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    What is the process to allow for the contractor to repair or pay for the damages? Is this a mod to the contract? Withholding payment for the paint job?


    Excellent question.
    Now, let’s draw out additional information to help you arrive at the proper course of action!
    Let’s start out with a decision tree approach:
    1.  Who owns the crane?  The Government or the contractor?
    a.  If the crane is CONTRACTOR owned –
    THEN – They pay for their own repairs to their own crane (no impact to the Government or the contract)
    b.  If the crane is GOVERNMENT owned and is accountable to the installation -
    THEN - the CO can accept a check made out to General Receipts of the Treasury (reference DoD FMR Volume 12, Chapter 7) (coordination through legal counsel is advisable)
    c.  If the crane is GOVERNMENT owned and it is either “contract property” accountable to the service contract or to another Government contract -
    THEN – it’s a bit more involved and some “contract forensics” necessary as noted immediately below.
    If you are the Procuring Contracting Officer, Administrative Contracting Officer, Property Administrator or Contracting Officer Representative this contract research should be fairly simple for you.  If not, you’ll need their help.
    First, is some form of FAR clause 52.245-1, “Government Property,” on contract?  Since you noted that a contractor was involved in an incident involving Government property in their possession, there is an extremely high likelihood that FAR Part 45 applies and as well as a form of the aforementioned clause. 
    Next – determine whether it is FAR clause 52.245-1 (which affords the contractor “limited” risk-of-loss) or 52.245-1, ALT 1 (which holds the contractor responsible for “full” risk-of-loss.  What’s the difference?  It’s huge!  Compare paragraph (h) of ALT 1, versus the basic clause paragraph (h) as follows:
    ·  If (h) ALT 1 of the clause is present, then the Contractor assumes the risk of, and shall be responsible for, any loss, theft, damage or destruction of Government property upon its delivery to the Contractor as Government-furnished property.
    ·  If NO ALT 1 (therefore, basic clause (h) applies) and 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 unless they possess insurance which covers the loss, willful misconduct on the part of (high level) Contractor's managerial personnel, or the assumption of risk was revoked by the Contracting Officer due to a Property Management System  where practices are inadequate, and/or present an undue risk to the Government. 
    Now that you’ve determined what application of the Government Property clause applies, let’s look at responsibilities of the parties involved - the Contractor and the Government!
    The Contractor is responsible under clause to submit a full report of the incident you describe and which is discussed in the clause at 52.245-1(f)(1)(vi) – Reports
    o  Did the contractor investigate and promptly furnish a written narrative of the incident, and damage to the assigned property administrator as soon as the facts become known or when requested by the Government?
    o  Did the report contain all information required under the paragraph?
    The Government (specifically the Property Administrator or the Contracting Officer acting as the PA), after determining which paragraph (h) discussed above applies, takes action under FAR Part 45.105(d) as follows:
    When the property administrator determines that a reported case of loss, theft, damage or destruction of Government property constitutes a risk assumed by the Government, the property administrator shall notify the contractor in writing that they are granted relief of responsibility in accordance with FAR clause 52.245-1(f)(1)(vii).  Where the property administrator determines that the risk of loss is not assumed by the Government, the property administrator shall forward a recommendation requesting that the contracting officer hold the contractor liable.
    This determination is necessary for the contract parties to comply with FAR clause 52.245-1(f)(1)(vii), Relief of stewardship responsibility which states the following:
    Unless the contract provides otherwise, the Contractor shall be relieved of stewardship responsibility for Government property when such property is—
    (A) Consumed or expended, reasonably and properly, or otherwise accounted for, in the performance of the contract, including reasonable inventory adjustments of material as determined by the Property Administrator; or a Property Administrator granted relief of responsibility for loss, theft, damage or destruction of Government property;
    Based upon what the contract says, this contractor may not be liable to reimburse the Government for the damage to the crane.  Why?  In the Government’s desire to self-insure (which saves the taxpayers HUGE insurance premiums each year across all Government property bearing contracts!), the Government may have assumed the risk of this sort of damage and may be compelled under the Government Property clause to relieve them appropriately for this instance of damage!  Therefore – nothing is owed. 
    Of course, there is the possibility of some other contract provision making the contractor, in-fact liable for such damage; or there may be insurance covering the loss.  If either of these cases applies, then a contract modification (equitable adjustment) should be written.
    One last note…
    Knowledgeable parties to the contract may mutually agree to waive contract provisions.  Therefore:
    ·  IF the Contractor HAS the limited risk-of-loss provision,
    ·  HAS submitted the appropriate report and
    ·  the assigned Property Administrator HAS appropriately made a determination that the contractor IS NOT liable under the Government Property clause;
    ·  THEN, the contractor may voluntarily pay for such damages via a contract modification (equitable adjustment).
    ·  DoD FMR Volume 12, Chapter 7
    ·  FAR Subpart 45 Government Property
    ·  FAR 52.245-1 & 52.245-1 (ALT 1)

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