Can a Contractor include the Builder Risk and Sub-Contract Default Insurance in their proposal for modification? Is there any FAR reference where I can go back to them and tell them that these are unallowable cost or is it?
This response is based on the information provided. We suggest you discuss with your contracting and finance team, program manager and/or legal department as appropriate.
The contractor is allowed to charge for insurance. See FAR 31.205-4 and -19. FAR 31.105 also refers to construction and architect-engineer contracts. However, this is a modification to an awarded contract, the implication being that insurance and bonds are already in place and sufficient.
When negotiating this modification, you be to be clear about what each of these terms, listed in your background information, means. Prime Contractor Builders Risk could possibly refer to bond costs, but if only the words are our guide, it appears to be a contingency charge which is not allowed. The other two terms you refer to are insurance and insurance is allowable to a point. You need to check your contract and its applicable clauses in conjunction with the FAR part 31 references. It is our opinion based on the limited data provided that your contract likely does not need increased bond or insurance coverage.