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B-114811 1 (1972-06-21)

handle is hein.gao/gaobabkzc0001 and id is 1 raw text is: ,-ESTMCTED - No t6be Nleaed emtside tme General AcmoLm~it- Office except. on the basis ofsp2 r al 'by the 0fi of Congaslnal K~tes GOMPThOLLER GENERAL OF THE UNI 0 REEAEDWASHINGTON, D.C. ON RELEASED..... B-114811 (K KDear Mr. Chairman: Your letter of April 26, 1972, referred to recent testi- mony by Admiral R. G. Freeman III, Deputy for Procurement and ' Production, Naval Material Command, regarding the groj d and fight riskf0. use.contained in defens.e conQtracts. In his testimony Admiral Freeman stated that this clause'resulted / from an investigation by the General Accounting Office in the mid-1950's. You requested further information about that in- vestigation and raised certain questions about the application and effects of the Government's policy of self-insuring its risks. Enclosed is a copy of our Report of Survey of Fire and Extended Coverage Insurance on 'Airplanes in Open' under Con- tracts with the Department of the Air Force and the Department of the Navy (B-114811, Nov. 6, 1953), which, we believe, is the General Accounting Office report referred to in Admiral Freeman's testimony. The ground and flight risk clause referred to by Admiral Freeman, contained in Armed Services Procurement Regula- tion 7-104.10 and 10-404, is used by all the armed services in negotiated fixed-price-type contracts for the production, modification, maintenance, or overhaul of aircraft. Under the,r' Vis'f6ns f this clause, the Government assumes all risk of loss or damage to such aircraft in flight or during certain other operations, except that the contractor is re- sponsible for the first $1,000 of loss or damage resulting from each separate event. Other circumstances under which the Government acts as a self-insurer in connection with military supply contracts include (1) risk of loss or damage to Government-owned prop- erty and equipment in the possession of contractors, (2 risk of loss or damage to vessels over 200 feet in length while under construction, and (3) risk of loss or damage to Govern- ment property, with the exception of the contract item itself. resulting from defects or deficiencies in the contract item when the loss or damage occurs after final acceptance of the contract item by the Government. In the third circumstance, a contractor is also relieved of liability for loss or damage to major contract items of high unit cost, such as missiles, aircraft, tanks, ships, and aircraft engines. 6 O c~706-/l.

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