1. LOSS OF GOVERNMENT PROPERTY
IND 205 LESSON # 9
LOSS OF
GOVERNMENT PROPERTY

2. Loss of Government Property
TLO 9: Analyze a court case involving the loss for Government property.
ELOs:
1. Define loss and related terms.
2. Explain contractor liability provisions when the full risk of loss is included in the Government Property Clause.
3. Explain the contractor liability provisions when the limited risk of loss is included in the Government Property Clause.
4. Determine the roles of the Contracting Officer and Property Administrator in resolving loss of Government Property.

3. Loss of GP
ELOs:
5. Analyze a court case involving the loss of Government property with the full risk of loss provision in the Government Property Clause.
6. Analyze a court case involving the loss of Government Property with the limited risk of loss provision in the Government Property Clause.
7. Analyze a court case involving the loss of Government Property when the F.O.B. Origin Clause is cited in the contract.
8. Explain the impact that other FAR clauses may have on Contract Liability Provisions

4. Loss of GP ELO #1
“Loss of Government property” (April 2012) means unintended, unforeseen or accidental loss, damage or destruction to Government property that reduces the Government’s expected economic benefits of the property. Loss of Government property does not include purposeful destructive testing, obsolescence, normal wear and tear or manufacturing defects.

5. Loss of GP ELO #1
Loss of Government property includes, but is not limited to— (1) Items that cannot be found after a reasonable search; (2) Theft; (3) Damage resulting in unexpected harm to property requiring repair to restore the item to usable condition; or (4) Destruction resulting from incidents that render the item useless for its intended purpose or beyond economical repair.

6. Loss of GP ELO #1 Types of Liability Provisions
Full Risk-of-Loss Provision - The contractor is liable for any loss of Government property provided under the contract except for reasonable wear and tear or for consumption in performance of the contract.
Limited Risk-of-Loss Provision - The Government assumes the risk for liability of loss. The Contractor may be held liable if the loss falls under one of the exceptions identified under FAR

7. Loss of GP ELO #2 Government Policy
FAR Contractors’ PMS Compliance
FAR Responsibility and Liability for Government Property
DFARS Responsibility and Liability for Government Property
Contract Clauses
(f)(1)(vii) Relief of Stewardship and Responsibility
(h)(1) Contractor Liability for Government Property
Reporting Loss of Government Property

8. Loss of GP ELO # 2 Contract Clause Prescriptions
FAR prescribes which clause the C.O. is
required to include in the contract.
The Government Property Clause at FAR and Alt I describes the two basic types of Contractor Liability:
-Limited Risk ( )
-Full Risk ( Alt I)

9. Loss of GP ELO # 3
Responsibility and Liability for Government Property
(a) Generally, contractors are not held liable for loss of Government property under the following types of contracts:
(1) Cost-reimbursement contracts.
(2) Time-and-material contracts.
(3) Labor-hour contracts.
(4) Fixed-price contracts awarded on the basis of submission of certified cost or pricing data.
DFARS Responsibility and Liability for Government Property
In addition to the contract types listed at FAR , contractors are not held liable for loss of Government property under negotiated fixed-price contracts awarded on a basis other than submission of certified cost or pricing data.
*Limited Risk of Loss

10. Loss of GP ELO # 2
Alternate I “The contractor assumes the risk of and shall be responsible for any loss, theft, damage, or destruction of Government property upon its delivery to the Contractor as Government-furnished property. However, the contractor is NOT responsible for reasonable wear and tear to Government property or for Government property properly consumed in performing this contract.”

11. Loss of GP ELO # 3 * Includes CO Authority and Direction
(h)(1) Contractor Liability for Government Property.
The CO may hold the contractor responsible and liable when one or more of the following conditions exist:
Property loss is a result of willful misconduct or lack-of-good faith on the part of contractor managerial personnel per FAR (h)(1)(ii);
The Government’s assumption of risk for property loss was previously withdrawn in accordance with FAR (b);
The loss is covered by insurance or the contractor is/will be otherwise reimbursed, or
The possibility of property loss was a risk assumed by the contractor; i.e., such action is authorized by contract terms and conditions.
* Includes CO Authority and Direction

12. Loss of GP ELO # 3 The Exceptions Under Limited Risk
These are the exceptions to the loss of Government Property as provided by the Government Property Clause at FAR (h)(1):
Risk covered by insurance
Contractor is reimbursed for the loss
The loss is the result of willful misconduct or lack of good faith on the part of the Contractor’s Managerial Personnel
The CO has, in writing, revoked the Government’s assumption of risk for the loss of Government Property

13. Loss of GP ELO #3
(f)(1)
(vii) Relief of stewardship responsibility and liability. The Contractor shall have a process to enable the prompt recognition, investigation, disclosure and reporting of loss of Government property, including losses that occur at subcontractor or alternate site locations.

14. * Includes PA Authority and Direction
Loss of GP ELO #3
(f)(1)
(C) Unless the contract provides otherwise, the Contractor shall be relieved of stewardship responsibility and liability for property when—
Such property is consumed or expended, reasonably and properly, or otherwise accounted for, in the performance of the contract, including reasonable inventory adjustments of material as determined by the Property Administrator;
Property Administrator grants relief of responsibility and liability for loss of Government property;
* Includes PA Authority and Direction

15. Loss of GP ELO #2
How Limited Risk of Loss Can Change to Full Risk of Loss
When the Contractor fails to take timely corrective action to correct an inadequate Property Management System AND the Contracting Officer has, in writing, revoked the Government’s assumption of risk for loss of Government Property, the Contractor is liable for the loss of Government Property.
Reference: (h)(1)(iii).

16. Loss of GP ELO # 4 Roles in Resolving Loss of Government Property
Property Administrator
Contracting Officer
Validates Contractors’ Report Compliance with FAR & DFARS
Make Final Determination of Liability for Loss
Review Contract Terms and Conditions i.e., Loss provision.
Hold Contractor Liable
Investigates Facts and Circumstances
Evaluates Contractors Root Cause & Corrective Action
Relieve Contractor of Responsibility and/or Liability
Recommend Contractor be Held Liable

17. Loss of GP ELO #8 What is the Ground Flight Risk Clause?
Provides federal requirements on the relationship between contractors and Defense Contract Management Agency (DCMA) performing work on Aircraft being manufactured, disassembled, or reassembled.
Gives specific definitions of who is liable for loss during the critical period of initial tests and test flights of a government airplane, helicopter, unmanned vehicle, or other aerial vehicle.

18. Loss of GP ELO #8 Mandated by DFARS 228.370:
“Use the clause at , Ground and Flight Risk, in all solicitations and contracts for the acquisition, development, production, modification, maintenance, repair, flight, or overhaul of aircraft…”
Invokes the Combined Instruction, DCMA INST C * , “Contractor’s Flight and Ground Operations”.
* A.K.A. AR95-20 (Army), AFI (Air Force), NAVAIRINST G (Navy), and COMDTINST M A (Coast Guard)

19. Loss of GP ELO #8 DFARS 252.228-7001, GFRC & DCMA INST 8210.1C:
Contractor must establish and maintain a separate set of Contractor Flight and Ground Operations procedures; approved by the GFR annually.
Contractor is liable for the first $100K of damage or 20% of the contract cost; whichever is less.
Incentivizes Contractor to assure safe and effective operations, thus assuring “Better Acquisitions Outcomes”

20. Loss of GP ELO #8 DFARS 252.228-7001, GFRC & DCMA INST 8210.1C:
Contractor is fully liable for damage/destruction due to workmanship unless such damage, loss, or destruction would be covered by insurance which would have been maintained by the Contractor, but for the Government’s assumption of risk
The GFR along with the PA SHALL review ALL Loss Damage/Destruction incidents involving aircraft under the GFRC and provide RECOMMENDATIONS to the ACO concerning the applicability of the GFRs deductible for each relevant incident.

21. Loss of GP ELO #8 DFARS 252.228-7001, GFRC:
(c) Government as self-insurer. Subject to the conditions in paragraph (d) of this clause, the Government self-insures and assumes the risk of damage to, or loss or destruction of aircraft “in the open,” during “operation,” and in “flight,” except as may be specifically provided in the Schedule as an exception to this clause. The Contractor shall not be liable to the Government for such damage, loss, or destruction beyond the Contractor’s share of loss amount under the Government’s self-insurance.

22. Loss of GP ELO #8 DFARS 252.228-7001, GFRC:
(a)(1) “Aircraft,” unless otherwise provided in the contract Schedule, means—
(i) Aircraft to be delivered to the Government under this contract (either before or after Government acceptance), including complete aircraft and aircraft in the process of being manufactured, disassembled, or reassembled; provided that an engine, portion of a wing or a wing is attached to a fuselage of the aircraft;

23. Loss of GP ELO #8 DFARS 252.228-7001, GFRC:
(ii) Aircraft, whether in a state of disassembly or reassembly, furnished by the Government to the Contractor under this contract, including all Government property installed, in the process of installation, or temporarily removed; provided that the aircraft and property are not covered by a separate bailment agreement;
(iii) Aircraft furnished by the Contractor under this contract (either before or after Government acceptance);…

24. Loss of GP ELO #8 DFARS 252.228-7001, GFRC:
(a)(6) “In the open” means located wholly outside of buildings on the 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.

25. Loss of GP ELO # 8 Other FAR & DFAR Clauses that Impact Liability
(d)(e) Progress Payments
(f)(g) Performance-Based Payments
Responsibility for Supplies
Limitation of Liability
Limitation of Liability - High-Value Items
Limitation of Liability – Services
F.o.b. – Origin
F.o.b. – Destination
Ground Flight Risk
Property Loss provisions of the Property Clause DO NOT apply to loss of property covered by the following
Progress Payment Inventory
Ground & Flight Risk Clause property
Loss of delivered end items
FOB Origin Clause

26. Loss of Government Property
TLO 9: Analyze a court case involving the loss for Government property.
ELOs:
1. Define loss and related terms.
2. Explain contractor liability provisions when the full risk of loss is included in the Government Property Clause.
3. Explain the contractor liability provisions when the limited risk of loss is included in the Government Property Clause.
4. Determine the roles of the Contracting Officer and Property Administrator in resolving loss of Government Property.

27. Loss of Government Property
ELOs:
5. Analyze a court case involving the loss of Government property with the full risk of loss provision in the Government Property Clause.
6. Analyze a court case involving the loss of Government Property with the limited risk of loss provision in the Government Property Clause.
7. Analyze a court case involving the loss of Government Property when the F.O.B. Origin Clause is cited in the contract.
8. Explain the impact that other FAR clauses may have on Contract Liability Provisions