CONTRACTOR LIABILITY
A LOOK BEYOND 52.245-1
52.232-16 & 32
Progress/Performance Payment
52.247-29 thru -38
F.O.B.
252.228-7001
Ground and Flight Risk
52.246-23, -24 & -25
Limitation of Liability
52.237-2
Protection of Government Buildings, Equipment and Vegetation
Edward Winters, CPPM CF
Lockheed Martin Missiles & Fire Control
July 26, 2011
Scenario’s
 Scenario #1
 Scenario #2
 Scenario #3
 Scenario #4
 Scenario #5
Scenario #1
Smith Associates Manufacturing company has a FP contract with
the 52.232-16 Progress Payment Clause. During contract
performance the company has a break in that resulted in severe
damage to several high dollar parts procured on the contract that
are needed to complete production. All progress payments have
been received and 50% of the deliverables have been completed.
Questions
 Who is liable for the repair or replacement, the contractor or
government?
 How much?
52.232-16
(e) Risk of Loss. Before delivery to and acceptance by the
Government, the contractor shall bear the risk of loss for
property, the title to which vests in the Government under
this clause, except to the extent the Government expressly
assumes the risk…….
52.232-16
(e) ……. The Contractor shall repay the Government and
amount equal to the unliquidated progress payments that are
based on costs allocable to property that is lost, stolen,
damaged or destroyed.
Note: Liquidation occurs when the contractor makes delivery
of end items called out in the contract
Return to Scenario’s
Final Quiz
Scenario #2
ABC Company has a FP negotiated contract to build and deliver
80 whatnots to the US Government valued at $100K each.
Upon acceptance (signed DD250) of these whatnots the US
Government requests the contractor to hold them in storage
for several weeks while the Government receiving activity
finishes a new facility that will store the delivered property.
While moving them to storage the ABC Company Expeditor
drops the pallet which results in damage to the whatnots
totaling $1M.
Questions
 Who is liable for the repair or replacement of the whatnots,
the contractor or Government?
F.O.B. Clauses 52.247-29 thru 38
All F.O.B. clauses contain the same language regarding liability
“(b) the Contractor shall….
(4) Be responsible for any loss of and/or damage to the
goods –
(i) Occurring before delivery to the carrier;
(ii) Resulting from improper packing and marking; or
(iii) Resulting from improper loading, stowing,
trimming, blocking and/or bracing of the
shipment, if loaded by the contractor on or in the
carrier’s conveyance
Questions
 Who is liable for the repair or replacement of the whatnots,
the contractor or Government?
 What if that Whatnot is ST/STE acquired or fabricated
against a CLIN on a FP contract and shipped-in-place for use
on the contract?
 What if it is a deliverable shipped-in-place for storage on a
storage contract?
Return to Scenario’s
Final Quiz
Scenario #3
Smith Vehicle Manufacturer Co. has a contract to manufacture and deliver
new armored vehicles to the US Army with a CLIN value of $250K each.
As part of this contract several major components including Heavy Duty
Batteries are furnished to the contractor by the Government for
installation in the deliverable. After the DD250 is signed the contractor
starts loading a vehicle on a flatbed, finds there are no brakes and
proceeds to drive off the flatbed resulting in Substantial damage to the
front end of the armored vehicle.
Upon investigation it is found that the government furnished heavy duty
batteries are a new design that have never been fielded and have a defect
that resulted in battery acid leaking on and through the front brake cables.
Questions
 Who is liable for the repair or replacement, contractor or the
Government?
 What clause is applicable?
FAR 46.8 Contractor Liability for Loss of or
Damage to Property of the Government
 This subpart prescribes policies and procedures for limiting
contractor liability for loss or damage to property of the
Government that –
(a) Occurs after acceptance and
(b) Results from defects or deficiencies in the supplies delivered
or services performed
 46.803 instructs contracting officers to insert 52.246-23, -24
(high value) or -25 as applicable.
52.243-24 Limitation of Liability – High
Value Items
(a) Except as provided in paragraphs (b) through (e) of this
clause, and notwithstanding any other provision of this
contract, the Contractor shall not be liable for loss of or
damage to property of the Government (including supplies
delivered under this contract) that
(1) Occurs after the Government acceptance of the supplies
delivered under this contract; and
(2) Results from any defects or deficiencies in the supplies.
52.243-24 Limitation of Liability – High
Value Items
As with most clauses there are exceptions.
52-243-24 contains language similar to 52.245-1 that addresses
willful misconduct or lack of good faith on the part of any of
the Contractor’s managerial personnel and further describes
who within the company comprises managerial personnel.
Return to Scenario’s
Final Quiz
Scenario #4
The Contracting Officer notified a contractor in writing that
three aircraft being stored outside were in close proximity to a
fueling station which presented an undue risk in the event of an
explosion/fire and requested that the aircraft be relocated to a
safe distance of 200’. Twenty (20) days later the aircraft had not
been moved and an explosion of the fueling station occurred that
destroyed the three aircraft.
DFAR 252.228-7001 GROUND AND FLIGHT RISK
Under normal circumstances when the Contractor is following all requirements of the clause
they have a Liability ceiling for loss, damage or destruction to aircraft as defined in the clause.
(f) Contractor’s share of loss and Contractor’s deductable under the Government self-insurance
(1) The Contractor assumes the risk of loss and shall be responsible for the Contractor’s share of loss
under the Government’s self insurance. That share is the lesser of –
(i) The first $100,000 of loss or damage to aircraft in the open, during operation, or
in flight resulting from each separate event, except for reasonable wear and tear and
to the extent the loss or damage is caused by negligence of Government personnel; or
(ii) Twenty percent of the price or estimated cost of this contract.
NOTE: Insurance costs to cover these costs are unallowable.
DFAR 252.228-7001 GROUND AND FLIGHT RISK
This clause contains many variables that affect liability.
For this scenario we need to look at the following sections of the clause to
determine liability
(6) “in the open” means located wholly outside of buildings on Contractor’s
premises or other places described in the Schedule as being “in the open”.
Government furnished aircraft shall be considered to be located “in the
open” at all times while in the Contractor’s possession, care, custody, or
control.
(b) Combined Regulations/instruction. The Contractor shall be bound by the
operating procedures contained in the combined regulation/instruction
entitled “Contractor’s Flight and Ground Operations” (Air Force Instruction
10-220, Army Regulations 95-20, NAVAIR Instruction3710-1 (Series),
Coast Guard Instruction M13020-3, and Defense Contract Management
Agency Instruction 8210.1) in effect on the date of contract award.
DFAR 252.228-7001 GROUND AND FLIGHT RISK
(d) Conditions of Government self-insurance. The Government’s assumption
of risk for aircraft in the open shall continue unless the Contracting Officer
finds that the Contractor failed to comply with paragraph (b) of this clause,
or that the aircraft is in the open under unreasonable conditions, and the
contractor fails to take prompt corrective action.
(1)The Contracting Officer, when finding aircraft in the open under
unreasonable conditions, shall notify the Contractor in writing of the
unreasonable conditions and require the Contractor to make corrections
within a reasonable time.
(2) Upon receipt of the notice, the contractor shall promptly correct the
cited conditions, regardless of whether there is agreement that the
conditions are unreasonable.
DFAR 252.228-7001 GROUND AND FLIGHT RISK
(3) If the Contracting Officer finds that the Contractor failed to act
promptly to correct the cited conditions or failed to correct the
conditions within a reasonable time, the Contracting Officer may
terminate the Government’s assumption of risk for any aircraft in the
open under the cited conditions. The termination will be effective at
12:01 a.m. on the fifteenth day following the day the written notice is
received by the contractor.
DFAR 252.228-7001 GROUND AND FLIGHT RISK
(4) If the Government terminates its assumption of risk pursuant to the
terms of this clause (i) The contractor shall therefore assume the entire risk for damage,
loss , or destruction of, the affected aircraft;
(ii) Any costs incurred by the contractor (including the costs of the
Contractor’s self insurance, insurance premiums paid to the insure the
Contractor’s assumption of risk, deductibles associated with such
purchased insurance, etc.) to mitigate its assumption of risk are
unallowable; and
(iii) The provisions of the Government Property clause of this
contract are not applicable to the affected aircraft
DFAR 252.228-7001 GROUND AND FLIGHT RISK
Scenario #4
The Contracting Officer notified a contractor in writing that
three aircraft being stored outside were in close proximity to a
fueling station which presented an undue risk to the Government
in the event of an explosion/fire and requested that the aircraft be
relocated to a safe distance of 200’. Twenty (20) days later the
aircraft had not been moved and an explosion of the fueling
station occurred that destroyed the aircraft.
Return to Scenario’s
Final Quiz
Scenario #5
A contractor has a service contract at White Sands Missile Range to
maintain the grounds and buildings which includes everything from
landscaping to window washing. Early one morning one of the service
contractor employees arrives and begins cutting the lawn in front of
the Administration office. As the worker is driving the mower an
officer arrives that the worker finds rather attractive. A little distracted
the service contract employee proceeds to mow over several award
winning rose bushes and hits the Government owned automobile of a 3
Star.
Questions
 What is the gender of the service contract employee and the
officer?
 Who is liable for the repair or replacement, contractor or the
Government?
 What clause is applicable?
Protection of Government Buildings, Equipment and Vegetation
52.237-2
The contractor shall use reasonable care to avoid damaging
existing buildings, equipment and vegetation on the
Government installation. If the Contractor’s failure to use
reasonable care causes damage to any of this property, the
Contractor shall replace or repair the damage at no expense to
the Government as the Contracting Officer directs. If the
Contractor fails or refuses to make such repair or replacement,
the Contractor shall be liable for the cost, which may be
deducted from the contract price.
Return to Scenario’s
Final Quiz
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QUESTIONS
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QUOTE OF THE DAY
“I would rather entertain and hope that
people learned something than
educate people and hope they were
entertained.”
Walt Disney