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B-209170 L/M, JAN 25, 1983, OFFICE OF GENERAL COUNSEL

B-209170 L/M Jan 25, 1983
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000 FOR ANY DAMAGE TO THE VESSEL OR OTHER GOVERNMENT-OWNED PROPERTY GROWING OUT OF THE WORK EXCEPT WHERE SUCH DAMAGE WAS CAUSED BY THE GOVERNMENT OR DUE TO CAUSES BEYOND THE CONTROL OF THE CONTRACTOR. WE HAVE NOT BEEN PRESENTED WITH ANY INFORMATION WHICH INDICATES THE CONTRARY. UNLESS THE NAVY CAN SHOW THAT IT IS COST EFFECTIVE TO HAVE CONTRACTORS ASSUME THE RISK UP TO THE STATED LIMITS. WE HAVE NO FURTHER COMMENTS.

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B-209170 L/M, JAN 25, 1983, OFFICE OF GENERAL COUNSEL

PRECIS-UNAVAILABLE

MR. JAMES T. BRANNAN, OFFICE OF THE UNDER SECRETARY OF DEFENSE FOR RESEARCH AND ENGINEERING:

BY LETTER DATED SEPTEMBER 20, 1982, YOU REQUESTED OUR COMMENTS ON THE PROPOSED ADDITION TO THE DEFENSE ACQUISITION REGULATION (DAR) OF SECTIONS 4-1300 AND 7-2400, WHICH WOULD INCORPORATE AND REVISE THE MASTER AGREEMENT FOR THE REPAIR AND ALTERATION OF VESSELS. WE SUBMIT THE FOLLOWING COMMENTS.

PROPOSED SECTION 7-2402.25 SETS FORTH A MANDATORY LIABILITY AND INSURANCE CLAUSE. SUBSECTION (B) OF THAT CLAUSE PROVIDES THAT THE GOVERNMENT SHALL ASSUME THE AMOUNT OF THE CONTRACTOR'S AGGREGATE LIABILITY EXCEEDING $1,000,000 FOR ANY DAMAGE TO THE VESSEL OR OTHER GOVERNMENT-OWNED PROPERTY GROWING OUT OF THE WORK EXCEPT WHERE SUCH DAMAGE WAS CAUSED BY THE GOVERNMENT OR DUE TO CAUSES BEYOND THE CONTROL OF THE CONTRACTOR. (WE NOTE THAT WHILE THE PROPOSED SECTION AS REPRESENTED IN TAB B PLACES THE DOLLAR FIGURE AT $1,000,000, TAB C, WHICH SETS FORTH EACH SECTION, WITH BOTH ITS PRESENT AND PROPOSED LANGUAGE, PROVIDES FOR A $300,00 LIABILITY LIMIT.) SUBSECTION (D) REQUIRES THE CONTRACTOR TO PURCHASE INSURANCE AGAINST THAT $1,000,000 LIABILITY.

IN A REPORT ENTITLED "EXTENDING THE GOVERNMENT'S POLICY OF SELF INSURANCE IN CERTAIN INSTANCES COULD RESULT IN GREAT SAVINGS," AUGUST 26, 1975, WE RECOMMENDED THAT THE GOVERNMENT ASSUME THE RISK OF LOSS IN CONNECTION WITH ANY DAMAGE TO ITS OWN PROPERTY UNDER VESSEL REPAIR CONTRACTS SINCE OUR FINDINGS REVEALED THE LIKELIHOOD OF SIGNIFICANT CONTRACT COST SAVINGS BY DOING SO. WE HAVE NOT BEEN PRESENTED WITH ANY INFORMATION WHICH INDICATES THE CONTRARY. THEREFORE, UNLESS THE NAVY CAN SHOW THAT IT IS COST EFFECTIVE TO HAVE CONTRACTORS ASSUME THE RISK UP TO THE STATED LIMITS, WE MUST RECOMMEND THAT SUBSECTIONS (B) AND (D) OF THE CLAUSE BE REVISED TO PROVIDE THAT THE TOTAL RISK OF LOSS FOR DAMAGE TO THE VESSEL OR GOVERNMENT PROPERTY BE ASSUMED BY THE GOVERNMENT AND THAT THE REQUIREMENT THAT CONTRACTORS PROCURE INSURANCE FOR THIS RISK AT THEIR EXPENSE BE DELETED.

WE HAVE NO FURTHER COMMENTS.

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