Purchasing equipment w/ contract funds for exclusive govt use.

[Guest Vern Edwards]

4 hours ago, Retreadfed said:

I am well aware of what a bailment is.

Retread, So you meant indemnity in a general sense of the word, not in connection with PL 85-804? I ask because you said:

23 hours ago, Retreadfed said:

Without going back and completely researching this issue, my recollection is that GAO has held that agencies do not need statutory authority, such as P.L. 85-804, in order to use appropriated funds to indemnify a contractor against specified loses. 

When I clicked the link in your post I got a 1946 Comptroller General decision about bailment that makes no mention of indemnity, and PL 85-804 was enacted in 1958. What am I missing?

[Guest Vern Edwards]

I searched for GAO decisions that mention bailment and found 22. The most recent decision is U-Save Auto Rental, B-270916, Sept. 13, 1996. In that case a government civilian employee rented a car while on authorized travel and the car was stolen. The employee had declined LDW insurance, which made him responsible for loss or damage. The rental company filed a claim with the agency for the value of the car. The rental car company was not a participant in the U.S. Government Car Rental Agreement. The agency requested an opinion from the GAO. The GAO concluded:

Quote

As between U-Save and Mr. Eslinger, the rental of the automobile constitutes a bailment for hire, which is a bailment for the mutual benefit of the parties, and it is well settled that under such a bailment, the bailee is required to exercise only ordinary diligence in the care of the property bailed. Allen Business Machines, 55 Comp. Gen. 356 (1975); 23 Comp. Gen. 907 (1944); and 8 Am. Jur. 2d, Bailments, § 221 (1980). Absent a contractual provision increasing the bailee's liability, where the bailee has met the standard of ordinary diligence, the bailee is not liable for loss of or damage to the property, including loss due to theft. 8 Am. Jur. 2d, Bailments § 216 (1980).

*     *     *

As noted above, the JTR authorizes reimbursing an employee for or paying directly to a rental car company a claim for damage to a rented vehicle incurred during the performance of official business, but the JTR does not mention paying a claim for theft of a rented vehicle in the same circumstances. However, we do not believe this omission precludes the agency from paying a valid claim asserted by a rental company for loss of a vehicle due to theft when the vehicle was properly rented by an employee for use on official business, as in this case.4 Although the rental contract was between U-Save and Mr. Eslinger, the agency authorized Mr. Eslinger to rent an automobile for use on official travel, and therefore he is entitled to reimbursement for the cost of doing so. We believe that such reimbursement (or payment directly to the rental company) may include the amount of a valid claim for loss due to theft of the vehicle on the same basis that such a claim for loss due to damage to the vehicle may be paid. Accordingly, the agency may pay U-Save's claim for the value of the vehicle ($13,430) to the extent that it does not exceed the reasonable value of the vehicle as verified by the agency.

Thus, that matter was settled pursuant to the terms of the car rental agreement and the JTR.

I found no bailment decision that included the term indemnify or mentioned indemnification in any way.

The next most recent decision was from 1981 and dealt with a bailment in which the bailor was the vice president of the U.S. It was settled under the Military Personnel and Civilian Employees' Claims Act of 1964, Pub. L. 88-558. See Rafael v. Capo, Esq., Office of the Vice President of the United States, B-202683, Dec. 9, 1981.

That's as much reading about this topic as I am willing to do.

[here_2_help 0]

On 1/6/2018 at 9:48 AM, Michael11 said:

If the contractor would make this purchase how would they mitigate their liability for property that is not in their possession or under their control? Can a title be transferred to the government thereby neutralizing the contractors risk of tracking equipment they aren’t privy to? ... Contractor would not want to be held liable if doesn’t have control over the unit.

Due respect to those debating bailment agreements and indemnification issues. It's been another of those WIFCON rabbit holes we fall into--which is not to say it's been without value.

In my view the original question is simply answered. Title is transferred in accordance with the contract clause(s). Once title has transferred there is very little liability (for the contractor) with respect to how the laptop is used by the government. In particular the contractor is not liable for the theft of the laptop while in the government's control, because it is no longer the contractor's laptop.

To the question "can a title be transferred to the government?" the forum's answer should have been a resounding "YES". To the related question of contractor liability for what happens after the government accepts the item, the forum's answer should have been "not a risk to worry about".

[Guest Vern Edwards]

On 1/8/2018 at 10:26 AM, Vern Edwards said:

If the laptop is added as a deliverable, and if it won't be handed back to you as GFP, then you don't have to worry about loss or damage after the government receives it. You would be responsible for it only until the date the government receives. You don't need to negotiate special terms if the transaction is as straightforward as you described.

Uh, H2H, as you can see, I said that a couple of days ago. Didn't expressly mention the word "title," but I supposed that everyone would understand that the government gets title to a "deliverable" upon receipt.

[Guest Vern Edwards]

9 hours ago, here_2_help said:

Once title has transferred there is very little liability (for the contractor) with respect to how the laptop is used by the government. In particular the contractor is not liable for the theft of the laptop while in the government's control, because it is no longer the contractor's laptop.

H2H:

I'm confused by that. Are you saying that liability follows title? And how does government control affect title ("while in the government's control, because it is no longer the contractor's laptop")?

[Michael11 0]

Thanks guys!

I heard the resounding Yes answer earlier this week and was also pleased to follow along in the rabbit hold as we debated bailments. All told I agree adding the unit as a deliverable will likely be the simplest, most transparent and financially worthwhile way to go.

[here_2_help 0]

1 hour ago, Vern Edwards said:

H2H:

I'm confused by that. Are you saying that liability follows title? And how does government control affect title ("while in the government's control, because it is no longer the contractor's laptop")?

Vern,

When title passes the laptop ceases being the contractor's property, and becomes the government's property. At that point, the government is responsible for protection against loss, theft, damage, destruction, etc. The contactor is no longer responsible for those things.

[Guest Vern Edwards]

21 minutes ago, here_2_help said:

When title passes the laptop ceases being the contractor's property, and becomes the government's property. At that point, the government is responsible for protection against loss, theft, damage, destruction, etc. The contactor is no longer responsible for those things.

H2H:

That's not necessarily true. You have left something out. The contractor is responsible for properly managing (i.e., protecting) the government property in its possession. See FAR 45.104:

Quote

45.104 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.

(b) The contracting officer may revoke the Government’s assumption of risk when the property administrator determines that the contractor’s property management practices are noncompliant with contract requirements.

(c) A prime contractor that provides Government property to a subcontractor shall not be relieved of any responsibility to the Government that the prime contractor may have under the terms of the prime contract.

(d) With respect to loss of Government property, the contracting officer, in consultation with the property administrator, shall determine—

(1) The extent, if any, of contractor liability based upon the amount of damages corresponding to the associated property loss; and

(2) The appropriate form and method of Government recovery (may include repair, replacement, or other restitution).

(e) Any monies received as financial restitution shall be credited to the Treasury of the United States as miscellaneous receipts, unless otherwise authorized by statute (31 U.S.C. 3302(b)).

Emphasis added. See also FAR 45.105 and 28.303.

I wonder if the property manager can determine, after the fact, that the contractor's practices were noncompliant.

[here_2_help 0]

26 minutes ago, Vern Edwards said:

H2H:

That's not necessarily true. You have left something out. The contractor is responsible for properly managing (i.e., protecting) the government property in its possession. See FAR 45.104:

Vern,

Two points in rebuttal.

1. In the scenario described, the government property (laptop) was no longer in the contractor's possession.

2. Those FAR quotes are interesting, to be sure. But they are not binding on the contractor unless incorporated into the contract via clause. I believe in this case the OP stated that there were no Part 45 clauses in the contract.

[Guest Vern Edwards]

Wait a minute! You're going back from general remarks to a specific scenario. And you, yourself, referred to contract property clauses. 

But I agree that under standard government contract clauses a contractor cannot be liable for property to which the government holds title and that was not in its possession when lost or damaged. In fact, I said that a couple of days ago.

[here_2_help 0]

5 hours ago, Vern Edwards said:

Wait a minute! You're going back from general remarks to a specific scenario. And you, yourself, referred to contract property clauses. 

I am large, I contain multitudes.

[Guest Vern Edwards]

So is/does the devil.