Government-Furnished Property

Government-Furnished Property (GFP) is any property owned by the United States government that is provided to, or acquired by, a contractor for use in the performance of a contract, creating a bailment relationship in which the contractor bears responsibility for proper use and return of the property.

What is Government-Furnished Property?

Government-Furnished Property is governed by FAR Part 45 (Government Property) and the standard GFP clause at FAR 52.245-1. GFP encompasses all tangible property owned by the government and provided to contractors: facilities, equipment, materials, components, and real property. When the government provides property to a contractor, it creates specific legal obligations: the contractor must use GFP only for the contract under which it was provided (unless otherwise authorized); must exercise reasonable care in its use and maintenance; must maintain a property management system meeting FAR requirements; must report loss, damage, or destruction; and must return or dispose of GFP at contract completion according to the contracting officer's instructions.

The government retains title to all GFP. The contractor's obligation is a custodial one, it holds the property as a bailee, not as an owner. If GFP is lost, damaged, or destroyed, the contractor may be held liable for the loss unless it can demonstrate the loss was not due to contractor fault or neglect. This liability standard is different from the general negligence standard, the contractor must affirmatively prove no fault.

GFP administration requires contractors to maintain a formal property management system, track all GFP by serial number or other identifier, report any changes in property status, and make GFP available for government property administration audits. The Defense Contract Management Agency (DCMA) performs GFP audits on major defense contracts; civilian agencies perform similar oversight.

GFP should be distinguished from Contractor-Acquired Property (CAP), property acquired by the contractor with government funds under the contract, which also becomes government property upon acquisition.

Why Government-Furnished Property matters for government contractors

GFP creates significant administrative and financial risk. Contractors who lose or damage GFP can face liability equal to the replacement value, which on defense contracts involving high-value equipment can be substantial. Additionally, delays in the government providing promised GFP, when GFP is required for performance, can entitle the contractor to an equitable adjustment under the government's failure-to-provide obligations.

Example

A defense electronics contractor receives 50 government-owned radar modules (valued at $2.5M total) for integration into a larger weapon system. The contractor establishes individual serial number tracking for each module in its property management system, designates a property administrator, and reports receipt to the contracting officer within 5 business days as required. Midway through the contract, one module is damaged during transport within the contractor's facility. The contractor immediately reports the damage to the contracting officer, files a property loss/damage report, documents that the damage was caused by an equipment malfunction (not negligence), and cooperates with the government's damage investigation. The government determines the contractor was not at fault and does not pursue recovery.

Frequently Asked Questions

Who is responsible if GFP is damaged during the contract period?

The contractor is presumed responsible for loss, damage, or destruction of GFP in its possession. However, the contractor is not liable if it can affirmatively show that the loss was not due to fault or neglect on the part of the contractor, its employees, or any person under the contractor's control. This reverse-burden standard makes documentation of care and custodial procedures essential.

What happens to GFP at contract completion?

The contracting officer issues disposition instructions for GFP at or before contract completion. Options include: return to a government depot or installation; transfer to the next contractor; retention by the contractor for use on a follow-on contract; sale; or disposal. The contractor should not dispose of GFP without written contracting officer approval.

Can a contractor use GFP for work other than the designated contract?

No, without explicit written authorization from the contracting officer. Using GFP for other work, including other government contracts or the contractor's commercial work, is unauthorized use and can trigger contractual remedies, including liability for the value of use.

Is delayed delivery of GFP a basis for an equitable adjustment?

Yes. When the government promises to provide GFP by a specific date and fails to do so, and the delay impacts contract performance, the contractor may be entitled to an equitable adjustment for the cost and schedule impact. The contractor should document the promised delivery date, the actual delivery date, and the specific performance impact caused by the delay.