46.803 Policy
Source: FAR 46.803 on acquisition.gov
FAR 46.803 generally relieves contractors of liability for loss or damage to Government property after acceptance, with specific exceptions for high-value items, misconduct, and insurance coverage.
Overview
FAR 46.803 outlines the Government’s policy regarding contractor liability for loss or damage to Government property, particularly after acceptance of supplies or services. Generally, the Government acts as a self-insurer, relieving contractors of liability for loss or damage resulting from defects or deficiencies discovered after acceptance. For high-value items, contractors are also relieved of liability, but the Government retains rights to require correction or seek equitable relief if defects are found. However, this relief does not apply if contractor liability can be preserved without increasing contract costs, or if liability is specifically provided for in the contract, results from willful misconduct or bad faith, or is covered by contractor insurance. The policy is subject to the specific limitation of liability clauses in each contract.
Key Rules
- General Relief from Liability
- Contractors are generally relieved of liability for loss or damage to Government property after acceptance, except for the contract end item (unless it is a high-value item).
- High-Value Items
- Contractors are relieved of liability for loss or damage to high-value items, but the Government can still require correction or seek equitable relief for defects.
- Exceptions and Limitations
- Relief does not apply if liability can be preserved without cost, is expressly provided in the contract, results from willful misconduct, or is covered by insurance.
Responsibilities
- Contracting Officers: Must ensure appropriate limitation of liability clauses are included and determine when relief applies.
- Contractors: Must understand when they are relieved of liability and when exceptions apply, especially regarding high-value items and insurance coverage.
- Agencies: Oversee compliance and ensure contract terms align with FAR policy.
Practical Implications
- This policy clarifies when contractors are and are not liable for loss or damage to Government property, reducing risk for contractors in most cases but retaining Government rights in cases of misconduct or insurance coverage. Contractors must carefully review contract clauses and insurance provisions to ensure compliance and avoid unexpected liability.
(a) General. The Government will generally act as a self-insurer by relieving contractors, as specified in this subpart, of liability for loss of or damage to property of the Government that (1) occurs after acceptance of supplies delivered or services performed under a contract and (2) results from defects or deficiencies in the supplies or services. However, the Government will not relieve the contractor of liability for loss of or damage to the contract end item itself, except for high-value items.
(b) High-value items. In contracts requiring delivery of high-value items, the Government will relieve contractors of contractual liability for loss of or damage to those items. However, this relief shall not limit the Government’s rights arising under the contract to-
(1) Have any defective item or its components corrected, repaired, or replaced when the defect or deficiency is discovered before the loss of or damage to a high-value item occurs; or
(2) Obtain equitable relief when the defect or deficiency is discovered after such loss or damage occurs.
(c) Exception. The Government will not provide contractual relief under paragraphs (a) and (b) of this section when contractor liability can be preserved without increasing the contract price.
(d) Limitations. Subject to the specific terms of the limitation of liability clause included in the contract, the relief provided under paragraphs (a) and (b) of this section does not apply-
(1) To the extent that contractor liability is expressly provided under a contract clause authorized by this regulation;
(2) When a defect or deficiency in, or Government’s acceptance of, the supplies or services results from willful misconduct or lack of good faith on the part of the contractor’s managerial personnel; or
(3) To the extent that any contractor insurance, or self-insurance reserve, covers liability for loss or damage suffered by the Government through purchase or use of the supplies delivered or services performed under the contract.