Overview
FAR 28.306 establishes that while the Government generally does not dictate insurance coverage for fixed-price contracts, it may prescribe specific requirements under certain conditions, particularly when work is performed on Government installations or involves Government property.
Key Rules
- General Exception: Insurance is typically the contractor's private concern in fixed-price contracts unless specific "special circumstances" apply.
- Criteria for Mandatory Insurance: Agencies may specify requirements if the contractor is primarily engaged in Government work, Government property is involved, work is performed on a Government installation, or the Government assumes specific risks.
- Work on Government Installations:
- If clause 52.228-5 is required, the insurance types listed in FAR 28.307 serve as the mandatory minimums.
- Contracting Officers (COs) have the authority to require higher limits or additional types of coverage than the standard minimums.
- Discretionary Inclusion: If the CO includes insurance requirements for the Government's interest (when not strictly required by 28.310), they have the flexibility to lower limits or omit certain types of insurance.
Practical Implications
- Cost Accounting: Since these are fixed-price contracts, contractors must ensure that the costs of required insurance premiums are accurately factored into their initial bid or proposal to protect profit margins.
- Compliance Verification: Contractors performing on-site work at federal facilities should expect to provide proof of insurance that meets the specific minimums defined in FAR 28.307 and any additional limits specified in the contract Schedule.