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  • Question

    1. Should the contractor continue to purchase the same type of assets against the contract? 2. Are there any additional FAR references that you can share ( besides the two mention above)? 3. I am I wrong to recommend disallow of cost?


    Answer

    FAR clause 52.245-2 only provides property for initial provisioning and while the clause statesthe Government is not responsible for repair or replacement” this is in direct conflict with the spirit and intent of the purpose of a cost-reimbursement contract which provides for reimbursement of all reasonable, allocable and allowable costs.  Also FAR 45.104(a)(1), Responsibility and Liability for Government Property, states that under cost-reimbursement contracts,  “Generally, contractors are not held liable for loss, theft, damage or destruction of Government property…”
    Furthermore, the other clause 52-245-1 that is contained in your contract states that any item purchased on this cost-reimbursement contract that title passes to the government for any property acquired in the course of the contract.
     
    Additionally paragraph (h), Contractor Liability for Government Property, of
    clause 52.245-1 reads as follows:
    (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—
    (i) The risk is covered by insurance or the Contractor is otherwise reimbursed (to the extent of such insurance or reimbursement). The allowability of insurance costs shall be determined in accordance with 31.205-19.
    (ii) The loss, theft, damage or destruction is the result of willful misconduct or lack of good faith on the part of the Contractor's managerial personnel.
    (iii) The Contracting Officer has, in writing, revoked the Government's assumption of risk for loss, theft, damage or destruction, due to a determination under paragraph (g) of this clause that the Contractor's property management practices are inadequate, and/or present an undue risk to the Government, and the Contractor failed to take timely corrective action. If the Contractor can establish by clear and convincing evidence that the loss, theft, damage or destruction of Government property occurred while the Contractor had adequate property management practices or the loss, theft, damage or destruction of Government property did not result from the Contractor's failure to maintain adequate property management practices, the Contractor shall not be held liable. 
     
    If you are concerned with the quantity of items the contractor is purchasing and their loss rate, the area you need to look to is verifying how they are managing and accounting for the government property in the hands of the contractor.  What are their management practices?  Have they filed reports of loss, theft, damage or destruction?  Have you performed a consumption analysis?  Once you have looked at these areas, you may be better prepared to support a disallowance of cost.


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