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Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

DATE: February 14, 2003

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

SOURCE: Federal Register, February 14, 2003, Vol. 68, No. 31, page 7491

AGENCIES: Department of Defense (DOD)

ACTION: Proposed Rule

SYNOPSIS: DOD is proposing to amend 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.

DATES: Comments on the proposed rule must be submitted on or before April 15, 2003.

ADDRESSES: Respondents may submit comments directly on the web site at http://emissary.acq.osd.mil/dar/dfars.nsf/pubcomm. As an alternative, respondents may e-mail comments to: dfars@acq.osd.mil. Also, respondents who cannot submit comments through the web site or by e-mail may submit comments to Defense Acquisition Regulations Council, Attn: Sandra Haberlin, OUSD(AT&L)DP(DAR), IMD 3C132, 3062 Defense Pentagon, Washington, DC 20301-3062, or by fax to 703-602-0350. Cite "DFARS Case 2002-D016" when making comments on this proposed rule.

FOR FURTHER INFORMATION CONTACT: Sandra Haberlin, 703-602-0289.

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 contractor bears the first $5,000 of loss or damage from each occurrence or incident.

This rule proposes to increase the contractor's liability ceiling from $5,000 to $50,000, because (1) the $5,000 ceiling dates back to 1982, and has not been adjusted for inflation; and (2) an analysis of contractor-incurred damages for a period of three years indicates that 70% of the incidents were below $50,000.

It is anticipated that this increase will incentive contractors to reduce the number of such incidents. Improved contractor performance will not only reduce the vessel "down time" for maintenance and repair, but will also make more efficient use of scarce maintenance dollars that would otherwise be used to pay for the damage between the $5,000 and the $50,000 ceilings.

To implement this change, this proposed rule would replace 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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