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  • Question

    1) Does the contractor have to file a property loss report? 2) How does the Government recover the proceeds that have been paid to the contractor from the carrier?


    Answer

    You asked “Does the contractor have to file a property loss report?”  The contractor would only be required to report the loss of Government property in accordance with FAR 52.245-1 if the helicopter landing pads, after acceptance by the Government, were provided as Government-furnished property accountable to a contract. 

    Let’s turn to the FAR for the rationale.  FAR 46.501 states “Acceptance constitutes acknowledgment that the supplies or services conform with applicable contract quality and quantity requirements, except as provided in this subpart and subject to other terms and conditions of the contract. Acceptance may take place before delivery, at the time of delivery, or after delivery, depending on the provisions of the terms and conditions of the contract.”  In accordance with FAR 46.505 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.  It further states “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.”  The same verbiage can be found in FAR 52.246-16.  The bottom line is that the contractor doesn’t have to submit a property loss report because the landing pads are not accountable to the contract and therefore is not covered by FAR 52.245-1.

    Now, that does not mean that the incident does not get reported at all.  We see that FAR 46.505 identifies circumstances under which the contractor assumes risk of loss.  However, the assumption of risk of loss is dependent upon the contract delivery terms (i.e., the f.o.b. origin or destination clause).

    So the contractor has filed a claim and received reimbursement for the damage…BUT is the contractor entitled to the monies received?  They are not!  So that brings us to your second question.  You asked “How does the Government recover the proceeds that have been paid to the contractor from the carrier?”  Because this was a cost reimbursement contract, the cost of replacement/correction is an allowable cost, determined as provided in the Allowable Cost and Payment clause at FAR 52.216-7, but no additional fee shall be paid. Since the landing pads are going to be repaired by the contractor at Government’s expense, then any reimbursement the contractor has received from the carrier would be an overpayment under FAR 52.232-25(d)  and  should be determined a debt under FAR 32.601(a) (1).  The contracting officer has primary responsibility for identifying and demanding payment of contract debts. It is advised that the procedures under FAR Subpart 32.6, DFARS Subpart 32.6 and DFARS PGI 32.6 are followed to resolve this situation.


    Also, the Prompt Payment clause FAR 52.232-25(d) addresses overpayments and makes it mandatory for the contractor to remit the overpayment to the payment office cited in the contract along with a description of the overpayment including the circumstances of the overpayment,  affected contract number, etc.  You are advised to review the clause that governs the contract and give the contractor an opportunity to remit payment if this has not already been done.



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