32642 Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Rules and Regulations 

List of Subjects in 48 CFR Part 216 

Government procurement. 

Ynette R. Shelkin, 

Editor, Defense Acquisition Regulations 

System. 

■ Therefore, 48 CFR part 216 is 

amended as follows: 

PART 216—TYPES OF CONTRACTS 

■ 1. The authority citation for 48 CFR 

part 216 continues to read as follows: 

Authority: 41 U.S.C. 421 and 48 CFR 

chapter 1. 

■ 2. Section 216.603–2 is added to read 

as follows: 

216.603–2 Application. 

(c)(3) In accordance with 10 U.S.C. 

2326, establish definitization schedules 

for letter contracts following the 

requirements at 217.7404–3(a) instead of 

the requirements at FAR 16.603–2(c)(3). 

[FR Doc. 2010–13527 Filed 6–7–10; 8:45 am] 

BILLING CODE 5001–08–P 

DEPARTMENT OF DEFENSE 

Defense Acquisition Regulations 

System 

48 CFR Parts 228, 231, and 252 

RIN 0750–AF72 

Defense Federal Acquisition 

Regulation Supplement; Ground and 

Flight Risk Clause (DFARS Case 2007– 

D009) 

AGENCY: Defense Acquisition 

Regulations System, Department of 

Defense (DoD). 

ACTION: Final rule. 

SUMMARY: DoD is issuing a final rule 

amending the Defense Federal 

Acquisition Regulation Supplement 

(DFARS) to revise and combine contract 

clauses addressing assumption of risk of 

loss under contracts that furnish aircraft 

to the Government. The final rule 

establishes requirements that apply 

consistently to all contract types. 

DATES: Effective Date: June 8, 2010. 

FOR FURTHER INFORMATION CONTACT: 

Julian Thrash, 703–602–0310. 

SUPPLEMENTARY INFORMATION: 

A. Background 

The DFARS clauses at 252.228–7001, 

Ground and Flight Risk, and 252.228– 

7002, Aircraft Flight Risk, are presently 

used in contracts that involve the 

furnishing of aircraft to the Government. 

The clause at 252.228–7001 is used in 

negotiated fixed-price contracts, and the 

clause at 252.228–7002 is used in costreimbursement contracts. A proposed 

rule was published in the Federal 

Register at 72 FR 69177 on December 7, 

2007. This final rule revises and 

combines the two clauses into a single 

ground and flight risk clause, applying 

requirements consistently to all contract 

types. In addition, a new subsection is 

added at DFARS 231.205–19 to explain 

the treatment of insurance costs under 

the new clause and all similar clauses. 

The final rule changes include— 

Æ Applying the clause to all contracts 

for the purchase, development, 

production, maintenance, repair, flight, 

or overhaul of aircraft, with exceptions 

for contracts for activities incidental to 

the normal operations of aircraft, FAR 

Part 12 contracts, and contracts where a 

non-DoD customer has declined to 

accept the risk of loss for its aircraft 

asset; 

Æ Adding a requirement for inclusion 

of the clause in subcontracts at all tiers; 

Æ Adding a statement that the 

Government property clause is not 

applicable if the Government withdraws 

its self-insurance coverage; 

Æ Adding a statement that 

commercial insurance costs or selfinsurance charges that duplicate the 

Government’s self- insurance are 

unallowable; and 

Æ Establishing a share of loss for the 

contractor that is the lesser of $100,000 

or twenty percent of the estimated 

contract cost or price. This is consistent 

with the contractor’s share of loss 

presently specified in the clause at 

252.228–7002. The clause at 252.228– 

7001 presently prescribes a share of loss 

of $25,000 for the contractor. 

B. Public Comments 

Three respondents submitted 

comments on the proposed rule. 

Specific comments received are 

addressed in paragraphs 1 through 8 of 

this section. 

1. Applicability 

Comment: The respondent 

recommended adding an additional 

exception to the requirement for 

inclusion of the Ground and Flight Risk 

clause by inserting a new paragraph 

(b)(1)(iv) in DFARS 228.370 to read: 

‘‘For Commercial Derivative Aircraft that 

continue to be maintained to FAA 

Airworthiness Standards and the work 

will be conducted at a licensed FAA 

Repair Station.’’ 

Response: Commercial Derivative 

Aircraft are militarized versions of 

commercial aircraft platforms. Their 

repair at FAA repair stations most often 

denotes a commercial services contract. 

Normal commercial terms and 

conditions would apply and, thus, 

payment for insurance and acceptance 

of FAA standards is appropriate. In 

addition to adding the recommended 

new exception, DoD is changing DFARS 

228.370(b)(1)(ii) to read: ‘‘Awarded 

under FAR Part 12 for the acquisition, 

development, production, modification, 

maintenance, repair, flight, or overhaul 

of aircraft, or otherwise involving the 

furnishing of aircraft.’’ 

2. Compliance 

Comment: Two comments addressed 

potentially confusing language on 

compliance and the cost of compliance. 

One respondent indicated that 

paragraph (b)(2)(iii) of DFARS 228.370 

was confusing as to intent and purpose. 

The respondent was concerned that, 

when a contracting officer expressly 

defines ‘‘contractor premises,’’ the 

contractor might be able to avoid 

compliance with DCMAI 8210.1 (the 

Joint Instruction) by moving 

performance to a different location. 

Another respondent commented that 

DFARS 228.370 appears to require the 

Ground and Flight Risk clause for all 

aircraft, including unmanned aerial 

vehicles, without taking into account 

significant variations in size, cost, or 

vehicle ceiling. The respondent 

expressed concern that use of the clause 

constitutes costly overkill in cases of 

small/micro unmanned aerial vehicles 

(UAVs). 

Response: DoD believes the language 

is clear and unambiguous as is, and it 

presents no meaningful basis for a 

contractor to avoid compliance with the 

DCMAI 8210.1. The definition of 

‘‘contractor premises’’ is applicable 

solely to the determination of the 

Government’s acceptance of the risk of 

loss. DFARS 252.228–7001(b) requires 

the contractor to assure compliance 

with DCMAI 8210.1 regardless of the 

location of the aircraft. 

With regard to the cost of compliance, 

DFARS 228.370(b)(2)(i) allows tailoring 

of the definition of ‘‘aircraft’’ to 

appropriately cover atypical and 

‘‘nonconventional’’ aircraft. If 

contracting officers wish to omit small/ 

micro UAVs, the clause allows that 

flexibility. The contracting officer is 

required to make this determination on 

a case-by-case basis in coordination 

with the program office. While the 

respondent’s concerns could be 

legitimate in some cases, these concerns 

should be addressed during the 

preaward phase on an individual 

contract basis. There is sufficient 

flexibility in the approval process for 

the clause to recognize unique 

requirements or the absence of standard 


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ground and flight operation 

requirements for small/micro UAVs. 

3. Definitions 

Comment: Two respondents 

expressed concerns in this area. One 

requested inclusion of a new definition 

for ‘‘temporarily removed,’’ as follows: 

‘‘Those items removed for the duration 

of the contracted work with the intent 

to add the item back to the same 

aircraft.’’ Another respondent 

recommended revising the definition of 

‘‘in the open’’ so that it includes ‘‘located 

on the Contractor’s premises or other 

places described in the Schedule.’’ 

Response: DoD does not believe that 

it is necessary to define ‘‘temporarily 

removed’’ because, as long as a removed 

item retains its relationship with a 

particular tail number or aircraft, the 

clause covers the method for 

determining risk of loss. If an item 

intended for reinstallation is found to be 

unsuitable for re-introduction onto the 

aircraft, it loses its relationship with the 

aircraft; it will be handled under the 

property clause from that point forward. 

DoD declines to revise the definition of 

‘‘in the open,’’ which is substantially 

unchanged from prior versions. The 

respondent’s recommended language 

would significantly expand the 

Government’s acceptance of risk for new 

production aircraft. It would shift the 

triggering event for Government liability 

to the production line and potentially 

expose the Government to claims for the 

cost of rework and production mishaps. 

4. Conditions Under Which the 

Government Retains Risk 

Comment: Three comments were 

submitted on this topic. One respondent 

recommended revising DFARS 252– 

228.7001(e)(5) to read ‘‘Consists of wear 

and tear; deterioration (including rust 

and corrosion) * * * (This exclusion 

does not apply to Government-furnished 

property if damage consists of 

reasonable wear and tear or 

deterioration, damage caused by or 

relating to wear and tear or 

deterioration, or results from inherent 

vice (e.g., a known condition or design 

defect in the property).’’ As an example 

of ‘‘damage caused by or relating to wear 

and tear or deterioration,’’ the 

respondent refers to a situation where a 

defect in the aircraft allows rain water 

to enter the aircraft and damage its 

electronic systems. 

In a similar vein, another comment 

was to change DFARS 252.228– 

7001(f)(1)(i) to read as follows: ‘‘The first 

$100,000 of loss or damage to aircraft in 

the open, during operation in flight 

resulting from each separate event, 

except for reasonable wear and tear or 

deterioration, damage caused by or 

relating to wear and tear or 

deterioration, or to the extent the loss or 

damage is caused by negligence of 

Government Personnel.’’ A third 

comment suggested that the language at 

DFARS 252.228–7001(e)(6), which 

provides that the Government does not 

accept the risk for losses that occur as 

a result of work on the aircraft unless 

such losses would have been covered by 

commercial insurance in the absence of 

the Ground and Flight Risk clause, is 

confusing and a source of frequent 

disputes. 

Response: While the contractor 

should not be liable for reasonable wear 

and tear, handling of the aircraft to 

prevent damage related to wear and tear 

is something within the contractor’s 

control. If rain water is allowed to 

damage electronics, the contractor has 

failed to take necessary precautions to 

store the aircraft under reasonable 

conditions. The damage may have been 

avoided via closer intake inspection, 

storing the aircraft indoors, or covering 

certain areas to avoid water damage. 

The recommended change would 

diminish the contractor’s incentive to 

take timely and appropriate action to 

protect Government assets, and 

therefore neither paragraph (e) nor (f) of 

the clause is changed. DoD also 

disagrees that the language at paragraph 

(e)(6) of the clause is confusing; it is 

unchanged from previous versions of 

the Ground and Flight Risk clause, and 

DoD is unaware of any disputes arising 

from the language. 

5. Avoidance of Liability 

Comment: Three comments were 

received on this subject. One 

respondent expressed concern that the 

frequent necessity for Government 

Flight Representatives to approve flight 

crew members via telephone call or email message may violate the DFARS 

252.228–7001(e)(2) requirement for 

approval ‘‘in writing.’’ Also, DFARS 

252.228–7001(e)(4) provides that the 

Government will not accept the liability 

for losses covered by insurance. The 

respondent expressed concern that 

contractors could avoid application of 

the clause’s requirements by purchasing 

insurance. The respondent 

recommended inclusion of the 

following language currently found in 

DFARS 252.228.7002: ‘‘The Contractor 

shall not be reimbursed for liability to 

third persons for loss or damage to 

property, or for death or bodily injury, 

caused by aircraft during flight unless 

the flight crew members previously 

have been approved in writing by the 

Government Flight Representative, who 

has been authorized in accordance with 

the combined regulation entitled 

‘Contractor’s Flight and Ground 

Operations’.’’ 

Response: DoD believes that 

telephonic and e-mail approvals are 

adequate as long as the Government 

Flight Representative follows up with a 

formal written approval as soon as 

practicable. The language at 252.228– 

7001(e)(4) is included to prevent a 

duplicate recovery for a single loss. In 

no case does the purchase of insurance 

relieve the contractor of its obligation to 

comply with the clause requirements. 

While DoD agrees that contractors 

should not be reimbursed for third-party 

liability if the Government Flight 

Representative had not approved the 

flight crew members, it does not concur 

in the respondent’s assumption that 

Government acceptance of third-party 

liability arises from the cited language 

in DFARS 252.228–7002, Aircraft Flight 

Risk. The current language merely 

establishes a condition precedent to the 

Government’s express acceptance of 

third-party liability under other 

provisions of the contract (e.g., FAR 

52.228–7, Insurance—Liability to Third 

Persons). DoD has added a paragraph to 

the Ground and Flight Risk clause as 

follows: ‘‘To the extent that the 

Government has accepted such liability 

under other provisions of this contract, 

the Contractor shall not be reimbursed 

for liability to third persons for loss or 

damage to property, or for death or 

bodily injury caused by aircraft during 

flight, unless the flight crew members 

previously have been approved for this 

flight in writing by the Government 

Flight Representative, who has been 

authorized in accordance with the 

combined regulation entitled 

‘Contractor’s Flight and Ground 

Operations’.’’ 

6. Contractor’s Share of Loss 

Comment: One respondent 

recommended revising DFARS 252.228– 

7001(f) to reduce the maximum share of 

loss to $50,000 for all contracts. The 

respondent suggested that the increase 

may negatively impact small businesses 

that do not have the resources to absorb 

an increased share of loss. The 

respondent also recommended separate 

language addressing the contractor’s 

share of loss on firm-fixed price 

contracts and flexibly-priced contracts. 

Another respondent cited concerns that 

the use of the phrase ‘‘twenty percent of 

the estimated price or cost of this 

contract’’ creates confusion because 

prices on firm fixed-price contracts are 

not usually ‘‘estimated.’’ The respondent 

recommended that the language in the 

current DFARS clause defining the 

contractor’s share of loss on cost-type 


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contracts as ‘‘Twenty percent of the 

estimated cost of the contract’’ remain 

unchanged. 

Response: While DoD’s review 

indicates a fairly even split between 

fixed-price and flexibly-priced aircraft 

contracts, there is a decided weighting 

toward flexibly-priced contracts for 

aircraft repair, overhaul, and 

maintenance. Such contracts are 

typically where the bulk of damage 

arises that results in liability 

assessments. Therefore, the majority of 

contracts where liability arises already 

contain a $100,000 maximum share of 

loss, consistent with the previous 

DFARS 252.228–7002 language. 

Lowering the share of loss on all 

contracts to $50,000 would produce an 

inequitable and counter-productive 

result. Further, DoD disagrees that 

raising the liability to $100,000 will 

disproportionately disadvantage small 

businesses. Most of the small businesses 

participating in these contracts do so as 

repair, overhaul, and maintenance 

prime contractors or as commercial 

subcontractors. 

DoD does not agree that separate 

language is necessary to address firmand flexibly-priced contracts. However, 

DoD is revising the proposed language 

of DFARS 252.228–7001(f) to clarify the 

language cited by the respondent and 

provide guidance for determination of 

the contractor’s share of loss on task or 

delivery order contracts. The 

recommended revision defines the 

contractor’s share of loss as the lesser of 

‘‘(i) the first $100,000 * * *, or (ii) 

twenty percent of the price or estimated 

cost of the contract’’ and adds a 

statement that ‘‘for task order and 

delivery order contracts, the DoD’s share 

of loss shall be the lesser of $100,000 or 

twenty percent of the combined total 

price or estimated cost of those orders 

to which the clause applies.’’ 

7. Compliance With DCMA Regulation 

Comment: The respondent expressed 

concern that DFARS 252.228–7001(b) 

imposes an absolute requirement for 

contractor compliance with DCMAI 

8210.1, Combined Regulation/ 

Instruction. Under certain 

circumstances, the respondent claims 

that imposition of this requirement is 

inappropriate. The respondent 

recommends modifying the initial 

sentence of the paragraph to provide 

some flexibility, as follows: ‘‘Unless 

specified otherwise in the contract 

Schedule, the Contractor shall be bound 

***’’ 

Response: The requirement to comply 

with the Joint Instruction is not a 

substantive change; paragraph (k) of the 

existing clause imposes the identical 

requirement. The Joint Instruction itself 

provides adequate flexibility to address 

the commenter’s concern. With few 

exceptions, the Instruction’s standard 

for contractor procedures is simply that 

they be ‘‘safe and effective.’’ 

8. Flowdown 

Comment: One respondent 

recommended revising DFARS 252.228– 

7001(g) to add: ‘‘The Contractor is 

required to ensure that each of its 

subcontractors also complies with the 

combined regulation/instruction 

entitled ‘‘Contractor’s Flight and Ground 

Operations.’’ Another respondent, 

noting that DFARS 228.252–7001(l) 

requires contractors to assure that 

subcontractors at all tiers comply with 

the clause, recommended that the clause 

provide some flexibility in the 

imposition of flowdown requirements. 

Response: The addition recommended 

by the first respondent is unnecessary 

because the effect of the suggested 

change is already provided for at 

DFARS 252.228–7001(b), Combined 

Regulation/Instruction, which requires 

flowdown to subcontracts at all tiers. 

As to providing flexibility in the 

flowdown requirement, DoD considers 

the Joint Instruction itself to provide 

adequate flexibility to address the 

commenter’s concern. With few 

exceptions, the Instruction’s standard 

for contractor procedures is simply that 

they be ‘‘safe and effective.’’ Any 

subcontractor in possession or control of 

a Government aircraft should have ‘‘safe 

and effective’’ procedures in place. 

This rule was subject to Office of 

Management and Budget review under 

Executive Order 12866, dated 

September 30, 1993. This is not a major 

rule under 5 U.S.C. 804. 

C. Regulatory Flexibility Act 

DoD has prepared a final regulatory 

flexibility analysis consistent with 5 

U.S.C. 604. A copy of the analysis may 

be obtained from the individual 

specified in the contact-information 

section of this notice. The analysis is 

summarized as follows: 

The objective of the rule is to clearly 

and consistently address the 

responsibilities of the Government and 

the contractor with regard to incidents 

that may occur under contracts 

involving the furnishing of aircraft to 

the Government. The rule applies to 

DoD contractors and their 

subcontractors under contracts for the 

acquisition, development, production, 

or servicing of aircraft. Excluded are 

contracts for activities strictly incidental 

to the normal operations of an aircraft; 

contracts awarded under FAR Part 12, 

Acquisition of Commercial Items; and 

contracts where a non-DoD customer 

does not assume risk for loss of or 

damage to the aircraft. The impact on 

small entities is expected to be minimal 

based on the fact that most contractors 

engaged in this type of business have 

historically been large businesses. 

D. Paperwork Reduction Act 

The Paperwork Reduction Act does 

not apply because the rule does not 

impose any information collection 

requirements that require the approval 

of the Office of Management and Budget 

under 44 U.S.C. 3501, et seq. 

List of Subjects in 48 CFR Parts 228, 

231, and 252 

Government procurement. 

Ynette R. Shelkin, 

Editor, Defense Acquisition Regulations 

System. 

■ Therefore, 48 CFR parts 228, 231, and 

252 are amended as follows: 

■ 1. The authority citation for 48 CFR 

parts 228, 231, and 252 continues to 

read as follows: 

Authority: 41 U.S.C. 421 and 48 CFR 

chapter 1. 

PART 228—BONDS AND INSURANCE 

■ 2. Section 228.370 is amended as 

follows: 

■ a. By revising paragraph (b); 

■ b. By removing paragraph (c); and 

■ c. By redesignating paragraphs (d) 

through (f) as paragraphs (c) through (e) 

respectively. 

The revised text reads as follows: 

228.370 Additional clauses. 

* * * * * 

(b)(1) Use the clause at 252.228–7001, 

Ground and Flight Risk, in all 

solicitations and contracts for the 

acquisition, development, production, 

modification, maintenance, repair, 

flight, or overhaul of aircraft, except 

those solicitations and contracts— 

(i) That are strictly for activities 

incidental to the normal operations of 

the aircraft (e.g., refueling operations, 

minor non-structural actions not 

requiring towing such as replacing 

aircraft tires due to wear and tear); 

(ii) That are awarded under FAR Part 

12 procedures and are for the 

development, production, modification, 

maintenance, repair, flight, or overhaul 

of aircraft; or otherwise involving the 

furnishing of aircraft; 

(iii) For which a non-DoD customer 

(including a foreign military sales 

customer) has not agreed to assume the 

risk for loss or destruction of, or 

damages to, the aircraft; or 

(iv) For commercial derivative aircraft 

that are to be maintained to Federal 


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Aviation Administration (FAA) 

airworthiness when the work will be 

performed at a licensed FAA repair 

station. 

(2) The clause at 252.228–7001 may 

be modified only as follows: 

(i) Include a modified definition of 

‘‘aircraft’’ if the contract covers other 

than conventional types of winged 

aircraft, i.e., helicopters, vertical take-off 

or landing aircraft, lighter-than-air 

airships, unmanned aerial vehicles, or 

other nonconventional aircraft. The 

modified definition should describe a 

stage of manufacture comparable to the 

standard definition. 

(ii) Modify ‘‘in the open’’ to include 

‘‘hush houses,’’ test hangars and 

comparable structures, and other 

designated areas. 

(iii) Expressly define the ‘‘contractor’s 

premises’’ where the aircraft will be 

located during and for contract 

performance. These locations may 

include contract premises which are 

owned or leased by the contractor or 

subcontractor, or premises where the 

contractor or subcontractor is a 

permittee or licensee or has a right to 

use, including Government airfields. 

(iv) Revise paragraph (e)(3) of the 

clause to provide Government 

assumption of risk for transportation by 

conveyance on streets or highways 

when transportation is— 

(A) Limited to the vicinity of 

contractor premises; and 

(B) Incidental to work performed 

under the contract. 

(3) Follow the procedures at PGI 

228.370(b) when using the clause at 

252.228–7001. 

* * * * * 

PART 231—CONTRACT COST 

PRINCIPLES AND PROCEDURES 

■ 3. Section 231.205–19 is added to read 

as follows: 

231.205–19 Insurance and indemnification. 

(e) In addition to the cost limitations 

in FAR 31.205–19(e), self-insurance and 

purchased insurance costs are subject to 

the requirements of the clauses at 

252.217–7012, Liability and Insurance, 

and 252.228–7001, Ground and Flight 

Risk. 

PART 252—SOLICITATION 

PROVISIONS AND CONTRACT 

CLAUSES 

■ 4. Section 252.228–7001 is revised to 

read as follows: 

252.228–7001 Ground and flight risk. 

As prescribed in 228.370(b), use the 

following clause: 

GROUND AND FLIGHT RISK (JUN 

2010) 

(a) Definitions. As used in this clause— 

(1) Aircraft, unless otherwise provided in 

the contract 

Schedule, means— 

(i) Aircraft to be delivered to the 

Government under this contract (either 

before or after Government acceptance), 

including complete aircraft and aircraft in the 

process of being manufactured, 

disassembled, or reassembled; provided that 

an engine, portion of a wing, or a wing is 

attached to a fuselage of the aircraft; 

(ii) Aircraft, whether in a state of 

disassembly or reassembly, furnished by the 

Government to the Contractor under this 

contract, including all Government property 

installed, in the process of installation, or 

temporarily removed; provided that the 

aircraft and property are not covered by a 

separate bailment agreement; 

(iii) Aircraft furnished by the Contractor 

under this contract (either before or after 

Government acceptance); or 

(iv) Conventional winged aircraft, as well 

as helicopters, vertical take-off or landing 

aircraft, lighter-than-air airships, unmanned 

aerial vehicles, or other nonconventional 

aircraft specified in this contract. 

(2) Contractor’s managerial personnel 

means the Contractor’s directors, officers, 

and any of the Contractor’s managers, 

superintendents, or other equivalent 

representatives who have supervision or 

direction of— 

(i) All or substantially all of the 

Contractor’s business; 

(ii) All or substantially all of the 

Contractor’s operation at any one plant or 

separate location; or 

(iii) A separate and complete major 

industrial operation. 

(3) Contractor’s premises means those 

premises, including subcontractors’ 

premises, designated in the Schedule or in 

writing by the Contracting Officer, and any 

other place the aircraft is moved for 

safeguarding. 

(4) Flight means any flight demonstration, 

flight test, taxi test, or other flight made in 

the performance of this contract, or for the 

purpose of safeguarding the aircraft, or 

previously approved in writing by the 

Contracting Officer. 

(i) For land-based aircraft, ‘‘flight’’ begins 

with the taxi roll from a flight line on the 

Contractor’s premises and continues until the 

aircraft has completed the taxi roll in 

returning to a flight line on the Contractor’s 

premises. 

(ii) For seaplanes, ‘‘flight’’ begins with the 

launching from a ramp on the Contractor’s 

premises and continues until the aircraft has 

completed its landing run and is beached at 

a ramp on the Contractor’s premises. 

(iii) For helicopters, ‘‘flight’’ begins upon 

engagement of the rotors for the purpose of 

take-off from the Contractor’s premises and 

continues until the aircraft has returned to 

the ground on the Contractor’s premises and 

the rotors are disengaged. 

(iv) For vertical take-off or landing aircraft, 

‘‘flight’’ begins upon disengagement from any 

launching platform or device on the 

Contractor’s premises and continues until the 

aircraft has been engaged to any launching 

platform or device on the Contractor’s 

premises. 

(v) All aircraft off the Contractor’s premises 

shall be considered to be in flight when on 

the ground or water for reasonable periods of 

time following emergency landings, landings 

made in performance of this contract, or 

landings approved in writing by the 

Contracting Officer. 

(5) Flight crew member means the pilot, the 

co-pilot, and, unless otherwise provided in 

the Schedule, the flight engineer, navigator, 

and bombardier-navigator when assigned to 

their respective crew positions for the 

purpose of conducting any flight on behalf of 

the Contractor. It also includes any pilot or 

operator of an unmanned aerial vehicle. If 

required, a defense systems operator may 

also be assigned as a flight crew member. 

(6) In the open means located wholly 

outside of buildings on the Contractor’s 

premises or other places described in the 

Schedule as being ‘‘in the open.’’ 

Government-furnished aircraft shall be 

considered to be located ‘‘in the open’’ at all 

times while in the Contractor’s possession, 

care, custody, or control. 

(7) Operation means operations and tests of 

the aircraft and its installed equipment, 

accessories, and power plants, while the 

aircraft is in the open or in motion. The term 

does not apply to aircraft on any production 

line or in flight. 

(b) Combined regulation/instruction. The 

Contractor shall be bound by the operating 

procedures contained in the combined 

regulation/instruction entitled ‘‘Contractor’s 

Flight and Ground Operations’’ (Air Force 

Instruction 10–220, Army Regulation 95–20, 

NAVAIR Instruction 3710.1 (Series), Coast 

Guard Instruction M13020.3, and Defense 

Contract Management Agency Instruction 

8210.1) in effect on the date of contract 

award. 

(c) Government as self-insurer. Subject to 

the conditions in paragraph (d) of this clause, 

the Government self-insures and assumes the 

risk of damage to, or loss or destruction of 

aircraft ‘‘in the open,’’ during ‘‘operation,’’ and 

in ‘‘flight,’’ except as may be specifically 

provided in the Schedule as an exception to 

this clause. The Contractor shall not be liable 

to the Government for such damage, loss, or 

destruction beyond the Contractor’s share of 

loss amount under the Government’s selfinsurance. 

(d) Conditions for Government’s selfinsurance. The Government’s assumption of 

risk for aircraft in the open shall continue 

unless the Contracting Officer finds that the 

Contractor has failed to comply with 

paragraph (b) of this clause, or that the 

aircraft is in the open under unreasonable 

conditions, and the Contractor fails to take 

prompt corrective action. 

(1) The Contracting Officer, when finding 

that the Contractor has failed to comply with 

paragraph (b) of this clause or that the aircraft 

is in the open under unreasonable 

conditions, shall notify the Contractor in 

writing and shall require the Contractor to 

make corrections within a reasonable time. 

(2) Upon receipt of the notice, the 

Contractor shall promptly correct the cited 


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32646 Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Rules and Regulations 

conditions, regardless of whether there is 

agreement that the conditions are 

unreasonable. 

(i) If the Contracting Officer later 

determines that the cited conditions were not 

unreasonable, an equitable adjustment shall 

be made in the contract price for any 

additional costs incurred in correcting the 

conditions. 

(ii) Any dispute as to the unreasonableness 

of the conditions or the equitable adjustment 

shall be considered a dispute under the 

Disputes clause of this contract. 

(3) If the Contracting Officer finds that the 

Contractor failed to act promptly to correct 

the cited conditions or failed to correct the 

conditions within a reasonable time, the 

Contracting Officer may terminate the 

Government’s assumption of risk for any 

aircraft in the open under the cited 

conditions. The termination will be effective 

at 12:01 a.m. on the fifteenth day following 

the day the written notice is received by the 

Contractor. 

(i) If the Contracting Officer later 

determines that the Contractor acted 

promptly to correct the cited conditions or 

that the time taken by the Contractor was not 

unreasonable, an equitable adjustment shall 

be made in the contract price for any 

additional costs incurred as a result of 

termination of the Government’s assumption 

of risk. 

(ii) Any dispute as to the timeliness of the 

Contractor’s action or the equitable 

adjustment shall be considered a dispute 

under the Disputes clause of this contract. 

(4) If the Government terminates its 

assumption of risk pursuant to the terms of 

this clause— 

(i) The Contractor shall thereafter assume 

the entire risk for damage, loss, or 

destruction of the affected aircraft; 

(ii) Any costs incurred by the Contractor 

(including the costs of the Contractor’s selfinsurance, insurance premiums paid to 

insure the Contractor’s assumption of risk, 

deductibles associated with such purchased 

insurance, etc.) to mitigate its assumption of 

risk are unallowable costs; and 

(iii) The liability provisions of the 

Government Property clause of this contract 

are not applicable to the affected aircraft. 

(5) The Contractor shall promptly notify 

the Contracting Officer when unreasonable 

conditions have been corrected. 

(i) If, upon receipt of the Contractor’s 

notice of the correction of the unreasonable 

conditions, the Government elects to again 

assume the risk of loss and relieve the 

Contractor of its liability for damage, loss, or 

destruction of the aircraft, the Contracting 

Officer will notify the Contractor of the 

Contracting Officer’s decision to resume the 

Government’s risk of loss. The Contractor 

shall be entitled to an equitable adjustment 

in the contract price for any insurance costs 

extending from the end of the third working 

day after the Government’s receipt of the 

Contractor’s notice of correction until the 

Contractor is notified that the Government 

will resume the risk of loss. 

(ii) If the Government does not again 

assume the risk of loss and the unreasonable 

conditions have been corrected, the 

Contractor shall be entitled to an equitable 

adjustment for insurance costs, if any, 

extending after the third working day after 

the Government’s receipt of the Contractor’s 

notice of correction. 

(6) The Government’s termination of its 

assumption of risk of loss does not relieve the 

Contractor of its obligation to comply with all 

other provisions of this clause, including the 

combined regulation/instruction entitled 

‘‘Contractor’s Flight and Ground Operations.’’ 

(e) Exclusions from the Government’s 

assumption of risk. The Government’s 

assumption of risk shall not extend to 

damage, loss, or destruction of aircraft 

which— 

(1) Results from failure of the Contractor, 

due to willful misconduct or lack of good 

faith of any of the Contractor’s managerial 

personnel, to maintain and administer a 

program for the protection and preservation 

of aircraft in the open and during operation 

in accordance with sound industrial practice, 

including oversight of a subcontractor’s 

program; 

(2) Is sustained during flight if either the 

flight or the flight crew members have not 

been approved in advance of any flight in 

writing by the Government Flight 

Representative, who has been authorized in 

accordance with the combined regulation/ 

instruction entitled ‘‘Contractor’s Flight and 

Ground Operations’’; 

(3) Occurs in the course of transportation 

by rail, or by conveyance on public streets, 

highways, or waterways, except for 

Government-furnished property; 

(4) Is covered by insurance; 

(5) Consists of wear and tear; deterioration 

(including rust and corrosion); freezing; or 

mechanical, structural, or electrical 

breakdown or failure, unless these are the 

result of other loss, damage or destruction 

covered by this clause. (This exclusion does 

not apply to Government-furnished property 

if damage consists of reasonable wear and 

tear or deterioration, or results from inherent 

vice, e.g., a known condition or design defect 

in the property); or 

(6) Is sustained while the aircraft is being 

worked on and is a direct result of the work 

unless such damage, loss, or destruction 

would be covered by insurance which would 

have been maintained by the Contractor, but 

for the Government’s assumption of risk. 

(f) Contractor’s share of loss and 

Contractor’s deductible under the 

Government’s self-insurance. 

(1) The Contractor assumes the risk of loss 

and shall be responsible for the Contractor’s 

share of loss under the Government’s selfinsurance. That share is the lesser of— 

(i) The first $100,000 of loss or damage to 

aircraft in the open, during operation, or in 

flight resulting from each separate event, 

except for reasonable wear and tear and to 

the extent the loss or damage is caused by 

negligence of Government personnel; or 

(ii) Twenty percent of the price or 

estimated cost of this contract. 

(2) If the Government elects to require that 

the aircraft be replaced or restored by the 

Contractor to its condition immediately prior 

to the damage, the equitable adjustment in 

the price authorized by paragraph (j) of this 

clause shall not include the dollar amount of 

the risk assumed by the Contractor. 

(3) In the event the Government does not 

elect repair or replacement, the Contractor 

agrees to credit the contract price or pay the 

Government, as directed by the Contracting 

Officer, the lesser of— 

(i) $100,000; 

(ii) Twenty percent of the price or 

estimated cost of this contract; or 

(iii) The amount of the loss. 

(4) For task order and delivery order 

contracts, the Contractor’s share of the loss 

shall be the lesser of $100,000 or twenty 

percent of the combined total price or total 

estimated cost of those orders issued to date 

to which the clause applies. 

(5) The costs incurred by the Contractor for 

its share of the loss and for insuring against 

that loss are unallowable costs, including but 

not limited to— 

(i) The Contractor’s share of loss under the 

Government’s self-insurance; 

(ii) The costs of the Contractor’s selfinsurance; 

(iii) The deductible for any Contractorpurchased insurance; 

(iv) Insurance premiums paid for 

Contractor-purchased insurance; and 

(v) Costs associated with determining, 

litigating, and defending against the 

Contractor’s liability. 

(g) Subcontractor possession or control. 

The Contractor shall not be relieved from 

liability for damage, loss, or destruction of 

aircraft while such aircraft is in the 

possession or control of its subcontractors, 

except to the extent that the subcontract, 

with the written approval of the Contracting 

Officer, provides for relief from each liability. 

In the absence of approval, the subcontract 

shall contain provisions requiring the return 

of aircraft in as good condition as when 

received, except for reasonable wear and tear 

or for the utilization of the property in 

accordance with the provisions of this 

contract. 

(h) Contractor’s exclusion of insurance 

costs. The Contractor warrants that the 

contract price does not and will not include, 

except as may be authorized in this clause, 

any charge or contingency reserve for 

insurance covering damage, loss, or 

destruction of aircraft while in the open, 

during operation, or in flight when the risk 

has been assumed by the Government, 

including the Contractor share of loss in this 

clause, even if the assumption may be 

terminated for aircraft in the open. 

(i) Procedures in the event of loss. 

(1) In the event of damage, loss, or 

destruction of aircraft in the open, during 

operation, or in flight, the Contractor shall 

take all reasonable steps to protect the 

aircraft from further damage, to separate 

damaged and undamaged aircraft, and to put 

all aircraft in the best possible order. Except 

in cases covered by paragraph (f)(2) of this 

clause, the Contractor shall furnish to the 

Contracting Officer a statement of— 

(i) The damaged, lost, or destroyed aircraft; 

(ii) The time and origin of the damage, loss, 

or destruction; 

(iii) All known interests in commingled 

property of which aircraft are a part; and 

(iv) The insurance, if any, covering the 

interest in commingled property. 

(2) The Contracting Officer will make an 

equitable adjustment for expenditures made 


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Federal Register / Vol. 75, No. 109 / Tuesday, June 8, 2010 / Rules and Regulations 32647 

by the Contractor in performing the 

obligations under this paragraph. 

(j) Loss prior to delivery. 

(1) If prior to delivery and acceptance by 

the Government, aircraft is damaged, lost, or 

destroyed and the Government assumed the 

risk, the Government shall either— 

(i) Require that the aircraft be replaced or 

restored by the Contractor to the condition 

immediately prior to the damage, in which 

event the Contracting Officer will make an 

equitable adjustment in the contract price 

and the time for contract performance; or 

(ii) Terminate this contract with respect to 

the aircraft. Notwithstanding the provisions 

in any other termination clause under this 

contract, in the event of termination, the 

Contractor shall be paid the contract price for 

the aircraft (or, if applicable, any work to be 

performed on the aircraft) less any amount 

the Contracting Officer determines— 

(A) It would have cost the Contractor to 

complete the aircraft (or any work to be 

performed on the aircraft) together with 

anticipated profit on uncompleted work; and 

(B) Would be the value of the damaged 

aircraft or any salvage retained by the 

Contractor. 

(2) The Contracting Officer shall prescribe 

the manner of disposition of the damaged, 

lost, or destroyed aircraft, or any parts of the 

aircraft. If any additional costs of such 

disposition are incurred by the Contractor, a 

further equitable adjustment will be made in 

the amount due the Contractor. Failure of the 

parties to agree upon termination costs or an 

equitable adjustment with respect to any 

aircraft shall be considered a dispute under 

the Disputes clause of this contract. 

(k) Reimbursement from a third party. In 

the event the Contractor is reimbursed or 

compensated by a third party for damage, 

loss, or destruction of aircraft and has also 

been compensated by the Government, the 

Contractor shall equitably reimburse the 

Government. The Contractor shall do nothing 

to prejudice the Government’s right to 

recover against third parties for damage, loss, 

or destruction. Upon the request of the 

Contracting Officer or authorized 

representative, the Contractor shall at 

Government expense furnish to the 

Government all reasonable assistance and 

cooperation (including the prosecution of 

suit and the execution of instruments of 

assignment or subrogation) in obtaining 

recovery. 

(l) Government acceptance of liability. To 

the extent the Government has accepted such 

liability under other provisions of this 

contract, the Contractor shall not be 

reimbursed for liability to third persons for 

loss or damage to property or for death or 

bodily injury caused by aircraft during flight 

unless the flight crew members previously 

have been approved for this flight in writing 

by the Government Flight Representative, 

who has been authorized in accordance with 

the combined regulation entitled 

‘‘Contractor’s Flight and Ground Operations’’. 

(m) Subcontracts. The Contractor shall 

incorporate the requirements of this clause, 

including this paragraph (m), in all 

subcontracts. 

(End of clause) 

252.228–7002 [Removed and Reserved] 

■ 5. Section 252.228–7002 is removed 

and reserved. 

252.228–7003 [Amended] 

■ 6. Section 252.228–7003 is amended 

in the introductory text by removing 

‘‘228.370(d)’’ and adding in its place 

‘‘228.370(c)’’. 

252.228–7005 [Amended] 

■ 7. Section 252.228–7005 is amended 

in the introductory text by removing 

‘‘228.370(e)’’ and adding in its place 

‘‘228.370(d)’’. 

252.228–7006 [Amended] 

■ 8. Section 252.228–7006 is amended 

in the introductory text by removing 

‘‘228.370(f)’’ and adding in its place 

‘‘228.370(e)’’. 

[FR Doc. 2010–13528 Filed 6–7–10; 8:45 am] 

BILLING CODE 5001–08–P 


emcdonald on DSK2BSOYB1PROD with RULES2