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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: August 21, 2003

SUBJECT: Defense Federal Acquisition Regulation Supplement (DFARS); Liability for Loss Under Vessel Repair and Alteration Contracts

SOURCE: Federal Register, August 21, 2003, Vol. 68, No. 162, page 50477

AGENCIES: Department of Defense (DOD)

ACTION: Final Rule

SYNOPSIS: DOD is amending DFARS 252.217-7012, Liability and Insurance, to increase a contractor's liability for loss or damage under vessel repair and alteration contracts from $5,000 to $50,000 per incident.

EDITOR'S NOTE: For more on the proposed rule, see the February 14, 2003, FEDERAL CONTRACTS DISPATCH "Defense Federal Acquisition Regulation Supplement (DFARS); Liability for Loss Under Vessel Repair and Alteration Contracts."

EFFECTIVE DATE: August 21, 2003.

FOR FURTHER INFORMATION CONTACT: Euclides Barrera, Defense Acquisition Regulations Council, OUSD(AT&L)DPAP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062; 703-602-0296; fax: 703-602-0350. Cite "DFARS Case 2002-D016" when referring to this final rule.

SUPPLEMENTAL INFORMATION: DFARS 252.217-7012, Liability and Insurance, is used in master agreements for repair and alteration of vessels. It holds a contractor liable for loss or damage resulting from defective contractor workmanship and materials. For any other contractor-incurred loss or damage, the clause required the contractor to bear the first $5,000 of loss or damage from each occurrence or incident.

On February 14, 2003, a proposed rule was published to amend DFARS 252.217-7012(b)(6) to increase the contractor's liability ceiling from $5,000 to $50,000, because (1) the $5,000 ceiling dated back to 1982, and had not been adjusted for inflation; and (2) an analysis of contractor-incurred damages for a period of three years indicated that 70% of the incidents were below $50,000.

One respondent submitted comments on the proposed rule. The respondent recommended a ceiling of $7,465 based on actual inflation experienced by the shipbuilding industry since 1982. DOD disagrees, so it is replacing the "$5,000" ceiling in DFARS 252.217-7012(b)(6) with "$50,000."

FOR FURTHER INFORMATION CONTACT: Panoptic Enterprises at 703-451-5953 or by e-mail to Panoptic@FedGovContracts.com.

Copyright 2003 by Panoptic Enterprises. All Rights Reserved.

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