Published 2026 | TIKC NewsWire
Sometimes the government does not just pay you to do the work. It hands you the tools to do it: equipment, materials, special test gear, even facilities. This is government-furnished property, and it comes with a duty most contractors underestimate. The property is still the government’s, you are only its steward, and you are expected to track it, protect it, use it only for the contract, and give a full accounting when asked. Treat it casually and a simple inventory gap can turn into a finding, a withhold, or a fraud allegation.
What counts and what you owe
Government-furnished property, often grouped with government property more broadly, includes equipment, material, special tooling, and other items the government provides or that you acquire and the government owns. Your contract obligates you to establish and maintain a property management system that identifies the property, tracks where it is, controls its use, maintains it, and reports on it. In plain terms, you must always be able to answer three questions: what do you have, where is it, and what condition is it in. Failing to answer is itself the problem.
Where contractors get into trouble
The trouble is rarely theft. It is drift. Property gets moved and never re-recorded. A tool bought under one contract quietly gets used on another, mixing what the government paid for with your commercial work. Items wear out or disappear and the records never catch up. When the government audits and your system cannot reconcile, the gap looks like loss, misuse, or worse. An inadequate property system is one of the recognized business-system deficiencies that can trigger payment withholds, so the consequences hit your cash flow directly.
When it becomes fraud
Most property findings are administrative, but some cross into fraud. Using government-furnished property to perform your commercial or other-client work, and not disclosing it, is a way of making the government subsidize your other business, cousin to cost mischarging. Billing the government to replace property you actually lost through your own neglect, or certifying property reports you know are wrong, can become a false claim. The line is the same one that runs through all of contracting: honest stewardship and honest reporting keep you on the administrative side, concealment pushes you across it.
Stewardship down the chain
If you put government property in the hands of a subcontractor, your duty does not disappear, it extends. The obligations flow down, and you remain accountable to the government for property your sub holds. The same honest-records discipline that protects your billing applies to every asset tag: if you can show what you have, where it is, and that it was used only for the contract, an audit is routine. If you cannot, the gap becomes the story.
What to do now
- Stand up a real property system. Identify, tag, and record all government property, and keep the records current as things move.
- Segregate use. Use government-furnished property only for the contract that provided it, never for commercial or other-client work.
- Reconcile and report. Perform regular inventories and submit accurate property reports on schedule.
- Control it at subs. Flow property requirements down and track what subcontractors hold on your behalf.
- Report loss honestly. Disclose lost, damaged, or destroyed property through the proper process rather than hiding or rebilling it.
Government property in your shop is a trust, not a windfall. Account for every item as if the owner could walk in tomorrow, because effectively they can, and a property audit becomes proof of how you run your whole operation. Brick by brick.
FAQ
What is government-furnished property?
Equipment, materials, special tooling, facilities, or other items the government provides for performance, or that you acquire and the government owns. It remains government property while in your custody.
What is my main obligation?
To maintain a property management system that lets you show what you have, where it is, and its condition, and to use, maintain, and report on the property as the contract requires.
Can I use government property for other work?
No. Using it for commercial or other-client work without authorization misuses the asset and can amount to making the government subsidize your other business, which carries fraud exposure.
What happens if my records do not reconcile?
An inadequate property system is a recognized business-system deficiency that can trigger payment withholds, and unexplained gaps can look like loss or misuse in an audit.
Sources
Federal Acquisition Regulation. (2026). Part 45, Government Property, and clause 52.245-1.
Defense Federal Acquisition Regulation Supplement. (2026). Contractor property management system criteria.
This article is general information, not legal advice.
About the Author
Melanie Patterson
Founder and CEO of Team Integrity Knowledge Center and creator of GovCon iSource. Former nurse turned entrepreneur with over 10 years guiding small, women-owned, and minority-owned businesses to over $10 million in government awards. Build, grow, scale, brick by brick. Contact
