Terminated contracts do not relieve a contractor from dispositioning and closing out Government property. This will become a bigger issue as more and more agencies receive funding cuts or contracts are simply terminated.
Agencies and Clauses Governing Government Property
While the majority of all Government property resides in the Department of Defense or with contractors who own DoD contracts, there are certainly other agencies who own property. Contractors take direction on Government property from two main clauses: FAR 52.245-1 Government Property and DFARS 252.245-7005 Management and Reporting of Government Property. Although there are other agency-specific supplements that deal with property, most all contractor property management systems are based on these two clauses and instruction from the DCMA Property Management Audit Guidebook.
FAR 52.245-1 states this about property disposition and inventory disposal schedules:
(3)Submission requirements.
(i)The Contractor shall submit inventory disposal schedules to the Plant Clearance Officer no later than-
(A) 30 days following the Contractor’s determination that a property item is no longer required for performance of this contract;
(B) 60 days, or such longer period as may be approved by the Plant Clearance Officer, following completion of contract deliveries or performance; or
(C) 120 days, or such longer period as may be approved by the Termination Contracting Officer, following contract termination in whole or in part.
When No Specific Language Exists in the Contract
If the contract in question does not contain specific language on how and when to disposition accountable Government property, then this clause gives specific instruction to contractors. While a contractor is normally granted a minimum of 120 days for a terminated contract, the contractor still has the requirement to disposition all accountable Government property. The inventory disposal schedule is the first step in the process. After submittal, it is up to the agency plant clearance officer to inform the contractor on exact disposition instructions. Those could range from simply turning in the property; selling the property; scrapping the property; or possibly transferring the property to another contract.
Exceptions and Contracting Officer Authority
Take note – the “120 days” from the clause above can be raised or lowered in certain circumstances by the contracting officer. If the contractor receives a contract termination where the work is based in a country that might not have current active U.S. agency control (think USAID here), the agency contracting officer will want to get that property dispositioned as soon as possible. The fear here would be that the Government property could be stolen, looted or could cause harm to the public if falling into the wrong hands.
Disposition is Only Part of the Closeout Process
Just as submitting inventory disposal schedules is a singular part of the disposition process, the disposition process is a singular part of the Government property contract closeout process. Redstone Government Consulting offers expert guidance to contractors navigating the complexities of Government property management. Whether you’re facing a contract termination, need help preparing inventory disposal schedules, or are working through the final stages of property closeout, our team is here to help. We bring in-depth knowledge of FAR, DFARS, and DCMA expectations to ensure compliance and reduce risk at every stage. Our team of experts provides the support contractors need to stay on track and meet all Government property requirements efficiently and effectively.
As Director of Compliance Consulting at Redstone Government Consulting, Jonas Clem leads our compliance team in helping government contractors navigate the complexities of federal compliance requirements. With deep expertise in DFARS business systems, cost proposal compliance, and government audits, Jonas provides strategic guidance to our clients facing DCAA and DCMA audits, ensuring compliance at every stage, from pre-audit preparation to post-audit resolution. Jonas is a recognized expert in government property management and purchasing system compliance, having successfully implemented and refined these systems for contractors of all sizes—each passing rigorous government audits. He also delivers targeted training programs, equipping clients with the knowledge needed to maintain compliance with DFARS business systems, FAR 31 cost principles, indirect rate strategies, and cost proposal requirements. With over 20 years of experience in the government contracting industry, Jonas has held senior leadership roles spanning program finance, contracts, accounting, and operations. A significant portion of his career was spent with a small business contractor that expanded into a $100M+ large business prime contractor, where he progressed through leadership positions to ultimately serve as Business Operations Manager for the NASA and Army Programs Division. Additionally, he has served as a Controller for a large NASA prime contractor, strengthening his expertise in financial management, compliance, and audit readiness. Jonas' comprehensive, hands-on experience across the government contracting lifecycle, including DoD and NASA contracts, makes him an invaluable resource to our clients. His proven expertise spans proposal development and pricing, indirect rate structuring, and DCAA/DCMA audit readiness. With an unparalleled blend of accounting, contracts, operations, and regulatory knowledge, Jonas delivers practical, results-driven compliance strategies that help our clients mitigate risk and succeed in today's highly regulated environment.