Subpart 46.8 - Contractor Liability for Loss of

or Damage to Property of the Government

Parent topic: Part 46 - Quality Assurance

46.800 Scope of subpart.

This subpart prescribes policies and procedures for limiting contractor liability for loss of or damage

to property of the Government that-

(a) Occurs after acceptance and

(b) Results from defects or deficiencies in the supplies delivered or services performed.

46.801 Applicability.

(a) This subpart does not apply to commercial products and commercial services. This subpart

applies to contracts other than those for—

(1)Information technology, including telecommunications;

(2)Construction;

(3)Architect-engineer services; and

(4)Maintenance and rehabilitation of real property.

(b) See subpart 46.7, Warranties, for policies and procedures concerning contractor liability caused

by nonconforming technical data.

46.802 Definition.

High-value item, as used in this subpart, means a contract end item that-

(1) Has a high unit cost (normally exceeding $100,000 per unit), such as an aircraft, an aircraft

engine, a communication system, a computer system, a missile, or a ship, and

(2) Is designated by the contracting officer as a high-value item.

46.803 Policy.

(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.

46.804 [Reserved]

46.805 Contract clauses.

(a) Contracts that exceed the simplified acquisition threshold. The contracting officer shall insert the

appropriate clause or combination of clauses specified in paragraphs (a)(1) through (a)(5) of this

section in solicitations and contracts when the contract amount is expected to be in excess of the

simplified acquisition threshold and the contract is subject to the requirements of this subpart as

indicated in 46.801:

(1) In contracts requiring delivery of end items that are not high-value items, insert the clause at

52.246-23, Limitation of Liability.

(2) In contracts requiring delivery of high-value items, insert the clause at 52.246-24, Limitation of

Liability-High Value Items.

(3) In contracts requiring delivery of both high-value items and other end items, insert both clauses

prescribed in (a)(1) and (a)(2) of this section, AlternateI of the clause at 52.246-24, and identify

clearly in the contract schedule the line items designated as high-value items.

(4) In contracts requiring the performance of services, insert the clause at 52.246-25, Limitation of
Liability-Services.

(5) In contracts requiring both the performance of services and the delivery of end items, insert the

clause prescribed in paragraph (a)(4) of this section and the appropriate clause or clauses

prescribed in paragraph (a)(1), (2), or (3) of this section, and identify clearly in the contract schedule

any high-value line items.

(b) Acquisitions at or below the simplified acquisition threshold. The clauses prescribed by

paragraph (a) of this section are not required for contracts at or below the simplified acquisition

threshold. However, in response to a contractor’s specific request, the contracting officer may insert

the clauses prescribed in paragraph (a)(1) or (a)(4) of this section in a contract at or below the

simplified acquisition threshold and may obtain any price reduction that is appropriate.