U.S. flag

An official website of the United States government

Dot gov

Official websites use .gov
A .gov website belongs to an official government organization in the United States.

Https

Secure .gov websites use HTTPS
A lock () or https:// means you’ve safely connected to the .gov website. Share sensitive information only on official, secure websites.

Breadcrumb

  1. Home
  2. Risk of Loss and Liability For Government Property

Risk of Loss and Liability for Government Property

ACON 071

DAU GLOSSARY DEFINITION

Alternate Definition

“Acceptance” means the act of an authorized representative of the Government by which the Government, for itself or as agent of another, assumes ownership of existing identified supplies tendered or approves specific services rendered as partial or complete performance of the contract. (FAR 46.101)
“F.o.b. destination” means free on board at destination; i.e., the seller or consignor delivers the goods on seller’s or consignor’s conveyance at destination. Unless the contract provides otherwise, the seller or consignor is responsible for the cost of shipping and risk of loss. For use in the clause at 52.247-34, see the definition at 52.247-34(a). (FAR 2.101)
“F.o.b. origin” means free on board at origin; i.e., the seller or consignor places the goods on the conveyance. Unless the contract provides otherwise, the buyer or consignee is responsible for the cost of shipping and risk of loss. For use in the clause at 52.247-29, see the definition at 52.247-29(a). (FAR 2.101)
“F.o.b.” … (For other types of F.o.b., see 47.303). (FAR 2.101)
“Government-furnished property” means property in the possession of, or directly acquired by, the Government and subsequently furnished to the contractor for performance of a contract. Government-furnished property includes, but is not limited to, spares and property furnished for repair, maintenance, overhaul, or modification. Government-furnished property also includes contractor-acquired property if the contractor-acquired property is a deliverable under a cost contract when accepted by the Government for continued use under the contract. (FAR 45.101)
“Government property” means all property owned or leased by the Government. Government property includes both Government-furnished and Contractor-acquired property. Government property includes material, equipment, special tooling, special test equipment, and real property. Government property does not include intellectual property and software. (FAR 45.101)
“Loss of Government Property” means unintended, unforeseen or accidental loss, damage or destruction to Government property that reduces the Government’s expected economic benefits of the property. Loss of Government property does not include purposeful destructive testing, obsolescence, normal wear and tear or manufacturing defects. Loss of Government property includes, but is not limited to—

  • Items that cannot be found after a reasonable search:
  • Theft:
  • Damage resulting in unexpected harm to property requiring repair to restore the item to usable condition; or
  • Destruction resulting from incidents that render the item useless for its intended purpose or beyond economical repair. (FAR 45.101)
    “Property,” as used in FAR 52.232-16 and FAR 52.232-32, includes all of the below-described items acquired or produced by the Contractor that are or should be allocable or properly chargeable to this contract under sound and generally accepted accounting principles and practices.
  • Parts, materials, inventories, and work in process;
  • Special tooling and special test equipment to which the Government is to acquire title;
  • Nondurable (i.e., noncapital) tools, jigs, dies, fixtures, molds, patterns, taps, gauges, test equipment, and other similar manufacturing aids, title to which would not be obtained as special tooling under subparagraph (ii) above; and
  • Drawings and technical data, to the extent the Contractor or subcontractors are required to deliver them to the Government by other clauses of this contract. (FAR 52.232-16(d) and FAR 52.232-16(f))
General Information

The purpose of this article is to provide information regarding the various Federal Acquisition Regulation (FAR) policies and clauses that address risk of loss and liability regarding three categories of property owned by the Government or to which the Government has title or the right to take title. The categories are: (1) Government property as defined by FAR part 45 (2) Property to which the Government has acquired a lien or title solely because of partial, advance, progress, or performance-based payments, and (3) Property of the Government, which is property that the Government has accepted and assumed ownership under contract terms and conditions (reference FAR part 46). When an instance of loss or damage occurs the first concern is generally liability and which organization, i.e., the Government or the Contractor, is responsible. Determining liability depends on the circumstances surrounding the event and the applicable contract clause. The most commonly known clause associated with risk of loss or damage of property and liability is the Government Property clause at FAR 52.245-1. The other FAR clauses that address risk of loss or damage and liability are:

  • 52.232-16 Progress Payments,
  • 52.232-32 Performance-Based Payments,
  • 52.246-16 Responsibility for Supplies,
  • 52.246-23 Limitation of Liability,
  • 52.246-24 Limitation of Liability -- High-Value Items,
  • 52.246-25 Limitation of Liability – Services,
  • 52.247-29 F.o.b. – Origin, and
  • 52.247-34 F.o.b. – Destination.

In addition to the FAR clauses, there is also a clause in the Defense Federal Acquisition Regulation Supplement (DFARS) that includes risk of loss and liability; DFARS 252.228-7001 -- Ground and Flight Risk, which applies to covered aircraft.

Now that the clauses that address risk of loss and liability have been identified it is time to identify when they are applied. FAR 52.245-1 applies to "Government property" as defined by the clause and FAR part 45. The Government generally assumes the risk of loss under the Government property clause. The Government Property clause requires the contractor to have a process to enable the prompt recognition, investigation, disclosure and reporting of loss of Government property, including losses that occur at subcontractor or alternate site locations. Reports of loss under FAR 52.245-1 are submitted to the property administrator using the Government Furnished Property (GFP) Module in the Procurement Integrated Enterprise Environment (PIEE). Neither FAR part 45 nor the risk of loss provision of FAR 52.245-1 apply to property to which the Government has acquired a lien or title solely because of partial, advance, progress, or performance-based payments. The risk of loss provisions located in paragraphs (e) and (g) of FAR 52.232-16 and FAR 52.232-32 respectively should be applied to loss of property that the Government has title to under those clauses, e.g., progress payment inventory.

FAR 52.246-16, 52.246-23, 52.246-24, 52.246-25, 52.247-29, and 52.247-34 apply to "property of the Government" that has been accepted under contract terms and conditions. Confusion regarding distinguishing "property of the Government" from "Government property" covered by FAR part 45 and the Government property clause is what led to this article. Once acceptance of property by the Government has occurred, the property is no longer covered by the Government Property clause that includes the risk of loss provision. 

Consider this scenario. The Government has provided a High Mobility Multipurpose Wheeled Vehicle (HMMWV) as GFP to a contractor for repair. The contract includes the Government property clause and the F. O. B. origin clause. During repair, a forklift (also GFP) was accidentally backed into the HMMWV causing damage to both vehicles. The contractor is required to report the damages to the Government property to the property administrator in accordance with the Government property clause and DFARS 252.245-7005, Managing and Reporting Government Property (Jan. 2024). Generally, the contractor would be relieved of liability under the Government Property clause. The contractor would not be relieved of responsibility because the items have not been lost or destroyed. They are still in the possession of the contractor. Typically, unless otherwise provided for in the contract, if the items were lost or destroyed, the contractor would be relieved of responsibility and liability under cost-reimbursement, time-and-material, labor-hour, and fixed-price contracts awarded on the basis (reference FAR 45.104(a)). For DoD, that includes negotiated fixed-price contracts awarded on a basis other than submission of certified cost or pricing data (reference DFARS 245.104). FAR 52.245-1(h)(1) identifies when a contractor can be held liable for loss of Government property.

Under a second scenario, the same HMMWV has been repaired and the Government has accepted it at the contractor’s plant. Upon acceptance of the HMMWV, it is no longer GFP accountable to the contract. It is now considered property of the Government and is no longer covered by the Government property clause. Prior to the contractor placing the HMMWV with a carrier for conveyance, the forklift was accidentally backed into the HMMWV causing damage to both vehicles. The damage to the HMMWV, because it has been accepted and is no longer GFP, would be covered by the F. O. B. origin clause, which states that the contractor is responsible for any loss of and/or damage to the goods occurring before delivery to the carrier. The forklift would still be covered by the Government Property clause. The two scenarios are just a brief illustration of how risk of loss of and/or damage to property and liability are dependent upon the circumstances and the applicable clause.

Courses
Communities