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It is my underdstanding that the Gov't is generally self insured; we have a CPIF contract that has called out FAR 52.247-34 F.O.B. Destination; as you are well aware the clause contains language that stipulates the contactor bears the risk of loss until delivered to consignee's dock. Title to this property is already vested in the Gov't prior to shipment and as such is Gov't Property. Being Gov't property 52.245-1 states that the contractor is not responsible for loss or damage unless such loss/damage was caused by contractor's wilfull misconduct. This would seemingly contridict the loss risk associated with F.O.B destination. Looking for any insight that you may have regarding this issue. Ed

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Title to this property is already vested in the Gov't prior to shipment and as such is Gov't Property.

Why do you say this? Typically, for FOB Destination, title passes with acceptance at destination.

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46.505 Transfer of title and risk of loss.

(a) Title to supplies shall pass to the Government upon formal acceptance, regardless of when or where the Government takes physical possession, unless the contract specifically provides for earlier passage of title.

(B) Unless the contract specifically provides otherwise, risk of loss of or damage to supplies shall remain with the contractor until, and shall pass to the Government upon?

(1) Delivery of the supplies to a carrier if transportation is f.o.b. origin; or

(2) Acceptance by the Government or delivery of the supplies to the Government at the destination specified in the contract, whichever is later, if transportation is f.o.b. destination.

? Paragraph (B) of this section shall not apply to supplies that so fail to conform to contract requirements as to give a right of rejection. The risk of loss of or damage to such nonconforming supplies remains with the contractor until cure or acceptance. After cure or acceptance, paragraph (B) of this section shall apply.

(d) Under paragraph (B) of this section, the contractor shall not be liable for loss of or damage to supplies caused by the negligence of officers, agents, or employees of the Government acting within the scope of their employment.

(e) The policy expressed in (a) through (d) of this section is specified in the clause at 52.246-16, Responsibility for Supplies, which is prescribed in 46.316.

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Do you have this clause in your contract: 52.246-16 -- Responsibility for Supplies?

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It is my underdstanding that the Gov't is generally self insured; we have a CPIF contract that has called out FAR 52.247-34 F.O.B. Destination; as you are well aware the clause contains language that stipulates the contactor bears the risk of loss until delivered to consignee's dock. Title to this property is already vested in the Gov't prior to shipment and as such is Gov't Property. Being Gov't property 52.245-1 states that the contractor is not responsible for loss or damage unless such loss/damage was caused by contractor's wilfull misconduct. This would seemingly contridict the loss risk associated with F.O.B destination. Looking for any insight that you may have regarding this issue. Ed
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Please remember this is a cost contract and as such title vests with the Gov't when payment is received or when material is released to the floor for performance of the contract. I recognize F.O.B states title passes on acceptance by Gov't at destination. That is the problem I see here; title has already passed. We do not have 52.246-16 in the contract; I believe this pertains to FFP only. Appreciate your comments Thanks ED

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Please remember this is a cost contract and as such title vests with the Gov't when payment is received or when material is released to the floor for performance of the contract. I recognize F.O.B states title passes on acceptance by Gov't at destination. That is the problem I see here; title has already passed. We do not have 52.246-16 in the contract; I believe this pertains to FFP only. Appreciate your comments Thanks ED

Problem is that Government doesn't pay you until the material has been received. So release of the material to the floor for performance, assuming that happens at the Government facility, always happens at the Destination specified in the order.

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Please remember this is a cost contract and as such title vests with the Gov't when payment is received or when material is released to the floor for performance of the contract. I recognize F.O.B states title passes on acceptance by Gov't at destination. That is the problem I see here; title has already passed. We do not have 52.246-16 in the contract; I believe this pertains to FFP only. Appreciate your comments Thanks ED]

In summary, I believe the contractor remains liable for damage to the government property. This is because 1) subparagraph (h) of the clause FAR 52.245-1 -- Government Property, relieves the contractor from liability "Unless otherwise provided for in the contract?" and 2) subparagraph (B)(4) of the FAR clause 52.247-34 -- F.o.b. Destination, otherwise provides for the contractors liability. After reviewing the FAR coverage at the clauses 52.245-1 and 52.247-34 and at a 1987 ASBCA decision, I believe the contractor is not relieved of risk of loss under the cost reimbursement contract. However, my conclusion is based upon an analysis of a single, 23 year old ASBCA decision. I have been unable to check my conclusion against Westlaw to determine if there are more recent decisions.

My rationale follows.

First, your contract contains the FAR clause 52.245-1 -- Government Property. The most recent version is dated August 2010; the previous version is dated June 2007. Both versions of the clause contain the same subparagraph (h), Contractor Liability for Government Property. It says

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(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...

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Note the first 7 words in the subparagraph: "Unless otherwise provided for in the contract ..."

Next, I assume you have in your contract FAR clause 52.247-34 -- F.o.b. Destination. Subparagraph (B) (4) says that the contractor shall

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Be responsible for any loss of and/or damage to the goods occurring before receipt of the shipment by the consignee at the delivery point specified in the contract;

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In my view, subparagraph (B) (4) is coverage "... otherwise provided for..." by the first sentence of Subparagraph (h) of the clause at 52.245-1.

I attempted to find a case confirming my belief. After researching in several sources including Administration of Government Contracts, Fourth Edition, Cost Reimbursement Contracting, Third Edition, and discussions on government property revealed via Google, I could find only one ASBCA decision similar to your circumstance: Appeal of‑‑Litton Systems, Inc./Guidance & Control Systems Division, ASBCA, 29,762, 88‑3 BCA 21,008. You may download the decision from the DAU site if you Google it.

Here is an extract from the opinion:

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This appeal was taken under the Contract Disputes Act from a final decision of the contracting officer requiring appellant to replace an Inertial Measurement Unit Test Set which was damaged by a common carrier. Each party claims the other has assumed the risk of loss for this damage under the terms of the contract. Appellant claims that the standard Government Property clause places the risk of loss upon the Government after the Government accepted the unit.

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In his decision, the judge sets out Litton's theory for transferring liability. Then, in the concluding sentence of the first paragraph of the decision, the judge undermines the theory that responsibility for the loss transferred to the Gov't because title was transferred to the Gov't when the Gov't accepted the item:

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Appellant argues that the Government must bear the risk of loss to the inertial measurement unit test set caused by the negligence of the common carrier in moving the unit from the bonded Government property storage area operated by appellant to appellant's loading dock. It is undisputed that title to the unit passed from appellant to the Government when the Government inspected and accepted the unit prior to the accident (finding 2). Thus, appellant contends that the Government Property clause is controlling. This clause places the risk of loss on the Government for damage to Government property in the possession of appellant either (1) in the absence of willful misconduct or lack of good faith of appellant in handling that property or (2) unless some other contract clause provides otherwise (finding 4). Thus, this clause by its very terms only applies if some other clause, such as the Title and Risk of Loss clause, does not provide guidance governing the risk of loss.

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The Government Property clause examined in the Litton decision came from the Defense Acquisition Regulations (DAR). The clause said the following at paragraph (g) Risk of Loss:

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(1) The Contractor shall not be liable for loss or destruction of or damage to the Government property provided under this contract except as provided in (2) below....

(2) The Contractor shall be responsible for any loss or damage (i) to the extent specifically provided in the clause or clauses of this contract designated in the schedule or (ii) which results from:

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Note subparagraph (g) (2) (i):

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The Contractor shall be responsible for any loss or damage (i) to the extent specifically provided in the clause or clauses of this contract designated in the schedule...

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In the first paragraph of his decision, the judge made this observation about the DAR government property clause:

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Thus, this clause by its very terms only applies if some other clause, such as the Title and Risk of Loss clause, does not provide guidance governing the risk of loss.

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Later in his decision, after concluding that the contract delivery terms were FOB Destination, the judge examines risk of loss under FOB destination:

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We turn now to that portion of the Title and Risk of Loss clause covering f.o.b. destination delivery terms. That clause expressly provides that the risk of loss only passes after both acceptance and the transfer of possession to the Government at the destination specified in the contract whichever occurs later ...

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In your contract, the FAR clause 52.247-34 -- F.o.b. ? Destination, at subparagraph (B) (4), says that the contractor shall

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Be responsible for any loss of and/or damage to the goods occurring before receipt of the shipment by the consignee at the delivery point specified in the contract;

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In summary, I believe the contractor remains liable for damage to the government property. This is because 1) subparagraph (h) of the clause FAR 52.245-1 -- Government Property, relieves the contractor from liability "Unless otherwise provided for in the contract..." and 2) subparagraph (B)(4) of the FAR clause 52.247-34 -- F.o.b. Destination otherwise provides for the contractors liability.

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Guest Vern Edwards
It is my underdstanding that the Gov't is generally self insured; we have a CPIF contract that has called out FAR 52.247-34 F.O.B. Destination; as you are well aware the clause contains language that stipulates the contactor bears the risk of loss until delivered to consignee's dock. Title to this property is already vested in the Gov't prior to shipment and as such is Gov't Property. Being Gov't property 52.245-1 states that the contractor is not responsible for loss or damage unless such loss/damage was caused by contractor's wilfull misconduct. This would seemingly contridict the loss risk associated with F.O.B destination. Looking for any insight that you may have regarding this issue. Ed

Emphasis added.

I have one insight: You should not have put 52.247-34 in a cost-reimbursement contract. That doesn't make sense and is contrary to FAR. That clause is for fixed-price contracts. Did anybody read FAR 47.300 and the text of the clause before they put it into the solicitation/contract? Did anybody look at the clause matrix?

Somebody in your shop didn't know what they were doing.

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Emphasis added.

I have one insight: You should not have put 52.247-34 in a cost-reimbursement contract. That doesn't make sense and is contrary to FAR. That clause is for fixed-price contracts. Did anybody read FAR 47.300 and the text of the clause before they put it into the solicitation/contract? Did anybody look at the clause matrix?

Somebody in your shop didn't know what they were doing.

Vern: This was imposed by my customer, on my contract; however; if you look at the clause it states it can be used on a cost type contract as a "guide". I am of the opinion that it should not and have contacted the KO to so state. Thanks for your opinion anyway. ED

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