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Robert Tibbitts

Insurance for vehicles purchased for use under a government cost-plus fixed fee contract

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I am currently working on a government contract that is cost-plus fixed fee. The work under the contract has necessitated us buy several vehicles in Sierra Leone. The government will own the vehicles at the conclusion of the contract. Do I need to take steps to insure the vehicles prior to the government taking possession or are the vehicles covered under the government's self-insurance program? I have read FAR 52.245 regarding government property but am still hazy regarding when government insurance kicks in and what steps I need to adequately protect the property.

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Doesn't the government take title the instant you charge the cost of the vehicles to the contract? If so, then the government is insuring the vehicles from that moment forward.

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FAR Part 45 is the wrong place to look.  Instead, see FAR Subpart 28.3, Insurance.

Cost-reimbursement contracts ordinarily require contractors to to provide automobile liability insurance (bodily injury and property damage) covering the operation of all automobiles used in connection with performing the contract.    

Your CPFF contract should contain the clause at FAR 52.228-7, Insurance.

Even if it doesn't, any contractor subject to Cost Accounting Standard 416 is required to obtain insurance for the perils to which the contractor is exposed.

And even if a contractor isn't subject to CAS 416, it may still be required by law (outside the FAR) to provide insurance for certain types of perils and situations.

All of this is explained in FAR Subpart 28.3, Insurance.

Allowability of insurance costs is covered by FAR 31.205-19.

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Does it make a difference that this is contractor acquired equipment so while it belongs to the government they don’t take title until we dispose of it at the end of the contract as I understand the process?

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1 hour ago, Robert Tibbitts said:

Does it make a difference that this is contractor acquired equipment so while it belongs to the government they don’t take title until we dispose of it at the end of the contract as I understand the process?

It shouldn't make any difference.  What does the contract require for insurance and what is the KO saying or requiring?  I'm wondering why you are asking for specific answers here rather than asking the contracting agency...   I do recommend contracting the KO,. who (especially on a cost reimbursement contract) should be providing direction concerning the requirements for automobile insurance to protect the government's and your interests..

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28.307 Insurance under cost-reimbursement contracts.

Cost-reimbursement contracts (and subcontracts, if the terms of the prime contract are extended to the subcontract) ORDINARILY REQUIRE the types of insurance listed in 28.307-2, with the minimum amounts of liability indicated. (See 28.308 for self-insurance.)

 

 

 

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28.307-2 Liability.

[ ]...(c) Automobile liability. The CONTRACTING OFFICER SHALL REQUIRE automobile liability insurance written on the comprehensive form of policy. The policy shall provide for bodily injury and property damage liability covering the operation of all automobiles used in connection with performing the contract. Policies covering automobiles operated in the United States shall provide coverage of at least $200,000 per person and $500,000 per occurrence for bodily injury and $20,000 per occurrence for property damage. The amount of liability coverage on other policies shall be commensurate with any legal requirements of the locality and sufficient to meet normal and customary claims.

 


 

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28.311-1 Contract clause.

In accordance with agency acquisition regulations, the CONTRACTING OFFICER SHALL INSERT the clause at 52.228-7, Insurance—Liability to Third Persons, in solicitations and contracts, other than those for construction contracts and those for architect-engineer services, when a cost-reimbursement contract is contemplated

 

 

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52.228-7 Insurance—Liability to Third Persons.

As prescribed in 28.311-1, insert the following clause:

Insurance—Liability to Third Persons (Mar 1996)

(a)(1) Except as provided in paragraph (a)(2) of this clause, the Contractor shall provide and maintain workers’ compensation, employer’s liability, comprehensive general liability (bodily injury), comprehensive automobile liability (bodily injury and property damage) insurance, and such other insurance AS THE CONTRACTING OFFICER MAY REQUIRE under this contract.

(2) The Contractor may, WITH THE APPROVAL OF THE CONTRACTING OFFICER, maintain a self-insurance program, provided that, with respect to workers’ compensation, the Contractor is qualified pursuant to statutory authority.

(3) All insurance required by this paragraph shall be in a form and amount and for those periods as the Contracting Officer may require or approve and with insurers approved by the Contracting Officer.

(b) The Contractor agrees to submit for the Contracting Officer’s approval, to the extent and in the manner required by the Contracting Officer, any other insurance that is maintained by the Contractor in connection with the performance of this contract and for which the Contractor seeks reimbursement.

(c) The Contractor shall be reimbursed—

(1) For that portion—

(i) Of the reasonable cost of insurance allocable to this contract; and

(ii) REQUIRED OR APPROVED under this clause; and

(2) For certain liabilities (and expenses incidental to such liabilities) to third persons not compensated by insurance or otherwise without regard to and as an exception to the limitation of cost or the limitation of funds clause of this contract. These liabilities must arise out of the performance of this contract, whether or not caused by the negligence of the Contractor or of the Contractor’s agents, servants, or employees, and must be represented by final judgments or settlements approved in writing by the Government. These liabilities are for—

(i) Loss of or damage to property (other than property owned, occupied, or used by the Contractor, rented to the Contractor, or in the care, custody, or control of the Contractor); or

(ii) Death or bodily injury.

(d) The Government’s liability under paragraph (c) of this clause is subject to the availability of appropriated funds at the time a contingency occurs. Nothing in this contract shall be construed as implying that the Congress will, at a later date, appropriate funds sufficient to meet deficiencies.

(e) The Contractor shall not be reimbursed for liabilities (and expenses incidental to such liabilities)—

(1) For which the Contractor is otherwise responsible under the express terms of any clause specified in the Schedule or elsewhere in the contract;

(2) For which the Contractor has failed to insure or to maintain insurance AS REQUIRED BY THE CONTRACTING OFFICER; or

(3) That result from willful misconduct or lack of good faith on the part of any of the Contractor’s directors, officers, managers, superintendents, or other representatives who have supervision or direction of—

(i) All or substantially all of the Contractor’s business;

(ii) All or substantially all of the Contractor’s operations at any one plant or separate location in which this contract is being performed; or

(iii) A separate and complete major industrial operation in connection with the performance of this contract.

(f) The provisions of paragraph (e) of this clause shall not restrict the right of the Contractor to be reimbursed for the cost of insurance maintained by the Contractor in connection with the performance of this contract, other than insurance required in accordance with this clause; provided, that such cost is allowable under the Allowable Cost and Payment clause of this contract.

(g) If any suit or action is filed or any claim is made against the Contractor, the cost and expense of which may be reimbursable to the Contractor under this contract, and the risk of which is then uninsured or is insured for less than the amount claimed, the Contractor shall—

(1) Immediately notify the Contracting Officer and promptly furnish copies of all pertinent papers received;

(2) Authorize Government representatives to collaborate with counsel for the insurance carrier in settling or defending the claim when the amount of the liability claimed exceeds the amount of coverage; and

(3) Authorize Government representatives to settle or defend the claim and to represent the Contractor in or to take charge of any litigation, if required by the Government, when the liability is not insured or covered by bond. The Contractor may, at its own expense, be associated with the Government representatives in any such claim or litigation.

(End of clause)

 

 

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ji and Joel, the OP asked about insurance on the vehicles, not insurance for coverage for operation of the vehicles.  Bodily injury and property damage coverage is usually to protect third parties.  Having such insurance does not necessarily provide coverage for damage to the vehicles that may be government property.  If the vehicles are government property, it seems to me that the liability provisions of 52.245-1 have to be considered.

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2 hours ago, Robert Tibbitts said:

Does it make a difference that this is contractor acquired equipment so while it belongs to the government they don’t take title until we dispose of it at the end of the contract as I understand the process?

As for taking title, the government normally takes title of the property during contract performance and the contractor has possession of and accountability for it under the terms of the cost reimbursement contract. . I don't think that he government can take title to something that you have disposed of . 

See 45.101 Definitions and also 52.245-1 Government Property. (a) Definitions:

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[As used in this part—]

[ ]

“Contractor-acquired property” means property acquired, fabricated, or otherwise provided by the contractor for performing a contract and to which the Government has title.

[ ]

“Government property” means all property owned or leased by the Government. Government property includes both Government-furnished property and contractor-acquired property. Government property includes material, equipment, special tooling, special test equipment, and real property. Government property does not include intellectual property and software.

 

 

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17 minutes ago, Retreadfed said:

signed: e ji and Joel, the OP asked about insurance on the vehicles, not insurance for coverage for operation of the vehicles.  Bodily injury and property damage coverage is usually to protect third parties.  Having such insurance does not necessarily provide coverage for damage to the vehicles that may be government property.  If the vehicles are government property, it seems to me that the liability provisions of 52.245-1 have to be considered.

AHA!  - ok, understood and thanks, Retread.  Well,  the Contracting Officer should provide direction for the question to insure or self-insure, I would think. 

Signed: 

Sincerely, "Bald Tire".:wacko:

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1 hour ago, Retreadfed said:

Bodily injury and property damage coverage is usually to protect third parties.

I disagree.  This coverage protects the owner/operator of the vehicle from liabilities to third parties.

if the OP is asking about insuring against loss or damage to the Government Property (or CAP) generally, rather than automobiles specifically, the normal rules apply -- there is nothing special about an automobile in this regard.  FAR 45.104 and 28.303 give guidance.  

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ji, I don't know what you are disagreeing with.  While bodily injury and personal property damage insurance can relieve the insured from liability to third parties, its primary purpose is to protect third parties from being financially harmed due to the negligence of the insured.  The theory behind such insurance is to protect the public from injuries arising from the operation of a dangerous instrument.

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From DMV.org, http://www.dmv.org/insurance/bodily-injury-and-property-damage-liability-coverage.php

 

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Bodily Injury Liability Insurance Coverage

Bodily injury liability coverage, sometimes referred to as “bodily injury insurance," can protect you financially when you are at fault in an accident that results in physical injury to other people.

Whether it's minor bumps and bruises, serious injuries, or even death, you (the at-fault driver) will carry the burden of paying the costs related to those injuries/deaths.

What Will It Cover? 

Bodily injury coverage can help pay for medical expenses and funeral costs to somebody who is hurt in an accident you cause. It is important to note that bodily injury coverage does not pay for your own injuries.

Property Damage Liability Insurance Coverage

Property damage liability insurance covers the cost of damages to someone else's property after an accident you cause.

Most commonly, your property damage will pay out when you are at fault for an accident that causes damage to someone else's car. However, property damage will cover other property types as well.

What Property Damage Coverage Covers

Property damage liability insurance takes effect when your vehicle is involved in an accident and found at least partially at fault for causing damage to another person's property.

Exactly what your liability insurance covers varies according to your policy and amount of coverage, so read the contract carefully or ask your insurance agent.

Typically, property damage liability insurance covers repair and/or replacement of:

  • Damaged vehicles.
  • Damaged personal property, such as a house, a fence, or a lamppost.

What If My Car Gets Damaged?

Property damage liability coverage does not pay for damages you cause to your own vehicle or personal property.

To ensure you'll be able to pay for damage to your own property, consider getting collisionand/or comprehensive coverage.

 

Liability insurance protects the insured from liability.

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Robert,

See FAR 45.104 and 28.303.  And re-read your contract to see if it requires you to provide insurance against loss or damage to government property.

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On ‎8‎/‎17‎/‎2017 at 3:02 PM, Robert Tibbitts said:

I am currently working on a government contract that is cost-plus fixed fee. The work under the contract has necessitated us buy several vehicles in Sierra Leone. The government will own the vehicles at the conclusion of the contract. Do I need to take steps to insure the vehicles prior to the government taking possession or are the vehicles covered under the government's self-insurance program? I have read FAR 52.245 regarding government property but am still hazy regarding when government insurance kicks in and what steps I need to adequately protect the property.

Robert,

(Assuming here you are a contractor) Is the govt paying you for the vehicles, or are you buying the vehicles to perform a service?  If the govt is paying you to get vehicles to perform a service, those vehicles "normally" become GFP when you procure them, not wait until the end of the contract. Being a cost-type contract, 52.245-1 is "supposed" to be on the contract. The contractor would then maintain stewardship of those vehicles while the govt has title.  The govt is normally self-insured and we don't pay the added expense for insurance. To mitigate that, the -1 clause assumes the contractor will take care of the property IAW an approved Property Management System.  And normally, the contractor isn't held liable for damage.......normally.  You should contact the contracting officer.

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As I understand it, FAR 52.245-1(e)(3) states that under a cost reimbursement contract title does not vest in the government until it is "delivered." Here the vehicles won't be delivered to the government until they are done being used in West Africa. If that's the case, my follow up question is who should bear the cost of insuring the vehicles against property damage until they are delivered to the government?

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I think you have misinterpreted 52.245-1(e)(3).  Vendor as used there refers to the entity that sold the property to the contractor.  It does not refer to the contractor.  Thus, when the contractor receives the vehicles from the dealer, title will pass to the government if the cost of the vehicles is chargeable as a direct cost of the contract.

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3 hours ago, Robert Tibbitts said:

[W]ho should bear the cost of insuring the vehicles against property damage until they are delivered to the government?

Robert,

There is ambiguity in your words "insuring the vehicles against property damage."

Are you asking about insurance to cover loss of or damage to Government property?

Or are you asking about insurance to provide automobile liability insurance (bodily injury and property damage) covering the operation of automobiles used in connection with performing the contract?

These are different, and your words don't make it easy to decide which.

If you are asking about insurance to cover loss of or damage to Government property, the answers already given above tell you to consult FAR 28.303 and FAR 45.104.  There, you will learn that the Government generally doesn't require such insurance from contractors, but that any particular contract may do so.  We don't know what your contract says, so we can't give you a definitive answer -- except to say, read your contract.

If you are asking about insurance to provide automobile liability insurance (bodily injury and property damage) covering the operation of automobiles used in connection with performing the contract, the answers already given above tell you to look in your contract for the clause at FAR 52.228-7, Insurance.  We don't know what your contract says, so we can't give you a definitive answer -- except to say, read your contract.

As for who should bear the cost, well, if the contract requires you to provide the insurance, then you have to bear the cost.  But these will be reimbursable costs under your CPFF contract -- allowability of insurance costs is covered by FAR 31.205-19.

And of course, I hope you come here only for general learning -- for any question specific to your contract, you need to direct the question to your contracting officer.

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On ‎8‎/‎18‎/‎2017 at 9:35 AM, joel hoffman said:

It shouldn't make any difference.  What does the contract require for insurance and what is the KO saying or requiring?  I'm wondering why you are asking for specific answers here rather than asking the contracting agency...   I do recommend contracting the KO,. who (especially on a cost reimbursement contract) should be providing direction concerning the requirements for automobile insurance to protect the government's and your interests.

going once...

 

On ‎8‎/‎18‎/‎2017 at 11:11 AM, joel hoffman said:

AHA!  - ok, understood and thanks, Retread.  Well,  the Contracting Officer should provide direction for the question to insure or self-insure, I would think

going twice...

3 hours ago, ji20874 said:

And of course, I hope you come here only for general learning -- for any question specific to your contract, you need to direct the question to your contracting officer.

Boom - three times.

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