FM 406
Date of issue: 7 November 2000

4.    Unless otherwise stated in their letters of delegation from their Establishment Director or the Head of Finance, PPARC, staff who hold delegated powers in respect of the placing of contracts for the supply of goods and services are also permitted to place contracts for the sale of surplus assets subject to the written down book value of such items not exceeding 10% of the individual’s delegated powers in respect of purchase contracts or their Establishment Director’s delegated authority in respect of disposals, whichever is the lower.

GENERAL PRINCIPLES

5.     In disposing of surplus assets Establishments should have regard to the provisions of chapter 32 of Government Accounting.

7.    In disposing of surplus assets, a method should be chosen which safeguards the taxpayer’s interest by securing best value for money. The objective is to maximise the benefit to PPARC in cash terms or to put the assets to good use in such a way that would benefit either PPARC’s general aims or the Government’s wider interests.

8.    In assessing the economy of repairs or refurbishment, the value of staff effort involved must be added to the repair cost. Unserviceable items which are not economic to repair should be disposed of.

9.    Surplus items not considered saleable should be disposed of in the most economical manner possible.

10.    To ensure that value for money is achieved and that high standards of propriety are maintained, there should be clear separation of duties between staff valuing assets and those selling them.

11.    Where surplus assets are sold, payment should normally be required before items are released for collection or delivery.

12.    The disposal of assets may create a VAT liability. This can arise whether an asset is sold, donated without charge or loaned. See PPARC VAT Briefing Note 15 (para 1.4.1) for further information.

DISPOSAL ROUTES

14.    As a first step and where it is economic to do so, the procurement staff handling the disposal exercise should establish whether the surplus items are of use to another PPARC Establishment. However, care should be taken by the receiving Establishment to ensure that transferring an asset is the most cost effective way of fulfilling the Establishment’s requirement. Factors to consider include the costs associated with the transfer; the condition of surplus equipment, its reliability and its estimated remaining useful life; and the anticipated duration of the requirement at the receiving Establishment.

15.    In the UK, surplus items may be disposed of using approved external agents such as the MOD disposal service. The latter service includes all the administration associated with disposal. MOD charges a management fee based on the amount of work involved. (Contact details may be obtained from the Head of Procurement.)

16.    Surplus items may also be sold by commercial auction. Advice should be sought from the Head of Procurement regarding the selection of suitable auctioneers.

17.    For high value and highly attractive items of a specialist nature it may be appropriate to offer the surplus assets for tender. However, this process tends to be labour intensive and often fails to produce returns significantly in excess of the returns achieved by specialist auction groups. This option should therefore be used only where there is a realistic expectation of the net receipts exceeding the costs of advertising, tendering and collection/delivery. The principles for preparing tender documents are the same as those for purchasing. Tenderers should be invited to inspect the items being sold and it should be made clear to them that the items are sold "as seen" with no implied warranties as to quality, condition or fitness for purpose (see paragraph 20 below).

18.    Staff sales tend to be resource intensive but where Establishment Directors consider it cost effective to do so, Establishments may offer surplus items to staff on the same terms and conditions as such items would be offered for sale to the general public.

19.    In certain circumstances it may be possible to donate surplus items to educational establishments, subject to the value of the item or items not exceeding the current thresholds for the purpose set out in Annex A to FM 101. Prior authorisation to make such gifts must be obtained from the Director Administration or the Establishment Director, as appropriate, in accordance with local arrangements. In the case of Swindon Office, proposals should be submitted to the Director Administration through the Head of Finance, PPARC. Surplus items should not normally be disposed of by gifting unless disposal by sale is considered uneconomic; the Director Administration must be consulted in all other cases.

LIABILITY FOR INJURY CAUSED BY DEFECTIVE EQUIPMENT

22.     Loans should not be used as a mechanism for the disposal of surplus items. The general principle governing loans is that there must be an adequate return for the loan. Free permanent loans, indefinite loans or loans for the expected useful life of the asset are virtually indistinguishable from gifts and should therefore be treated as such. Proposals to make such loans must be referred to the Director Administration for approval.

Tom Hinde
Head of Procurement