28.306 Insurance under fixed-price contracts
Source: FAR 28.306 on acquisition.gov
Insurance requirements under fixed-price contracts are generally not mandated, but can be imposed in special circumstances, especially for work on government installations or involving government property.
Overview
FAR 28.306 addresses insurance requirements under fixed-price contracts, clarifying that while the government typically does not mandate specific insurance for such contracts, there are notable exceptions. Agencies may require insurance when the contractor primarily works for the government, government property is involved, work is performed on a government installation, or the government assumes certain risks. When work is performed on a government installation and the clause at 52.228-5 is required (per FAR 28.310), the minimum insurance coverage outlined in FAR 28.307 must be included in the contract. The contracting officer may also require additional or higher coverage. If the clause is included at the contracting officer's discretion (not required by 28.310), some insurance types or limits may be reduced or omitted as appropriate.
Key Rules
- General Rule for Fixed-Price Contracts
- Insurance is generally not a government concern unless special circumstances apply.
- Special Circumstances for Insurance Requirements
- Insurance may be required if the contractor mainly works for the government, government property is involved, work is on a government installation, or the government assumes unusual risks.
- Work on Government Installations
- If clause 52.228-5 is required, minimum insurance per 28.307 must be included; additional coverage may be required.
- If clause 52.228-5 is included at the CO's discretion, insurance types and limits may be adjusted.
Responsibilities
- Contracting Officers: Determine when insurance is required, include appropriate clauses, and set coverage limits.
- Contractors: Obtain and maintain required insurance as specified in the contract.
- Agencies: Oversee compliance and ensure contract terms reflect necessary insurance requirements.
Practical Implications
- This section ensures the government is protected in situations where risk exposure is higher under fixed-price contracts.
- Contractors must be vigilant about insurance requirements in solicitations and contracts, especially for work on government installations or involving government property.
- Failure to comply with specified insurance requirements can result in contract noncompliance or increased liability.
(a) General. Although the Government is not ordinarily concerned with the contractor’s insurance coverage if the contract is a fixed-price contract, in special circumstances agencies may specify insurance requirements under fixed-price contracts. Examples of such circumstances include the following:
(1) The contractor is, or has a separate operation, engaged principally in Government work.
(2) Government property is involved.
(3) The work is to be performed on a Government installation.
(4) The Government elects to assume risks for which the contractor ordinarily obtains commercial insurance.
(b) Work on a Government installation.
(1) When the clause at 52.228-5, Insurance-Work on a Government Installation, is required to be included in a fixed-price contract by 28.310, the coverage specified in 28.307 is the minimum insurance required and shall be included in the contract Schedule or elsewhere in the contract. The contracting officer may require additional coverage and higher limits.
(2) When the clause at 52.228-5, Insurance-Work on a Government Installation, is not required by 28.310 but is included because the contracting officer considers it to be in the Government’s interest to do so, any of the types of insurance specified in 28.307 may be omitted or the limits may be lowered, if appropriate.