAs may request the assistance of the ACO and DCAA to ensure consistent application of the 366

FAR and Cost Accounting Standards rules. 367

368

While PAs are not expected to perform detailed reviews of contractors’ cost accounting 369

systems, they must be knowledgeable about the cost accounting principles discussed above. 370

When costs charged to Government contracts do not appear to be reasonable, allowable, and 371

allocable per the requirements in FAR Part 31, Cost Principles, the Allowable Cost and Payment 372

Clause at FAR 52.216-7, and the Cost Accounting Standards (CAS), PAs must report potential 373

noncompliances or issues to the ACO. If costs for items appear to be unallowable, the PA will 374

notify the ACO administering the contract with a recommendation for cost disallowance. The 375

recommendation will include thorough documentation of the PA’s findings. If the PA 376

determines that a systemic problem exists, the PA must forward a recommendation to the ACO 377

and request a Defense Contract Audit Agency (DCAA) review for possible impact to the 378

contractor Disclosure Statement as applicable. 379

380

The element of Acquisition does not apply to all Government property. GFP that is 381

“pushed” to the contractor through the contract is not subject to testing for the element of 382

Acquisition. For example, GFP that is included on a GFP attachment based on the PCO’s 383

determination to provide the property to the contractor would not fall under the element of 384

Acquisition. This example includes property transferred between contracts via modification. 385

Also, property contractors acquire in performance of fixed-price contracts for which they are not 386

entitled to be reimbursed as a direct item of cost belongs to the contractor, and is not subject to 387

testing for the element of Acquisition. 388

389

Only the PCO may authorize the contractor to requisition using MILSTRIP (i.e., pulled 390

GFP). The PA does not have the authority to issue such authorization. The authorization may be 391

granted in the contract or separately, by contract modification or authorization of the cognizant 392

PCO for the applicable contract. The PCO authorization may be limited as to time, type of 393

property, specifically identified items, or dollar value. 394

395

PROCEDURES: 396

All contractors that have cost-type, time-and-material, or fixed-price contracts with cost 397

reimbursable CLINS, or contracts authorizing the contractor to requisition via MILSTRIP must 398

establish acquisition procedures as a part of their property management systems. Those 399

CHAPTER 2 – PMSA ELEMENT JOB AIDS

procedures will vary from contractor to contractor but the PA must ensure that the contractor’s 400

procedures address the following considerations to the extent that they are applicable: 401

• How the contractor establishes that there is authority and a need for the property, and 402

how that need is documented (e.g., BOM, MRL, Tech drawings, R&D Proof of Concept). 403

• The type of purchasing method used to order property, (e.g., purchase order). 404

• How purchase orders are controlled and distributed, 405

• Assurance that Credit-Debit system transfers of contractor-acquired material account for 406

all costs pertaining to such material, including general and administrative, and are 407

reallocated and transferred with the material. Additionally, assurance that the contractor 408

ensures that costs for such material are allowable on the contract to which transferred. 409

• The documentation of the PCO’s consent where required (e.g., special terms and 410

conditions in the contract, purchases over the dollar threshold in Subcontract Clause, 411

FAR 52.244-2, or where there is no approved purchasing system). 412

• How the contractor maintains MILSTRIP requisition documents. 413

414

OBJECTIVE: The PA will determine whether the contractor is acquiring all property 415

consistent with its engineering, production planning, and property control operations; whether 416

the contractor acquires only the items and quantities authorized by the contract. 417

418

POPULATION: 419

The population consists of all acquisitions of property for which the contractor is eligible 420

to be reimbursed as a direct item of cost that were initiated and received within the past 12 421

months. To review this population, PAs will have to review the procurement and purchase 422

orders, petty cash documents, or fabrication documents, as applicable. A separate population 423

consisting of any property the contractor ordered within the past 12 months via MILSTRIP is 424

required if the contractor has any MILSTRIP acquisition transactions. Property acquired using 425

MILSTRIP must be treated as a separate population and sample because there are unique 426

ordering requirements. 427

428

PAs may use the same population to test both the elements of Acquisition and Receiving 429

only in the infrequent event that all of the following conditions are met: 430

431

• All items of Government property that were ordered during the timeframe under 432

review were also received during the period under review. 433

• No items of Government property that were ordered outside of the period under 434

review were received. 435

• No Government furnished property (GFP) was received during the period under 436

review. 437

438

If any of the above conditions are not met, separate populations for Acquisition and 439

Receiving are required. If a PA uses the same population for both Acquisition and Receiving, 440

the rationale must be documented in the Audit Report. 441

442

CHAPTER 2 – PMSA ELEMENT JOB AIDS

PAs will not review pushed GFP (GFP provided on the contract) under Acquisition, 443

because the Government has already determined a contractual need for the property. Note that 444

this GFP includes property transferred via PCO contract modification. 445

446

The PA will include only those acquisitions made by the contractor in the performance of 447

contracts administered by DCMA in the populations for review. 448

449

SOURCE DOCUMENTS: Source documents include purchase orders, material requisitions 450

from contractor stores (debits/credits), fabrication orders, petty cash documents for property to 451

which the Government would have title, and MILSTRIP requisitions. 452

453

SUPPORT DOCUMENTS: 454

Support documents include contractor records, material requirements lists (MRL), bill of 455

material (BOM), statement of work (SOW), blueprints, drawings, technical orders (TO), proof of 456

concept for R&D, property management procedures, or other sources of the contractor’s 457

acquisition plans. 458

459

Different types of contractors will have different supporting documentation. For 460

example, a production contractor will likely have detailed drawings, MRLs, schematics, etc., 461

while a repair contractor may only be able to determine what items will be required after 462

assessing a damaged item to determine the extent of required repairs. Research and development 463

contractors may not have a formal listing of the property the contractor requires in order to 464

perform the contract, but should be able to provide a proof of concept or description of their 465

proposal. The contractor must be able to explain how items purchased support that proposal. 466

Additional resources to verify reasonableness of an acquisition include the contractor’s lead 467

scientist or technician, the buying activity’s program office, and DCMA Engineers or Industrial 468

Specialists. 469

470

SAMPLING: The element of Acquisition is tested statistically for standard PMSAs using the 471

contractor’s ordering documents. 472

473

The PA will use judgmental sampling to test Acquisition when performing a limited 474

PMSA. Support for all conclusions must include sample documentation provided by the 475

contractor. 476

477

TESTING CONSIDERATIONS: 478

PAs are expected to perform contract review during PMSA planning in order to identify all cost-479

type contracts that require the contractor to make purchases in order to successfully perform the 480

contract. If the contractor reports that it has not made acquisitions in performance of any 481

identified cost reimbursable contract, the PA will perform additional verification by reviewing 482

public vouchers filed in WAWF. The PA will access WAWF through the Procurement 483

Integrated Enterprise Environment (PIEE), and select “Admin by View Only” to view the most 484

recent voucher. The voucher will be reviewed to determine whether the contractor has directly 485

charged for tangible items of Government property. The contractor must categorize these 486

charges as for material, supplies, or equipment. In some cases, the contractor may include 487

property under the heading of Other Direct Costs (ODCs). Because ODCs would be considered 488

CHAPTER 2 – PMSA ELEMENT JOB AIDS

unallocable, the PA must elevate such contractor allocations to the ACO for review if suspected. 489

While this voucher review may not provide a one-to-one comparison, the review provides 490

information the PA will use to determine whether the population provided by the contractor is 491

reasonable. 492

493

PAs will also: 494

495

• Determine whether the contractor screens existing stock prior to acquisition, and how 496

the contractor documents that screening. 497

• Determine whether the contractor acquires supplies supported by the contract needs. 498

The quantity the contractor orders should not exceed the total quantity required for 499

contract performance minus the quantity received as of the order date. Potentially 500

excessive purchases may be explained by minimum buys, which are a vendor’s 501

requirement that orders must be for a minimum quantity. 502

• For contractors subject to Cost Accounting Standards, the PA will ensure that 503

acquisitions are in accordance with the contractor’s Disclosure Statement. PAs can 504

obtain the Disclosure Statement from the contractor or from the cognizant ACO. 505

• Ensure that there is PCO authority for all MILSTRIP acquisitions. 506

507

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 508

NONCOMPLIANCES: 509

510

• Discuss how the PA determined whether quantities acquired were supported by the 511

contract needs. 512

• State whether there were any purchases in excess of documented need, and explain 513

whether they were justified and why. 514

• Address whether acquisitions made by contractors subject to Cost Accounting Standards 515

were in accordance with the contractor’s Disclosure Statement. 516

517

518

PMSA ELEMENT 4 – RECEIVING 519

520

REQUIREMENT: 521

FAR 52.245-1(f)(1): 522

523

(ii) Receipt of Government Property. “The Contractor shall receive Government property 524

and document the receipt, record the information necessary to meet the record 525

requirements of paragraph (f)(1)(iii)(A)(1) through (5) of this clause …” 526

527

BACKGROUND: 528

The contractor’s receiving process may consist of a number of different steps: 529

530

• Notification to receiving department of incoming assets. Contractors may provide an 531

electronic or paper copy of the originating purchase orders, MILSTRIP requisitions, and 532

other requisitioning data that reflect the items and quantities ordered and/or expected to 533

the receiving department. The receiving department uses those documents and data for 534

CHAPTER 2 – PMSA ELEMENT JOB AIDS

comparison with items physically received, as well as for proper posting to the 535

accounting records. 536

• Physical delivery and initial inspection of the property. Upon delivery, a contractor 537

inspection ascertains that there is no obvious or visible damage and the quantity of 538

pallets, boxes or containers agrees with the transportation document. 539

• Reconciliation of assets received. (Ref., “PMSA ELEMENT 5 - DISCREPANCIES 540

INCIDENT TO SHIPMENT” below if any discrepancies are noted based on physical 541

reconciliation of the actual assets with the documentation provided.) 542

• Quality or technical acceptance inspection as required. Quality and technical inspections 543

are performed less frequently than in the past, with contractors more accustomed to 544

quality control built into an item through the supplier’s inspection processes, i.e., TQM, 545

ISO, Six Sigma, etc. 546

• Distribution of property. Upon completion of any required quality inspection, acceptance 547

testing, and physical identification (Ref., “PMSA ELEMENT 6 - IDENTIFICATION” 548

below), the item is delivered to the appropriate storage area, stockroom, or released for 549

use as authorized by contract terms. 550

• Distribution of documentation. At the same time the property is distributed, contractors 551

distribute the associated receiving notification. This distribution may be electronic or 552

manual. 553

• Normally items that are fabricated in-house do not go through receiving. PAs must 554

ensure that contractors establish control over these in-house items and establish records in 555

accordance with FAR 52.245-1(f)(1)(iii) and the contractor’s procedures. 556

557

PROCEDURES: 558

The receiving process is the means by which the contractor assumes control or custody of 559

Government property. That includes recording the information necessary to meet the record 560

requirements of paragraph (f)(1)(iii)(A)(1) through (5) of FAR 52.245-1. In order to comply 561

with the contractual requirements to provide effective and efficient control of Government 562

property and to maintain current records of all transactions, it is essential that the contractor 563

receives Government property in a timely manner. For that reason, the PA must ensure that the 564

contractor’s procedures establish timeframes for the performance of receiving actions. 565

566

The timeframes will vary from contractor to contractor depending on the nature of the 567

business, the type and criticality of property involved, and other relevant factors. Individual 568

contractors may have different timeframes for different types of property, most notably sensitive 569

property. Precious metals, hazardous property and arms, ammunition and explosives may all 570

require different timeframes for the performance of receiving actions. PAs must ensure that the 571

contractor’s procedures define the timeframes and that they support the requirement to 572

effectively and efficiently control Government property, and the contractor has a process in place 573

sufficient to create records that are complete, current, and auditable. 574

575

PAs will ensure that the contractors’ procedures for receiving address the following, to 576

include timeframes, as applicable: 577

578

• What the contractor’s receiving department does upon physical receipt of an item, the 579

type of inspection the contractor conducts to determine whether there is obvious or 580

CHAPTER 2 – PMSA ELEMENT JOB AIDS

visible damage, and whether the quantity of pallets, boxes or containers agrees with the 581

transportation document. 582

• The title and form number of the receiving report, or other means the contractor uses to 583

document receipt. The contractor’s procedures should provide a timeframe for the form’s 584

completion and directions for its distribution. 585

• How and when the contractor will establish records of the Government property. 586

• Any special handling requirements regarding the receipt of sensitive property. 587

• When quality or technical acceptance inspection is required. 588

• How the property is to be distributed after receipt. 589

• How property fabricated in-house will be inducted into the contractor’s property 590

management system. 591

592

OBJECTIVE: The PA will determine whether the contractor received Government property, 593

documented the receipt, and recorded the information necessary to meet the record requirements 594

prescribed in FAR 52.245-1(f)(1)(iii)(A)(1) through (5). 595

596

POPULATION: 597

All Government property accountable to contracts administered by, or delegated to, 598

DCMA that was received in the past 12 months. This includes any property that was fabricated 599

in-house, or otherwise should have documentation of receipt (e.g., usable property removed 600

during repair or overhaul, property received under a Receipt and Issue system) 601

602

PAs may use the same population to test both the elements of Acquisition and Receiving 603

only in the infrequent event that all of the following conditions are met: 604

605

• All items of Government property that were ordered during the timeframe under review 606

were also received during the period under review. 607

• No items of Government property the contractor ordered outside of the period under 608

review were received. 609

• No GFP was received during the period under review. 610

611

If any of the above conditions are not met, separate populations for Acquisition and 612

Receiving are required. If a PA uses the same population for both Acquisition and Receiving, 613

the rationale must be documented in the Audit Report. 614

615

SOURCE DOCUMENTS: All receiving documents (e.g., packing lists, Government bills of 616

lading, in-house fabrication orders). Note that purchase orders are not receiving documents, and 617

are not used to evidence receipt. 618

619

SUPPORT DOCUMENTS: Receiving logs, contractor-generated receiving reports, and 620

property records. 621

622

SAMPLING: The element of Receiving is tested statistically for standard PMSAs. The sample 623

will consist of the contractor’s receiving documents. The PA may use judgment sampling of 624

receiving documentation for limited PMSAs. 625

626

CHAPTER 2 – PMSA ELEMENT JOB AIDS

TESTING CONSIDERATIONS: 627

• Be cognizant that reusable containers shipped with Government property are Government 628

property as well. Because of this, the receipt of reusable shipping containers must be 629

documented, and a record must be established. Reusable containers are not always 630

separately identified on the shipping document. 631

• Determine whether the property is promptly examined in accordance with the 632

contractor’s procedures upon arrival to determine whether the quantity received and 633

condition are consistent with the information on the shipping document. 634

• Determine whether the receiving report is promptly prepared. Compare the date of the 635

receiving report, the date of delivery as reflected on the shipping document, and the 636

timeframe for completion of the receiving report in the contractor’s procedures. 637

• Review the record for each item received to confirm that the records meet the 638

requirements of paragraph (f)(1)(iii)(A)(1) through (5) of FAR 52.245-1 and that the 639

records were established within the timeframe required by the procedures. 640

• If quality or technical acceptance inspection is required, confirm that the contractor 641

performed inspection within the timeframes required by the procedures. 642

• Confirm that the contractor distributes the property and receiving report as directed and 643

within the established timeframe specified by the procedures. 644

• Determine whether property the contractor fabricated in-house was inducted into the 645

contractor’s property management system as required by the contractor’s procedures. 646

• The PA will use a separate population of all sensitive Government property accountable 647

to contracts administered by DCMA received in the past 12 months to determine the 648

adequacy of the contractor’s process for receipt of sensitive items. 649

• Sensitive items are tested as a separate population, using a double sampling plan that 650

identifies defects of 10% or more, if they exist, 97% of the time as described in 651

paragraphs 8.3.1.1. and 17.2.3. of Chapter 1. 652

653

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 654

NONCOMPLIANCES: 655

• Address whether the contractor received the samples promptly, as defined in the 656

contractor’s procedures, and examined them upon arrival to determine whether the 657

quantity received and condition were consistent with the information on the shipping 658

document. 659

• Discuss whether the receiving reports were prepared within the timeframe in the 660

contractor’s procedures. 661

• Analyze the records associated with the samples received to confirm that the records 662

meet the requirements of paragraph (f)(1)(iii)(A)(1) through (5) of FAR 52.245-1, and 663

whether the documentation was established within the timeframe required by the 664

procedures. Excessive time between receipt of Government property and record creation 665

increases risk to the Government. 666

• Indicate how the contractor documented receipt, and discuss whether it was as specified 667

in the contractor’s procedures. 668

• Explain how property fabricated in-house was inducted into the contractor’s property 669

management system, and address whether the contractor complied with the directions in 670

its procedures. 671

672

CHAPTER 2 – PMSA ELEMENT JOB AIDS

PMSA ELEMENT 5 - DISCREPANCIES INCIDENT TO SHIPMENT 673

674

REQUIREMENT: 675

FAR 52.245-1(f)(1): 676

677

(ii)The Contractor shall . . .manage any discrepancies incident to shipment. 678

679

(A) Government-furnished property. The Contractor shall furnish a written statement to 680

the Property Administrator containing all relevant facts, such as cause or condition and a 681

recommended course(s) of action, if overages, shortages, or damages and/or other 682

discrepancies are discovered upon receipt of Government-furnished property. 683

(B) Contractor-acquired property. The Contractor shall take all actions necessary to 684

adjust for overages, shortages, damage and/or other discrepancies discovered upon 685

receipt, in shipment of contractor acquired property from a vendor or supplier, so as to 686

ensure the proper allocability and allowability of associated costs. 687

688

BACKGROUND: 689

Discrepancies include any differences (e.g., count or condition) between the items 690

documented to have been shipped and items actually received, including misdirected shipments, 691

overages, shortages, or damages discovered upon receipt of Government property. FAR 52.245-692

1 establishes separate and distinct requirements for managing discrepancies incident to shipment, 693

depending on whether the property is GFP or CAP. 694

695

• When discrepancies are discovered upon receipt of GFP, FAR 52.245-1(f)(1)(ii) (A) 696

requires the contractor to furnish a written statement to the PA containing all relevant 697

facts, such as cause or condition, and a recommended course of action. 698

699

Note: The clause does not require the contractor to prepare an SF 361 “Transportation 700

Discrepancy Report” or SF 364 “Report of Discrepancy.” These reports are usually 701

prepared by a QAR, but in some cases it may fall to the PA to prepare them. 702

703

• When the contractor discovers discrepancies upon receipt of contractor-acquired 704

property, the clause at FAR 52.245-1(f)(1)(ii)(B) requires the contractor to take all 705

actions necessary to adjust for overages, shortages, and damage so as to ensure the 706

proper allocability and allowability of associated costs. 707

708

PROCEDURES: 709

In order to be compliant, the contractor’s procedures must address how the contractor 710

will manage discrepancies incident to shipment of both GFP and CAP. In addition, the 711

contractor’s procedures must provide direction about how the contractor will handle misdirected 712

shipments. 713

714

The procedures should, at a minimum, specify what facts and information the report 715

should contain, and the timeframe in which the report should be completed and forwarded. 716

717

CHAPTER 2 – PMSA ELEMENT JOB AIDS

Similarly, for discrepancies incident to the shipment of CAP, the contractor’s procedures 718

must describe how the necessary adjustments for overages, shortages, and damage will be made 719

so as to ensure the proper allocability and allowability of associated costs. Additionally, the 720

contractor’s procedures must establish a mechanism that will ensure appropriate action is taken 721

when such discrepancies are identified. The procedures also must establish a timeframe in which 722

the contractor will make adjustments. 723

724

For misdirected shipments, the contractor’s procedures must identify the actions that will 725

be performed to obtain disposition instructions, and immediately seek the disposition instructions 726

from the source from which the item was shipped. If the contractor is unable to obtain 727

disposition instructions, the contractor’s procedures should direct the responsible official to 728

contact the PA. The PA will ensure that the contractor has established and documented 729

timeframes for initiation of actions and adequate follow-up to ensure proper disposition. 730

731

OBJECTIVE: The PA will determine whether the contractor adequately manages discrepancies 732

incident to shipment. 733

734

POPULATION: There are two populations that have different reporting requirements. If both 735

are applicable, they must be tested separately: 736

737

• All discrepancies incident to the shipment of GFP in the past 12 months. 738

• All discrepancies incident to the shipment of CAP in the past 12 months. 739

740

SOURCE DOCUMENTS: For GFP, all written statements from the contractor to the PA 741

regarding discrepancies discovered upon receipt of Government-furnished property. For CAP, 742

documentation of actions taken by the contractor to ensure the proper allocability and 743

allowability of associated costs resulting from discrepancies discovered upon receipt of property 744

from a vendor or supplier. 745

746

SUPPORT DOCUMENTS: These will vary from contractor to contractor. Support documents 747

may include packing slips, DD 1149s, DD 1348s, receiving logs, and contractor generated 748

receiving reports. For GFP, they may also include SF 361 “Transportation Discrepancy Reports” 749

or SF 364 “Reports of Discrepancy.” 750

751

SAMPLING: The element of Discrepancies Incident to Shipment is tested statistically for 752

standard PMSAs. The PA may use judgmental sampling to review documents that are 753

representative of the contractor’s handling of discrepant shipments for CAP and for GFP when 754

performing a limited PMSA. 755

756

TESTING CONSIDERATIONS: 757

• Government prepared documentation such as an SF 361 “Transportation Discrepancy 758

Report” or an SF 364 “Report of Discrepancy” may be used as sources to identify a 759

population. PAs should not rely on these documents as the sole documentation sources 760

for a population. 761

• Determine whether the contractor is reporting discrepancies in shipping documentation to 762

the PA (e.g., incomplete data, to include missing acquisition costs). Discrepancies with 763

CHAPTER 2 – PMSA ELEMENT JOB AIDS

shipping documentation can make it impossible for a contractor to create an accurate 764

record of Government property. 765

• Compare the date of receipt of discrepant GFP with the date of the report to the PA to 766

determine if the contractor was timely in sending the report, as defined in the contractor’s 767

procedures. 768

• Review the discrepancy report to determine whether it includes all relevant facts. 769

• Trace the documentation of receipt of discrepant CAP to the appropriate accounting 770

records to determine whether the contractor made the necessary adjustments for overages, 771

shortages, and damages in the correct amounts. 772

• The PA will separate populations of discrepancies as follows: 773

o All discrepancies incident to the shipment of sensitive GFP in the past 12 months, 774

and 775

o All discrepancies incident to the shipment of sensitive CAP in the past 12 months. 776

777

Each population will be used to determine whether the contractor adequately 778

managed discrepancies incident to shipment of sensitive property. 779

780

• Sensitive items are tested as a separate population, using a double sampling plan that 781

identifies defects of 10% or more, if they exist, 97% of the time as described in 782

paragraphs 8.3.1.1. and 17.2.3. of Chapter 1. 783

784

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 785

NONCOMPLIANCES: 786

• Describe when the contractor received the items of discrepant GFP, when the contractor 787

reported the discrepancies, and discuss whether the reporting was timely, accurate, and 788

complete. 789

• For contractor-acquired property, detail the quantity of the overage or shortage, describe 790

the nature of the damage, and specify the nature of the adjustment. 791

• A description of how the PA confirmed an adjustment was made for discrepant 792

contractor-acquired property, and whether the adjustment ensured the proper allocability 793

and allowability of associated costs. 794

795

796

PMSA ELEMENT 6 - IDENTIFICATION 797

798

REQUIREMENT: 799

FAR 52.245-1(f)(1)(ii): “The Contractor shall…identify [property] as Government owned in a 800

manner appropriate to the type of property (e.g., stamp, tag, mark, or other identification)…” 801

802

BACKGROUND: 803

In order to comply with FAR 52.245-1(f)(1)(ii), contractors must physically mark and 804

identify Government property indicating that it is Government owned during the receiving 805

process or upon fabrication. Proper identification ensures that Government property is 806

recognized as such and not mistaken for contractor or other customer owned property. It also 807

reduces the risk that Government property will be used for unauthorized purposes. 808

809

CHAPTER 2 – PMSA ELEMENT JOB AIDS

A marking may consist of, but is not limited to, barcodes, labels, engraving, etching, 810

painting, stamping, and tagging. Radio Frequency Identification (RFID) is generally not a 811

“marking” methodology unless used in concert with visible markings, as it does not provide a 812

form of physical identification. 813

814

Item Unique Identification (IUID) and valuation is the process of marking an item of 815

property with a system of data that discloses possession and ownership, and retains that 816

identification data as supporting evidence for internal Government finance, property, and 817

logistics management requirements. The IUID marking requirement applies to DoD contractors 818

through contract clause DFARS 252.211-7003. Contractor compliance with this requirement is 819

not a property management responsibility, and PAs should not test for compliance when 820

performing a PMSA. Note that this requirement is distinct from those requirements at DFARS 821

252.211-7007 that require the contractor to report GFP to the IUID registry or GFP Module 822

within PIEE. PAs provide oversight for compliance with DFARS 252.211-7007, but not for 823

compliance with DFARS 252.211-7003. 824

825

In general, contractors must physically mark all property that will not be consumed, or 826

otherwise lose its identity through incorporation into an end item or deliverable system, to 827

identify the property as Government property. For material, the marking identifying it as 828

Government property may be at the higher package level (bin, box, shelf, etc.). Contractors are 829

not required to physically mark material that is accountable under a Material Management 830

Accounting System (MMAS). 831

832

Some types of property may not lend itself to proper identification. Marking will either 833

damage the property or is impractical. If that is the case, the contractor may indicate 834

Government ownership at the higher storage or packaging level. If none of those methods is 835

appropriate, the contractor is expected to contact the PA for alternate instructions. 836

837

PROCEDURES: 838

In order to be compliant, the contractor’s procedures must specify the method it will use 839

to mark each type of Government property. Compliant procedures specify a timeframe from 840

time of receipt or completion of fabrication in which the marking will be completed. The PA 841

will determine whether the timeframe for identification of Government property adequately 842

protects the Government from unnecessary risk. Note that property that is not identified 843

promptly is more likely to be diverted for unauthorized use or consumption, and may not be 844

managed in accordance with the contractor’s property management system if contractor 845

personnel are unaware that it is Government property. 846

847

OBJECTIVE: The PA will determine whether the contractor physically identifies Government 848

property with an indication of Government ownership. 849

850

POPULATION: There are two potential populations for testing this element: all Government 851

property received within the past year, or all Government contract property administered by 852

DCMA (standard Receiving and Record populations, respectively). 853

854

CHAPTER 2 – PMSA ELEMENT JOB AIDS

Note: Because there are two potential populations, there are multiple worksheet options. 855

The Receiving and Records worksheets have Identification as an optional data element. 856

There is also a standalone Identification worksheet for use if neither of the other 857

outcomes is being tested. If the contractor has over $100M of Government property 858

accountable to contracts that are administered by DCMA, the Records population will 859

include all DoD contract property and be tested using a 97% confidence level. 860

Identification is tested at a 90% confidence level for standard PMSAs. In order to avoid 861

oversampling the PA may take a random sample of that larger 97% sample in order to 862

select the correct number of samples to test Identification at a 90% confidence level. For 863

example: If you have a population of 10,000 line items of Government property, the 864

Records sample would be 43 line items at 97%, but only 34 line items at 90%. The PA 865

may choose a random sample of 34 line items from the population of 43 Record samples 866

to test for Identification. 867

868

SOURCE DOCUMENTS: Government Property, identification tags, labels, etchings, 869

markings, etc. 870

871

SUPPORT DOCUMENTS: None 872

873

SAMPLING: The element of Identification is tested statistically for standard PMSAs. The PA 874

may use judgmental sampling, to include an example of identified Government property, for 875

limited PMSAs. 876

877

TESTING CONSIDERATIONS: 878

• Using the Receiving population allows the PA only to generalize to property received in 879

the past year, rather than to determine compliance for identification of all Government 880

property. 881

• Using the Receiving population, the PA will test the adequacy of the contractor’s recent 882

identification efforts. The PA may use this population if the PA has concerns about the 883

contractor’s recent performance of this process. This population will not allow the PA to 884

address whether items that have been in the contractor’s possession for many years have 885

lost or worn identification. Additionally, if the contractor is not on an annual schedule, 886

using this testing methodology would miss property received in years not covered by the 887

PMSA. 888

• Using the Records population and corresponding sample allows the PA to generalize any 889

findings to all property. See the note under population for a description of how to use the 890

Records population when enhanced oversight of contractors with over $100M of DCMA 891

administered population is required. 892

• Using the Records population may be more useful to ensure that property that has been in 893

the contractor’s possession over an extended period of time is still properly identified. 894

• Regardless of which population is used, PAs must physically verify that all sampled 895

items have appropriate identification. A separate, additional physical verification of the 896

asset will be required if the PA uses the Receiving population. 897

• The fact that the contactor’s records indicate that the Government has title to an item is 898

not the same as stamping, tagging, marking, or otherwise physically identifying the item 899

CHAPTER 2 – PMSA ELEMENT JOB AIDS

as Government owned. Taken alone, documentation of Government ownership in the 900

contractor’s records is therefore not compliant with this requirement. 901

• PAs may consider alternating the use of Receiving and Records populations to test 902

Identification to ensure a broad coverage of this element. 903

904

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 905

NONCOMPLIANCES: 906

• Address whether all Government contract property is physically identified with an 907

indication of Government ownership. 908

909

910

PMSA ELEMENT 7 - RECORDS 911

912

REQUIREMENT: 913

FAR 52.245-1(f)(1): 914

915

(iii), Records of Government property. The Contractor shall create and maintain records 916

of all Government property accountable to the contract, including Government-furnished 917

and Contractor-acquired property. 918

(A) Property records shall enable a complete, current, auditable record of all transactions 919

and shall, unless otherwise approved by the Property Administrator, contain the 920

following: 921

922

(1) The name, part number and description, National Stock Number (if needed for 923

additional item identification tracking and/or disposition) and other data elements 924

as necessary and required in accordance with the terms and conditions of the 925

contract. 926

(2) Quantity received (or fabricated), issued, and balance-on-hand. 927

(3) Unit acquisition cost. 928

(4) Unique-item identifier or equivalent (if available and necessary for individual 929

item tracking). 930

(5) Unit of measure. 931

(6) Accountable contract number or equivalent code designation. 932

(7) Location. 933

(8) Disposition. 934

(9) Posting reference and date of transaction. 935

(10) Date placed in service (if required in accordance with the terms and 936

conditions of the contract). 937

938

DFARS 252.211-7007, Reporting of Government-furnished property. 939

940

BACKGROUND: 941

In accordance with the Government property clause, the contractor must establish records 942

for all Government property. Those records must contain the data elements identified at FAR 943

52.245-1 (f)(1)(iii)(A)(1 thru 10), unless otherwise approved by the PA. If the PA approves the 944

exclusion of any of those data elements from the record, the PA must do so in writing, supported 945

CHAPTER 2 – PMSA ELEMENT JOB AIDS

by a Memorandum for Record (MFR), explaining the rationale for the decision. The PA’s first 946

level supervisor must sign the MFR, concurring with the PA’s determination. The PA will 947

upload the MFR to CPAS as an attachment to each FY tab under the Property Management 948

System Analyses (PMSA) Record in accordance with GCPG direction. 949

950

Once the contractor releases material to the shop floor, the items are typically considered 951

work-in-process (WIP). FAR 52.245-1 does not address how, or whether, the contactor is 952

required to track WIP on record. Accordingly, unless specifically required elsewhere in the 953

contract, tracking of WIP should be based upon the contractor’s established practices. 954

955

PROCEDURES: 956

In order to be compliant, the contractor’s procedures must identify the format in which 957

the contractor will maintain records of Government property. The contractor’s procedures must 958

identify the contractor’s process to for establishing and maintaining the records, and reasonable 959

timeframes for establishing and updating records. Timeframes are required because FAR 960

52.245-1 requires the records to be complete, current, and auditable. 961

962

The procedures must address whether the contractor will track material once it is issued 963

from stores to WIP. If WIP is not tracked after issuance, the contractor’s procedures must 964

describe the safeguards in place to prevent and identify unreasonable consumption. WIP is not 965

to be used as a methodology to avoid creating and maintaining records of contract property. 966

967

Some contractors use a standard cost process (vs. actual cost) for contractor-acquired 968

property. If the contractor’s records will not reflect the actual cost by purchase order, batch, or 969

lot, the contractor’s procedures and cost Disclosure Statement must describe the methodology 970

the contractor will use to record the acquisition cost. 971

972

Special test equipment, sometimes abbreviated as “STE,” may consist of readily 973

removable general-purpose components. To ensure contractor control of those items is 974

maintained, records must clearly identify the general purpose components. Another reason for 975

identifying general purpose components is to assist in the disposal process, and the reporting and 976

screening requirements for potential reutilization. In addition to the complete unit of special test 977

equipment, the contractor’s records must clearly identify these general purpose items on 978

inventory disposal schedules in conjunction with plant clearance of special test equipment. 979

980

The contractor’s procedures must also address in-house fabricated property, if applicable, 981

and how that fabrication is properly documented to ensure that the tooling is incorporated within 982

the stewardship records. 983

984

Moreover, the contractor’s procedures must establish a process to document and post 985

location changes so that records may be maintained in a current status and property can be 986

located within a reasonable period of time, dependent upon the type of property, size of site, 987

frequency of movement, and sensitivity of the item. 988

989

OBJECTIVE: The PA will determine whether the contractor creates and maintains records of 990

all Government property accountable to its contracts, and whether those records contain the data 991

CHAPTER 2 – PMSA ELEMENT JOB AIDS

elements required by 52.245-1(f)(1)(iii)(A)(1) through (10) and enable a complete, current, and 992

auditable record of all transactions. 993

994

POPULATION: All Government property accountable to contracts administered by, or 995

delegated to, DCMA. For contractors with more than $100M of Government property, the PA 996

will also test all Government contract property accountable to all DoD contracts, regardless of 997

administration. 998

999

If a contractor has at least $100M of Government property accountable to contracts administered 1000

by DCMA, and also has sensitive property, then at least two populations will need to be tested. 1001

Sensitive property administered by DCMA must always be tested separately from non-sensitive 1002

property. 1003

1004

The Records population does not include material accountable under an approved receipt and 1005

issue system, as that is tested separately. With very few exceptions, the required data elements 1006

and other contractual requirements are identical for each type of property. Since populations are 1007

based upon common characteristics, PAs will not identify separate populations for different 1008

types of property unless one or more has different characteristics. The PA’s identification of 1009

different types of property as separate populations requires a written justification, and the 1010

concurrence of the PA’s first level supervisor. 1011

1012

SOURCE DOCUMENTS: All Government property records accountable to contracts 1013

administered by DCMA. For contractors with more than $100M of Government property 1014

administered by DCMA, all Government property records for all DoD contracts, regardless of 1015

administration. 1016

1017

SUPPORT DOCUMENTS: Supporting documents for this element include: invoices, contract 1018

modifications, purchase orders, stock records, receiving documents, fabrication work orders, 1019

requisition slips, issue documents, inventory adjustment references, property loss relief 1020

documentation, transfer documents, and shipping documents. 1021

1022

SAMPLING: 1023

For standard PMSAs, test the element of Records using statistical sampling. The PA will 1024

use judgmental sampling to request examples of records for both equipment and materials to 1025

review for completeness and compliance when performing a limited PMSA. Support for all 1026

conclusions must include sample documentation provided by the contractor. Physical 1027

verification of Records-to Property and Property-to-Records does not apply to limited PMSAs 1028

unless there are concerns or deficiencies that would indicate a need for a purposive review. 1029

1030

PAs will review the element of Records annually and on-site for systems with more than 1031

$100M of Government property. When performing reviews for those systems, PAs will include 1032

all Government property accountable to DoD contracts in their population, regardless of whether 1033

DCMA administers those contracts. PAs will use the double sampling plan that provides a 97% 1034

confidence of rejecting lots having 10% or more defects. If the contractor also has sensitive 1035

property, this means that there will be two populations that are separately tested at a 97% 1036

confidence level. Sensitive property may not be combined with the greater population. 1037

CHAPTER 2 – PMSA ELEMENT JOB AIDS

1038

TESTING CONSIDERATIONS: 1039

• PAs will perform two types of review: Records-to-Property and Property-to-Records. 1040

PAs will request a listing of all Government property accountable to contracts 1041

administered by DCMA that is currently on-hand, or listings of all DoD contract property 1042

with the same characteristics, as appropriate. PAs will select a statistical sample from that 1043

list and review the records of the items selected. 1044

• The balance a contractor has on-hand, part number, description, and location are among 1045

the data elements required by 52.245-1(f)(1)(iii)(A)(1) through (10). To test the accuracy 1046

of those elements, PAs must perform a Records-to-Property review. A Records-to-1047

Property review involves a physical inspection of each item sampled to establish the 1048

accuracy of the balance on-hand and the location as reflected in the record. 1049

• The data element Unit Acquisition Cost must be verified using the appropriate acquisition 1050

documentation (e.g., vendor invoice, GFP listing, contract modification, internal 1051

fabrication document) or the documentation supporting the contractor’s standard cost 1052

process as described in the contractor’s procedures. 1053

• Verify all other required data elements using either physical inspection or review of 1054

source and supporting documentation. 1055

• PAs will determine whether the contractor creates records for all items of Government 1056

property by randomly selecting items on the contractor’s floor and then confirming that a 1057

record exists for that item. This is called a “Property-to-Records” review. This review 1058

cannot be performed remotely. 1059

• The sample size of the Property-to-Records review must be the same as the sample size 1060

used for the Records-to-Property review when using statistical sampling. PAs may not 1061

reduce the size of the Property-to-Records review to equal one half that of the Records-1062

to-Property review. An exception to this rule may be required if the amount of 1063

Government property on-hand is not sufficient to make up a Property-to-Records sample 1064

of the same size as the Records-to-Property sample. If an exception is made, PAs must 1065

document their reasoning in the Audit Report. 1066

• It is essential that the Property-to-Records sample be random to ensure statistical validity. 1067

This means that PAs may not simply walk through the contractor’s facility and select 1068

items that catch the PA’s eye. That would be a judgment sample and its results would not 1069

be generalizable to the larger population. If the PA is unable to ensure randomness due 1070

to the set-up of the contractor’s facility, the PA must explain that in the Audit Report. 1071

One technique for selecting random samples for the Property-to-Records review is to 1072

identify a method for selecting samples before beginning the Records-to-Property review. 1073

1074

For example: The PA may select the nearest item of Government property to the 1075

left or to the right of the sample item, and repeat that strategy as consistently as 1076

possible. The method should address as many contingencies as possible to ensure 1077

that the sample selected is random. Those samples are then compared to the 1078

contractor’s records to identify whether there is a record for all items. PAs will 1079

not review any other data elements during the Property-to-Record review. Doing 1080

so would subject the contractor to oversampling since all other data elements are 1081

reviewed during the Records-to-Property review. The sole purpose of a Property-1082

CHAPTER 2 – PMSA ELEMENT JOB AIDS

to-Records review is to test whether the contractor has established a record for the 1083

item sampled and to test the adequacy of the contractor’s locator system. 1084

1085

• Materials subject to an MMAS must be included in Records-to-Property testing. In 1086

an MMAS system, PAs may not be able to perform Property-to-Records testing, 1087

since the materials will likely be commingled. If a Property-to-Records review 1088

cannot be performed, the Audit Report must annotate that. 1089

• When testing MMAS records, PAs must be aware that due to commingling, the 1090

quantities on-hand may not match the quantity on record. The PA only needs to 1091

ensure that there are at least as many items as are on record. Any quantity on-hand 1092

that exceeds the amount on the record could belong to other projects or to the 1093

contractor. 1094

• A separate population of all sensitive items currently on-hand will be used for 1095

determining the adequacy of sensitive items records. A corresponding Property-to-1096

Records sample will also be tested. 1097

• Sensitive items are tested as a separate population, using a double sampling plan that 1098

identifies defects of 10% or more, if they exist, 97% of the time as described in 1099

paragraphs 8.3.1.1. and 17.2.3. of Chapter 1. 1100

1101

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 1102

NONCOMPLIANCES: 1103

• Address whether the contractor’s records enable an auditable record of all 1104

transactions. To determine whether the records meet that requirement, the PA will 1105

examine the supporting documentation for the most recent transaction for each item 1106

sampled (e.g., receipt, movement, calibration, inventory, etc.), analyze whether the 1107

record posting accurately reflects the nature of the transaction, the date the 1108

transaction took place, and the quantity of property involved. 1109

• The PA will determine whether the contractor posts transactions to the records within 1110

the timeframes identified in its procedures. PAs will do this by comparing the date 1111

of the transaction, as reflected in the supporting document with the date of the 1112

posting, and address their findings in the Audit Report. The PA will also report the 1113

results of the Records-to-Property review, specifically addressing whether the actual 1114

location of each item of property and the balance on-hand were the same as those 1115

reflected in the contractor’s record. If an asset is not found in the location on record, 1116

the PA will indicate in the Audit Report how long it took the contractor to find it. If 1117

the contractor is able to locate the item in a reasonably short amount of time (e.g., 1118

less than 48 hours), it may indicate a lower level of materiality for the defect, 1119

depending on the type of property and the scope of the property management system. 1120

• The PA will establish whether the records are complete by confirming that they 1121

contain the data elements required by 52.245-1(f)(1)(iii)(A)(1) through (10). If any 1122

of the required data elements are missing, the PA will address whether the PA 1123

approved the omission in writing, or whether the data element was not applicable to 1124

that item. Note that there is no mandatory format for Government property records, 1125

nor is there a requirement for all of the data elements to be in one database. The 1126

determining factor is whether the records enable effective and efficient control of 1127

Government property and contain all of the required records data elements. 1128

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• Discuss whether records of Government property are safeguarded from tampering or 1129

destruction. The PA will also address whether the contractor’s ability to edit records 1130

limited to authorized personnel only, as described in the contractor’s procedures. 1131

• PAs who are performing reviews of property management systems that have more 1132

than $100M in accountable Government property will ensure that the Audit Report 1133

identifies that the elements of Records and Physical Inventory include all DoD 1134

property, regardless of whether it is accountable to contracts administered by 1135

DCMA, and that the populations are tested at a 97% confidence level. 1136

1137

1138

PMSA ELEMENT 8 – RECEIPT AND ISSUE SYSTEM 1139

1140

REQUIREMENT: FAR 52.245-1(f)(1): 1141

1142

(iii)(B), Use of a Receipt and Issue System for Government Material. When approved by 1143

the Property Administrator, the Contractor may maintain, in lieu of formal property 1144

records, a file of appropriately cross-referenced documents evidencing receipt, issue, and 1145

use of material that is issued for immediate consumption. 1146

1147

BACKGROUND: 1148

Use of an approved receipt and issue system relieves contractors of the record keeping 1149

requirements of 52.245-1 (f)(1)(iii). PAs may approve use of an R&I system only on a contract-1150

by-contract basis. Use of an R&I system by a contractor is limited to research and development, 1151

remediation, and other non-production efforts. The rationale for this restriction is that production 1152

environments typically require material requirements planning, etc., practices that do not align 1153

with an R&I process. 1154

1155

Once receipt and issue is approved, material is received and moved directly to a work 1156

area and delivered to the user. The use of an R&I system is limited to material only. It is not 1157

applicable to equipment, special tooling, sometimes abbreviated as “ST,” or special test 1158

equipment. 1159

1160

Use of an R&I system is not applicable to sensitive material (as defined in FAR Part 45 1161

and 52.245-1) or material accounted for in an MMAS. 1162

1163

PROCEDURES: 1164

In order to be compliant, the contractor’s procedures must clearly state that an R&I 1165

system will not be used unless there is written approval from the PA, and that such approval will 1166

be required for every contract for which it will be used. Further, the procedures must define 1167

what “immediate consumption” means. This may vary from contractor to contractor and even 1168

between contracts, depending on circumstances, but there must be a maximum timeframe 1169

established from date of receipt to consumption. PAs must ensure that the timeframe established 1170

does not subject the Government to undue risk and is consistent with efficient and effective 1171

control of Government property. 1172

1173

CHAPTER 2 – PMSA ELEMENT JOB AIDS

For items that are not consumed within the timeframe, the contractor’s procedures must 1174

establish and describe a process such as a periodic review to ensure unused property is returned 1175

to the stock room, and that a record is established, in order to be acceptable. 1176

1177

Additionally, the procedures must identify the documents that the contractor will 1178

maintain to evidence receipt, issue, and use of material. 1179

1180

OBJECTIVE: The PA will determine whether the contractor’s receipt and issue system is 1181

approved, whether there is a file of appropriately cross-referenced documents that evidence 1182

receipt, issue and use of the material, and whether the material is immediately consumed. 1183

1184

POPULATION: All Government-owned property received within the preceding 12 months that 1185

is accounted for in an R&I system in place of formal accounting records. 1186

1187

SOURCE DOCUMENTS: Written approvals signed by the PA, receiving documents, issue 1188

documents, and documents evidencing use. 1189

1190

SUPPORT DOCUMENTS: Supporting documents for this element include: invoices, contract 1191

modifications, purchase orders, bills of material, fabrication work orders, requisition slips, 1192

property loss relief letters, transfer documents, and shipping documents. 1193

1194

SAMPLING: For standard PMSAs, test the element of Receipt and Issue by statistical 1195

sampling. PAs will request a listing of all Government-owned material that the contractor 1196

received within the preceding 12 months that is accounted for in an R&I system in place of 1197

formal property records. The PA will use judgmental sampling to review example 1198

documentation representative of the contractor’s R&I practices when performing a limited 1199

PMSA. The PA must support all conclusions with sample documentation detailing receipt, 1200

issuance, and use provided by the contractor. 1201

1202

TESTING CONSIDERATIONS: 1203

• To determine whether the receipt and issue system is approved, review the written 1204

approval of the PA for each contract. 1205

• To determine whether the records are complete and auditable, PAs will examine each 1206

R&I file to ensure the documentation evidences receipt, issue, and use, that they include 1207

an item description, part number, quantity, contract number or equivalent code 1208

designation, date of receipt, date of issue, and date of use, and description of use. 1209

• Determine whether the contractor returned any property remaining after the timeframe 1210

for immediate consumption to the stockroom and established a record for it that complies 1211

with FAR 52.245-1 (f)(1)(iii)(A)(1) through (10). The PA will require the contractor to 1212

show record establishment for any items of material for which the contractor fails to 1213

clearly describe consumption (e.g., a prototype required 3 widgets, but the contractor 1214

issued 5 to the floor because it was unknown which widgets would work best. R&I 1215

documentation should show the 3 widgets used on the prototype, and the contractor 1216

would need to establish a record for the remaining 2 widgets). 1217

1218

CHAPTER 2 – PMSA ELEMENT JOB AIDS

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 1219

NONCOMPLIANCES: 1220

• Describe the documents that evidence receipt, issue, and use of material, and address 1221

whether the documents include an item description, part number, quantity, contract 1222

number or equivalent code designation, date of receipt, date of issue, and date of use. 1223

While separate documents evidencing receipt, issue, and use are not required, the 1224

documentation for each of those actions must be sufficient to provide traceability of all 1225

quantities for each item from receipt through use. 1226

• Discuss whether the records are current, whether the material has been consumed or, if 1227

still on-hand, whether it was received and issued within the timeframe established in the 1228

contractor’s procedures for immediate consumption. 1229

• Address whether the contractor established a record compliant with 52.245-1230

1(f)(1)(iii)(A)(1) through (10) for all unused material. 1231

1232

1233

PMSA ELEMENT 9 – PHYSICAL INVENTORY 1234

1235

REQUIREMENT: 1236

FAR 52.245-1(f)(1): 1237

1238

(iv), Physical inventory. The Contractor shall periodically perform, record, and disclose 1239

physical inventory results. A final physical inventory shall be performed upon contract 1240

completion or termination. The Property Administrator may waive this final inventory 1241

requirement, depending on the circumstances (e.g., overall reliability of the Contractor’s 1242

system or the property is to be transferred to a follow-on contract). 1243

1244

BACKGROUND: 1245

The purpose of the physical inventory is to ensure that the property is on-hand, at the 1246

location reflected in the record, and that the record balance is accurate. There are several 1247

physical inventory methodologies available to contractors, including the following examples: 1248

• A “periodic inventory” is taken at predetermined intervals, usually accomplished in a 1249

short period of time, and performed on a wall-to-wall basis. The inventories may be 1250

semiannual, annual, biennial, and so forth, depending on the type, amount, value, and 1251

usage of Government property, and the established practices and reliability of the 1252

contractor's property management system. 1253

• An “inventory by exception” is performed on a continuous basis with a fixed 1254

beginning and ending to the inventory cycle. This type of inventory uses move orders, 1255

calibration checks, and other situations where the items are "touched" by contractor 1256

personnel. The contractor must perform a periodic inventory for items not touched on 1257

an exception basis during the inventory period. 1258

• A “cycle or cyclic inventory” is a technique where inventory is counted on a cyclic 1259

schedule rather than once a year. Cyclic counting systems require the counting of a 1260

certain number of items each prescribed period of time (e.g. weekly) with each item 1261

counted at a prescribed frequency. 1262

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• An “ABC inventory” stratifies the inventoried property either by criticality or dollar 1263

value, depending on the control requirements for each stratum. For example, those 1264

items with high dollar values are financially more critical than those with low dollar 1265

values and require more rigorous controls. Class A items, the most critical, are 1266

counted, for example, perhaps six times a year; class C items, the least critical, are 1267

counted less frequently. Consideration should also be given to other situations such as 1268

items that have a long lead time, items subject to pilferage, and critical or sensitive 1269

items. 1270

• A “statistical sampling” inventory, if performed properly at the appropriate statistical 1271

risk level, will reduce costs, yet not increase the Government's risk significantly. In 1272

reviewing the contractor's use of a sampling-type inventory, the PA should examine the 1273

contractor's plan to ensure that it does not exceed the risk the Government is willing to 1274

accept, and that it provides for use of valid sampling techniques. If results from the 1275

sample inventory reveal that variances exceed a predetermined acceptable variance 1276

standard, the contractor must perform a complete inventory to identify and correct 1277

overall variances within the inventory control system. 1278

• A final physical inventory, performed at contract completion or termination. This 1279

additional inventory identifies item condition and whether the property is required on a 1280

current or future contract in order to provide the PCOs and PLCOs information to 1281

support reutilization priorities and avoid unnecessary waste. This is tested under 1282

Contract Property Closeout. 1283

1284

Inventorying all the line items (100 percent) of material is a very time consuming and 1285

seldom a cost effective method of checking for discrepancies within the contractor's 1286

property management system. Consequently, the following two alternative methods 1287

addressed above are commonly used in commercial practice: cyclic and sampling 1288

inventories. 1289

1290

A combination of stratification and statistical sampling may be useful. For example, 1291

the contractor could perform a statistical sampling of low value items and a complete 1292

inventory of high value items. Criteria for segregating items is a matter of judgment and 1293

should be determined consistent with the contractor’s normal operations. The evaluation of 1294

the appropriateness of the method of inventory employed by the contractor should be based 1295

on the risk to the Government, the PA’s knowledge, and the PA’s confidence in the 1296

contractor's operation. If inventory methods can be cost-effective without requiring the 1297

Government to assume an unreasonable risk, they should be deemed compliant and adequate. 1298

1299

Contractors may use current or emerging technologies such as electronic, optical, 1300

electro-magnetic, or similar identification systems, (e.g., bar codes and radio frequency 1301

identification), to facilitate the accomplishment and completion of inventories. 1302

1303

In accordance with FAR 52.245-1(f)(1)(iv), contractors are required to perform a 1304

physical inventory of all Government property, including Government property in the possession 1305

of their subcontractors, upon termination or completion of contracts. Depending on the 1306

circumstances, the PA may waive this requirement on a contract-by-contract basis. PAs will 1307

coordinate with the cognizant PLCO prior to approving a waiver. PAs will only consider 1308

CHAPTER 2 – PMSA ELEMENT JOB AIDS

waivers for contractors that currently have approved property management systems, with no 1309

outstanding findings of noncompliance in the elements of Records or Physical Inventory. 1310

Additional considerations include how recent the last physical inventory was, overall property 1311

loss rates, and whether the property will be transferred to a follow-on contract for the same 1312

contractor. Additionally, PAs will not waive final inventories of sensitive Government property. 1313

1314

The PA must document any physical inventory waiver with a memorandum for record 1315

setting forth the rationale for the waiver. The memorandum must include the signed concurrence 1316

of the PA’s first level supervisor and will be loaded in the IWMS contract file, as opposed to the 1317

CAGE code level file. 1318

1319

PROCEDURES: 1320

In order to be compliant, the contractor’s procedures must identify the type or types of 1321

physical inventory that will be used, and provide specific directions for how inventories will be 1322

performed. 1323

1324

To be compliant, the procedures must also identify how the inventory will be performed 1325

and describe the count slips, tally sheets, or other means that will be used to record it. The 1326

procedures must establish timeframes in which the results of the inventory will be reconciled and 1327

posted to the record. 1328

1329

Regardless of the methodologies employed, in order to be compliant the contractor’s 1330

procedures must include a process for inventorying all Government property regardless of dollar 1331

value or risk level. 1332

1333

OBJECTIVE: The PA is responsible for determining whether the contractor is scheduling and 1334

performing inventories in accordance with its written property procedures. The PA will also 1335

determine whether the frequency and methodology of those inventories is appropriate for the 1336

types and quantity of Government property in the contractor’s stewardship. 1337

1338

POPULATION: All Government property accountable to contracts administered by, or 1339

delegated to, DCMA, and all Government contract property accountable to all DoD contracts, 1340

regardless of administration, for contractors with more than $100M of Government property 1341

administered by DCMA. 1342

1343

If a contractor has at least $100M of Government property accountable to contracts administered 1344

by DCMA, and also has sensitive property, then at least two populations will need to be tested. 1345

Sensitive property must always be tested separately from non-sensitive property. 1346

1347

SOURCE DOCUMENTS: Contractor count sheets for manual inventories and scanner uploads 1348

for automated inventories (e.g., performed utilizing a barcode scanner or updates from an RFID 1349

system). Additionally, posting references and dates of transaction in the contractor’s records that 1350

document inventory by exception. 1351

1352

SUPPORT DOCUMENTS: Inventory schedules, material adjustment records, loss reports, and 1353

the contractor’s property records. 1354

CHAPTER 2 – PMSA ELEMENT JOB AIDS

1355

SAMPLING: 1356

The element of Physical Inventory is tested statistically for standard PMSAs, and is based 1357

on a review of the documentation that the contractor uses to document that the contractor 1358

performs inventories periodically and in accordance with its procedures. PAs will review the 1359

element of Physical Inventory annually for systems with more than $100M of Government 1360

property accountable to contracts administered by DCMA. When performing reviews for those 1361

systems, PAs will include all Government property accountable to DoD contracts in their 1362

population, regardless of whether DCMA administers those contracts. PAs will use the double 1363

sampling plan that provides a 97% confidence of rejecting lots having 10% or more defects. The 1364

PA will use either the population of all Government property accountable to contracts 1365

administered by DCMA, or all Government property accountable to DoD contracts regardless of 1366

administration as appropriate, to ensure that all property is inventoried as scheduled, including 1367

items that are inventoried less frequently than annually. 1368

1369

If the contractor also has sensitive property, this means that there will be two populations 1370

that are separately tested at a 97% confidence level. 1371

1372

The PA will use judgmental sampling to review source and support documentation in 1373

order to test all portions of Physical Inventory when performing a limited PMSA. 1374

1375

TESTING CONSIDERATIONS: 1376

• If the PA finds that the contractor does not have records of all Government property 1377

while testing the element of Records, the PA will determine whether gaps in records 1378

translates to a noncompliance in the element of Physical Inventory. PAs should consider 1379

that an item that is not on record is unlikely to be inventoried. Also, if the contractor 1380

does not have a record of an item, the contractor could not have posted the inventory to 1381

the record. 1382

• Some larger contractors stratify material inventories and use a statistical sampling 1383

inventory for low dollar value, low risk materials. The PA must verify this methodology 1384

to be statistically valid during the review of written procedures. If a randomly selected 1385

sample falls under this methodology, and as such has not yet been inventoried, the PA 1386

will indicate that on the worksheet. If a statistically significant number of samples have 1387

not yet been inventoried in accordance with the contractor’s procedures, the PA may need 1388

to select a purposive sample of items that have been inventoried to provide insight into 1389

the contractor’s inventory processes. 1390

• The PA will review accountable contracts to ensure that any special provisions related to 1391

inventory frequency or methodology are addressed in both the contractor’s procedures 1392

and implemented practices (e.g., many MDA and NASA contracts require annual 1393

inventories for all types of Government property). 1394

• PAs must review reports of discrepancies to determine whether the discrepancies are 1395

indicative of systemic issues. For example, boxes of a lost materials (vs. individual 1396

items) from a single location, may point to pilferage as opposed to reasonable attrition. 1397

• The PA will ensure that the contractor is accurately posting material inventory 1398

adjustments to the record within the timeframe described in its written procedures. 1399

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• The PA will determine whether the contractor reports inventory results, to include any 1400

discrepancies, to the PA within the timeframe described in the contractor’s written 1401

procedures. 1402

• A separate population of all sensitive Government property accountable to contracts 1403

administered by DCMA will be used to test the adequacy of physical inventories of 1404

sensitive items. Sensitive items are tested as a separate population, using a double 1405

sampling plan that identifies defects of 10% or more, if they exist, 97% of the time as 1406

described in paragraphs 8.3.1.1. and 17.2.3. of Chapter 1. 1407

1408

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 1409

NONCOMPLIANCES: 1410

• Describe when the contractor performed the inventory. Discuss whether the contractor 1411

performed all inventories as scheduled. 1412

• Describe the methodology that the contractor used to perform the inventory. 1413

• Address when and how the contractor reconciled the results with the record, and whether 1414

the contractor reconciled the results with the record within the required timeframe. 1415

• Discuss whether the contractor posted the results to the record and whether the posting 1416

was accomplished within the required timeframe. 1417

• PAs who are performing reviews of property management systems that have more than 1418

$100M in accountable Government property will ensure that the Audit Report identifies 1419

that the elements of Records and Physical Inventory include all DoD property, regardless 1420

of whether it is accountable to contracts administered by DCMA, and that the populations 1421

are tested at a 97% confidence level. 1422

1423

1424

PMSA ELEMENT 10 - SUBCONTRACTOR AWARDS AND FLOW DOWN 1425

1426

REQUIREMENT: 1427

FAR 52.245-1(f)(1): 1428

1429

(v)(A) Subcontractor Control. The Contractor shall award subcontracts that clearly 1430

identify items to be provided and the extent of any restrictions or limitations on their use. 1431

The Contractor shall ensure appropriate flow down of contract terms and conditions (e.g., 1432

extent of liability for loss of Government property). 1433

1434

BACKGROUND: 1435

PAs must be aware of the distinction between subcontractors and a contractor’s alternate 1436

locations. Some contractors transfer Government property to other corporate divisions via 1437

interdivisional work orders, or agreements. Contractors use different names for these 1438

agreements. These agreements, however, are essentially work orders issued by the contractor to 1439

one of their other corporate divisions that has the required technical expertise or manufacturing 1440

capability to perform a particular task. PAs need to understand whether the other corporate 1441

division is an alternate location under the control of the prime contractor, or a separate legal 1442

entity. Awards, orders, or agreements with a separate legal entity should comply with 1443

requirements for awards to a subcontractor. In order to determine what the relationship between 1444

the prime contractor and the other corporate division is, the PA may use sources like the System 1445

CHAPTER 2 – PMSA ELEMENT JOB AIDS

for Award Management (SAM), or the contractor’s Disclosure Statements. If the PA has 1446

difficulty determining the relationship, the PA should seek guidance from the DACO or CACO 1447

administering the contract, and the DACO or CACO’s assigned legal counsel. See paragraph 4.1. 1448

in Chapter 1 of this guidebook for further discussion on this topic. 1449

1450

While FAR 52.245-1 requires the appropriate flow down of contract terms and conditions 1451

to subcontractors, the prime contractor should not flow down FAR 52.245-1 verbatim. The 1452

clause addresses an agreement between the Government and the prime contractor. If contractors 1453

incorporate the FAR 52.245-1 Government Property Clause verbatim in their subcontracts, it 1454

may lead to confusion because the Government is not a party to the subcontract. In such 1455

instances contractors often have, as part of their terms and conditions, clarification that when the 1456

term “Government” is used – it will be changed to reflect the contractor’s name to avoid 1457

confusion as to the relationship between the parties. 1458

1459

The liability provision the prime contractor flows down depends upon the pricing 1460

arrangement of the prime contract and of the subcontract. Specifically, prime contractors should 1461

flow down the limited risk of loss in the following types of subcontracts for prime contracts with 1462

limited risk of loss: 1463

1464

• Cost-reimbursement contracts. 1465

• Time-and-material contracts. 1466

• Labor-hour contracts. 1467

• Fixed-price contracts awarded on the basis of submission of certified cost or 1468

pricing data. 1469

• Negotiated fixed-price contracts awarded on a basis other than submission of 1470

certified cost or pricing data (for DoD contracts only). 1471

1472

Prime contractors should flow down the full risk of loss for any types of subcontracts 1473

other than those listed above. Prime contractors may also flow down full risk of loss in other 1474

circumstances, (i.e., situations that might lead a Government ACO to revoke the Government’s 1475

assumption of risk of loss for Government property.) 1476

1477

The contract clause at DFARS 252.228-7001, Ground and Flight Risk requires a DoD 1478

prime contractor to incorporate the requirements of the clause in all subcontracts. That clause 1479

contains a number of exclusions to the Government’s assumption of risk. 1480

1481

PROCEDURES: 1482

In order to be compliant, the contractor’s procedures must direct that subcontracts, or 1483

agreements with other corporate divisions where the corporate division is a separate legal entity, 1484

clearly identify all Government property to be provided. The PA should consider not just what 1485

the contractor calls an agreement (for example a “work order”), but determine whether the 1486

agreement constitutes a subcontract. Determining whether a subcontract has been awarded will 1487

require the PA to evaluate whether the other party is under the control of the contractor, which 1488

would mean not negotiating independently, or a separate legal entity acting in its own, 1489

independent best interest. Compliant procedures must also address how the contractor will flow 1490

CHAPTER 2 – PMSA ELEMENT JOB AIDS

down the terms and conditions of FAR 52.245-1 for effective and efficient control of 1491

Government property to the subcontract. The contractor may do this by incorporating a standard 1492

subcontract or purchase order form into the procedures by reference. 1493

1494

The contractor’s procedures must also address the risk of loss the subcontractor will 1495

assume under each type of contract. 1496

1497

OBJECTIVE: The PA will determine whether the prime contractor has awarded subcontracts 1498

that clearly identify property to be provided, and has ensured proper flow down of contract terms 1499

and conditions. The PA will also determine whether the contractor includes appropriate liability 1500

for risk of loss in flowing down contract terms and conditions to subcontractors. 1501

1502

POPULATION: All subcontracts that have Government property accountable to prime 1503

contracts administered by DCMA. The population applies to subcontracts that are currently 1504

active or that have been closed in the past year. 1505

1506

SOURCE DOCUMENTS: Subcontracts to which Government property is accountable. 1507

1508

SAMPLING: Test Subcontractor Awards and Flow Down statistically for standard PMSAs. 1509

The PA may use judgmental sampling for limited PMSAs to review a sample subcontract. 1510

1511

TESTING CONSIDERATIONS: 1512

• Review each subcontract or purchase order sampled to determine: 1513

• That subcontract instrument clearly identifies the Government property provided. 1514

• That the prime contractor adequately flows down FAR 52.245-1 requirements and 1515

contract terms and conditions for effective and efficient control of Government 1516

property. 1517

• That the prime contractor incorporates the appropriate risk of loss provision for the 1518

type of contract in subcontracts. 1519

• Determine whether the contractor is readily able to identify subcontracts with 1520

accountable Government property. 1521

1522

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 1523

NONCOMPLIANCES: 1524

• Describe how the prime contractor identifies the property provided under a subcontract. 1525

• Address how the prime contractor flows down contract terms and conditions and whether 1526

they are sufficient to provide effective and efficient control of Government property for 1527

all of the 22 elements that are applicable to the subcontractor’s property management 1528

system. 1529

• For the sampled subcontracts, indicate what type of award instrument the prime 1530

contractor used, whether and how the risk of loss is flowed down, and discuss the 1531

suitability of the risk of loss flowed down to the subcontractor in view of the type of 1532

contract. 1533

• If the contractor is unable to identify which subcontracts have accountable Government 1534

property, address how, and whether, they are ensuring that those subcontracts are 1535

properly administered. 1536

CHAPTER 2 – PMSA ELEMENT JOB AIDS

PMSA ELEMENT 11 - SUBCONTRACTOR REVIEWS 1537

1538

REQUIREMENT: 1539

FAR 52.245-1(f)(1): 1540

1541

(v)(B), Subcontractor Control. The Contractor shall assure its subcontracts are properly 1542

administered and reviews are periodically performed to determine the adequacy of the 1543

subcontractor’s property management system. 1544

1545

BACKGROUND: 1546

1547

1548

The type of review the contractor performs must be sufficient to determine whether the 1549

subcontractor’s property management system provides effective and efficient control of 1550

Government property. While the contractor is not obligated to use the methods and standards 1551

PAs use in performing PMSAs, the reviews should provide the Government a substantially 1552

similar confidence level regarding the adequacy of subcontractors’ property management 1553

systems. Depending on the size, complexity and risk of the subcontractor’s property 1554

management system, and on the nature of the property in the subcontractor’s possession, those 1555

reviews may be on-site, requiring entrance and exit conferences, and detailed tests and formal 1556

examination and evaluation of a subcontractor’s property management system. For lower risk 1557

subcontractors, the reviews the prime contractor performs may involve less formal testing 1558

methods and techniques. In any event, the reviews must be sufficient to ensure that 1559

subcontractors’ property management systems are adequately monitored and managed by the 1560

prime contractor in order to mitigate Government risk. 1561

1562

Prime contractor documentation supporting the review should be sufficient to 1563

demonstrate that the prime contractor conducted an adequate review, including the tests 1564

performed, the information obtained, and the pertinent conclusions reached. 1565

1566

Prime contractors may use risk or other standards to determine when and how to perform 1567

a review of their subcontractors, as long as those reviews are sufficient to assess the health of the 1568

subcontractor’s system, and are performed frequently enough to avoid exposing the Government 1569

to unreasonable risk. Generally reviews for low risk subcontractors would be performed at least 1570

once every 3 years, as that aligns with the maximum interval that DCMA considers acceptable 1571

for low risk prime contractors. 1572

1573

If the prime contractor identifies a deficiency during a subcontractor review, the prime 1574

must ensure that the subcontractor accomplishes effective corrective actions in a timely manner. 1575

1576

If a contractor chooses to use a limited review questionnaire, the questionnaire must 1577

require objective data and submission of sample documentation upon which a prime contractor 1578

finding may be based. Additionally, the answers the prime contractor requests must adequately 1579

address how the subcontractor manages Government property. The use by a prime contractor of 1580

survey questionnaires with only “Yes/No” answers would not meet this requirement for a 1581

number of reasons. In the absence of objective data and sample documentation, all conclusions 1582

CHAPTER 2 – PMSA ELEMENT JOB AIDS

are opinion-based, and do not satisfy the FAR 52.245-1 requirements. A subcontractor who is 1583

asked on a questionnaire whether they have compliant records, for example, is likely to respond 1584

in the affirmative, regardless of whether that statement is completely accurate. Conversely, if the 1585

questionnaire requested a sample record, the prime contractor would be able to verify whether 1586

that sample record was compliant. 1587

1588

PROCEDURES: 1589

• In order to be compliant, the procedures must fully describe the types of reviews the 1590

prime contractor will perform, the methodology, and the standards to be employed. The 1591

prime contractor’s procedures must also address how the contractor will determine what 1592

type of review to perform and how frequently the prime contractor’s reviews will be 1593

conducted. If the prime contractor uses risk or other standards to determine when and 1594

how to perform a review of subcontractors, the prime contractor’s procedures must 1595

explain the criteria used for the evaluation. Moreover, the prime contractor’s procedures 1596

must address how the prime contractor will document the reviews, detailing the type of 1597

support documentation that it will use. 1598

• The procedures must establish the process the contractor will employ when its 1599

subcontractor reviews reveal deficiencies in order to be compliant with the requirement to 1600

initiate and maintain the processes, systems, procedures, records, and methodologies 1601

necessary for effective and efficient control of Government property, as described in 1602

FAR 52.245-1(b)(1). The process should ensure that subcontractors implement 1603

corrective actions that address the root cause of the deficiencies, that the corrective 1604

actions are accomplished in a timely manner, and that the subcontractor effectively 1605

corrects the shortcoming. 1606

1607

OBJECTIVE: PAs will determine if prime contractors have sufficient control over their 1608

subcontractors and are performing periodic reviews to determine the adequacy of the 1609

subcontractor’s property management system. 1610

1611

POPULATION: All of the contractor’s subcontractors that possessed Government property 1612

accountable to prime contracts administered by DCMA at any time within the past 12 months. 1613

1614

SOURCE DOCUMENTS: Reports or other documentation of reviews of subcontractors’ 1615

property management systems. 1616

1617

SUPPORT DOCUMENTS: Prime contractor’s workpapers supporting reviews of 1618

subcontractors’ property management systems. 1619

1620

SAMPLING: Test the element of Subcontractor Reviews statistically for standard PMSAs. The 1621

PA may use judgmental sampling for limited PMSAs. 1622

1623

TESTING CONSIDERATIONS: 1624

• The PA will test to determine whether the prime contractor correctly and consistently 1625

applied a risk assessment or other methods to determine the type and frequency of 1626

subcontractor property management reviews. 1627

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• Examine each subcontractor review in the sample, and assess whether the prime 1628

contractor performed the review as scheduled, whether the review was sufficient to 1629

determine the adequacy of the subcontractor’s property management system, and whether 1630

the contractor documented the review with data upon which a valid finding may be 1631

based. Ensure that all applicable elements were included in the review. 1632

• If a prime contractor elects to retain some elements of property administration rather than 1633

flowing them down to the subcontractor (e.g., the contractor elects to maintain records or 1634

perform inventories), the PA will ensure that the prime contractor is performing oversight 1635

of those elements that were not retained when reviewing this element. Retained elements 1636

of property administration will be tested by the PA as part of the overall populations for 1637

those elements. For example, if the prime contractor retains recordkeeping, the PA will 1638

include the records located at the subcontractor facility in the overall records population, 1639

and will request support property administration assistance to perform physical 1640

verification of those items if appropriate. 1641

• Verify that subcontractor corrective actions addressed the root cause of identified 1642

deficiencies, that they were accomplished in a timely manner, and that the corrective 1643

actions effectively corrected the shortcoming. 1644

1645

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 1646

NONCOMPLIANCES: 1647

• Describe the methods the prime contractor used to determine the type and frequency of 1648

subcontractor property reviews and address whether the prime contractor reviews were 1649

correctly applied. 1650

• For subcontractor reviews discuss: 1651

o The method(s) the prime contractor used to perform the reviews. 1652

o Whether the prime contractor performed the reviews as scheduled. 1653

o Whether all applicable elements were addressed for all reviews. 1654

o Whether the prime contractor’s reviews were sufficient to determine the adequacy 1655

of the subcontractor’s property management system. 1656

o Whether the contractor documented the reviews with adequate data to support a 1657

determination of subcontractor system compliance. 1658

• Address all deficiencies identified by the prime contractor and explain whether 1659

subcontractor corrective actions addressed the root cause of the deficiencies, were 1660

accomplished in a timely manner, and effectively corrected any deficiencies. 1661

1662

1663

PMSA ELEMENT 12 - REPORTS 1664

1665

REQUIREMENT: 1666

FAR 52.245-1(f)(1): 1667

1668

(vi). Reports. The Contractor shall have a process to create and provide reports of 1669

discrepancies, loss of Government property, physical inventory results, audits and self-1670

assessments, corrective actions, and other property-related reports as directed by the 1671

Contracting Officer. 1672

1673

CHAPTER 2 – PMSA ELEMENT JOB AIDS

BACKGROUND: 1674

Among the reports the contractor may be required to submit are reports of discrepancies; 1675

loss; NASA Form 1018; physical inventory results; self assessments; corrective actions; IUID for 1676

GFP; Commercial Asset Visibility CAV reports; and other contractually required reports. 1677

1678

PROCEDURES: In order to be compliant, the contractor’s procedures must identify all 1679

required reports and the contractor’s method for compiling the necessary data. Furthermore, the 1680

contractor’s procedures must address requirements for submission of each report, including when 1681

the report is due, and to whom the report should be submitted. 1682

1683

OBJECTIVE: The PA will determine whether the contractor has a process to create and 1684

provide accurate and complete reports, and whether the contractor submits the reports within the 1685

required timeframe. 1686

1687

POPULATION: PAs must review all contractually-required reports issued by the contractor 1688

within the preceding 12 months. Because each type of report has different characteristics and 1689

addresses different requirements, the PA must use separate populations for each type of report. 1690

For example, if a contractor is reporting receipt of GFP, CSA results, physical inventory results, 1691

and NASA 1018s, there would be separate populations and separate worksheets for each type of 1692

report. Reports of loss of Government property will be tested under the element of Relief of 1693

Stewardship Responsibility and Liability. 1694

1695

SOURCE DOCUMENTS: The contractor’s property management procedures, NASA form 1696

1018, GFP attachments, physical inventory reports, reports of inventory adjustments, CSA 1697

reports, corrective action plans, reports required by Contract Data Requirements Lists (CDRLs), 1698

and other property related reports directed by the PCO or ACO. 1699

1700

SUPPORT DOCUMENTS: Supporting documents for this element include: records of 1701

Government property, receiving documents, and any other sources of data for the reports. 1702

1703

SAMPLING: 1704

For standard PMSAs, PAs will test the element of Reports by using statistical sampling. 1705

PAs will review the contractor’s procedures and will request a listing of all contractually-1706

required reports issued within the preceding 12 months. PAs will select statistical samples from 1707

that list for each type of report, and review the reports selected. If PAs have concerns about 1708

whether the contractor submitted all required reports, the PA may select a purposive sample from 1709

all reports that should have been submitted within the preceding 12 months. 1710

1711

PAs will test reports of GFP to the IUID Registry or GFP Module within PIEE by 1712

requesting a population of all GFP accountable to contracts administered by DCMA. The GFP 1713

must be accountable to a contract that includes DFARS clause 252.211-7007 “Reporting of 1714

Government-Furnished Property to the IUID Registry.” Because this clause requires all property 1715

received after January 1, 2014, to be reported to the IUID Registry or GFP Module within PIEE 1716

(prior to that, only some categories of GFP were required to be reported to the registry), the PA 1717

must select a random sample of property on hand for which receipt should have been reported. 1718

1719

CHAPTER 2 – PMSA ELEMENT JOB AIDS

When performing a limited PMSA, PAs will use judgmental sampling to test whether the 1720

reports are accurate and complete, and whether the contractor submitted the reports by the 1721

required date. PAs will request samples of each type of report to review for completeness and 1722

compliance. Support for all conclusions must include sample documentation provided by the 1723

contractor. 1724

1725

TESTING CONSIDERATIONS: 1726

• PAs will review the contractor’s property management procedures to determine whether 1727

the contractor has a process to create and provide reports. 1728

• To confirm that the reports are accurate, PAs will compare the reports to the sources of 1729

data and determine and assess how the contractor ensures the sources of data are accurate 1730

and complete. 1731

• To determine whether the reports were submitted on time, PAs will compare the 1732

submission dates to the date the report was due, and whether the due date was established 1733

by contract or by the contractor’s procedures. 1734

• Contractors are required to report the results of the physical inventory, including all 1735

inventory discrepancies (overages and shortages) to the Government PA. With the 1736

exception of normal and reasonable inventory adjustments, (i.e., losses of low-risk 1737

consumable material such as common hardware), as agreed to by the contractor and the 1738

PA, and clearly documented in the contractor’s written procedures, the contractor will 1739

treat all inventory shortages as losses, and must report shortages as such pursuant to FAR 1740

52.245-1(f)(1)(vii). 1741

• Contractor inventory adjustments must also be reported to the PA. While these are not 1742

considered losses, the PA needs to have visibility to ensure that the contractor is 1743

identifying adjustments in accordance with the procedure described in the contactor’s 1744

written procedures. 1745

• The PA will determine whether the contractor is reporting significant deficiencies 1746

identified during their CSA, as well as any other results in accordance with the 1747

contractor’s written procedures. 1748

• The PA will determine whether the contractor is providing requested corrective action 1749

plans that adequately address root causes and corrective actions, in a timely manner. 1750

• The PA will verify that all samples requiring IUID reporting have been reported to the 1751

IUID registry by validating that they are included in the contractor’s GFP listing in the 1752

GFP Module in PIEE. 1753

1754

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 1755

NONCOMPLIANCES: 1756

• Discuss whether the contractor’s procedures establish an adequate process to create and 1757

provide property-related reports, and provide the rationale for your conclusion. 1758

• For each type of report, address whether the reports were accurate and on time, and 1759

discuss how the PA arrived at all conclusions. 1760

1761

1762

1763

CHAPTER 2 – PMSA ELEMENT JOB AIDS

PMSA ELEMENT 13 - RELIEF OF STEWARDSHIP 1764

1765

REQUIREMENT: 1766

FAR 52.245-1(f)(1): 1767

1768

(vii), Relief of stewardship responsibility and liability. The Contractor shall have a 1769

process to enable the prompt recognition, investigation, disclosure and reporting of loss 1770

of Government property, including losses that occur at subcontractor or alternate site 1771

locations. 1772

(A) This process shall include the corrective actions necessary to prevent recurrence. 1773

(B) Unless otherwise directed by the Property Administrator, the Contractor shall 1774

investigate and report to the Government all incidents of property loss as soon as the 1775

facts become known. Such reports shall, at a minimum, contain the following 1776

information: 1777

(1) Date of incident (if known). 1778

(2) The data elements required under paragraph (f)(1)(iii)(A) of this clause. 1779

(3) Quantity. 1780

(4) Accountable contract number. 1781

(5) A statement indicating current or future need. 1782

(6) Unit acquisition cost, or if applicable, estimated sales proceeds, estimated 1783

repair or replacement costs. 1784

(7) All known interests in commingled material of which includes Government 1785

material. 1786

(8) Cause and corrective action taken or to be taken to prevent recurrence. 1787

(9) A statement that the Government will receive compensation covering the loss 1788

of Government property, in the event the Contractor was or will be reimbursed or 1789

compensated. 1790

(10) Copies of all supporting documentation. 1791

(11) Last known location. 1792

(12) A statement that the property did or did not contain sensitive, export 1793

controlled, hazardous, or toxic material, and that the appropriate agencies and 1794

authorities were notified. 1795

1796

DFARS 252.245-7002(b), Reporting Loss of Government Property: 1797

1798

(2) Unless otherwise provided for in this contract, the requirements of paragraph (b)(1) 1799

of this clause do not apply to normal and reasonable inventory adjustments, i.e., losses of 1800

low risk consumable material such as common hardware, as agreed to by the Contractor 1801

and the Government PA. Such losses are typically a product of normal process variation. 1802

The Contractor shall ensure that its property management system provides adequate 1803

management control measures, e.g., statistical process controls, as a means of managing 1804

such variation. 1805

1806

BACKGROUND: 1807

• FAR 52.245-1(f)(1)(vii)(B) grants the PA some discretion with regard to when 1808

contractors must report a property loss, providing, “Unless otherwise directed by the PA, 1809

CHAPTER 2 – PMSA ELEMENT JOB AIDS

the Contractor shall investigate and report to the Government all incidents of property 1810

loss as soon as the facts become known.” 1811

• With the exception of reasonable inventory adjustments of material, PAs may not excuse 1812

contractors from reporting property losses, regardless of the value of the item. 1813

Otherwise, the contractor will not be relieved of stewardship for such items. 1814

• As agreed to between the PA and contractor, and as documented in the contractor’s 1815

procedures, contractor reporting may be accomplished on a regular basis, no less 1816

frequently than quarterly. PAs may consider low risk property as a factor in determining 1817

whether to allow the contractor to report a loss later than “as soon as the facts become 1818

known.” The information required by FAR 52.245-1(f)(1)(vii)(B)(1-12) is still required, 1819

notwithstanding the frequency of reporting. 1820

• Ultimately, the most important consideration the PA will take account of in deciding 1821

whether to allow a contractor to report losses later than as soon as the facts become 1822

known must always be whether it is in the best interest of the Government to do so. 1823

• Losses determined to be subject to the provisions of DFARS 252.228-7001, Ground and 1824

Flight Risk, are also subject to review under this element. 1825

• Overconsumption of material, whether discovered during a consumption analysis or 1826

otherwise, is not a loss. If the PA determines that the contractor has overconsumed 1827

Government owned, contractor-acquired material, the PA will report this to the ACO for 1828

potential “Disallowance of the Reimbursement of Cost” in accordance with FAR subpart 1829

42.8. If the material that the contractor overconsumed was Government furnished, the 1830

PA will notify the ACO who may seek some form of consideration to compensate the 1831

Government. 1832

• Some contractors use an indication in their records for “missing” property while they 1833

investigate to determine whether the property is really lost during inventory 1834

reconciliation. This process must be clearly defined in the contractor’s procedures, and 1835

must include a timeframe by which losses will be recognized if the property is not found 1836

after a reasonable search. These items should be included in the population. Limiting the 1837

population to only reported losses leads to the risk of overlooking losses the contractor 1838

identified but failed to report. Such items are particularly relevant when testing whether 1839

the contractor promptly investigates and discloses losses. 1840

• Loss of sensitive property must always be reported as soon as the contractor identifies the 1841

potential loss. 1842

1843

PROCEDURES 1844

• In order to be compliant, the contractor’s procedures must enable the following: 1845

o Prompt contractor recognition of property losses. 1846

o Prompt contractor investigation of property losses, including the root cause of the 1847

loss. 1848

o Prompt disclosure of property losses by internal notification of any loss to the 1849

responsible contractor property control organization and to the Government PA. 1850

o Prompt contractor reporting of property loss to the Government PA. 1851

• FAR 52.245-1(f)(1)(vii)(B) requires the contractor to ”investigate and report to the 1852

Government all incidents of property loss as soon as the facts become known” unless 1853

otherwise directed by the PA. It is good practice for the contractor to disclose the loss by 1854

informally notifying the PA shortly after the contractors becomes aware of a loss, and 1855

CHAPTER 2 – PMSA ELEMENT JOB AIDS

PAs should encourage contractors to include that initial notification in their written 1856

procedures. 1857

• “Prompt” must be defined in the contractor’s procedures as an objective measurable 1858

timeframe. 1859

• The contractor’s procedures must address the contractor’s corrective action process, 1860

describing how the process identifies, develops, implements, tracks, and evaluates 1861

corrective actions to ensure similar losses do not occur in the future. 1862

1863

OBJECTIVE: The PA will determine whether the contractor has a process to enable the 1864

prompt recognition, investigation, disclosure, and reporting of loss of Government property, 1865

including the corrective actions necessary to prevent recurrence, whether the contractor 1866

investigated and reported to the Government all incidents of property loss as soon as the facts 1867

became known, and whether the reports, at a minimum, contained the information set forth at 1868

52.245-1(f)(1)(vii)(1-12). 1869

1870

POPULATION: All losses of Government property accountable to contracts administered by 1871

DCMA within the preceding 12 months. 1872

1873

SOURCE DOCUMENTS: Property loss reports. 1874

1875

SUPPORT DOCUMENTS: Supporting documents for this element include: records of 1876

Government property, acquisition documents (to support the data element of unit acquisition 1877

cost), police reports, insurance company reports and liability determinations, shipping, and any 1878

other sources of data for the reports. 1879

1880

SAMPLING: For standard PMSAs, PAs will select a statistical sample from all contractor 1881

reports or other indications of loss of Government property in the Property Loss capability within 1882

the GFP Module application in PIEE submitted within the preceding 12 months. For limited 1883

PMSAs, PAs will perform a judgmental review by assessing the compliance of a loss report 1884

submitted within the preceding 12 months. 1885

1886

TESTING CONSIDERATIONS: 1887

PAs will review the contractor’s property management procedures to determine whether 1888

the contractor has a process to enable the prompt recognition, investigation, disclosure, and 1889

reporting of loss of Government property, including the corrective actions necessary to prevent 1890

recurrence. 1891

1892

The PA will review each report to ensure that the report contains all the information 1893

required by FAR 52.245-1(f)(1)(vii)(B)(1 through 12). 1894

1895

For each item sampled: 1896

• Compare the date the contractor recognized the loss with the dates the contractor began 1897

and completed its investigation to determine whether the contractor promptly investigated 1898

the loss. 1899

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• The PA will determine whether the contractor promptly internally disclosed a property 1900

loss by comparing the date the contractor recognized the loss with the date the contractor 1901

notified the responsible contractor property control organization of the loss. 1902

• Compare the date the contractor recognized the loss with the date the contractor reported 1903

the loss, and these dates to the date the contractor submitted its report to the Government 1904

PA. The PA will consider this information to determine if the contractor promptly 1905

reported the property loss to the Government PA. 1906

• Assess whether the contractor’s initial loss report was accurate and included all required 1907

data elements. If the loss report was rejected for re-work, assess whether the contractor 1908

has a pattern submitting loss reports with similar incomplete or inaccurate data. 1909

1910

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 1911

NONCOMPLIANCES: 1912

• Discuss whether the contractor’s procedures establish a process to enable the prompt 1913

recognition, investigation, disclosure, and reporting of loss of Government property, 1914

including the corrective actions necessary to prevent recurrence. Address whether the 1915

contractor’s procedures adequately define “prompt” as an objective measurable 1916

timeframe. 1917

• Evaluate whether the contractor’s recognition, investigation, disclosure and reporting of 1918

the sampled losses of Government property was prompt as defined in its procedures. 1919

• For the samples, address whether the contractor’s initial report included all of the 1920

information required by FAR 52.245-1 (f)(1)(vii)(B)(1 through 12). 1921

• If, for example, the contractor is allowed to report a loss on a regular basis, such as 1922

monthly or quarterly rather than “as soon as the facts become known,” address whether 1923

the contractor reported those losses in a timely manner, and whether there were trends 1924

indicating an undue increase in the amount of property loss or a deficiency in the 1925

contractor’s property management system. 1926

1927

1928

PMSA ELEMENT 14 - UTILIZATION 1929

1930

REQUIREMENT: 1931

FAR 52.245-1(f)(1)(viii)(A), Utilizing Government property: “The Contractor shall utilize… 1932

Government Property only as authorized under this contract.” 1933

1934

BACKGROUND: 1935

Generally, unless otherwise authorized by the contract, contractors may only use 1936

Government property in the performance of the contract to which the property is accountable. 1937

Use of such Government property for any other purpose, whether Government or commercial, is 1938

prohibited unless the contractor obtains written approval from the PCO with cognizance of the 1939

contract to which the property is accountable. 1940

1941

There is no contractual requirement for the contractor to establish and maintain utilization 1942

records. However, if the contractor’s procedures provide for the establishment and maintenance 1943

of utilization records, the PA may identify incomplete, inaccurate, or nonexistent utilization 1944

records as non-compliances that require correction. Such issues taken alone, however, normally 1945

CHAPTER 2 – PMSA ELEMENT JOB AIDS

do not materially affect the ability of DoD officials to rely upon information produced by the 1946

system. 1947

1948

PROCEDURES: In order to be compliant, the contractor’s procedures must describe the 1949

process the contractor will use to ensure that it will use Government property only as authorized 1950

by contract. If the contractor will do this by establishing utilization records, the contractor’s 1951

procedures will fully describe the format of the records and the method of maintaining them. 1952

1953

OBJECTIVE: The PA will determine whether the contractor uses Government property only as 1954

authorized by the contract to which the property is accountable. 1955

1956

POPULATION: All Government owned equipment, special tooling, and special test equipment 1957

accountable to contracts administered by DCMA. The element of Utilization does not apply to 1958

material. 1959

1960

SOURCE DOCUMENTS: Utilization documentation, to include utilization reviews, and 1961

written approvals from the PCO for use of property on work other than the contract to which the 1962

property is accountable. 1963

1964

SUPPORT DOCUMENTS: Supporting documents for this element includes: records of 1965

Government property, and any other sources of data for utilization. 1966

1967

SAMPLING: 1968

For standard PMSAs, PAs will test the element of Utilization by selecting a statistical 1969

sample from all Government owned equipment, special tooling, and special test equipment that 1970

is accountable to contracts administered by DCMA. 1971

1972

The PA will use judgmental sampling to test Utilization when performing a limited 1973

PMSA. PAs will request sample utilization support documentation. Support for all conclusions 1974

must include sample documentation provided by the contractor. 1975

1976

TESTING CONSIDERATIONS: 1977

• The PA will review contractor utilization records, if they exist, for the items sampled, and 1978

compare the number of the contract to which the item is accountable to the contract 1979

number on which it was used. The PA will then determine whether the contractor is 1980

using the property only as authorized by the contract to which it is accountable, or as 1981

approved by the PCO. 1982

• In the absence of utilization records or logs, PAs may use contractor utilization reviews 1983

as documentation that the contractor has a process to assess continued usage and future 1984

need for the property. 1985

• It is also good practice for the PA to perform a physical review of each item sampled to 1986

ascertain the current use of the item. Depending on the contractor’s process, there may 1987

be a work or task order identifying the contract number associated with the task on which 1988

the contractor has used the property. PAs may also ask the employee using the item to 1989

identify the contract under which the property is being used. 1990

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• If any sampled item has been used other than on the contract to which it accountable, PAs 1991

will check for contractual authorization or the written consent of the PCO. 1992

1993

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 1994

NONCOMPLIANCES: 1995

• Explain whether the contractor is using the property, and whether that use is as 1996

authorized by the contract to which the property is accountable. 1997

• If there is unauthorized property use on other contracts, explain the nature of that 1998

property use, whether the contractor used the property to perform work on other 1999

Government contracts or commercial work, how much of the property was used, and if 2000

there are any facts concerning that unauthorized use the PA could not verify. 2001

2002

2003

PMSA ELEMENT 15 – DECLARATION OF EXCESS 2004

2005

REQUIREMENT: 2006

FAR 52.245-1(f)(1)(viii)(A), Utilizing Government property: “The Contractor shall promptly 2007

disclose and report Government property in its possession that is excess to contract 2008

performance.” 2009

2010

BACKGROUND: 2011

Retention of unneeded Government property adds costs to the contract, exposes the 2012

Government to unnecessary risk of loss, and prevents effective reutilization of that property. 2013

Potential additional costs for retained property include costs to store the property, costs to 2014

maintain complete, current, and auditable property records, costs to perform and report periodic 2015

inventories, and costs to maintain the property in usable condition. 2016

2017

FAR 52.245-1(j)(3) requires that excess property be submitted on an inventory disposal 2018

schedule no later than 30 days after the contractor determines the property to be excess, or 60 2019

days after completion of contract deliveries or performance. 2020

2021

While the elements of Declaration of Excess, Disposal, and Property Closeout are related, 2022

the populations used to test each are different because PAs are assessing separate actions. When 2023

testing the element of Declaration of Excess, PAs are determining whether the contractor is 2024

effectively identifying excess property so that it can be reported as such. The PA is tasked with 2025

determining whether all property that should have been declared as excess has been declared as 2026

excess. 2027

2028

When testing the element of Disposal, the PA is determining whether property that the 2029

contractor reported as excess, and submitted to plant clearance, was disposed of in a timely 2030

manner. Incorrectly using a Disposal population to test Declaration of Excess excludes all items 2031

that are excess to contract needs that the contractor may have failed to declare as excess, as well 2032

as all excess items for which the contractor was relieved of stewardship through other means 2033

(e.g., transferred to another contract, returned to the buying activity.) 2034

2035

CHAPTER 2 – PMSA ELEMENT JOB AIDS

While the declaration and disposal of excess property are often required steps for a 2036

contractor performing property closeout, the element of Property Closeout covers other actions 2037

as well (i.e., final physical inventory performance, reporting, investigating, and securing closure 2038

of all loss cases, and reporting the contract property closeout to the PA.) Because of this, the 2039

population for the element of Property Closeout is contracts with a final delivery date that has 2040

past, or that have been fully performed. When testing Property Closeout, the PA is determining 2041

whether all closeout actions have been performed. 2042

2043

PROCEDURES: In order to be compliant, the contractor’s procedures must address how the 2044

contractor will promptly identify property that is excess to contractual requirements. Typically, 2045

identification of excess property will involve some type of review of property that the contractor 2046

is not currently using. The contractor will then need to determine whether to initiate a disposal 2047

action or to justify continued retention of the property that is not in current use. The contractor’s 2048

procedures must detail the methodology and frequency of such a review and describe how the 2049

review of excess property will be documented. The PA must ensure that the contractor’s 2050

intervals of review are frequent enough to allow for maximum reutilization and reduction of 2051

contact costs. 2052

2053

OBJECTIVE: The PA will determine whether the contractor promptly discloses and reports 2054

Government property in its possession that is excess to contract performance. 2055

2056

POPULATION: All excess Government property in the contractor’s possession at any time in 2057

the past 12 months. Because it would be difficult to identify such property when performing a 2058

PMSA, the population should also include: 2059

2060

• All Government property accountable to contracts that are past their final delivery 2061

date. 2062

• All Government property that has not had any usage transactions in the past 12 2063

months (or other length of time that may be appropriate for the contract). 2064

o For material, this would mean no issuance. 2065

o For special tooling, special test equipment, and equipment, this would 2066

mean no known usage. 2067

• If the contractor does not have any property that is accountable to contracts past 2068

the contracts’ final delivery date, or that has not had any usage transactions in the 2069

past 12 months, then the PA will test a population of all Government contract 2070

property accountable to contracts administered by or delegated to DCMA that is 2071

on hand in order to ensure that the contractor is effectively identifying excess 2072

property. 2073

2074

2075

SOURCE DOCUMENTS: Contractor records of Government property. 2076

SUPPORT DOCUMENTS: Bills of material, schematics, drawings, etc., letters or contract 2077

modifications from PCOs authorizing property retention. 2078

2079

CHAPTER 2 – PMSA ELEMENT JOB AIDS

SAMPLING: 2080

For standard PMSAs, the PA will test the element of Declaration of Excess by selecting a 2081

statistical sample from all Government owned property meeting the conditions identified above 2082

that was on hand within the preceding 12 months and accountable to contracts administered by 2083

DCMA. 2084

2085

The PA will use judgmental sampling to test Declaration of Excess when performing a 2086

limited PMSA. PAs will request sample documentation of reviews to identify excess for the 2087

items sampled, if available. At a minimum, the PA will identify whether there is property 2088

accountable to contracts with final delivery dates that have transpired. The PA must support all 2089

conclusions with sample documentation provided by the contractor. 2090

2091

TESTING CONSIDERATIONS: 2092

• Because the contractor is required to promptly disclose and report excess Government 2093

property, PAs will, to the extent they are able, address when each item became excess, 2094

when the contractor disclosed the property as excess, and when the contractor reported 2095

the Government property as excess. 2096

• Sometimes the buying office, or someone from DCMA, will provide the contractor with 2097

written authorization to retain excess property. Such authorizations are inappropriate and 2098

are, in effect, unfunded storage agreements. However, PAs must be aware that 2099

contractors who receive written authorizations to retain excess property may be 2100

performing in accordance with direction from someone with apparent authority to modify 2101

the terms and conditions of the contract. The PA will engage with the ACO or PCO to 2102

ensure a warranted contracting officer is made aware of direction to the contractor to 2103

retain the property. 2104

• Determine whether the contractor has documentation supporting retention on hand at the 2105

time of the PMSA. If a contractor has to ask the PCO for permission to retain excess 2106

property after the sample was selected, it means that the contractor retained property 2107

without proper authorization, and the PA will identify the noncompliance. 2108

• A separate population of all excess sensitive Government property accountable to 2109

contracts administered by DCMA in the contractor’s possession for the past 12 months 2110

will be used to test the adequacy of declaration of excess of sensitive items. Because it 2111

would be difficult to identify such property when performing a PMSA, the population 2112

should also include: 2113

o All sensitive Government property accountable to contracts that are past the 2114

contracts’ final delivery date. 2115

o All sensitive Government property that has not had any usage transactions in the 2116

past 12 months (or other length of time that may be appropriate for the contract). 2117

 For material, this would mean no issuance. 2118

 For special tooling, special test equipment, and equipment, this would 2119

mean no usage. 2120

• Sensitive items are tested as a separate population, using a double sampling plan that 2121

identifies defects of 10% or more, if they exist, 97% of the time as described in 2122

paragraphs 8.3.1.1. and 17.2.3. of Chapter 1. 2123

2124

CHAPTER 2 – PMSA ELEMENT JOB AIDS

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 2125

NONCOMPLIANCES: 2126

• Discuss whether the contractor disclosed and reported excess Government property 2127

promptly. The PA will measure the promptness of those two actions in relation to when 2128

the property became excess. 2129

• Describe the process the contractor uses to identify and disclose excess property and 2130

indicate whether the contractor implemented that process as set forth in its procedures. 2131

2132

2133

PMSA ELEMENT 16 - CONSUMPTION 2134

2135

REQUIREMENT: 2136

FAR 52.245-1(f)(1)(viii)(A), Utilizing Government property: “The Contractor 2137

shall…consume… Government Property only as authorized under this contract.” 2138

2139

BACKGROUND: 2140

The FAR does not define the word “consumption.” For property management purposes, 2141

consumption is the process of incorporating material into a higher-level assembly or end item, or 2142

otherwise expending it in the performance of a contract. “Consumption” applies only to 2143

material. 2144

2145

PAs will evaluate the adequacy of the contractor’s consumption of Government material 2146

by performing a consumption analysis, which is perhaps the most difficult and challenging 2147

aspect of a PMSA. Stated as simply as possible, a consumption analysis is a matter of tracing 2148

what became of Government material that came into the contractor’s possession, and 2149

determining whether the material is consumed consistent with contract requirements, with 2150

reasonable allowances for scrap and salvage. To perform this analysis, the PA will subtract the 2151

balance on-hand from the quantity of Government property the contractor received, and then 2152

determine what happened to the difference. That is, how much Government property was 2153

incorporated into the end item, how much is still in WIP, and how much was disposed of in 2154

accordance with the contractor’s scrap procedures. 2155

2156

The adequacy and accuracy of the contractor’s records are critical to reflecting the 2157

quantities of property received, issued, and on-hand. 2158

2159

When assessing the quantities of material required for contract performance, PAs must 2160

take into consideration the type of contract involved. Production contracts may clearly spell out 2161

consumption rates, including scrap. Alternatively, the information about consumption may be in 2162

the contractor’s material requirements lists, bills of materials, and master production schedules. 2163

2164

Material requirements for research and development contracts may be vague and driven 2165

largely by an engineer's individual program requirements, interim engineering drawings, a proof 2166

of concept, or testing parameters. The PA may have to interview the engineer, scientist, or 2167

principal investigator who requisitioned material under the contract, soliciting information 2168

through an interview process as to the need for the material, the quantity needed, evidence of 2169

actual consumption (i.e., examining the item created where possible), and determining whether 2170

100

CHAPTER 2 – PMSA ELEMENT JOB AIDS

there is any excess property. The PA must take care to ensure that materials not consumed under 2171

the contract by the engineer or scientist or principal investigator are not stashed away in a desk 2172

drawer or cabinet, as opposed to the contractor returning the property to stores for proper 2173

management. The decision of whether the consumption was reasonable under the contract terms 2174

depends primarily on the PA’s judgment supported by sufficient investigation to reach a 2175

decision. PAs may use additional discussion with other DCMA functional specialists, such as 2176

Engineers and Industrial Specialists to confirm conclusions. 2177

2178

For repair contracts, the contract frequently identifies material requirements in repair 2179

analysis documents. The PA needs to be aware that work that is out of scope of the contract may 2180

arise during the performance of the repair or overhaul. This out-of-scope work may require the 2181

acquisition of CAP material under a cost reimbursement contract line item number (CLIN). 2182

Overhaul and maintenance contracts may set forth consumption allowances in the terms and 2183

conditions. 2184

2185

Cost-reimbursement type contracts or contracts with progress payments generally have a 2186

requirement for an MMAS. See DFARS 242.7200 for the prescription to use DFARS 252.242-2187

7004 for the specific contractor and Government requirements. The MMAS requires the use of 2188

an accounting system to manage the material. Material under the MMAS includes CAP under 2189

cost reimbursement contracts, progress payments inventory under fixed-price contracts with 2190

financing, as well as the contractor’s own material – all of which may be commingled. 2191

Contractors may credit and debit this material between contracts (Government and commercial) 2192

on a daily basis. Therefore, if the contractor has an MMAS, the PA must use extreme caution in 2193

ensuring to test only material of the CAP variety, ensure the CAP material is allocated to a 2194

specific Government contract, and trace that material as it is consumed. In some cases, CAP 2195

under an MMAS system may not be allocated to a DCMA-administered contract until it is 2196

needed for issuance. In these circumstances, the PA may need to work backward to perform a 2197

consumption review by selecting a deliverable end item, and determining what material was 2198

issued to create it. 2199

2200

As a general rule, material consumption should be considered to be unreasonable when 2201

consumption exceeds amounts supported by bills of material, material requirements lists, or 2202

similar material planning documents (including reasonable mortality or attrition rates). 2203

2204

Unreasonable consumption of Government materials is not considered loss of 2205

Government property under the risk-of-loss provisions. In cost reimbursement-type contracts 2206

where the PA identifies unreasonable consumption, the PA will forward the case to the ACO 2207

recommending cost disallowance action under the FAR Part 31 cost principles. In fixed-priced 2208

contracts where unreasonable consumption of GFM is found, the PA will forward the case to the 2209

ACO, and the ACO will determine whether or not consideration should be requested from the 2210

contractor. 2211

2212

PROCEDURES: 2213

In order to be compliant, the contractor’s procedures would need to describe how it will 2214

ensure that material is consumed only as authorized under the contract. This may entail the 2215

creation of specific consumption records. For a smaller R&D company, this may be as simple as 2216

101

CHAPTER 2 – PMSA ELEMENT JOB AIDS

maintaining a log book at the scientist’s workbench detailing what they have used, and how they 2217

have used it. In other cases, the contractor’s official property record data elements for 2218

disposition and posting reference and date of transaction may suffice. 2219

2220

If the contractor’s procedures provide for the establishment and maintenance of 2221

consumption records above and beyond what is maintained within the contractor’s general 2222

property records, the PA will identify incomplete, inaccurate, or nonexistent consumption 2223

records as non-compliances that require correction. Because this would constitute a 2224

noncompliance with the contractor’s procedures, rather than a noncompliance with paragraph (f) 2225

of the property clause, the PA may not identify the issue as shortcoming in the property 2226

management system. 2227

2228

OBJECTIVE: The PA will determine whether the contractor consumes Government property 2229

only as authorized by the contract to which the property is accountable and whether that 2230

consumption is reasonable. 2231

2232

POPULATION: All Government owned material accountable to contracts administered by, or 2233

delegated to, DCMA that was issued for use within the past 12 months. This includes material 2234

managed under an MMAS, and material for which the contractor has been granted R&I 2235

authorization, in addition to material with standard recordkeeping requirements. 2236

2237

SUPPORT DOCUMENTS: Bills of material, material requirement lists, issue documents, 2238

contract statements of work (For R&D), proofs of concept (Also for R&D), repair evaluation 2239

documents, blueprints, etc. 2240

2241

SAMPLING: 2242

PAs will test the element of Consumption statistically for standard PMSAs using a 2243

sample selected from the contractor’s records. 2244

2245

The PA will use judgmental sampling to test Consumption when performing a limited 2246

PMSA. The PA must support all conclusions with sample documentation provided by the 2247

contractor. 2248

2249

TESTING CONSIDERATIONS: 2250

• The PA will test the adequacy of the contractor’s consumption practices for material 2251

through the assessment of material requirements and calculations of the actual 2252

consumption of material in the performance of contract requirements to ensure that 2253

material is consumed in reasonable quantities. 2254

• For each sample item determine: 2255

o The quantity needed as evidenced by the material requirements list (MRL), bill of 2256

materials (BOM), or other supporting document. 2257

o The total quantity issued of each line item of material. 2258

o Any scrap for each line item of material. 2259

o Any loss for each line item of material. 2260

o The total quantity of higher-level assembly or end item delivered. 2261

102

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• The PA will select a separate population for sensitive material that is accountable to 2262

contracts administered by DCMA to determine the adequacy of consumption of those 2263

items. 2264

• Sensitive items are tested using a double sampling plan that identifies defects of 10% or 2265

more, if they exist, 97% of the time. 2266

2267

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 2268

NONCOMPLIANCES: 2269

• In the Audit Report, the PA will explain the consumption analysis, addressing the source 2270

used for each data element (e.g., the total quantity needed was computed by multiplying 2271

the quantity needed per end item as identified in the BOM by the total number of end 2272

items) for each item sampled, and will assess whether the consumption was reasonable 2273

and authorized under the contract terms and conditions. 2274

• PAs will also describe the rationale used to determine whether the consumption of the 2275

selected samples was reasonable. 2276

2277

2278

PMSA ELEMENT 17 - MOVEMENT 2279

2280

REQUIREMENT: 2281

FAR 52.245-1(f)(1)(viii)(A), Utilizing Government property: “The Contractor shall…move… 2282

Government Property only as authorized under this contract.” 2283

2284

BACKGROUND: 2285

• Contractors are required to manage the movement of Government property to ensure the 2286

physical protection of the property. 2287

• Contractors routinely transport property from receiving areas to storage facilities, to 2288

manufacturing areas, or other locations. The contractor may use a variety of processes to 2289

transport Government property. Movement may require the use of material handling 2290

equipment such as forklifts, cranes, hoists, positioning equipment, tugs, motor vehicles, 2291

and other equipment. 2292

2293

PROCEDURES: 2294

In order to be considered compliant, the contractor’s procedures must establish processes 2295

to minimize or prevent possible damage to property. Where appropriate, the contractor’s 2296

procedures must also address controls for the proper operation of material handling equipment 2297

including roles and responsibilities of authorized operators. 2298

2299

Compliant procedures must ensure that accurate location changes are promptly posted to 2300

the record any time Government property is moved unless that property is managed using the 2301

low risk practice methodology as described in the DCMA Low Risk Practice SOP. 2302

2303

There are some contractors that do not create separate movement documentation for 2304

internal moves, and instead document those move solely by updating the location data element in 2305

the property record. A contractor that uses this methodology would need to clearly describe this 2306

process in the written procedures in order to be considered compliant. 2307

103

CHAPTER 2 – PMSA ELEMENT JOB AIDS

2308

OBJECTIVE: The PA is responsible for determining whether the contractor performs 2309

movement of Government property under proper authority, whether appropriate support 2310

documentation is prepared and maintained, and that location changes are promptly recorded by 2311

the contractor. Additionally, the PA will determine whether the contractor adequately protects 2312

Government property during movement, and whether the contractor promptly reported any losses 2313

resulting from inadequate protection. 2314

2315

POPULATION: 2316

The population consists of all moves of Government property, both internal and external 2317

to the contractor’s facility, performed within the past 12 months. 2318

2319

For those contractors that do not use separate movement documentation for internal 2320

property moves, and instead update the location data element in the property record to document 2321

those moves, the PA will test property movement concurrently with Records, putting emphasis 2322

on location accuracy. In such a case, the PA will indicate in the Audit Report that the sample 2323

used to test Records will also be used to test Movement because the contractor cannot provide a 2324

separate property movement population. In the findings and observations section of the Audit 2325

Report, the PA will address location accuracy of the contractor’s records. Even if the contractor 2326

does not separately document internal property moves, external property moves would have 2327

shipping documentation that the PA can sample and test. If a contractor has both internal and 2328

external moves, but the contractor does not separately document internal property moves, the PA 2329

will identify a separate population and sample for those external movement transactions, and 2330

address them separately within the Audit Report. 2331

2332

SOURCE DOCUMENTS: Source documents include location change orders, move tickets, 2333

custodial transfer documents, maintenance work orders, issue slips, shipping tickets, DD1149s, 2334

DD1348s, Bills of Lading, and other similar documents. 2335

2336

SUPPORT DOCUMENTS: Support documents include the contractor’s Government property 2337

records and other documents generated for the movement of property. 2338

2339

SAMPLING: 2340

The element of Movement is tested statistically by PAs for standard PMSAs using the 2341

contractor’s documentation. This documentation is used to verify that the contractor performs 2342

movement in accordance with the contractor’s procedures. 2343

2344

The PA will use judgmental sampling to test Movement when performing a limited 2345

PMSA. Support for all conclusions must include sample documentation provided by the 2346

contractor. 2347

2348

TESTING CONSIDERATIONS: 2349

• Determine whether movement is performed in accordance with the contractor’s written 2350

procedures. 2351

• Determine whether the contractor is updating records of movement in accordance with 2352

the timeframes identified in the contractor’s written procedures. 2353

104

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• Determine whether there were any losses that occurred due to the contractor’s movement 2354

practices, and if so, whether those losses were reported to the PA. 2355

2356

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 2357

NONCOMPLIANCES: 2358

• Determine and discuss whether the movement of the sampled items was performed under 2359

proper authority and whether appropriate support documentation was prepared and 2360

maintained. 2361

• Address whether the contractor updated the Government property record to reflect the 2362

location change within the timeframes established in the procedures. 2363

• Address whether there were any losses resulting from inadequate protection of property. 2364

2365

2366

PMSA ELEMENT 18 - STORAGE 2367

2368

REQUIREMENT: 2369

FAR 52.245-1(f)(1)(viii)(A), Utilizing Government property: “The Contractor shall…store 2370

Government Property only as authorized under this contract.” 2371

2372

BACKGROUND: 2373

Contractors are required to provide protection for Government property when it is in 2374

storage. That protection includes, but is not limited to, physical security, control of access, and 2375

storage and handling processes that minimize potential for breakage or damage from heat, 2376

humidity, static, or other causes. 2377

2378

PAs must be aware of outside storage areas and will ensure the contractor applies proper 2379

protection to property while in outside storage. 2380

2381

2382

PROCEDURES: 2383

In order to be compliant, the contractor’s procedures must identify how Government 2384

property is stored when not in use. Compliant procedures will also address how the contractor 2385

will limit access to the property, as well as protect the property from unauthorized removal, 2386

pilferage, and theft. The procedures may also include direction for protection from water 2387

damage, insect and rodent infestation, or from deterioration because of dust, temperature, static 2388

electricity, and humidity, where applicable. 2389

2390

Compliant procedures will also address any special protection needed for sensitive 2391

property such as arms, ammunition, and explosives, hazardous materials, shelf-life items, 2392

classified property, etc. 2393

2394

OBJECTIVE: The PA is responsible for determining whether the contractor stores Government 2395

property appropriately to ensure adequate protection and preservation. This includes proper 2396

protection from unauthorized removal, pilferage, and theft; protection from water damage, insect 2397

and rodent infestation, or from deterioration because of dust, temperature, static electricity, and 2398

humidity, where applicable. 2399

105

CHAPTER 2 – PMSA ELEMENT JOB AIDS

2400

POPULATION: All locations where Government property is stored when not in use. 2401

2402

SOURCE DOCUMENTS: There are no source documents for this element. 2403

2404

SUPPORT DOCUMENTS: Any approvals of special storage provided by buying offices 2405

and/or outside agencies (e.g., for AA&E or for classified storage). 2406

2407

SAMPLING: Test the element of Storage judgmentally for both standard and limited PMSAs. 2408

Support for conclusions of storage adequacy when the PA has not performed a site visit consists 2409

of photographs provided by the contractor that show all of the locations where Government 2410

property is stored when not in use, and input from other DCMA functional specialists who make 2411

site visits (e.g., QARs, Safety, Plant Clearance). If the contractor has sensitive property, the PA 2412

must review all storage locations that house the sensitive property on-site. 2413

2414

TESTING CONSIDERATIONS: 2415

• Determine whether Government property that is in storage is adequately protected against 2416

unauthorized removal, to include pilferage and theft. 2417

• Review how the contractor controls access to stored property in order to ensure that only 2418

authorized employees have access. 2419

• Where applicable, determine whether the contractor adequately protects property from 2420

damage caused by water, rodents and insects, dust, temperature changes, static electricity, 2421

humidity, and other applicable environmental factors. 2422

• Determine whether the contractor effectively implements any special protections that 2423

may be required for sensitive, hazardous, or classified property. 2424

• Assess whether contractor storage areas are neat, clean, and well-organized. 2425

• Verify whether the contractor’s physical security for stored Government property is 2426

adequate for the type of property. 2427

• If the contractor utilizes outside storage, determine whether the contractor uses a type of 2428

outdoor storage appropriate for the stored type of property, and that the contractor has put 2429

sufficient security measures in place. 2430

• Ensure that the contractor’s storage areas for Government property awaiting plant 2431

clearance processing are appropriate for assuring the property's physical safety and 2432

preserving the property’s suitability for use. 2433

2434

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 2435

NONCOMPLIANCES: 2436

• Describe whether the contractor’s processes protect Government property against 2437

unauthorized removal, describing the security measures employed, and assessing their 2438

appropriateness and effectiveness. 2439

• State whether the contractor controls access to Government property that is not in use, 2440

and ensures that only authorized employees have access. 2441

• Where protection from damage caused by water, rodents and insects, dust, temperature 2442

changes, static electricity, humidity, and other applicable environmental factors is 2443

applicable, detail the protection the contractor provides and indicate whether it is 2444

effective, providing the rationale for your conclusions. 2445

106

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• Describe any special protections the contractor uses as part of storage of sensitive, 2446

hazardous, or classified property, and indicate whether the contractor effectively 2447

implements the protections. 2448

• Report whether storage areas are neat, clean, and well-organized. 2449

• Describe any Government property located outside and address whether it is appropriate 2450

for that type of property to be stored outside, and whether the contractor has put sufficient 2451

security measures in place. 2452

• Explain whether the contractor has appropriate protections for Government property 2453

awaiting plant clearance processing to assure the property's physical safety, and preserve 2454

the property’s suitability for use. 2455

2456

2457

PMSA ELEMENT 19 – STORAGE COMMINGLING 2458

2459

REQUIREMENT: 2460

FAR 52.245-1(f)(1): 2461

2462

(viii)(B) Unless otherwise authorized in this contract or by the Property Administrator the 2463

Contractor shall not commingle Government material with material not owned by the 2464

Government. 2465

2466

BACKGROUND: 2467

• Commingling means the storage of Government materials with contractor materials in a 2468

single location, mixed so the property loses the identification of the property’s ownership. 2469

For example, if 100 washers with the same part number, 50 belonging to the Government 2470

and 50 contractor-owned, are stored in the same bin, and the contractor no longer 2471

separately identifies ownership of the washers, the contractor has commingled the 2472

washers. 2473

• PAs must distinguish commingling from co-location of property. Co-location occurs 2474

when Government-owned material is stored in the same location with contractor-owned 2475

material, but the property does not lose its identity with regard to ownership due to the 2476

contractor’s identification, marking, and recording of the Government property. 2477

Contractors are permitted to co-locate Government material with contractor owned 2478

material. In the example above, if the contractor segregated the 50 washers owned by the 2479

Government and the 50 contractor-owned washers in separate bags, with each bag clearly 2480

identified and marked, one bag as Government property, and one as contractor-owned 2481

property, and stored the bags in the same bin, the property would be considered co-2482

located. 2483

• While an MMAS allows commingling of Government-owned material with contractor 2484

material, contractors may not include Government-furnished material (GFM) in a MMAS 2485

except for production planning purposes (e.g., GFM is recorded in the same 2486

computerized database as MMAS materials, but is not available for transfers between 2487

contracts like the contractor acquired material in the MMAS system.) Contractors may 2488

not commingle GFM with contractor material in a MMAS. 2489

107

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• The issue with commingling is that property can lose its identity as Government property, 2490

thereby potentially affecting consumption rates, and increasing the potential for 2491

unauthorized use. 2492

2493

PROCEDURES: 2494

The PA will ensure that the contractor’s procedures specifically state that the contractor 2495

will not commingle Government property with contractor property, without authorization. 2496

Compliant procedures will address any exception that stems from contract or PA authorization to 2497

commingle Government material with contractor material. 2498

2499

In order to be compliant, the contractor’s procedures must provide sufficient detail to 2500

describe how the contractor will avoid unauthorized commingling of property. 2501

2502

OBJECTIVE: The PA will determine whether the contractor is commingling Government 2503

material with contractor material. If the contractor is commingling Government material with 2504

contractor material, the PA will determine whether the contract or PA authorized the 2505

commingling. 2506

2507

POPULATION: All Government-owned material that is accountable to contracts administered 2508

by DCMA. 2509

2510

SOURCE DOCUMENTS: There are no source documents for this element. 2511

2512

SUPPORT DOCUMENTS: Any contractual provisions authorizing commingling or any 2513

approvals of commingling provided by the PA. 2514

2515

SAMPLING: 2516

The element of Storage Commingling is tested judgmentally for standard reviews, and is 2517

based on observations made by the PA while reviewing other elements, to include Records, 2518

Identification, and Storage. 2519

2520

The PA will also use judgmental sampling when reviewing the contractor’s written 2521

responses for limited PMSAs. The PA may support conclusions of storage adequacy when the 2522

PA has not performed a site visit through the following: photographs provided by the contractor, 2523

evidence from the contractor or Government officials that material is appropriately identified, 2524

and feedback from other DCMA functional specialists who perform contractor site visits (e.g., 2525

QARs, Safety, and PLCO). 2526

2527

TESTING CONSIDERATIONS: 2528

• PAs will review this element by visually inspecting those areas where Government 2529

material is stored. 2530

• If the contractor is commingling materials, the PA will determine whether the contractor 2531

has the required authorization to do so. 2532

• If the contractor is commingling property, and has authorization to do so, describe the 2533

nature of that authorization. Address whether the authorization is specific to a contract or 2534

group of contracts, and whether that authorization has any further limitations. 2535

108

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• Describe how the contractor addresses commingling, and any authorization to do so, 2536

within the contractor’s written procedures. If the contractor has authorization to 2537

commingle property, determine whether the contractor follows its procedures addressing 2538

the commingling. 2539

2540

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 2541

NONCOMPLIANCES: 2542

• Describe whether judgmentally sampled items of property are stored by the contractor in 2543

sufficient detail to establish whether the property is segregated or commingled. 2544

• If Government-owned material is commingled with contractor-owned material, the PA 2545

must address whether the contract or PA authorizes the commingling, and whether the 2546

materials is commingled as part of an MMAS. Any PA approvals will be specifically 2547

identified with an attached copy documenting the approval. PAs will identify any 2548

contractual provision authorizing commingling. 2549

2550

2551

PMSA ELEMENT 20 - MAINTENANCE 2552

2553

REQUIREMENT: 2554

FAR 52.245-1(f)(1): 2555

2556

(ix), Maintenance. The Contractor shall properly maintain Government property. The 2557

Contractor's maintenance program shall enable the identification, disclosure, and 2558

performance of normal and routine preventative maintenance and repair. The Contractor 2559

shall disclose and report to the Property Administrator the need for replacement and/or 2560

capital rehabilitation. 2561

2562

BACKGROUND: 2563

• Preventative maintenance is any regularly scheduled inspection, calibration, and 2564

maintenance performed to sustain the property’s suitability for its intended use, and to 2565

detect and correct minor deficiencies before they result in damage to property. 2566

Preventative maintenance could include such tasks as lubrication, servicing, inspection, 2567

and normal parts replacement. These actions will prevent excessive property wear, 2568

malfunction, or deterioration, and ensure effective use of the property for its designated 2569

purpose. Maintenance may be performed at production and non-production facilities. 2570

• Capital rehabilitation is any work the contractor performs or has another party perform 2571

outside of the normal maintenance obligation. If routine and preventative maintenance is 2572

not sufficient to sustain a property item’s suitability for the property’s intended use, the 2573

contractor should notify the PA promptly and request direction regarding repair or 2574

replacement, or other actions directed by the Government. Note that the performance of 2575

capital rehabilitation requires PCO or ACO authorization. 2576

• Special contract terms and conditions may require a higher level of maintenance or 2577

special maintenance provisions. The PA will review contracts for any special provisions. 2578

2579

109

CHAPTER 2 – PMSA ELEMENT JOB AIDS

PROCEDURES: 2580

In order to be compliant, the contractor’s procedures must describe the process for 2581

identifying Government property that requires maintenance. The contractor’s procedures must 2582

also explain how the contractor will document the results of its evaluation of property requiring 2583

routine preventative maintenance. 2584

2585

The PA will determine whether the contractor’s maintenance procedures address how the 2586

contractor will ensure that Government property is returned to the Government in the same; or 2587

better condition, less normal wear and tear. Maintenance control processes addressed in the 2588

contractor’s written procedures may include but are not limited to: 2589

• Planning maintenance and inspection. 2590

• Scheduling work. 2591

• Initiating work orders. 2592

• Controlling maintenance performance. 2593

• Ensuring field reporting (completed work orders returned noting work accomplished and 2594

providing remarks on equipment status). 2595

• Work order status. 2596

• Backlog. 2597

• Records. Records will include complete historical data on each item of property; i.e., all 2598

maintenance efforts, cost, accumulative cost (parts and labor), and documentation of 2599

repetitive failures. 2600

• Maintenance analysis. 2601

• Reporting. 2602

2603

The contractor's procedures must provide for the reporting, initiating, and performance of 2604

maintenance outside the scope of preventative maintenance, but within the contractor's normal 2605

maintenance obligation. The procedures should include instructions for the following: 2606

2607

• Disclosure and reporting of deficiencies by operational personnel. 2608

• Disclosure of deficiencies identified through preventative maintenance or inspections. 2609

• Initiating work orders with detailed assignment, guidance, and responsibilities. 2610

• Recording work accomplished. 2611

2612

The contractor’s procedures should address the requirement to disclose the need for 2613

capital rehabilitation, or any work that is outside of the normal maintenance obligation to the PA. 2614

2615

OBJECTIVE: There are several objectives to achieve in testing the element of Maintenance: 2616

• The PA will ensure the contractor identifies, discloses, and performs normal and routine 2617

preventative maintenance and repair. 2618

• The PA will determine whether the contractor discloses and reports to the PA the need 2619

for replacement or capital rehabilitation. 2620

2621

POPULATION: 2622

• The population used to test whether the contractor performs normal and routine 2623

preventative maintenance and repair is all Government property accountable to contracts 2624

110

CHAPTER 2 – PMSA ELEMENT JOB AIDS

administered by DCMA that requires normal and routine preventative maintenance and 2625

repair. This population typically includes special tooling, special test equipment, and 2626

equipment but not material. 2627

• To test whether the contractor discloses and reports to the PA the need for replacement or 2628

capital rehabilitation, the population is all Government property accountable to contracts 2629

administered by DCMA that required replacement or capital rehabilitation within the 2630

preceding 12 months. 2631

SOURCE DOCUMENTS: Maintenance records and logs, calibration stickers, repair work 2632

orders, replacement purchase orders, and documentation of the need for normal and routine 2633

preventative maintenance. 2634

2635

SUPPORT DOCUMENTS: Technical manuals, the contractor’s maintenance procedures, and 2636

contracts with special maintenance provisions. 2637

SAMPLING: 2638

For standard PMSAs, PAs will test the element of Maintenance by selecting a statistical 2639

sample from the applicable populations identified above. 2640

2641

The PA will use judgmental sampling to test Maintenance when performing a limited 2642

PMSA. PAs will request sample maintenance documents for the items sampled. Support for all 2643

conclusions must include sample documentation provided by the contractor. 2644

2645

TESTING CONSIDERATIONS: 2646

• PAs should seek input from quality assurance representatives or engineers when 2647

questions arise about matters they may not have the technical expertise to adequately 2648

address. Examples of such matters may include whether an item should be scheduled for 2649

normal and routine preventative maintenance or whether the type of maintenance the 2650

contractor is performing is adequate. 2651

• PAs may use the calibration records, stickers, etc., to support findings in the areas of 2652

maintenance of special test equipment. 2653

2654

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 2655

NONCOMPLIANCES: 2656

• When addressing whether the contractor identifies and discloses the items that require 2657

normal and routine preventative maintenance and repair, the PA will discuss: 2658

o Whether the contractor identifies property that requires preventative maintenance 2659

and the nature of that maintenance. 2660

o Whether the contractor discloses the need for normal and routine preventative 2661

maintenance and repair. 2662

• For the items sampled, the PA’s discussion about whether the contractor performs normal 2663

and routine preventative maintenance and repair will address: 2664

o The date the contractor performed maintenance or repair compared with the date 2665

it was scheduled to determine whether the contractor performed the maintenance 2666

as scheduled. 2667

111

CHAPTER 2 – PMSA ELEMENT JOB AIDS

o Whether the contractor documents the performance of normal and routine 2668

maintenance. 2669

• For items that required capital rehabilitation or replacement, the PA will address whether 2670

the contractor notified the PA of that need, and whether the notification was in 2671

accordance with the timeframes in the contractor’s written procedures. 2672

2673

2674

PMSA ELEMENT 21 - DISPOSAL 2675

2676

REQUIREMENT: 2677

FAR 52.245-1(f)(1): 2678

2679

(x) Property closeout. The Contractor shall promptly perform and report to the Property 2680

Administrator contract property closeout, to include … disposing of items at the time 2681

they are determined to be excess to contractual needs. 2682

2683

BACKGROUND: 2684

• Because of the potential harm that some types of sensitive property may cause, the 2685

contract may include special direction for the disposal of sensitive property and other 2686

types of property that could cause harm during the disposal process. 2687

• Except when otherwise provided for in a contract, contractors must dispose of contractor 2688

inventory only as authorized by the Plant Clearance Officer (PLCO). 2689

• Contractors are required to remove and destroy any markings identifying the property as 2690

Government-owned property prior to its disposal if they are not returning the property to 2691

the Government. See FAR 52.245-1(j)(7)(i). 2692

• Contractors will demilitarize Government property prior to shipment or disposal as 2693

directed by the PCO. See FAR 52.245-1(j)(7)(ii). 2694

• Contractors will credit the net proceeds from the disposal of contractor inventory to the 2695

contract, or to the Treasury of the United States as miscellaneous receipts as directed by 2696

the PCO. See FAR 52.245-1(j)(8). 2697

• Unless the PLCO determines otherwise, contractors are not required to identify or report 2698

production scrap on inventory disposal schedules, and may process and dispose of 2699

production scrap in accordance with its own internal scrap procedures. See FAR 52.245-2700

1(j)(3)(ii). 2701

• Contractors will dispose of all other types of scrap in accordance with the terms and 2702

conditions of the contract or PLCO direction, as appropriate. 2703

2704

While the elements of Declaration of Excess, Disposal, and Property Closeout are related, 2705

the populations used to test each are different because PAs are assessing separate actions. When 2706

testing the element of Declaration of Excess, PAs are determining whether the contractor is 2707

effectively identifying excess property so that it can be reported as such. The PA is tasked with 2708

determining whether all property that should have been declared as excess has been declared as 2709

excess. 2710

2711

When testing the element of Disposal, the PA is determining whether property that was 2712

reported as excess, and submitted to plant clearance, was disposed of in a timely manner. 2713

112

CHAPTER 2 – PMSA ELEMENT JOB AIDS

Incorrectly using a Disposal population to test Declaration of Excess excludes all items that are 2714

excess to contract needs that contractor may have failed to declare as excess, as well as all excess 2715

items for which the contractor was relieved of stewardship through other means, (e.g., 2716

transferred to another contract, returned to the buying activity.) While the declaration and 2717

disposal of excess property are often required steps for a contractor performing property 2718

closeout, the element of Property Closeout covers other actions as well (i.e., final physical 2719

inventory performance, reporting, investigating, and securing closure of all loss cases, and 2720

reporting the contract property closeout to the PA.) Because of this, the population for the 2721

element of Property Closeout is the contracts that are past the contract’s final delivery date. 2722

When testing Property Closeout, the PA is determining whether all closeout actions have been 2723

performed. 2724

2725

PROCEDURES: 2726

• In order to be compliant, the contractor’s procedures must clearly state that, except when 2727

otherwise provided for in a contract, disposal of contractor inventory must be authorized 2728

by the PLCO. 2729

• Compliant contractor procedures will establish a method to document and confirm that 2730

the contractor removed and destroyed any markings identifying the property as 2731

Government-owned prior to its disposal if property is not returned to the Government. 2732

• Disposal of scrap in accordance with the contractor’s own internal scrap procedures 2733

applies only to production scrap. Those procedures will provide for crediting the net 2734

proceeds from the sale of scrap to an appropriate overhead account. See paragraph 17.6 2735

of this Guidebook for more information regarding contractor scrap procedures. 2736

2737

OBJECTIVE: The PA will determine whether the contractor promptly disposes of Government 2738

property at the time the contractor determines the property to be excess to contractual needs, in 2739

accordance with the terms of the contract. 2740

2741

POPULATION: There are potentially several populations subject to review including: 2742

• All Government-owned property accountable to contracts administered by DCMA that 2743

was in the contractor’s possession within the preceding 12 months for which there were 2744

disposition instructions. The population also includes any Government property for 2745

which the contractor had previously received disposal instructions, but has not yet carried 2746

out the instructions. 2747

• All Government-owned production scrap accountable to contracts administered by 2748

DCMA that was disposed of by the contractor in accordance with its own internal scrap 2749

procedures within the preceding 12 months. 2750

• All Government-owned property, including scrap, accountable to contracts administered 2751

by DCMA that the contractor was directed to sell within the preceding 12 months. 2752

2753

SOURCE DOCUMENTS: All documentation of disposal actions including DD 1149 shipping 2754

documents, transfers between contracts, sales documents, and scrap tickets. 2755

2756

SUPPORT DOCUMENTS: Disposal instructions from PLCOs, contracts, and any other 2757

sources of disposal instructions. 2758

2759

113

CHAPTER 2 – PMSA ELEMENT JOB AIDS

SAMPLING: 2760

For standard PMSAs, PAs will test the element of Disposal by selecting a statistical 2761

sample from the applicable populations identified above. 2762

2763

The PA will use judgmental sampling to test Disposal when performing a limited PMSA. 2764

PAs will request sample disposal documents for the property items sampled. The PA must use 2765

sample documentation provided by the contractor to support all conclusions. 2766

2767

TESTING CONSIDERATIONS: 2768

• When reviewing the element of disposal, PAs will contact the PLCO responsible for the 2769

contractor and request the PLCO’s input on the contractor’s execution of disposal 2770

instructions and any other disposal related issues. 2771

• To determine whether the contractor disposed of the property under proper authority, the 2772

PA will review the disposition instructions for the sampled items. 2773

• The PA will compare the date of the disposition instructions with the date of the disposal 2774

document to determine whether the contractor disposed of the sampled items promptly. 2775

• The PA will determine whether each sample was submitted to the Plant Clearance 2776

Capability in the PIEE GFP Module within 30 days after identification of excess, 60 days 2777

after contract completion, or 120 days after contract termination (plus any authorized 2778

extensions.) To do this, the PA will compare the date that the item was determined to be 2779

excess (e.g., utilization review, end of contract, level of effort completion) with the date 2780

that it was submitted to the Plant Clearance Capability in the PIEE GFP Module. 2781

• For each sale of property that the PA samples, the PA will review the documentation the 2782

contractor used to credit the Government with the proceeds from the sale. 2783

• The PA will review the documentation for each item of scrap to ensure the contractor 2784

properly identified items as scrap in accordance with the contractor’s procedures and that 2785

the contractor properly credits the proceeds from the sale of the scrap to the Government. 2786

• The PA will use separate populations for sensitive property that is accountable to 2787

contracts administered by DCMA to determine the adequacy of the contractor’s disposal 2788

of sensitive items. 2789

• Sensitive items must be tested as a separate population, using a double sampling plan that 2790

identifies defects of 10% or more, if they exist, 97% of the time as described in 2791

paragraphs 8.3.1.1. and 17.2.3. of Chapter 1. 2792

2793

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 2794

NONCOMPLIANCES: 2795

• Analyze the promptness with which the contractor disposed of the sampled items. 2796

• Address how the contractor credited the Government with the proceeds for the sale items 2797

sampled. 2798

• Explain how the contractor determines whether an item is production scrap, whether that 2799

determination is verified by a Government representative, and how the Government is 2800

credited with any proceeds. 2801

• Discuss whether the contractor removed and destroyed any markings identifying the 2802

property as U.S. Government-owned property prior to its disposal. 2803

114

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• Identify the cognizant PLCO by name and indicate the date the PA contacted the PLCO, 2804

and summarize the information obtained. 2805

• Identify any of the sampled items that required demilitarization, describe how and when 2806

the contractor accomplished the demilitarization of the property, and identify the 2807

Government official who witnessed the demilitarization. 2808

2809

2810

PMSA ELEMENT 22 – PROPERTY CLOSEOUT 2811

2812

REQUIREMENT: 2813

FAR 52.245-1(f)(1): 2814

2815

(x) Property closeout. The Contractor shall promptly perform and report to the Property 2816

Administrator contract property closeout, to include reporting, investigating and securing 2817

closure of all loss of Government property cases; physically inventorying all property 2818

upon termination or completion of this contract… 2819

2820

BACKGROUND: 2821

Timely property closeout ensures that Government assets are available for use on other 2822

Government contracts and reduces the risk of loss, theft, damage or destruction. Furthermore, 2823

timely property closeout reduces Government expenses incurred in storing, inventorying, and 2824

maintaining excess Government property, as well as the expenses involved with administering an 2825

open contract. Contracts may not be closed for property or contract administration until all 2826

accountable Government property has been has been consumed, transferred, returned, shipped, 2827

or disposed of, and all loss cases have been adjudicated and closed. Additionally, before contract 2828

closeout, disposition actions for all items submitted to the Plant Clearance Capability in the PIEE 2829

GFP Module must have been carried out as directed by the PLCO. 2830

2831

FAR 52.245-1(j)(3)(i) requires the contractor to submit residual property for plant 2832

clearance within 60 days after completion of contract deliveries or performance (generally 2833

aligning with the final delivery date), unless the PLCO approves an extension. Contractors 2834

frequently find it difficult to comply with that requirement if they wait until completion of 2835

contract deliveries or performance to initiate property closeout actions. 2836

2837

If the contractor has written authorization from the PCO to retain excess Government 2838

property, the ACO cannot close out the accountable contract for property or contract 2839

administration. Contract closeout can only proceed once the Government property is properly 2840

transferred to a follow-on contract or otherwise disposed of in accordance with the contract or as 2841

authorized by the PLCO. 2842

2843

While the elements of Declaration of Excess, Disposal, and Property Closeout are related, 2844

the populations used to test each are different because PAs are assessing separate actions. When 2845

testing the element of Declaration of Excess, PAs are determining whether the contractor is 2846

effectively identifying excess property so that it can be reported as such. The PA is tasked with 2847

determining whether all property that should have been declared as excess has been declared as 2848

excess. When testing the element of Disposal, the PA is determining whether property that was 2849

115

CHAPTER 2 – PMSA ELEMENT JOB AIDS

reported as excess, and submitted to plant clearance, was disposed of in a timely manner. 2850

Incorrectly using a Disposal population to test Declaration of Excess excludes all items that are 2851

excess to contract needs that contractor may have failed to declare as excess, as well as all excess 2852

items for which the contractor was relieved of stewardship through other means, (e.g., 2853

transferred to another contract, returned to the buying activity.) While the declaration and 2854

disposal of excess property are often required steps for a contractor performing property 2855

closeout, the element of Property Closeout covers other actions as well (i.e., final physical 2856

inventory performance, reporting, investigating, and securing closure of all loss cases, and 2857

reporting the contract property closeout to the PA.) Because of this, the population for the 2858

element of Property Closeout is the contracts that are past their FDD. When testing Property 2859

Closeout, the PA is determining whether all closeout actions have been performed. 2860

2861

PROCEDURES: 2862

In order to be compliant, the contractor’s procedures must set out a method for 2863

identifying contracts approaching physical completion. The procedures must describe how the 2864

contractor will ensure that its property management organization is internally notified of the 2865

pending or actual completion of contracts, so that closeout actions can begin. 2866

2867

The contractor’s procedures will establish a process for initiating and completing a final 2868

physical inventory of all property accountable to the contract. The contractor’s inventory 2869

procedures must establish timeframes in which the contractor will perform the inventory, 2870

reconcile the results, and post them to the record. 2871

2872

The contractor’s procedures must describe a process to ensure reporting and investigation 2873

of all loss of Government property, and to secure closure of all pending cases of Government 2874

property loss. 2875

2876

Additionally, the contractor’s procedures must establish a timeframe in which the 2877

contractor will report to the PA that the contractor no longer has any Government property 2878

accountable to the contract in its possession, and that no unresolved issues relating to 2879

Government property remain. 2880

2881

While there is no standard format for reporting final property closeout, the contractor 2882

must notify the PA in writing, in accordance with FAR 52.245-1(f)(1)(x). Additionally, the 2883

notification must explicitly state that there is no residual property accountable to the contract, 2884

and address the following: 2885

2886

• Date and results of the final physical inventory. 2887

• That all Government property furnished or acquired under the contract has been 2888

consumed, transferred, returned, shipped, or disposed of only as authorized by the terms 2889

and conditions of the contract. 2890

• That all inventory adjustments have been posted, and all loss cases have been adjudicated 2891

and closed. 2892

• That disposition actions for all items submitted to the Plant Clearance Capability in the 2893

PIEE GFP Module have been carried out as directed by the PLCO. This includes any 2894

required demilitarization. 2895

116

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• That Government property records have been updated to reflect zero balances, and the 2896

disposition of each accountable item as required by 52.245-1(f)(1)(iii)(A)(8). 2897

2898

OBJECTIVE: The PA will determine whether completed contracts are closed for property 2899

administration, and whether the contractor dispositions Government property with proper 2900

authority and within required timeframes. 2901

2902

POPULATION: All contracts administered by DCMA that were physically complete at any 2903

time within the past year, including contracts that were physically completed in prior years if 2904

closeout actions were incomplete at any time during the past year. This will include all contracts 2905

that have passed the contract’s final delivery date. 2906

2907

SOURCE DOCUMENTS: The contractor's report that closeout actions have been completed, 2908

as required by 52.245-1(f)(1)(x). 2909

2910

SUPPORT DOCUMENTS: Inventory schedules, direction from the PLCO, shipping 2911

documents, transfer documents, modifications, and the final inventory report. Other documents 2912

related to relief of stewardship should be included, e.g., inventory adjustments, liability relief 2913

documentation, etc. 2914

2915

SAMPLING: 2916

PAs will test Contract Property Closeout statistically for standard PMSAs. PAs will 2917

request a listing of all contracts that were physically complete (i.e., past their final delivery date) 2918

at any time during the past 12 months, to include contracts that became physically complete in 2919

previous years if closeout actions are still pending at any time during the timeframe under 2920

review. The PA will then verify that the list is complete by comparing it to a listing of all 2921

contracts accountable to the contractor in MOCAS. 2922

2923

The PA will use judgmental sampling to test Contract Property Closeout when 2924

performing a limited PMSA. PAs will request sample documentation to review for completeness 2925

and compliance. Support for all conclusions must include sample documentation provided by 2926

the contractor. 2927

2928

TESTING CONSIDERATIONS: 2929

• Compare the final delivery date, or the date of completion of contract performance, with 2930

the dates the property management organization received notice of approaching 2931

completion of deliveries or contract performance. Consider the date of the contractor’s 2932

physical inventory, the date the contractor reported the inventory, investigated and 2933

secured closure of any losses, and reported final property closeout letter to the PA. 2934

• Review the method the contractor used to perform the physical inventory, and the 2935

adequacy of the documentation. 2936

• Determine the date that the contractor identified and reported all Government property 2937

still in its possession after final delivery or completion of performance to the PLCO 2938

within the Plant Clearance Capability in the PIEE GFP Module. 2939

117

CHAPTER 2 – PMSA ELEMENT JOB AIDS

• PAs will verify that all sampled closeout actions are supported by the contractor. In order 2940

to be compliant, the contractor must be able to provide documentation showing the 2941

disposition of all property accountable to the contract. 2942

• Review the final property closeout notification for adequacy and completeness. 2943

• Regardless of testing methodology, if the contractor has contracts that are more than 60 2944

days past the final delivery date (or 120 days after termination) for which inventory 2945

disposal schedules have not been submitted, the PA will (1.) determine whether there 2946

have been any contract extensions issued, and (2.) determine whether the delay is caused 2947

by a pending property transfer request. 2948

• If the contractor is able to show that it has proactively and regularly contacted the PCO to 2949

request a transfer of property to another contract, the PA will assist the contractor with 2950

getting resolution. Proactive and regular communication means upon discovery, and at 2951

least once within the 30 days prior to identification by the PA. If the contractor is unable 2952

to provide evidence of proactive and regular contact, the PA will identify the reporting 2953

delay as a noncompliance. 2954

2955

FACTORS FOR THE PA TO ADDRESS IN AUDIT REPORT FOR IDENTIFIED 2956

NONCOMPLIANCES: 2957

• Compare the applicable contract or order’s final delivery date with the date of completion 2958

of performance. Discuss whether the contractor was timely in taking the following 2959

actions based on the timeframes established in the contractors procedures and the 2960

requirements of FAR 52.245-1(j)(3)(i): 2961

o The contractor’s internal notification to its property management organization. 2962

o The contractor’s performance of physical inventory, reporting, investigation, and 2963

securing documentation showing completion of adjudication of any open property 2964

loss cases. 2965

o Reporting any remaining property to the Plant Clearance Capability in the PIEE 2966

GFP Module. 2967

o Reporting the final property closeout letter to the PA. 2968

• If the contractor did not input all residual Government property into the Plant Clearance 2969

Capability in the PIEE GFP Module within 60 days after completion of contract deliveries 2970

or performance (or 120 days following contract termination), the PA will determine whether 2971

the contractor received approval for an extension from the PLCO. 2972

• Analyze the adequacy of the physical inventory addressing the methodology and 2973

documentation. 2974

• Address any losses of Government property the contractor failed to resolve prior to the 2975

final delivery date, or the date of completion of contract performance, and whether the 2976

contractor reported, investigated, and secured documentation showing completion of 2977

adjudication for the loss. 2978

• Address whether the final property closeout notification is adequate and complete.2979

GLOSSARY – ABBREVIATIONS

ACAT Acquisition Category

ACO Administrative Contracting Officer

BOM bill of material

CAGE Commercial and Government Entity

CAP contractor-acquired property

CAR corrective action request

CDR contract deficiency report

CO Contracting Officer

CPAS Contract Property Administration System

CRR contract receipt and review

CTR capital-type rehabilitation

DCAA Defense Contract Audit Agency

DCMA Defense Contract Management Agency

DCMA-MAN DCMA Manual

DFARS Defense Federal Acquisition Regulation Supplement

DoDI Department of Defense Instruction

DSS Defense Security Service

EDA electronic document access

FAR Federal Acquisition Regulation

FOB free-on-board

FY fiscal year

GCPG Government Contract Property Group

GFP Government-furnished property

GFR Government Flight Representative

GFRC Ground and Flight Risk Clause

GP Government property

HV/HR High Value/High Risk

IAW in accordance with

ILP industry-leading practices

IPMS Industrial Property Management Specialist

IWMS Integrated Workload Management System

MMAS Materials Management and Accounting System

MOCAS Mechanization of Contract Administration Services

NSN national stock number

GLOSSARY – ABBREVIATIONS

PA Property Administrator

PDREP Product Data Reporting and Evaluation Program

PGI Procurement, Guidance and Information

PIEE Procurement Integrated Enterprise Environment

PIID procurement instrument identifier

PMSA Property Management System Analysis

SAT simplified acquisition threshold

SF Standard Form

ST special tooling

STE special test equipment