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I am struggling to find the benefits of the Ground and Flight Risk (GFRC) clause when applied to contracts for repair and maintenance of aircraft. Are there any sources that can help? The GFRC limits the contractor's liability for loss or damage to the aircraft by, in effect, creating a deductible and then self-insuring the balance of the loss. The clause is based on an assumption that, in the long run, the government's cost of self-insurance will be less than paying for the contractor's insurance to cover these risks. Where I am confused is how this clause interacts with the Government Property clause on aircraft that are provided to a contractor for repair, maintenance, modification, etc. Under the GFP clause, the contractor's liability for loss or damage of property is very limited. FAR 52.245-1(h)(1)(i-iii) provides the contractor shall not be liable for loss of Government property (which is defined earlier in the clause to include damage and destruction) furnished under the contract unless the risk is covered by insurance, the loss is the result of willful misconduct or lack of good faith on the part of the Contractor's managerial personnel, or the Contracting Officer has revoked the Government's assumption of risk. If I am reading the Government Property clause correctly, it seems to me that the GFRC reduces the scope of the Government's self-insurance by creating a "deductible" that otherwise would not exist. What am I missing? Thanks for your assistance.
Under FAR 52.245-1, Government Property, the government assumes risk of loss except under certain conditions. Para (h)of this clause states; (h) Contractor Liability for Government Property. (1) Unless otherwise provided for in the contract, the Contractor shall not be liable for loss, theft, damage or destruction to the Government property furnished or acquired under this contract, except when any one of the following applies— (i) The risk is covered by insurance or the Contractor is otherwise reimbursed (to the extent of such insurance or reimbursement). The allowability of insurance costs shall be determined in accordance with 31.205-19. (ii) The loss, theft, damage or destruction is the result of willful misconduct or lack of good faith on the part of the Contractor's managerial personnel. (iii) The Contracting Officer has, in writing, revoked the Government's assumption of risk for loss, theft, damage or destruction, due to a determination under paragraph (g) of this clause that the Contractor's property management practices are inadequate, and/or present an undue risk to the Government, and the Contractor failed to take timely corrective action. If the Contractor can establish by clear and convincing evidence that the loss, theft, damage or destruction of Government property occurred while the Contractor had adequate property management practices or the loss, theft, damage or destruction of Government property did not result from the Contractor's failure to maintain adequate property management practices, the Contractor shall not be held liable. What is the applicability of contractor liability provision on a cost reimbursement contract? If the contractor is found liable for loss/damage to government property under this paragraph is any cost associated with correcting the loss (through repair, repurchase, etc.) reimbursable under the contract or would this cost now be considered an unallowable cost? We are a Prime contractor on a government R&D program. We have flowed down 52.245-1 to a subcontractor on a cost reimbursement subcontract. We often require subcontractor to insure for risk of loss for GP but do not do so for subs who have a property system that has been accepted by DCMA. Instead, require subcontractor to notify us if the government has 'revoked the assumption of risk for loss.' The subcontract has stated that this is irrelevant since this is a cost reimbursement subcontract.