Did FAR 52.216-7 or FAR 52.216-13 accelerate federal title merely because they governed allowable cost and payment?

Plain-English summary

FAR 52.216-7 governed allowable cost and payment in cost-reimbursement contracts other than facilities contracts. It could affect which costs were reimbursable, but it did not itself accelerate title to property bought by the contractor.

For those cost-reimbursement contracts, the memorandum said accelerated title occurred only when FAR 52.245-5 was present.

FAR 52.216-13 applied to cost-reimbursement facilities contracts and likewise did not provide accelerated title. The memorandum added that contractors improving real property for the United States were consumers of the tangible personal property they used.

Neither cost-and-payment clause therefore supported accelerated title under Aerospace.

Common questions

Did FAR 52.216-7 transfer title?

No.

What clause was needed for accelerated title in the described cost-reimbursement contracts?

FAR 52.245-5.

Did FAR 52.216-13 transfer title in facilities contracts?

No.

How were real-property improvement contractors treated?

As consumers under the cited federal-construction rule.

Citations and references

• FAR 52.216-7 and FAR 16.307(a) — allowable cost and payment for non-facilities cost-reimbursement contracts
• FAR 52.216-13 and FAR 16.307(g) — allowable cost and payment for facilities contracts
• FAR 52.245-5 — clause required for accelerated title in the described cost-reimbursement contracts
• Cal. Rev. & Tax. Code § 6384 — federal real-property contractor consumer treatment

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/565-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/565-1141.pdf

Original ruling text

State of California

Board of Equalization
Legal Division

565.1141
Memorandum
To:

Mr. Mike Hilbert
Aerospace Claims Coordinator
Audit Review and Refund Unit

From

John L. Waid
Tax Counsel

Subject:

Aerospace Refunds
Alternate Title Clauses

Date:

December 14, 1992

I am answering your memorandum to me of September 23, 1992. You attached to it a memorandum to you from Lloyd Geggatt, an auditor in the San Diego district office. Mr. Geggatt attached to his memorandum copies of FAR 52.216-7 and 52.216-13, clauses which various contractors have asserted created accelerated title passage. You indicate that you are of the opinion that these clauses merely define certain allowable costs and indicate how payments will be made and do not affect title to the property purchased. FAR 52.216-7 is entitled "Allowable Cost and Payment," and is inserted in solicitations and contracts when a cost­reimbursement contract (other than a facilities contract) is contemplated. (FAR 16.307(a).) FAR 52.216-13 is entitled "Allowable Cost and Payment-Facilities" and is inserted in solicitations and contracts when a cost-reimbursement consolidated facilities contract or a cost reimbursement facilities acquisition contract is contemplated. (FAR 16.307(g).) We agree with your assessment. While FAR 52.216-7 may have an effect on title passage by determining what costs are allowable in cost-reimbursement contracts other than facilities contracts, it does not purport to accelerate title to property purchased by the contractor. Accelerated title passage in cost-reimbursement contracts occurs only if FAR 52.245-5 is present. FAR 52.216-13 likely has little effect on title passage since it applies to facilities contracts, and persons engaged in contracts with the United States to improve real property are the consumers of the tangible personal property they purchase to use in the performance thereof. (§ 6384.)

Mr. Mike Hilbert

-2-

December 14, 1992

Thus, neither of these clauses provides for accelerated passage of title under Aerospace.

JLW:es
Title-3.mem