Liability for Property Damage or Physical Injury in Cost-Reimbursement Supply and Research and Development Contracts

The Department of Health and Human Services (HHS) requested a GAO opinion regarding that agency's use of a third person insurance liability clause which regulations permit agencies to include in cost-reimbursement supply and research and development contracts. HHS believes that the clause may violate the Antideficiency Act and the Adequacy of Appropriations Act. GAO held that a clause of this type is in violation of the Acts because it subjects the Government to a contingent liability in an indefinite amount. Accordingly, the present FPR clause should not be used.