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    Under a disapproved property business system the contractor assume FULL risk of liability for loss. This is understood. My question is regarding "Quantum" or "compensation" when the loss occurs to USG property that is excess to contractual requirements or obsolete. The contractor is liable to make the USG whole, but if there in NO OTHER USG requirement for the property is the just compensation closer to scrap value rather than full acquistion price? In other words is the "intrinsic" value to the USG in this case the scrap value?


    Answer

    FAR 45.104(d) – Responsibility and Liability for Government Property, states that the contracting officer, in consultation with the property administrator shall determine the extent, if any, of contractor liability based upon the amount of damages corresponding to the associated property loss and the appropriate form and method of Government recovery.

    Quantification of liability for lost, damaged, destroyed, or stolen property should be based on the whether there is a current or future need for the item(s) by the Government and the “intrinsic” value of the property. 
    When the contracting officer has revoked the Government’s assumption of risk and the contractor has full risk of loss, the contracting officer’s may elect for the Government to be made whole through recovery of unit acquisition cost, replacement cost, repair cost, scrap value, or other restitution.  IF a determination is made by the property administrator and contracting officer that the Government has no current or future need for the property, then holding the contractor liable for scrap value is practicable.  Ultimately, it is the responsibility of the Government to determine the intrinsic value of the property.  Also, keep in mind that just because the property is excess to a contract does not mean that it is not needed by the owning agency (i.e., Department of Defense) or other federal agencies.

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