Contractor-Furnished Equipment

Contractor-Furnished Equipment (CFE) is equipment that the contractor owns and supplies for use in performing a government contract, with the cost of CFE either included in the contract price as a direct cost or recovered through the contractor's indirect cost rates, depending on how the equipment is used and accounted for.

What is Contractor-Furnished Equipment?

In government contracting, equipment used to perform a contract is either Government-Furnished Equipment (GFE), owned by the government and provided to the contractor, or Contractor-Furnished Equipment (CFE), owned by the contractor and used at the contractor's expense. CFE includes all equipment the contractor brings to performance that was not provided by the government: specialized machinery, test equipment, vehicles, computers, software tools, communication equipment, and similar items.

The cost treatment of CFE depends on the contract type and cost accounting principles under the Federal Acquisition Regulation and Cost Accounting Standards (CAS). For cost-reimbursement contracts, CFE costs are recovered through the contractor's cost accounting system: equipment purchased specifically for the contract may be recovered as a direct cost (depreciated over the contract period or expensed for certain lower-value items); equipment used across multiple contracts is recovered as indirect cost through equipment overhead pools. For fixed-price contracts, CFE costs are priced into the fixed price, the contractor bears the risk of equipment cost overruns.

The distinction between CFE and GFE matters most in proposal pricing. When the government asks whether it should provide GFE or allow the contractor to provide equipment (CFE), the decision involves: whether the government already owns the required equipment; whether CFE gives the contractor proprietary advantages; whether GFE risks supply chain dependency; and the cost comparison between GFE administrative overhead and CFE pricing.

Contractors acquiring equipment under government contracts with government funds (Contractor-Acquired Property or CAP) must be careful: property acquired with government money under a cost-type contract becomes government property, not CFE. Only equipment the contractor owns independently and brings to the contract qualifies as CFE.

Why CFE matters for government contractors

CFE cost accounting errors are a frequent audit finding. Using CFE that is accounted for as indirect cost and then charging it directly to the government contract, or billing for CFE use when the contract price already included it, creates potential CAS noncompliance and potential false claims liability. Contractors must align their CFE cost recovery practices with their disclosed accounting practices.

Example

A geotechnical services contractor submits a proposal for a soil investigation contract. The proposal includes CFE as a direct cost: $85,000 in rental equipment charges for a specialized drill rig not owned by the contractor; and $45,000 in vehicle mileage charges for field crew trucks at the IRS standard mileage rate. The contractor discloses that its own GPS survey equipment (owned by the contractor and accounted for in the indirect cost equipment pool) will be used but is not charged directly. The DCAA auditor reviewing the proposal confirms the direct/indirect split is consistent with the contractor's disclosed accounting practices and approves the CFE cost elements.

Frequently Asked Questions

Is CFE the contractor's to keep after the contract ends?

Yes, unlike GFP/GFE which must be returned to the government, CFE is owned by the contractor throughout the contract and remains the contractor's property after performance ends. The contractor is not required to deliver CFE to the government at closeout.

Can a contractor purchase equipment during a cost-reimbursable contract and call it CFE?

No. Equipment purchased with government funds under a cost-reimbursable contract is Contractor-Acquired Property (CAP), which becomes government property upon acquisition under FAR 45.402. The contractor cannot treat government-funded equipment purchases as CFE. CAP is subject to all the same accountability and return requirements as GFP/GFE.

Does the government have any oversight of CFE used in contract performance?

The government's oversight interest in CFE is primarily cost-focused: ensuring that CFE costs charged to the contract are allowable, allocable, and reasonable per FAR Part 31. The government does not have custody or title interests in CFE. Auditors may review CFE cost rates and usage documentation to verify that costs are properly allocated between government and commercial work.

Are there restrictions on using CFE for other contracts while it is being charged to a government contract?

Under cost accounting principles, equipment used on multiple contracts must be allocated proportionally. If a contractor charges a piece of CFE 100% to one government contract but also uses it on commercial projects, that is an unallowable cost, the contractor must allocate based on actual usage. Charging more CFE cost to the government than proportional use justifies is a cost misallocation and potential false claim.