Contractor Responsibility for Damage to Government Property

What is "FAR 45.107 Government Property (June 2009) (Deviation)"? There is no such thing. FAR 45.107 is entitled "Contract clauses."

There is no 45.107(h). To what paragraph (h) are you referring?

Did you mean FAR 52.245-1 Government Property (DEVIATION) (June 2007)?

Yes, I apologize. 52.245-1 Government Property (June 2007) (Deviation) is the contract clause I am referring to.

So you have a CPIF contract. The contractor did not do its repair work correctly and so had to do more work to correct the poor work. You are shocked that the cost of reperformance is not to be included in the total allowable cost for the purpose of calculating the fee payable under the Incentive Fee clause, FAR 52.216-10. That clause says, in part:

(e)(4) For the purpose of fee adjustment, ?total allowable cost? shall not include allowable costs arising out of... (v) Any claim, loss, or damage resulting from a risk for which the Contractor has been relieved of liability by the Government Property clause... .

Paragraph (h) of the Government Property clause says, in part:

(h) Contractor Liability for Government Property. (1) Unless otherwise provided for in the contract, the Contractor shall not be liable for loss, theft, damage or destruction to the Government property furnished or acquired under this contract... .

The contractor argues that pursuant to the terms of the Incentive Fee clause, the cost of its reperformance is not to be included in the total allowable cost because the Government property clause says that it is not liable for any claim, loss, theft, damage, or destruction of the property.

Is the above a correct statement of the problem?

If so, according to you there has been no loss, theft, damage, or destruction of the property and no government claim arising out of such. What happened was that the contractor did not do its work properly the first time ("trade error") and had to reperform part of the work to correct the poorly done work. So why do you think the contractor is correct?

Vern,

Thank you for your response. Yes, the situation is as you described it.

I believe the contractor is correct because paragraph (h) of the property clause says that we will not hold the contractor liable for damage to government property unless an exception applies.

1. The Turbine Generator fits in the definition of government property stated in the clauses.

2. The contractor damaged the Turbine Generator by failing to remove debris resulting from their repair.

2. No exception applies.

V/R,

Ruth

So you have a CPIF contract. The contractor did not do its repair work correctly and so had to do more work to correct the poor work...according to you there has been no loss, theft, damage, or destruction of the property and no government claim arising out of such. What happened was that the contractor did not do its work properly the first time ("trade error") and had to reperform part of the work to correct the poorly done work. So why do you think the contractor is correct?

RIR, what does the contract REQUIRE the contractor to do with regard to workmanship, supervision, quality control and inspection of its work. And did the contractor comply with the contract requirements? Apparently, poor workmanship and lack of quality control and supervision caused major damage to at least one turbine. Is there any contract requirement for actions that could or would have prevented such damage had the contractor complied with the contract requirements?

Joel,

I am at home and can't access a copy of the contract at the moment. I'm trying to get someone to email one to me but it may be next week before I can look at all of the language. Thank you for your response.

According to you, the contractor was hired to repair governement-owned turbine generators. The contractor did not do the work properly in the first place and had to take corrective action. I think there is a distinction between liability for loss or damage of government property and the contractor's obligation to perform the repair work properly. The clause at FAR 52.246-5, Inspection of Services -- Cost Reimbursement, provides as follows:

(d) If any of the services performed do not conform with contract requirements, the Government may require the Contractor to perform the services again in conformity with contract requirements, for no additional fee. When the defects in services cannot be corrected by reperformance, the Government may?

(1) Require the Contractor to take necessary action to ensure that future performance conforms to contract requirements; and

(2) Reduce any fee payable under the contract to reflect the reduced value of the services performed.

I do not believe that the cost of reperformance is the kind of cost contemplated by subparagraph (e)(4) of the Incentive Fee clause. I think the cost should be included in the total allowable cost for purposes of calculating payable fee.

But if you want to let the contractor off the hook, be my guest.

I should add that I could find no case law on this issue. In Cost Reimbursement Contracting 3d at 1083, Cibinic and Nash raise the issue of the impact of the paragraph (h) rule in the Incentive Fee clause and its apparent inconsistency with the purpose of the incentive. In my opinion, the drafters of the Incentive Fee clause could have been clearer, but as contracting officer I would include the "cost of reperformance" in the total allowable cost and let the contractor take me to a board or the Court of Federal Claims. My position might be different if the contract were for other than repair of government property or if the repair of damage did not constitute reperformance of specified work.

RIR - With regard to workmanship issues related to the matter you have described be mindful of DFARS 217.17, and its related clauses if the "contract" work you are describing is/was performed under a Master Agreement. If so then there may be some 252.217 clauses that are applicable beyond the inspection FAR clause mentioned by Vern.

Other places to look might be other clauses that deal with workmanship or other terms and conditions as many times matters of workmanship and protecting existing property during the performance of work are contained in the specifications. Bottomline is the contract should be read as a whole to explore the issue you have at hand inclusive of discussions with your agency folks that deal with the actual work requirements, legal, etc. as it seems the matter you have could become a tangled web.

One last question -

Because the original repair of the generator didn't include work on the bearing the contractor has argued that this isn't "re-work" but new work resulting from their damage of government property. Would you agree, if the repair of the bearing wasn't included in the original work package for the turbine generators, that the cost of repairing the bearing should be excluded for the purpose of fee calculation?

RIR - With regard to workmanship issues related to the matter you have described be mindful of DFARS 217.17, and its related clauses if the "contract" work you are describing is/was performed under a Master Agreement. If so then there may be some 252.217 clauses that are applicable beyond the inspection FAR clause mentioned by Vern.

Other places to look might be other clauses that deal with workmanship or other terms and conditions as many times matters of workmanship and protecting existing property during the performance of work are contained in the specifications. Bottomline is the contract should be read as a whole to explore the issue you have at hand inclusive of discussions with your agency folks that deal with the actual work requirements, legal, etc. as it seems the matter you have could become a tangled web.

Thank you very much. It is a tangled web. Our legal and technical people are all involved. I'm not making the decision; I'm just trying to understand it.

One last question -

Because the original repair of the generator didn't include work on the bearing the contractor has argued that this isn't "re-work" but new work resulting from their damage of government property. Would you agree, if the repair of the bearing wasn't included in the original work package for the turbine generators, that the cost of repairing the bearing should be excluded for the purpose of fee calculation?

I say that if the contractor was hired to repair one part of the generator, and that if the repair work damaged another part, then the original repair was faulty, and the work to fix the damaged part was reperformance. The cost of the reperformance should be included in the total allowable costs for purposes of determining payable fee.

Bottom line: I could find no litigation over the proper application of paragraph (e)(4)(v) of the Incentive Fee clause. I would read the contract in its entirety and ask myself whether the contractor's interpretation is reasonable. I think it is not, for reasons that I have already explained. I think that a reasonable application of paragraph (e)(4)(v) might be this: If a fork lift operator doing other work lost control of his machine and it struck and damaged the generator while it was under repair or afterward, I would (grudgingly) exclude the cost of repairing the damage from the total allowable cost. However, if the contractor did something improperly while doing the contractually specified repairs, resulting in damage to any part of the generator, I would include the cost of fixing the damage in the total allowable cost for purposes of calculating payable fee. I think that is a reasonable interpretation of (e)(4)(v) that does not conflict with the plain meaning of the contract, when read as a whole, and that is not contradicted by any board or court decision or official interpretation of which I am aware. I think it would be appropriate to at least consider including the cost and letting the contractor contest my interpretation before a board or court.

I say that if the contractor was hired to repair one part of the generator, and that if the repair work damaged another part, then the original repair was faulty, and the work to fix the damaged part was reperformance. The cost of the reperformance should be included in the total allowable costs for purposes of determining payable fee.

Bottom line: I could find no litigation over the proper application of paragraph (e)(4)(v) of the Incentive Fee clause. I would read the contract in its entirety and ask myself whether the contractor's interpretation is reasonable. I think it is not, for reasons that I have already explained. I think that a reasonable application of paragraph (e)(4)(v) might be this: If a fork lift operator doing other work lost control of his machine and it struck and damaged the generator while it was under repair or afterward, I would (grudgingly) exclude the cost of repairing the damage from the total allowable cost. However, if the contractor did something improperly while doing the contractually specified repairs, resulting in damage to any part of the generator, I would include the cost of fixing the damage in the total allowable cost for purposes of calculating payable fee. I think that is a reasonable interpretation of (e)(4)(v) that does not conflict with the plain meaning of the contract, when read as a whole, and that is not contradicted by any board or court decision or official interpretation of which I am aware. I think it would be appropriate to at least consider including the cost and letting the contractor contest my interpretation before a board or court.

Thank you very much for your time and advice!

RIR - In exploring the discussion of this thread further I found a reference document that you may or may not know about. I am unsure whether I found the most current copy or not but in reading it, while it does not address you situation exactly it does provide direction and information that may be useful.

Document is the "DoD Manual for the Perfomance of Contract Property Administration" DoD 4161.2-M

DOD 4161.2-M, dated December 31, 1991, was rescinded on February 22, 2008.

Vern - Edited post on my part. I am confused by your last post. I looked again at the reference and it is still listed as current. I then did a little further research and found some info on the "Ask the Professor" website. References provided below, noting that the some folks may have trouble accessing the Ask the Professor one.

So I guess my question is - Are you sure? Reference?

And again I note it is not the silver bullet to RIR's question but it might be helpful in sorting out the matter.

http://www.dtic.mil/whs/directives/corres/pub1.html

https://dap.dau.mil/aap/pages/qdetails.aspx...estionID=110001

I'm sure.

DCMA is the OPR for that manual. See DCMA Information Memorandum No. 08-170, dated February 22, 2008, "Rescission of Instruction DoD 4161.2-M DoD Manual for the Performance of Contract Property Information (INFORMATION)," which said:

Information Memorandum No. 08-170

Subject: Rescission of Instruction DoD 4161.2-M DoD Manual for the Performance of Contract Property Administration (INFORMATION)

Date: February 22, 2008

Target Audience: Property Administrators (PA) and Administrative Contracting Officers.

New Information/Guidance/Tools:

The subject Instruction designated the Defense Logistics Agency (Defense Contract Management Command) with responsibility for the developing, publishing, and maintaining the DoD 4161.2-M. This responsibility has continued under the Defense Contract Management Agency (DCMA).

The manual, last published in 1991, is now obsolete. Its utility as a policy-making tool has largely been superseded by DoD Procedures, Guidance and Information (PGI). With that in mind, OSD is in the process of cancelling DoDI 4161.2-M, DoD Manual for the Performance of Contract Property Administration.

Information and direction for DCMA Property Administrators and Plant Clearance Officers will be provided in the DCMA guidebook for Property Management on Government Contracts.

We will be updating the Guidebook on an incremental basis with the System Analysis Section projected for completion by May 1, 2008.

This information is applicable to the Property Management on Government Contracts Guidebook process.

Point of Contact for Further Information

Signature:

Deputy Executive Director, Contracts Directorate

http://guidebook.dcma.mil/34/dc08-170.htm

A new draft guidebook was published on August 17, 2011, by the Director of Defense Procurement.

http://www.acq.osd.mil/dpap/policy/policyv...754-11-DPAP.pdf

In any case, the old manual contained absolutely nothing that would be of help to RIR in the matter that he has raised here. It addressed contract clauses that have long been out of use and the coverage in Section C2.5, "Liability for Loss, Damage, or Destruction of Government Property," simply does not address RIR's issue. It mainly addresses the role of property administrators. The new guidebook would not be of much help, either. Moreover, the real question is the proper interpretation of the Incentive Fee clause, not the Government Property clause.

Of course, RIR is free to consult a 20 year old, obsolete, largely useless manual that does not address his problem. I don't want to discourage him. He can find it here:

http://www.dtic.mil/whs/directives/corres/pdf/416102m.pdf

Vern - Thanks. Always interesting to debate with you especially when on one hand you would and have advocated in this forum that folks should not depend on a "draft" policy documents (dated 7/28/11 at that) but then on another hand advocate that one should consider a current document as "rescinded" based on an informational memo that was issued some three years earlier?

Keying in on your premise regarding the date of the information memo I have been careful not to read more into RIR's post than meets the eye but it seems you have because it could be very possible that the repair contract and its required GFP management started prior to even the informational memo and as such I would conclude it could and would be applicable. Of course RIR might post the actual award date of his/her contract at issue and I could be assuming something I should not but again it seems you have.

Regardless of whether one should depend on a original and not yet cancelled manual, a draft manual, and/or an informational memo your point regarding the incentive fee interpretation being the only issue misses the point in my view. As RIR's initial post notes the issue revolves around both the GFP clause, specifically the "unless otherwise provided for in the contract" language of it and the incentive fee clause. With specific regard to the liability of the costs for the "reperformance" and therefore the associated fee one will find general discussion in both the current manual (see Chap. 2) and the draft (see Chap. 13) you have noted and again I note (for the third time) that such reference may or may not be known to and/or valuable to RIR. It was simply a post I made to be helpful whether in your mind?s eye the reference is or is not.

Carl,

I appear to have annoyed you. You had indicated that you were unsure whether the manual that you cited was the current one, and all I did was point out that the DOD manual was rescinded, according to DCMA. DOD has issued contradictory information in that regard, but I consider it rescinded since DCMA has told its people not to use it. Even the Ask A Professor post you cited said that contractors cannot rely on it. But you're right -- it's still listed at the DoD Directives website.

I haven't said that anybody should depend on anything, either the draft manual or the one declared obsolete by DCMA back in 2008. I don't think either manual is of any help in this issue, and I've read them. I doubt that RIR's contract was awarded before 2003, which is when the clause covered in the old manual was changed, but anything is possible, and a draft is just that.

The issue raised by RIR was simple:

I believe (I hope I?m wrong), based on the contract language, the contractor is correct in their assertion that the cost of the bearing repair should be excluded from the fee calculation, but it does not make sense to me. The damage occurred to a piece of government property they were tasked to repair, in the performance of that effort. Why are they excused from assuming their share of the risk for additional repair necessitated by their own poor workmanship?

What costs are to be excluded from the computation of total allowable cost under the Incentive Fee clause? Is damage caused by the contractor in the course of redoing the work it was hired to do to be excluded from the computation of total allowable cost? My opinion is that the answer is no, but I cannot cite anything in my favor in regulation or policy, and I couldn't find any case (as far as I can tell the issue has not been litigated).

Prof. Ralph Nash and I discussed this and he thinks I'm wrong, and I might be. He thinks the Incentive Fee clause was not meant to say what it says, but that it does and that's that. The clause has said that since at least the 1960s and there is nobody around who knows what the original objective was and why the clause says what it says. Ralph thinks the objective was to excuse the contractor from risks that are out of its control, but that damage is in its control. However, the clause says what it says and that's that. A retired GWU professor, Gil Ginsberg, wrote an article about it back in 1966 and I'm arranging to get it to see what he said. Ralph said he said the clause is goofy and inconsistent with the objectives of the incentive.

In any case, Carl, I'm not debating with you. I just passed on some information about the status of the manual. I'm curious, though. When you first referred RIR to the manual, had you read it. Have you read it yet? If so, can you point out what specific passage might be helpful?

Vern ? Not annoyed just saying it as I see it.

Did not read the manual in total but did read to the extent I thought was necessary to propose it as a reference.

My thoughts in total ?

GFP clause states ?unless otherwise stated in the contract? so without the contract in full determination of contractors liability is in question. However liability as stated in the manual is to be proposed by the PA, forwarded to the CO of review and determination (ref. C2.5.6.4). Liability is determined by not only FAR/DFAR contract clauses and terms and conditions which may in fact include non- standard risk of loss provisions (C.2.5.6.6.) but the contractors actions or lack thereof (C2.5.4).

With regard to the ?otherwise stated? reference I point back to my post mentioning DFARS 217-17 and specifically to DFARS Clause 252.217-7012 that does, in my view, enter into a determination of liability if such clause is in the ?contract?. Other 252.217 clauses might also come into play.

Without determination of the liability the total cost of re-performance is in question as to whether it should or should not be included in the fee calculation so concentrating simply on the incentive fee clause seems too simple to me. I do understand your posts and conclusions but the missing link is liability for the costs. I also understand why Prof. Nash has reached the conclusions he has and will be interested in what you find and share if you decide to as the entire discussion has captured my attention.

Thanks, Carl. Ralph has suggested that I write this up in The Nash & Cibinic Report, but I don't think there is much to write about except to say that excluding the cost of fixing a screw up during performance is not consistent with the idea of a cost incentive. A contractor could screw up a bunch of times when repairing government property and say that the costs of having to do additional work to undo its mistakes shouldn't count against it when it comes to earning incentive fee. Ralph accused me of being an unreasonable harda** CO, and maybe he's right.

One of my frustrations about this kind of thing is that the FAR councils won't initiate action to address such matters even when you've brought them to their attention. Just like the application of the late proposal rule to emailed proposals -- the rule has caused problems, but the councils are not going to do anything to fix it, even though the fix would be easy -- maybe 15 minutes worth of writing. Their rulemaking process is so bureaucratic that it takes them forever to fix even a simple problem. So why bother writing about such things?

Oh, well. It sounded to me like RIR's organization is going to go along with the contractor's interpretation, which is clearly the easiest and probably the wisest thing to do.

Vern

FAR 52.245-1(h) states:

Unless otherwise provided for in the contract, the Contractor shall not be liable for loss, theft, damage or destruction to the Government property furnished or acquired under this contract, except when any one of the following applies?

Thus the contractor is relieved from liability if the Government property was either 1) furnished by the Government (GFP) or 2) acquired by the contractor (CAP). It doesn't relieve the contractor from liability for loss, theft, damage, or destruction of all Government property (i.e., Government property that is neither GFP nor CAP). I don't see how, in RIR's situation, the turbine generators were furnished by the Government (assuming the contractor did not take possession of the turbine generators or the vessel itself). They were obviously not acquired by the contractor. Yes, the turbine generators are Government property as defined by the clause and stated in the NAVSEA clause. However, the NAVSEA clause doesn't say that equipment on the vessel is Government-furnished property. Here's what the clause says:

For purposes of paragraph (h) of the clause entitled "GOVERNMENT PROPERTY" (FAR 52.245-1) in addition to those items of property defined in that clause as Government Property, the following shall also be included within the definition of Government Property:

(1) the vessel;

(2) the equipment on the vessel;

(3) movable stores;

(4) cargo; and

(5) other material on the vessel

The definition of Government-furnished property at FAR 52.245-1 is:

?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.

Furnish is not defined in the clause or the FAR. An online legal dictionary (www.thefreedictionary.com) defines furnish as--

1. To equip with what is needed, especially to provide furniture for.

2. To supply; give: "The story of Orpheus has furnished Pope with an illustration" (Thomas Bulfinch).

If the contractor never takes possession of the turbine generators, I don't see how it could be argued that the Government "furnished" them.

Don - I had the same thoughts but just did not go there. I keep reading the new Part 45 to figure out how the turbine fits into being GFP. My comparison are things like a building where janitorial is done, or reconstruction of a bridge, or a 1000 acres that need fencing with lots of other examples wondering if they are now GFP. So should the turbines be considered GFP? I am still perplexed but then I wonder what if it was in the context of the specific contract so in essence everyone agreed that it was GFP, then what? As I noted earlier very tangled and holds my interest.

PS - Did you see the message I sent you via the WIFCON message board?

What about: "Government-furnished property includes, but is not limited to, spares and property furnished for repair, maintenance, overhaul, or modification."

Wouldn't the turbines be property furnished for repair? See e.g., Hayes Intern. Corp., ASBCA 21758, 79-1 BCA ? 13596, in which various CLINs said things like:

?0006AA Overhaul/repair and/or rob-back of accessories and components installed on aircraft to prevent work stoppage.

?0006AB Repair modification, overhaul or Technical Order compliance of Government Furnished Property [GFP] other than 0006AA.?

and

?0006AA Accomplish overhaul, repair, modification or technical order compliance of aircraft accessories and components or other Government Furnished Property.?

Vern's post represents the part of the definition that I kept stubbling over and got me to thinking about something like a building being "furnished" for janitorial (maintenance) and a bridge being "furnished" for repair or renovation (modification). Really makes my head spin when you start thinking about all the contracting efforts that occur! JOC contracts or whatever they are called in this day and age? Add to it the fact that "government property" includes by definition real property (ref. FAR 45.101).

What about: "Government-furnished property includes, but is not limited to, spares and property furnished for repair, maintenance, overhaul, or modification."

Wouldn't the turbines be property furnished for repair?

If the Government gave the turbines (or the entire vessel) to the contractor, and the contractor had possession of them, then I think that the turbines would be property furnished for repair. If the vessel were on a Navy base and the contractor boarded the vessel to repair the turbines in place, then the turbines would not be property furnished for repair (i.e., the turbines were not given to the contractor nor did the contractor take possession of them).

In the decision that you cited (which I skimmed), I gathered that the contractor would take possession of Government property and perform repair/overhaul work on it at its facility:

Mr. Noak attached the greatest significance to the last four words of that line item, ?other Government Furnished Property,? and stressed the importance of the need to repair or overhaul the many items of Air Force ground support equipment while they are at the PDM contractor's facility.

If that was the case, then that was correctly referred to as GFP in the contract. Accordingly, the contractor would be responsible for performing the custodial duties of the Government Property clause.

I think that for an item to be GFP or CAP, the contractor must have possession of the item. If the contractor damages Government property that is not in its possession while performing work, FAR 52.245-1(h) does not relieve them from liability. Accordingly, costs of repairing the damage should not be excluded in the "Total Allowable Cost" computation if the contract includes the Incentive Fee clause.

What constitutes possession? How do you define it? What does it mean in the case in question?

What constitutes possession? How do you define it? What does it mean in the case in question?

The Government Property clause uses the word "possession" several times, but does not define it (nor does FAR 2.101). I think one can glean what is required in order for possession to be present from paragraph ( of the clause:

Property management.

(1) The Contractor shall have a system to manage (control, use, preserve, protect, repair and maintain) Government property in its possession. The system shall be adequate to satisfy the requirements of this clause. In doing so, the Contractor shall initiate and maintain the processes, systems, procedures, records, and methodologies necessary for effective control of Government property, consistent with voluntary consensus standards and/or industry-leading practices and standards for Government property management except where inconsistent with law or regulation. During the period of performance, the Contractor shall disclose any significant changes to their property management system to the Property Administrator prior to implementation.

(2) The Contractor?s responsibility extends from the initial acquisition and receipt of property, through stewardship, custody, and use until formally relieved of responsibility by authorized means, including delivery, consumption, expending, sale (as surplus property), or other disposition, or via a completed investigation, evaluation, and final determination for lost, stolen, damaged, or destroyed property. This requirement applies to all Government property under the Contractor?s accountability, stewardship, possession or control, including its vendors or subcontractors (see paragraph (f)(1)(v) of this clause).

(3) The Contractor shall include the requirements of this clause in all subcontracts under which Government property is acquired or furnished for subcontract performance.

My interpretation of the clause is that in order for possession to exist, the contractor would have to at least receive the property. Paragraph (f)(1)(ii) of the clause requires the contractor to document receipt. The implication is that the property was sent to the contractor by someone. Once received, the contractor would be responsible for its stewardship (tagging, keeping records, taking inventory, maintenance, reporting, etc.) until relieved in accordance with (f)(1)(vii) of the clause.

In the case in question, were the turbines received by the contractor? Was the contractor responsible for stewardship of the turbines? If we removed the turbines and sent them to the contractor (or sent the entire vessel to the contractor) and they received them, then they were in the contractor's possession. As such, the contractor would be responsible for their stewardship and relieved of liability for loss, theft, damage, or destruction of the property while executing their stewardship responsibility.

On the other hand, if we didn't send the turbines (or the vessel) to the contractor, then they could not have received them. The Government could not hold them accountable for stewardship responsibilities pursuant to FAR 52.245-1.

If a contractor comes to a Government office to perform onsite maintenance of a copy machine, I don't believe that the contractor has taken possession of the copy machine. I think the situation is similar to a contractor coming to a Navy base performing on-board repair of equipment on a vessel.

Well, FAR 1.108(a) says that if a term is not defined in FAR it has its common dictionary meaning. My Oxford Dictionary of English defines possession as "the state of having, owning, or controlling something." When the Navy furnished the turbines for repair, did the contractor have control over them?

Black's Law Dictionary 9th defines possession as:

The fact of having or holding property in one's power; the exercise of dominion over property. 2. The right under which one may exercise control over something to the exclusion of all others; the continuing exercise of a claim to the exclusive use of a material object. 3. Civil law. The detention or use of a physical thing with the intent to hold it as one's own. 4. (usu. pl.) Something that a person owns or controls; PROPERTY (2). 5. A territorial dominion of a state or nation.

When the Navy furnished the turbines for repair, did the contractor have control over them?

I'm not sure that the Navy "furnished" the turbines for repair. If the contractor came on base and did on-board repair of the turbines, then I don't think the Navy "furnished" them.

OK. So what's your definition of possession?

I'm not sure that the Navy "furnished" the turbines for repair. If the contractor came on base and did on-board repair of the turbines, then I don't think the Navy "furnished" them.

The turbine generators are on board a ship that is being overhauled at the contractor's facility.

OK. So what's your definition of possession?

If the receiver has control of the ball with both feet in bounds

I'll go with the Merriam-Webster online dictionary:

Possession

a : the act of having or taking into control b : control or occupancy of property without regard to ownership.

I'll go with that too.

The turbine generators are on board a ship that is being overhauled at the contractor's facility.

RIR,

Is there anything in the contract that says that the vessel is still under the Government's control, even if it is located at the contractor's facility? I have experience with NAVSEA contracts and I recall there being some clause to that effect.

RIR,

Is there anything in the contract that says that the vessel is still under the Government's control, even if it is located at the contractor's facility? I have experience with NAVSEA contracts and I recall there being some clause to that effect.

This is the only language I can find referring to control of the vessel -

C-2-7 ADDITIONAL INSURANCE PROVISIONS

Notwithstanding any other provision of this contract, for the purpose of the contract clause entitled "Insurance-Liability to Third Persons (FAR 52.228-7)", the vessel, its outfit, supplies, equipment, and the property or equipment of Government personnel or Government contractors other than the Prime Contractor, shall not be considered to be in the care, custody or control of the Contractor nor used by the Contractor.

Don:

Rather than focusing on the particular contract, can't we look for a more general solution?

Do we know whether government property handed over to a contractor for repair traditionally has been considered GFP?

Do we have any reason to think that GFP includes only property provided to the contractor for its use or consumption in performance, rather than for maintenance or repair?

Is there anyone on the DAU faculty who can answer those questions?

Don and Vern - For the good of the order ....

I continue to read and research myself. Here is a DFARS 252.217 clause (see below) that I found that is partial answer to Vern's thoughts in his last post. See paragraph ©.

I referenced the DFARs 217 early on noting that it would apply to vessels that are being repaired under a master agreement. I finally got around to reading all the clauses and found this one. In my posts referencing the DFARS RIR has never indicated whether the work was connected to a Master Agreement or not but as the clause appears to be the standard for Master Agreement work makes me wonder if it is the standard as well, or should be, for work done outside the Master Agreement concept stated in DFARS 217?

I also found this solicitation on FBO for a USACE project and read through it. The only thing considered GFP for this solicitation were some parts that the USACE provided to be replaced on the vessel with wording otherwise implying that the USACE was not considering the vessel to be GFP.

https://www.fbo.gov/index?tab=documents&amp...deff8c0ac121b19

252.217-7006 Title.

As prescribed in 217.7104(a), use the following clause:

TITLE (DEC 1991)

(a) Unless otherwise provided, title to all materials and equipment to be incorporated in a vessel in the performance of a job order shall vest in the Government upon delivery at the location specified for the performance of the work.

( Upon completion of the job order, or with the approval of the Contracting Officer during performance of the job order, all Contractor-furnished materials and equipment not incorporated in, or placed on, any vessel, shall become the property of the Contractor, unless the Government has reimbursed the Contractor for the cost of the materials and equipment.

© The vessel, its equipment, movable stores, cargo, or other ship's materials shall not be considered Government-furnished property.

Vern,

Given the definition of GFP in the clause, I don't think that there's any question that property furnished to the contractor for repair is GFP. The question I was raising, which RIR just answered, is whether the Government "furnished" the turbine generators. The entire vessel was furnished to the contractor.

Carl,

You found the clause that I was asking RIR about. Paragraph ( c ) is what I remember. However, I suspect that the DFARS clause is not in RIR's contract because NAVSEA generally doesn't issue job orders against master agreements for ship repair. They award long-term multi-ship multi-option (MSMO) contracts that are combination CPAF/CPIF.

RIR,

1. Does the contractor have a Master Agreement for the Repair and Alteration of Vessels (MARAV) or Master Ship Repair Agreement (MSRA) with the Navy?

2. If yes to question #1, does the agreement include DFARS 252.217-7006?

3. If yes to #1 and #2, does the contract incorporate the MARAV by reference, or does the MARAV say that it applies to all future contracts for ship repair with that contractor? (i.e., Is there a way to bind the contractor to DFARS 252.217-7006 under your contract?)

If you can answer yes to all these questions, then pursuant to DFARS 252.217-7006( c ), the turbine generators are not to be considered GFP. As such, FAR 52.245-1(h) does not relieve the contractor from liability for loss, theft, damage, or destruction of the turbine generators.

RIR,

1. Does the contractor have a Master Agreement for the Repair and Alteration of Vessels (MARAV) or Master Ship Repair Agreement (MSRA) with the Navy?

2. If yes to question #1, does the agreement include DFARS 252.217-7006?

3. If yes to #1 and #2, does the contract incorporate the MARAV by reference, or does the MARAV say that it applies to all future contracts for ship repair with that contractor? (i.e., Is there a way to bind the contractor to DFARS 252.217-7006 under your contract?)

If you can answer yes to all these questions, then pursuant to DFARS 252.217-7006( c ), the turbine generators are not to be considered GFP. As such, FAR 52.245-1(h) does not relieve the contractor from liability for loss, theft, damage, or destruction of the turbine generators.

Don,

The clause doesn't apply to this contract.

Thank you to everyone for your interest and research!

RIR,

One last comment. If the contractor wants to argue that the turbine generators are GFP, they should know that they would then be responsible for performing all of the duties in FAR 52.245-1(f) for any property furnished to them for repair--documentation of receipt, identification, record-keeping, inventory, reporting, maintenance, closeout, etc. If the turbine generators are GFP for purpose of FAR 52.245-1(h), then they are GFP for the purpose of FAR 52.245-1(f)--the contractor can't have it both ways.

I would reject the contractor's interpretation. In order to do that you have to be able to say why the contractor's interpretation is wrong. I think Don had raised a very good issue, but I have a slightly different take.

As I read the Incentive Fee clause, it excludes from the total allowable cost calculation costs for claims, losses, or damage for which the contractor is indemnified under the Government Property clause. That clause protects the contractor from claims, loss, or damage to "Government property furnished" to the contractor. I read that as meaning GFP as defined in the Government Property clause, which is Government property in the contractor's possession that was furnished to the contractor "for performance" which I would interpret as meaning for use as a tool or for consumption.

I would first argue that the turbines are Government property, but not GFP, because (1) the property was never in the possession (under the control of) of the contractor and (2) was not furnished to the contractor for use as a tool or for consumption during performance. Moreover, I don't think the turbines were described in the contract as GFP, which is required by the Government property clause. The turbines are Government property to which the contractor was merely given access in order to repair it. Access is not possession. (I would not rely as heavily on "furnished" as Don is doing.)

I would further argue that it would make no sense to exclude the costs of correction of its defective work, since the purpose of the incentive is to motivate the contractor to be efficient in the performance of that work and excluding the costs of poor performance would not foster that purpose. Thus, the Incentive Fee clause cannot reasonably be interpreted as the contractor does.

As CO I would not hesitate to take that position and I would write a final decision accordingly. And unless prevented by my superiors, I would let the contractor appeal to the board or the Court of Federal Claims and take my chances. The only risk to the CO is that the Government would have to pay interest on the contractor's claim once it is submitted, and the interest rate now is very low.

I think this is an honest and reasonable interpretation for a CO to take and a reasonable legal risk. The clause is ambiguous in my opinion. If the court sides with the contractor you will lose, but you will have done a service to the acquisition community in getting a legal interpretation. If you lose you lose, so what? It happens. There is no shame unless your position was manifestly unreasonable. What kind of CO won't do what he or she thinks is right because a board or court might disagree? Back off if your lawyer or theirs finds case law that makes your interpretation unreasonable.

If you think you're right, or just probably right, then go for it! If not, then don't. Either way, for what it's worth, I've got your back and the power of the pen. (I think Don has your back, too.)

Vern

Vern,

Why do you say that the turbines were never in the possession (under the control of) of the contractor? RIR said the contractor has the ship at their facility.

Missed that. OK, then the property was not furnished for their use or consumption in performance. They had to repair it, and it was in their possession for that purpose only, they weren't using it as a tool to be used or material to be consumed. I can't find anything that says that all Government property in a contractor's possession is Government-furnished property, and I've been looking. See also FAR Subpart 45.3. I don't want to rely on "furnished" alone. Government-furnished property is property furnished "for performance". Moreover, it has to be "described" as GFP in the contract.

RIR, were the turbines described as GFP in the contract?

Missed that. OK, then the property was not furnished for their use or consumption in performance. They had to repair it, and it was in their possession for that purpose only, they weren't using it as a tool to be used or material to be consumed. I can't find anything that says that all Government property in a contractor's possession is Government-furnished property, and I've been looking. See also FAR Subpart 45.3. I don't want to rely on "furnished" alone. Government-furnished property is property furnished "for performance". Moreover, it has to be "described" as GFP in the contract.

RIR, were the turbines described as GFP in the contract?

No, the turbines are not described as Government Furnished Property.

Go for it.

RIR - How about a broader question following Vern's thoughts - Was there any property described in the contract as GFP and the turbines were not on the list? Was the vessel in total described as GFP?

RIR - How about a broader question following Vern's thoughts - Was there any property described in the contract as GFP and the turbines were not on the list? Was the vessel in total described as GFP?

There is a specific list of special tooling and equipment that is provided for use by the contractor and the turbines are not included. The vessel and its equipment are not described anywhere "Government- Furnished Property", but they are included in the definition of "government property" for the purposes of (h) (1) of the government property clause.

RIR ? Well after sorting this through I would only pursue inclusion of the re-performance costs in the fee calculation if-

1. There is other contract provision(s) that holds the contractor liable ? As noted in the thread such provisions might relate to an inspection clause or other term and condition of the contract that addresses workmanship.

2. Risk is covered by insurance or otherwise reimbursed ? No indication has been made by you that such insurance/reimbursement exists. It might be wise to ask the contractor if they have some type of coverage that would cover the matter. Remember you might not have asked for insurance but the contractor might have it anyway. Likewise if a subcontractor was involved in the work that resulted in the damage you might want to see the terms of that subcontract in case it covers such instances where the sub is insured or the prime is otherwise reimbursed by the sub.

3. Damage caused by managerial personnel ? This is a strong matter to prove as the 52.245-1(h) clause as supported by case law defines the ?managerial personnel? to be those at the top of the organizational structure. A reference here is ASBCA No. 14387, November 30, 1971 (sorry I could not find a link to on the web to this decision).

4. The CO has revoked the Governments assumption of risk. While the 52-245-1 clause references paragraph (g) where such a revocation determination is made my read of the clause suggests that paragraph ( and paragraph(f)(vi) come into play as well but only if the Government has done due diligence in administering these provisions of the clause per reference FAR 45.105 (see paragraph ((1) specifically).

I realize that I have basically stated the obvious above as the four ?ifs? are taken directly from the 52-245-1 clause at paragraph (h). I have voiced my view in this manner as I am not in 100% agreement with the posts by Vern and Don that determination of liability revolves around whether the turbine(s) is Government Furnished Property (GFP) or not.

As you have noted the turbine(s )in the context and definition of both FAR Part 45 and clause 52.245-1 as ?property? is ?Government Property? . However, as it was not ?provided? or otherwise described as GFP in the contract it is not GFP in my view. As the turbine(s) is ?Government Property? it is therefore covered by the 52.245-1 clause and FAR Part 45 (see FAR 45.000). In my close read of the 52.245-1 clause I believe it makes specific and intentional distinction in use of the words like ?Government Property? and ?GFP? inclusive of the (h) paragraph where the word ?furnished? is used in lieu of ?provided?. My conclusion therefore is that (h) covers ALL ?Government Property? and not just GFP. The simple view might be that it is after all the ?Government Property? clause.

Hope these additional thoughts help.

RIR ? Well after sorting this through I would only pursue inclusion of the re-performance costs in the fee calculation if-

1. There is other contract provision(s) that holds the contractor liable ? As noted in the thread such provisions might relate to an inspection clause or other term and condition of the contract that addresses workmanship.

2. Risk is covered by insurance or otherwise reimbursed ? No indication has been made by you that such insurance/reimbursement exists. It might be wise to ask the contractor if they have some type of coverage that would cover the matter. Remember you might not have asked for insurance but the contractor might have it anyway. Likewise if a subcontractor was involved in the work that resulted in the damage you might want to see the terms of that subcontract in case it covers such instances where the sub is insured or the prime is otherwise reimbursed by the sub.

3. Damage caused by managerial personnel ? This is a strong matter to prove as the 52.245-1(h) clause as supported by case law defines the ?managerial personnel? to be those at the top of the organizational structure. A reference here is ASBCA No. 14387, November 30, 1971 (sorry I could not find a link to on the web to this decision).

4. The CO has revoked the Governments assumption of risk. While the 52-245-1 clause references paragraph (g) where such a revocation determination is made my read of the clause suggests that paragraph ( and paragraph(f)(vi) come into play as well but only if the Government has done due diligence in administering these provisions of the clause per reference FAR 45.105 (see paragraph ((1) specifically).

I realize that I have basically stated the obvious above as the four ?ifs? are taken directly from the 52-245-1 clause at paragraph (h). I have voiced my view in this manner as I am not in 100% agreement with the posts by Vern and Don that determination of liability revolves around whether the turbine(s) is Government Furnished Property (GFP) or not.

As you have noted the turbine(s )in the context and definition of both FAR Part 45 and clause 52.245-1 as ?property? is ?Government Property? . However, as it was not ?provided? or otherwise described as GFP in the contract it is not GFP in my view. As the turbine(s) is ?Government Property? it is therefore covered by the 52.245-1 clause and FAR Part 45 (see FAR 45.000). In my close read of the 52.245-1 clause I believe it makes specific and intentional distinction in use of the words like ?Government Property? and ?GFP? inclusive of the (h) paragraph where the word ?furnished? is used in lieu of ?provided?. My conclusion therefore is that (h) covers ALL ?Government Property? and not just GFP. The simple view might be that it is after all the ?Government Property? clause.

Hope these additional thoughts help.

Thank you Carl. I believe that, since the repair of the turbines was authorized work, the damage and resulting repair to the bearings is "re-performance", as Vern has stated. That effort is an allowable cost under the contract and the contractor can repair the damage without any specific approval from the government. The contractor is not "held liable" for that cost, it is a CPIF contract - they will be paid for it. To not count the cost of re-performance when calculating the incentive fee would be to ignore the repairs as part of the work - an overrun insurance policy if you will. I also believe that the intent of including the ship and its equipment under para (h) is to cover the contractor for damage to property that they weren't already authorized to repair, i.e. not part of the effort that is being measured in the shareline. I very much appreciate all of your time and effort.