Overview
This section prescribes the mandatory use of FAR clause 52.228-7 in most cost-reimbursement contracts to address third-party liability insurance and clarifies that agencies may supplement these requirements with their own specific provisions.
Key Rules
- Mandatory Clause: Contracting officers must insert FAR 52.228-7, Insurance—Liability to Third Persons, in solicitations and contracts when a cost-reimbursement structure is used.
- Exemptions: This requirement does not apply to construction contracts or architect-engineer services contracts.
- Agency Supplemental Authority: Individual agencies are permitted to create and prescribe their own unique provisions and clauses to implement the insurance policies established in FAR Subpart 28.3.
Practical Implications
- Risk Allocation: Under cost-reimbursement terms, the government often indemnifies the contractor for certain liabilities; this clause ensures that required insurance is in place to protect both the contractor and the government from third-party claims.
- Compliance Monitoring: Contractors must review both the FAR and any agency-specific supplements (such as DFARS or GSAM) to ensure their insurance coverage meets the specific implementation standards of the buying agency.