July 25, 1985
Subject: Title to Property Under Federal Contracts
The enclosed Federal Acquisition Circular 84-8 has amended FAR Clause 52.245-5 Government Property (Cost-Reimbursement, Time-and-Material, or Labor-Hour Contracts), Alternate I, effective July 1, 1985. This amended clause dated
(JUL 1985) should begin appearing in the University's Federal research contracts in the near future. The changes to this clause concern vesting of title for contractor-acquired property.
VESTING OF TITLE
Under this amended clause, title to equipment (including non-inventorial equipment) and other tangible personal property (supplies) purchased by the University with funds available from Federal research contracts and having an acquisition cost of less than $5000 will vest in the University upon acquisition provided that Contracting Officer's approval was obtained before such acquisition. Title to equipment purchased under such contracts having an acquisition cost of $5000 or more will vest as specifically set forth in the contract. The previous dollar threshold in the subject clause had been $1000.
The change in the title vesting provision of this property clause which is often included in the University's Federal research contracts, will have an impact on the University's sales tax liability. As you are aware, when the University purchases equipment or other personal property under a Federal contract and when title is to vest in the University upon acquisition, tax is due on the purchase and must be included in the proposed budget. On the other hand, where title is to vest in the Federal government, no tax is due on the purchase and need not be budgeted. Therefore, for awards expected to include the newly revised property clause, FAR 52.245-5, Alternate I, Contracts and Grants Officers should ascertain that Principal Investigators have included the appropriate State sales tax in the proposal budget. The sales tax would be applied under the revised clause to all equipment and other tangible personal property with an acquisition cost of less than $5000 and to those items $5000 and over where title may, on a case-by-case basis, be vested in the University..
DOD SHORT FORM RESEARCH CONTRACTS/ONR BASIC AGREEMENT
Mr. Ken Popham of the Office of Naval Research was unaware of the FAR property clause amendment and therefore uncertain about how or when the standard property provision of the SFRC would be revised-to accommodate the FAR change. He did note, however, that because the basic property clause FAR 52.245-5 is in the SFRC and the version of that clause in effect on the date of proposal submission will be included in any resulting SFRC award, campuses should anticipate having the newly amended property clause in any SFRC awards resulting from proposals submitted on or after July 1, 1985. Under the terms of the SFRC, Contracting Officer prior approval is considered to be granted for property specifically itemized in a successful proposal. Therefore, sales tax should be included in SFRC proposals as discussed in the previous section of this Memo.
Awards under the ONR Basic Agreement will likely continue to include the old property clause language ($1000 threshold) until formal modification to the ONR Basic Agreement occurs. Contracts and Grants Officers should budget for sales tax accordingly.
OMB Circular No. A-110, Attachment N, which sets property administration standards for Federal grants, is unaffected by the FAR- clause revision. Attachment N continues to vest title to all "exempt property" in the recipient except where a specific written notice to the contrary is provided to the recipient. See Contract and Grant Memo No. 82-16 for further information on title and disposition of Federal property under Federal assistance awards.
Refer: Joe Acanfora
cc: Materiel Managers
Council on Governmental Relations
Subject Index: 02, 15
Organization Index: F-005, F-175, F-250, F-622
Cancel: C& G Memo 12-70, I-4. 9-75, I-1. 2-78, I-2.
David F. Mears
University Contracts and Grants Coordinator