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   <concept id="DFARS_228.370-2"
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            class="- topic/topic concept/concept ">
            <title class="- topic/title ">
         <ph props="autonumber" class="- topic/ph ">228.370-2</ph> General.</title>
            <conbody>
                  <p outputclass="List1">(a) <i>Assignment of a Government flight representative.</i> See PGI
                        228.370-2(a) for procedures on assigning a Government flight representative
                        (GFR) when using the clauses at 252.228-7001 and
                        252.228-7007.</p>
         <p outputclass="List1">(b) <i>Preaward survey</i>. Before awarding
                        any contract using the clause at 252.228-7001, Ground and Flight Risk, the
                        contracting officer should obtain a preaward survey of the offeror’s
                        proposed aircraft flight and ground operations facility. If the offeror
                        proposed subcontracting any aircraft work, the preaward survey should
                        include a review of the subcontractor’s facility. For acquisitions falling
                        under the exceptions at 228.371(b)(1)(iii), (iv), and (vi), the contracting
                        officer shall review the documentation the offeror submitted with the
                        proposal in response to the DD Form 1423, Contract Data Requirements List,
                        to ensure the offeror’s commercial insurance provides the appropriate
                        coverage required by the clause at 252.228-7001.</p>
         <p outputclass="List1">(c)
                        <i>Foreign military sales</i>. The exception for foreign military sales
                        (FMS) contracts at 228.371(b)(1)(iii) only applies to FMS cases where the
                        FMS customer has explicitly refused assumption of risk of loss. If the FMS
                        customer has accepted the standard Letter of Offer and Acceptance Standard
                        Terms and Conditions, as described in DoD 5105.38-M, Security Assistance
                        Management Manual, they have assumed risk of loss.</p>
         <p outputclass="List1">(d) <i>Commercial derivative aircraft</i>. The exception
                        at 228.371(b)(1)(iv) for commercial derivative aircraft only applies if the
                        contractor is a licensed and certified Federal Aviation Administration (FAA)
                        repair station for the specific model of aircraft under contract, when work
                        is being performed pursuant to the FAA license under 14 CFR part 145. The
                        FAA’s repair station search tool is available at <xref href="https://av-info.faa.gov/repairstation.asp"
                  format="html"
                  scope="external">https://av-info.faa.gov/repairstation.asp</xref>. All
                        aircraft flying public aircraft operations operate under airworthiness
                        certificates maintained by the military services. The FAA airworthiness
                        certificate in the exception in this paragraph (d) underlies the military
                        service certificate.</p>
         <p outputclass="List1">(e) <i>Insurance</i>. The clause at 252.228-7001, Ground
                        and Flight Risk, is intended to reduce acquisition costs by eliminating the
                        costs of commercial insurance premiums. This clause also is intended to
                        encourage the contractor to perform safe and effective operations through
                        inclusion of a contractor’s share of loss (i.e., a deductible).
                        Additionally, the clause requires compliance with the combined
                        regulation/instruction entitled “Contractor’s Flight and Ground Operations”
                        (Air Force Instruction 10-220, Army Regulation 95-20, Naval Air Systems
                        Command (NAVAIR) Instruction 3710.1 (Series), Coast Guard Instruction
                        M13020.3 (Series), and Defense Contract Management Agency Instruction 8210-1
                        (Series)), which provides procedures to mitigate the risk of loss to the
                        Government. For this reason, paragraph (e)(4)(ii) of the clause at
                        252.228-7001 specifies that insurance premium costs are unallowable. In
                        addition, paragraph (d)(4) of the clause provides that the Government’s
                        assumption of risk does not apply where the loss or damage is covered by
                        available insurance.</p>
         <p outputclass="List1">(f) <i>Damage to Government
                        aircraft</i>.</p>
         <p outputclass="List2">(1) Whenever damage to Government aircraft
                        is reported, each incident should be evaluated on its own merits. When the
                        cost of repair exceeds the contractor’s share of loss provisions, the
                        contracting officer shall make a liability determination in accordance with
                        paragraph (g) of this section.</p>
         <p outputclass="List2">(2) Contracting officers
                        should consult with the requiring activity and the assigned contract
                        administration office on replacement, repair, or beyond economic repair
                        decisions.</p>
         <p outputclass="List2">(3) See PGI 228.370-2(f) for an example of
                        accident or mishap damage versus workmanship-error damage.</p>
         <p outputclass="List1">(g) <i>Contracting officer determination of
                        liability.</i>
         </p>
         <p outputclass="List2">(1) When making a liability determination,
                        the contracting officer should seek input from the GFR and legal counsel, as
                        needed.</p>
         <p outputclass="List2">(2) The Government’s assumption of risk
                        shall not extend to damage, loss, or destruction of covered aircraft
                        that—</p>
         <p outputclass="List3">(i) Is the result of willful misconduct or
                        lack of good faith on the part of the contractor’s managerial personnel,
                        including the contractor’s oversight of subcontractors;</p>
         <p outputclass="List3">(ii) Is sustained during flight if either the flight or the crew members have
                        not been approved in advance and in writing by the GFR, who has been
                        authorized in accordance with the combined regulation/instruction entitled
                        “Contractor’s Flight and Ground Operations”;</p>
         <p outputclass="List3">(iii) Occurs
                        in the course of transportation by rail, or by conveyance on public streets,
                        highways, or waterways, unless the transportation is limited to the
                        vicinity of the contractor’s premises, and incidental to work performed
                        under the contract as described in the Schedule;</p>
         <p outputclass="List3"> (iv) Is covered by insurance;</p>
         <p outputclass="List3">(v) Occurs after the
                        contracting officer has, in writing, revoked the Government’s assumption of
                        risk; or</p>
         <p outputclass="List3">(vi) Is sustained due to workmanship
                        errors.</p>
         <p outputclass="List1">(h) <i>Notice of revocation of the Government’s
                        assumption of risk</i>. The liability provisions of the clause at FAR
                        52.245-1, Government Property, do not apply to the aircraft impacted by a
                        notice of revocation.</p>
         <p outputclass="List2">(1) <i>Preliminary notice of
                        revocation</i>.</p>
         <p outputclass="List3">(i) When finding that contractor
                        managerial personnel have failed to comply with the combined
                        regulation/instruction, as required by paragraph (b) of the clause at
                        252.228-7001, including finding the covered aircraft are exposed to
                        unreasonable conditions, the contracting officer shall issue a preliminary
                        notice of revocation of the Government’s assumption of risk to the
                        contractor and shall require the contractor to comply with contract
                        requirements. Factors for the contracting officer to consider in determining
                        exposure to unreasonable conditions include, but are not limited to, the
                        following:</p>
         <p outputclass="List4">(A) Lack of adequate hangar fire suppression or
                        firefighting vehicles;</p>
         <p outputclass="List4">(B) Failure to provide adequate
                        procedures to the GFR; or</p>
         <p outputclass="List4">(C) Systemic failure to comply
                        with approved procedures.</p>
         <p outputclass="List3">(ii) The preliminary
                        notice of revocation will state the timeframe for the contractor to correct
                        the noncompliance or conditions.</p>
         <p outputclass="List2">(2) <i>Notice of
                        revocation</i>. If the contractor fails to correct the cited noncompliance
                        or conditions within the specified timeframe, the contracting officer shall
                        issue to the contractor a notice of revocation of the Government’s
                        assumption of risk for any covered aircraft.</p>
         <p outputclass="List3">(i)
                        Thereafter the contractor assumes the entire risk for damage, loss, or
                        destruction of the previously covered aircraft.</p>
         <p outputclass="List3">(ii) Any
                        costs incurred by the contractor, including the costs of the contractor’s
                        self-insurance, insurance premiums paid to insure the contractor’s
                        assumption of risk, deductibles associated with such purchased insurance,
                        etc., to mitigate its risk are unallowable costs.</p>
         <p outputclass="List3">(iii)
                        The notice of revocation does not relieve the contractor of its obligation
                        to comply with all other provisions of the clause at 252.228-7001, including
                        the combined regulation/instruction entitled “Contractor’s Flight and Ground
                        Operations.”</p>
         <p outputclass="List3">(iv) Within 3 days of receipt of the
                        contractor’s notice of correction, the contracting officer shall notify the
                        contractor whether the Government will resume risk of loss. The contracting
                        officer shall determine that the noncompliance or cited conditions have been
                        corrected prior to resuming assumption of risk.</p>
         <p outputclass="List3">(v) Any
                        disputes regarding the contracting officer’s notice of revocation shall be
                        subject to FAR clause 52.233-1, Disputes.</p>
         <p outputclass="List1">(i)
                        <i>Procedures in the event of damage, loss, or destruction of covered
                        aircraft.</i>
         </p>
         <p outputclass="List2">(1) In the event of damage, loss, or
                        destruction of covered aircraft, except in cases covered by paragraph (j)(2)
                        of this section, the contracting officer shall evaluate the contractor’s
                        statement of—</p>
         <p outputclass="List3">(i) The damaged, lost, or destroyed
                        aircraft;</p>
         <p outputclass="List3">(ii) The time and origin of the damage, loss, or
                        destruction;</p>
         <p outputclass="List3">(iii) All known interests in commingled
                        property of which aircraft are a part; and</p>
         <p outputclass="List3">(iv) The
                        insurance, if any, covering the interest in commingled
                        property.</p>
         <p outputclass="List2">(2) If a new production aircraft is damaged,
                        lost, or destroyed before it has become a covered aircraft, the Government
                        bears no responsibility for risk of loss.</p>
         <p outputclass="List2">(3) If a
                        new production aircraft is damaged, lost, or destroyed after it has become a
                        covered aircraft, the contracting officer shall provide written direction to
                        the contractor to take action in accordance with the contracting officer’s
                        written direction that the aircraft shall be—</p>
         <p outputclass="List3">(i)
                        Replaced;</p>
         <p outputclass="List3">(ii) Repaired to the condition immediately prior
                        to the damage; or</p>
         <p outputclass="List3">(iii) Considered beyond economic repair.
                        The contracting officer shall decide whether further actions are required
                        under the contract.</p>
         <p outputclass="List2">(4) If a covered aircraft that has
                        been furnished by the Government to the contractor is damaged, lost, or
                        destroyed while covered, the contracting officer shall provide written
                        direction to the contractor that the aircraft shall be—</p>
         <p outputclass="List3"> (i) Repaired; or</p>
         <p outputclass="List3">(ii) Considered beyond economic repair.
                        The contracting officer shall decide further actions required under the
                        contract.</p>
         <p outputclass="List2">(5) The contracting officer shall make an
                        equitable adjustment for expenditures made in performing the obligations
                        under paragraph (h) of the clause at 252.228-7001.</p>
         <p outputclass="List1">(j)<i>
                        Contracting officer determination of the contractor’s share of
                        loss</i>.</p>
         <p outputclass="List2">(1) The contractor’s share of loss or damage to
                        covered aircraft, except for loss or damage caused by negligence of
                        Government personnel, is the least of—</p>
         <p outputclass="List3">(i)
                        $200,000;</p>
         <p outputclass="List3">(ii) 20 percent of the price or estimated
                        acquisition cost of affected aircraft; or</p>
         <p outputclass="List3">(iii) 20 percent
                        of the price or estimated cost of the contract, task order, or delivery
                        order.</p>
         <p outputclass="List2">(2) If the Government requires covered aircraft to
                        be replaced or repaired by the contractor, any resulting equitable
                        adjustment shall not include reimbursement of the contractor’s share of
                        loss.</p>
         <p outputclass="List2">(3) In the event the Government does not decide to
                        replace or repair the covered aircraft, the clause at 252.228-7001 requires
                        the contractor to credit the contract price or pay the Government, as
                        directed by the contracting officer, the least of—</p>
         <p outputclass="List3">(i)
                        $200,000;</p>
         <p outputclass="List3">(ii) 20 percent of the price or estimated
                        acquisition cost of affected aircraft; or</p>
         <p outputclass="List3">(iii) 20 percent
                        of the price or estimated cost of the contract, task order, or delivery
                        order.</p>
         <p outputclass="List2">(4) The costs incurred by the contractor for its
                        share of the loss and for insuring against that loss are unallowable costs,
                        including but not limited to—</p>
         <p outputclass="List3">(i) The contractor’s share
                        of loss under the Government’s self-insurance;</p>
         <p outputclass="List3">(ii) The
                        costs of the contractor’s self-insurance;</p>
         <p outputclass="List3">(iii) The
                        deductible for any contractor-purchased insurance;</p>
         <p outputclass="List3">(iv)
                        Insurance premiums paid for contractor-purchased insurance;
                        and</p>
         <p outputclass="List3">(v) Costs associated with determining, litigating, and
                        defending against the contractor’s liability.</p>
         <p outputclass="List1">(k)
                        <i>Reimbursement from a third party</i>. If the contracting officer finds or
                        has reason to believe that the contractor has been reimbursed or otherwise
                        compensated by a third party for damage, loss, or destruction of covered
                        aircraft and has also been compensated by the Government, then the
                        contracting officer shall demand an equitable reimbursement. If the
                        contracting officer requests that the contractor provide reasonable
                        assistance in obtaining recovery, such effort shall be an allowable expense
                        of the contractor.</p>
            </conbody>
      </concept>
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