[Federal Register Volume 86, Number 227 (Tuesday, November 30, 2021)]
[Proposed Rules]
[Pages 67892-67898]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25734]


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DEPARTMENT OF DEFENSE

Defense Acquisition Regulations System

48 CFR Parts 228, 242, and 252

[Docket DARS-2021-0024]
RIN 0750-AL13


Defense Federal Acquisition Regulation Supplement: Ground and 
Flight Risk (DFARS Case 2020-D027)

AGENCY: Defense Acquisition Regulations System, Department of Defense 
(DoD).

ACTION: Proposed rule.

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SUMMARY: DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to revise the requirements related to the 
assumption of risk associated with aircraft under DoD contracts. The 
current requirements are outdated and in need of revision to clarify 
applicability due to numerous changes in aircraft contract situations 
and the emergence of contracts for small, unmanned aircraft.

DATES: Comments on the proposed rule should be submitted in writing to 
the address shown below on or before January 31, 2022, to be considered 
in the formation of a final rule.

ADDRESSES: Submit comments identified by DFARS Case 2020-D027, using 
any of the following methods:
    [cir] Federal eRulemaking Portal: https://www.regulations.gov. 
Search for ``DFARS Case 2020-D027''; select ``Comment'' and follow the 
instructions to submit a comment. Please include ``DFARS Case 2020-
D027'' on any attached document.
    [cir] Email: [email protected]. Include DFARS Case 2020-D027 in 
the subject line of the message.
    Comments received generally will be posted without change to 
https://www.regulations.gov, including any personal information 
provided. To confirm receipt of your comment(s), please check https://www.regulations.gov, approximately two to three days after submission 
to verify posting.

FOR FURTHER INFORMATION CONTACT: Mr. David E. Johnson, telephone 571-
372-6115.

SUPPLEMENTARY INFORMATION:

I. Background

    The contract clause at DFARS 252.228-7001, Ground and Flight Risk, 
was established to reduce DoD acquisition costs by relieving 
contractors from the responsibility to obtain (and bill the Government 
for) commercial insurance to cover the loss of aircraft or damage to 
Government-owned aircraft in excess of the first $100,000 of loss or 
damage. The current clause requires the contractor to be responsible 
for the first $100,000 of loss or damage; and, when in excess of 
$100,000, the Government assumes the risk of loss of or damage to its 
aircraft. The clause is included (with rare exceptions) in 
solicitations and contracts for the acquisition, development, 
production, modification, maintenance, repair, flight, or overhaul of 
aircraft as prescribed in DFARS 228.370.
    Through the clause, contractors are bound by the operating 
procedures contained in the combined regulation/instruction entitled 
``Contractor's Flight and Ground Operations'' (Air Force Instruction 
10-220_IP, Army Regulation

[[Page 67893]]

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)) in effect on the date of 
contract award. The combined regulation/instruction is used to mitigate 
the risk assumed by the Government through the clause, which was last 
updated in June 2010.

II. Discussion and Analysis

    This proposed rule incorporates language in DFARS subpart 228.3 to 
update circumstances in which the contract clause at DFARS 252.228-7001 
is to be used. The current text at DFARS 228.370 does not adequately 
address contractor-owned aircraft and exceptions to the use of the 
clause. The proposed text at 228.3 does not require use of the clause 
in solicitations and contracts for which a non-DoD customer allows the 
use of commercial insurance or other self-insurance, under which the 
aircraft are classified as certain unmanned aircraft systems, or under 
which the aircraft will be dismantled and removed from inventory. The 
proposed change at DFARS 242.302 provides guidance on the DoD policy 
for maintaining surveillance of aircraft flight and ground operations.
    The changes proposed to DFARS clause 252.228-7001 remove confusing 
language and definitions and reflect changes in costs associated with 
evolving technology, such as relatively inexpensive drones. For 
example, the term ``in the open'' is replaced with the more common 
insurance term ``covered aircraft.'' The proposed language clarifies 
the difference between ``workmanship errors'' and ``damage.'' The 
update also clarifies the applicability of liability coverage for 
subcontracts, including those for commercial items.
    Additionally, due to the wide range that has developed in aircraft 
unit prices and the range of overall contract cost based on the variety 
of services contractors may perform, the proposed rule adds reasonable 
alternatives for calculating the contractor's cost share in the event 
of a mishap to a covered aircraft. Specifically, except for loss or 
damage caused by negligence of Government personnel, the contractor 
will be responsible only for the least of the following 3 alternatives: 
(1) $200,000; (2) 20 percent of the price or estimated acquisition cost 
of affected aircraft; or (3) 20 percent of the price or estimated cost 
of the contract, task order, or delivery order. In other words, if 20 
percent of the cost of an inexpensive aircraft (e.g., a drone) or 20 
percent of the price or estimated cost of a relatively inexpensive 
contract is less than $200,000, the contractor will pay a lesser cost 
share.
    The proposed rule includes a new contract clause at DFARS 252.228-
70XX, Public Aircraft and State Aircraft Operations--Liability, which 
is to be used when contracted aircraft perform public or state aircraft 
operations and the contract does not include DFARS clause 252.228-7001. 
The new clause provides definitions for terms related to public and 
state aircraft operations, requires compliance with the combined 
regulation/instruction for flight operations, and defines contractor 
liability for operations for contract performance conducted as public 
or state aircraft operations.

III. Applicability to Contracts at or Below the Simplified Acquisition 
Threshold and for Commercial Items, Including Commercially Available 
Off-the-Shelf Items

    This rule proposes to revise the clause at DFARS 252.228-7001, 
Ground and Flight Risk, and to create one new clause at DFARS 252.228-
70XX, Public Aircraft and State Aircraft Operations--Liability, for use 
in situations where contracted aircraft perform public aircraft 
operations or state aircraft operations and the clause at DFARS 
252.228-7001 is not used. DoD intends to apply both clauses to 
contracts below the simplified acquisition threshold; doing so allows 
for the inclusion of lower value items in affected contracts, while 
preventing contractors who have contracts valued below $200,000 from 
being liable for the entirety of the loss or damages. This burden on 
these smaller purchases is not commensurate with those of the larger 
dollar value contracts and, therefore, discourages the contractors with 
lower value contracts from working with the Government.
    DoD does not intend to apply either clause to prime contracts for 
commercial items including commercially available off-the-shelf items 
per DFARS 228.371. However, DFARS clause 252.228-7001 will apply to 
subcontracts for commercial items, with an exception for work 
subcontracted to a Federal Aviation Administration (FAA) Part 145 
repair station performing work pursuant to their FAA license. DFARS 
clause 252.228-7001 provides for self-insurance to avoid reliance on 
commercial insurance for military aircraft. Application of DFARS 
252.228-7001 to subcontracts, including those for commercial items, 
provides a mechanism to require subcontractor compliance with the 
combined regulation/instruction, which provides the terms and 
conditions for the Government's self-insurance.

IV. Expected Impact of the Rule

    This rule is not expected to have a significant impact on the 
Government or industry. The rule updates and expands procedures and 
guidelines on use of DFARS clause 252.228-7001. The change in the 
calculation of the contractor's share of loss is viewed as a positive 
incentive in reducing the magnitude of the risk of loss for 
contractors. Although the dollar amount for contractor liability is 
increased from $100,000 to $200,000 in this proposed rule, the addition 
of reasonable alternatives that recognize the low cost of aircraft, 
such as drones, will mean that a contractor's share of loss may be much 
lower. The rule also provides a new clause 252.228-70XX, Public 
Aircraft and State Aircraft Operations--Liability, to use when 
conditions for use of 252.228-7001 are not met, but the acquisition 
involves public aircraft operations or state aircraft operations. It is 
expected that contract clause 252.228-70XX will be used very 
infrequently, fewer than 10 times annually.

V. Executive Orders 12866 and 13563

    Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). E.O. 
13563 emphasizes the importance of quantifying both costs and benefits, 
of reducing costs, of harmonizing rules, and of promoting flexibility. 
This is not a significant regulatory action and, therefore, was not 
subject to review under section 6(b) of E.O. 12866, Regulatory Planning 
and Review, dated September 30, 1993.

VI. Congressional Review Act

    As required by the Congressional Review Act (5 U.S.C. 801-808) 
before an interim or final rule takes effect, DoD will submit a copy of 
the interim or final rule with the form, Submission of Federal Rules 
under the Congressional Review Act, to the U.S. Senate, the U.S. House 
of Representatives, and the Comptroller General of the United States. A 
major rule under the Congressional Review Act cannot take effect until 
60 days after it is published in the Federal Register. This rule is not 
anticipated to be a major rule under 5 U.S.C. 804.

[[Page 67894]]

VII. Regulatory Flexibility Act

    DoD does not expect this proposed rule to have a significant 
economic impact on a substantial number of small entities within the 
meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et seq., 
because the rule primarily provides updates and clarifications. As 
noted in Section IV of this preamble, the change in the calculation of 
the contractor's share of loss, increased from $100,000 to $200,000 in 
this clause, is viewed as a positive incentive in reducing the 
magnitude of the risk of loss for contractors. However, an initial 
regulatory flexibility analysis has been prepared and is summarized as 
follows:
    DoD is proposing to amend the Defense Federal Acquisition 
Regulation Supplement (DFARS) to update the ground and flight risk 
policy and associated contract clause at DFARS 252.228-7001, Ground and 
Flight Risk. The language is outdated and needs revision to clarify 
applicability due to numerous changes in aircraft contract situations 
and the emergence of contracts for small, unmanned aircraft. These 
updates also apply to contracts involving contractor-owned and operated 
aircraft. The proposed changes include the following: (1) Revising the 
clause prescription to clarify when use of the clause at DFARS 252.228-
7001 is mandatory; (2) updating the clause to reflect the evolution of 
aircraft technology; (3) creating a new clause to apply to contractor-
owned aircraft operated as public aircraft or in state aircraft status; 
and (4) clarifying how DoD will maintain surveillance of aircraft 
flight and ground operations during contract performance.
    The objective of the rule is to update the ground and flight risk 
policy and associated clause. The legal basis for the rule is 41 U.S.C. 
1707.
    The proposed rule will apply to all small entities that will be 
awarded contracts for the acquisition, development, production, 
modification, maintenance, repair, flight, or overhaul of aircraft. 
According to data from the Federal Procurement Data System for fiscal 
years 2017 through 2019, DoD made approximately 6,287 awards per year 
on average for these types of acquisitions for a total of 18,861 
awards. Approximately 7,757 of these awards were made to 2,185 unique 
small entities over the 3 fiscal years.
    This proposed rule does not include any new reporting, 
recordkeeping, or other compliance requirements for small entities.
    The rule does not duplicate, overlap, or conflict with any other 
Federal rules.
    There are no known, significant, alternative approaches to the 
proposed rule that would meet the objectives.
    DoD invites comments from small business concerns and other 
interested parties on the expected impact of this rule on small 
entities.
    DoD will also consider comments from small entities concerning the 
existing regulations in subparts affected by this rule in accordance 
with 5 U.S.C. 610. Interested parties must submit such comments 
separately and should cite 5 U.S.C 610 (DFARS Case 2020-D027), in 
correspondence.

VIII. Paperwork Reduction Act

    The rule does not contain any new information collection 
requirements that require the approval of the Office of Management and 
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35) or 
impact any existing information collection requirements.

List of Subjects in 48 CFR Parts 228, 242, and 252

    Government procurement.

Jennifer D. Johnson,
Editor/Publisher, Defense Acquisition Regulations System.

    Therefore, 48 CFR parts 228, 242, and 252 are proposed to be 
amended as follows:

0
1. The authority citation for 48 CFR parts 228, 242, and 252 continues 
to read as follows:

    Authority:  41 U.S.C. 1303 and 48 CFR chapter 1.

PART 228--BONDS AND INSURANCE


228.370  [Redesignated as 228.371]

0
2. Redesignate section 228.370 as section 228.371.
0
3. Add new section 228.370 and sections 228.370-1 and 228.370-2 to read 
as follows:


228.370   Ground and flight risk.


228.370-1   Definitions.

    As used in this section--
    Civil aircraft means an aircraft other than a public aircraft or 
state aircraft.
    Public aircraft means an aircraft that meets the definition in 49 
U.S.C. 40102(a)(41) and the qualifications in 49 U.S.C. 40125. 
Specifically, a public aircraft means any of the following:
    (1) An aircraft used only for the Government, except as provided in 
paragraphs (5) and (7) of this definition.
    (2) An aircraft owned by the Government and operated by any person 
for purposes related to crew training, equipment development, or 
demonstration, except as provided in paragraph (7) of this definition.
    (3) An aircraft owned and operated by the government of a State, 
the District of Columbia, or a territory or possession of the United 
States or a political subdivision of one of these governments, except 
as provided in paragraph (7) of this definition.
    (4) An aircraft exclusively leased for at least 90 continuous days 
by the government of a State, the District of Columbia, or a territory 
or possession of the United States or a political subdivision of one of 
these governments, except as provided in paragraph (7) of this 
definition.
    (5) An aircraft owned or operated by the armed forces or chartered 
to provide transportation or other commercial air service to the armed 
forces under the conditions specified by 49 U.S.C. 40125(c). In the 
preceding sentence, the term other commercial air service means an 
aircraft operation that--
    (i) Is within the United States territorial airspace;
    (ii) The Administrator of the Federal Aviation Administration 
determines is available for compensation or hire to the public; and
    (iii) Must comply with all applicable civil aircraft rules under 
title 14, Code of Federal Regulations.
    (6) An unmanned aircraft that is owned and operated by, or 
exclusively leased for at least 90 continuous days by, an Indian Tribal 
government, as defined in section 102 of the Robert T. Stafford 
Disaster Relief and Emergency Assistance Act (42 U.S.C. 5122), except 
as provided in paragraph (7) of this definition.
    (7) As described in 49 U.S.C.40125(b), an aircraft described in 
paragraph (1), (2), (3), or (4) of this definition does not qualify as 
a public aircraft in situations where the aircraft is used for 
commercial purposes or to carry an individual other than a crewmember 
or a qualified non-crewmember.
    Public aircraft operation means operation of an aircraft that meets 
the legal definition of public aircraft established in 49 U.S.C. 
40102(a)(41) and the legal qualifications for public aircraft status 
outlined in 49 U.S.C. 40125.
    State aircraft means an aircraft operated by the Government for 
sovereign, noncommercial purposes such as military, customs, and police 
services. Military aircraft are afforded status as state aircraft. In 
very rare circumstances, DoD-contracted aircraft may be designated, in 
writing, by a responsible Government official pursuant to DoD Directive 
4500.54E, DoD Foreign Clearance Program, to be operated in state 
aircraft status, and States may choose to treat them as

[[Page 67895]]

deemed state aircraft when they are operating under a Government 
contract.


228.370-2   General.

    (a) Preaward survey. 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.
    (b) Foreign military sales. 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.
    (c) Commercial derivative aircraft. 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 https://av-info.faa.gov/repairstation.asp. 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 (c) underlies the 
military service certificate.
    (d) Insurance. The clause at 252.228-7001, Ground and Flight Risk, 
reduces acquisition costs by eliminating the costs of insurance to 
incentivize the contractor to perform safe and effective operations. 
For this reason, 252.228-7001(f) specifies that insurance premium costs 
are unallowable. Additionally, 252.228-7001(d)(4) provides that the 
Government's assumption of risk does not apply where the loss or damage 
is covered by available insurance.
    (e) Damage to Government aircraft. (1) Whenever damage to 
Government aircraft is reported, particularly when the cost of repair 
exceeds the contractor's share of loss provisions, the contracting 
officer shall make a liability determination in accordance with the 
applicable version of the combined regulation/instruction entitled 
``Contractor's Flight and Ground Operations'' (Air Force Instruction 
10-220_IP, Army Regulation 95-20, NAVAIR Instruction 3710.1 (Series), 
Coast Guard Instruction M13020.3 (Series), and Defense Contract 
Management Agency Instruction 8210.1 (Series)). Each incident should be 
evaluated on its own merits. The contracting officer should seek input 
from the Government flight representative (see 252.228-7001) and legal 
counsel, as needed.
    (2) Contracting officers should consult with the requiring activity 
and the assigned contract administration office on replacement, repair, 
or beyond economic repair decisions.
    (3) See PGI 228.370-2(e) for an example of workmanship error or 
damage.
0
4. Amend newly redesignated section 228.371 by--
0
a. Revising paragraph (b);
0
b. Redesignating paragraphs (c), (d), and (e) as paragraphs (d), (e), 
and (f); and
0
c. Adding a new paragraph (c).
    The revision and addition read as follows:


228.371   Additional clauses.

* * * * *
    (b) Use the clause at 252.228-7001, Ground and Flight Risk, in 
solicitations and contracts--
    (1) For the acquisition, development, production, modification, 
maintenance, repair, flight, or overhaul of aircraft owned by or to be 
delivered to the Government, except those solicitations and contracts--
    (i) That are strictly for activities incidental to the normal 
operations of the aircraft (e.g., refueling operations, minor non-
structural actions not requiring towing such as replacing aircraft 
tires due to wear and tear);
    (ii) That are awarded for purchase under FAR part 12 procedures;
    (iii) For which a non-DoD customer (including an FMS customer per 
225.7305) has decided to allow the use of commercial insurance or other 
self-insurance;
    (iv) For maintenance (ground operations only) of commercial 
derivative aircraft with an FAA certificate of airworthiness maintained 
to FAA standards. Performance under the exception in this paragraph 
(b)(1)(iv) must be at a licensed and certified FAA repair station rated 
for the type of aircraft and work to be maintained;
    (v) Under which the aircraft are to be dismantled and removed from 
the inventory; or
    (vi) Under which the aircraft are classified as Group 1 or 2 
unmanned aircraft systems per DoD Instruction (DoDI) 6055.07, Mishap 
Notification, Investigation, Reporting, and Record Keeping, and the 
purchase price of the air vehicle, including installed Government-
furnished equipment, is below the cost threshold for a Class C mishap 
per DoDI 6055.07; or
    (2) Involving aircraft not owned by or to be delivered to the 
Government, only if the contracting officer decides that it is in the 
best interest of the Government. Potential factors for contracting 
officers to consider when deciding which course of action is in the 
best interest of the Government include, but are not limited to, 
whether--
    (i) The cost of hull insurance exceeds the replacement cost of the 
aircraft;
    (ii) Insurance is not available (e.g., high-risk experimental 
flights and operations of aircraft in a war zone); or
    (iii) Ground or flight activities that involve contractor-owned and 
contractor-operated aircraft may pose risk to Government aircraft 
(e.g., due to close proximity in flight).
    (c) Use the clause at 252.228-70XX, Public Aircraft and State 
Aircraft Operations--Liability, in solicitations and contracts that do 
not include the clause at 252.228-7001 but involve public aircraft 
operations or state aircraft operations.
* * * * *

PART 242--CONTRACT ADMINISTRATION AND AUDIT SERVICES

0
5. Amend section 242.302 by adding paragraph (a)(56) to read as 
follows:


242.302  Contract administration functions.

    (a) * * *
    (56) Within DoD, maintaining surveillance of aircraft flight and 
ground operations is accomplished by incorporating into the contract, 
task order, or delivery order the requirements of the applicable 
version of the combined regulation/instruction entitled ``Contractor's 
Flight and Ground Operations'' (Air Force Instruction 10-220_IP, Army 
Regulation 95-20, NAVAIR Instruction 3710.1 (Series), Coast Guard 
Instruction M13020.3 (Series), and Defense Contract Management Agency 
Instruction 8210.1 (Series)). See PGI 242.302(a)(56).
* * * * *

[[Page 67896]]

PART 252--SOLICITATION PROVISIONS AND CONTRACT CLAUSES


252.228-7000  [Amended]

0
6. Amend section 252.228-7000 introductory text by removing 
``228.370(a)'' and adding ``228.371(a)'' in its place.
0
7. Revise section 252.228-7001 to read as follows:


252.228-7001   Ground and Flight Risk.

    As prescribed in 228.371(b), use the following clause:

GROUND AND FLIGHT RISK (DATE)

    (a) Definitions. As used in this clause--
    Covered aircraft means an aircraft owned by or to be delivered 
to the Government and, when determined by the contracting officer 
and specifically identified as such in the contract Schedule, may 
include contractor-furnished aircraft that are not intended for 
induction into the DoD inventory, including--
    (1) Any item, other than a rocket or missile, intended for 
flight (e.g., fixed-winged aircraft, blended wing/lifting bodies, 
helicopters, vertical take-off or landing aircraft, lighter-than-air 
airships, and unmanned aerial vehicles);
    (2) Aircraft furnished by the Government to the Contractor under 
this contract while in the Contractor's possession, care, custody, 
or control regardless of their location, state of disassembly or 
reassembly; items removed from--
    (i) A particular aircraft already in the Government inventory 
retain their status as covered aircraft, provided they are intended 
for reinstallation on that particular aircraft; and
    (ii) An aircraft that are not intended for reinstallation on 
that aircraft lose their status as covered aircraft;
    (3) New production aircraft when wholly outside of buildings on 
the Contractor's premises or other places described in the Schedule 
(e.g., hush houses, run stations, and paint facilities).
    (i) New production aircraft become covered aircraft at a stage 
of manufacture or production (similar to the point of manufacture in 
a conventional aircraft) when a wing, portion of a wing, or engine 
is attached to a fuselage.
    (ii) Blended wing/lifting bodies become covered aircraft at a 
stage of manufacture or production when the center portion and a 
lifting surface become attached; and
    (4) Commercial aircraft, to include commercially available off-
the-shelf aircraft, become covered aircraft when the commercial 
aircraft arrives at the Contractor's place of performance for 
modification under the terms of the contract.
    Contractor's managerial personnel means the Contractor's 
directors, officers, managers, superintendents, or equivalent 
representatives who have supervision or direction of--
    (1) All, or substantially all, of the Contractor's business;
    (2) All, or substantially all, of the Contractor's operation at 
any one plant or separate location; or
    (3) A separate and complete major industrial operation.
    Contractor's premises means those premises, including 
subcontractors' premises, designated in the Schedule or in writing 
by the Contracting Officer, and any other place the aircraft is 
moved for safeguarding.
    Crewmember means, unless otherwise provided in the Schedule, 
personnel required in the flight manual, assigned for the purpose of 
conducting any flight on behalf of the Contractor. It also includes 
any operator of an unmanned aerial vehicle.
    Flight means any flight approved in writing by the Government 
flight representative, to include taxi test made in the performance 
of this contract, or flight for the purpose of safeguarding the 
aircraft.
    Workmanship errors mean damage to the aircraft that is the 
result of a task, operation, or action that was originally planned 
or intended, the end result of which is a noncompliance with 
contract specifications.
    (b) Combined regulation/instruction. The Contractor shall be 
bound by the operating procedures contained in the combined 
regulation/instruction entitled ``Contractor's Flight and Ground 
Operations'' (Air Force Instruction 10-220_IP, Army Regulation 95-
20, NAVAIR Instruction 3710.1 (Series), Coast Guard Instruction 
M13020.3 (Series), and Defense Contract Management Agency 
Instruction 8210.1 (Series)) in effect on the date of contract 
award. Compliance with the combined regulation/instruction is 
required from the time of contract award throughout the period of 
performance of the contract, regardless of the Government's 
assumption of risk under the contract.
    (c) Government as self-insurer. The Government self-insures and 
assumes the risk of damage to, or loss or destruction of, covered 
aircraft subject to the following conditions:
    (1) The Contractor's liability to the Government for damage, 
loss, or destruction of covered aircraft is limited to the 
Contractor's share of loss as defined at paragraph (h) of this 
clause, except when one of the exclusions at paragraph (d) applies.
    (2) The liability provisions of this clause take precedence over 
the liability provisions of Federal Acquisition Regulation (FAR) 
clause 52.245-1, Government Property, with respect to covered 
aircraft.
    (3) The Contractor is not liable for loss, damage, or 
destruction of covered aircraft as the result of normal wear and 
tear, or intentional damage or destruction as required in the 
Schedule.
    (4) Conditions for Government assumption of risk in flight are 
as follows:
    (i) The Contractor's crewmembers are approved in writing by the 
Government flight representative (GFR).
    (ii) The flight is approved in writing by the GFR.
    (d) Exclusions from the Government's assumption of risk. The 
Government's assumption of risk under this clause shall not extend 
to damage, loss, or destruction of covered aircraft which--
    (1) 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;
    (2) Is sustained during flight if either the flight or the 
crewmembers 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'';
    (3) 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 Contractor's premises, 
and incidental to work performed under the contract as described in 
the Schedule;
    (4) Is covered by insurance;
    (5) Occurs after the Contracting Officer has, in writing, 
revoked the Government's assumption of risk in accordance with 
paragraph (e)(1) of this clause;
    (6) Is sustained due to workmanship errors; or
    (7) Is found by the Contracting Officer to be the result of 
exposure to unreasonable conditions. The Contracting Officer will 
consider factors including but not limited to the following: Lack of 
adequate hangar fire suppression or firefighting vehicles, failure 
to provide adequate procedures to the GFR, or systemic failure to 
comply with approved procedures.
    (e) Revoking the Government's assumption of risk.
    (1) The Contracting Officer, when finding that Contractor 
managerial personnel have failed to comply with paragraph (b) of 
this clause, or finding the covered aircraft are exposed to 
unreasonable conditions, will notify the Contractor in writing and 
will require the Contractor to comply with contract requirements. 
This notice will state the timeframe to correct the noncompliance or 
conditions. If the Contracting Officer finds that the Contractor 
failed to correct the cited noncompliance or conditions within the 
specified timeframe, the Contracting Officer will issue a Notice of 
Revocation of the Government's assumption of risk for any covered 
aircraft.
    (2) Upon receipt of the Notice of Revocation, the Contractor 
shall promptly correct the noncompliance or cited conditions, 
regardless of whether there is agreement that the conditions are 
unreasonable.
    (3) If the Contracting Officer issues a Notice of Revocation 
pursuant to the terms of this clause--
    (i) The Contractor shall thereafter assume the entire risk for 
damage, loss, or destruction of the previously covered aircraft;
    (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; and
    (iii) The liability provisions of the clause at FAR 52.245-1, 
Government Property, are not applicable to the aircraft impacted by 
the Notice of Revocation.
    (4) The Contractor shall promptly notify the Contracting Officer 
when the

[[Page 67897]]

noncompliance or cited conditions have been corrected. Within 3 days 
of receipt of the Contractor's Notice of Correction, the Contracting 
Officer will notify the Contractor whether the Government will 
resume risk of loss. The Contracting Officer will determine that the 
noncompliance or cited conditions have been corrected prior to 
resuming assumption of risk.
    (5) The Notice of Revocation does not relieve the Contractor of 
its obligation to comply with all other provisions of this clause, 
including the combined regulation/instruction entitled 
``Contractor's Flight and Ground Operations.''
    (6) Any disputes regarding the Contracting Officer's Notice of 
Revocation shall be subject to FAR clause 52.233-1, Disputes.
    (f) Contractor's exclusion of insurance costs. The Contractor 
warrants that the contract price does not and will not include, 
except as may be authorized in this clause, any charge or 
contingency reserve for insurance (including the Contractor's share 
of loss) covering damage, loss, or destruction of covered aircraft 
when the risk has been assumed by the Government, even if the 
assumption may be terminated for covered aircraft.
    (g) Procedures in the event of damage, loss, or destruction.
    (1) In the event of damage, loss, or destruction of covered 
aircraft, the Contractor shall take all reasonable steps to protect 
the aircraft from further damage, to separate damaged and undamaged 
aircraft, and to put all aircraft in the best possible order. Except 
in cases covered by paragraph (h)(2) of this clause, the Contractor 
shall furnish to the Contracting Officer a statement of--
    (i) The damaged, lost, or destroyed aircraft;
    (ii) The time and origin of the damage, loss, or destruction;
    (iii) All known interests in commingled property of which 
aircraft are a part; and
    (iv) The insurance, if any, covering the interest in commingled 
property.
    (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.
    (3) If a new production aircraft is damaged, lost, or destroyed 
after it has become a covered aircraft, the Contractor shall take 
action in accordance with the Contracting Officer's written 
direction that the aircraft shall be--
    (i) Replaced;
    (ii) Repaired to the condition immediately prior to the damage; 
or
    (iii) Considered beyond economic repair. The Contracting Officer 
will decide whether further actions are required under the contract.
    (4) If a covered aircraft that has been furnished by the 
Government to the Contractor is damaged, lost, or destroyed while 
covered, the Contractor shall take action in accordance with the 
Contracting Officer's written direction that the aircraft shall be--
    (i) Repaired; or
    (ii) Considered beyond economic repair. The Contracting Officer 
will decide further actions required under the contract.
    (5) The Contractor may submit a request for equitable adjustment 
for expenditures made in performing the obligations under this 
paragraph (g).
    (h) Contractor's share of loss.
    (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--
    (i) $200,000;
    (ii) 20 percent of the price or estimated acquisition cost of 
affected aircraft; or
    (iii) 20 percent of the price or estimated cost of the contract, 
task order, or delivery order.
    (2) If the Government requires covered aircraft be replaced or 
repaired by the Contractor, any resulting equitable adjustment shall 
not include reimbursement of the Contractor's share of loss.
    (3) In the event the Government does not decide to replace or 
repair, the Contractor agrees to credit the contract price or pay 
the Government, as directed by the Contracting Officer, the least 
of--
    (i) $200,000;
    (ii) 20 percent of the price or estimated acquisition cost of 
affected aircraft; or
    (iii) 20 percent of the price or estimated cost of the contract, 
task order, or delivery order.
    (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--
    (i) The Contractor's share of loss under the Government's self-
insurance;
    (ii) The costs of the Contractor's self-insurance;
    (iii) The deductible for any Contractor-purchased insurance;
    (iv) Insurance premiums paid for Contractor-purchased insurance; 
and
    (v) Costs associated with determining, litigating, and defending 
against the Contractor's liability.
    (i) Reimbursement from a third party. In the event the 
Contractor is reimbursed or compensated by a third party for damage, 
loss, or destruction of covered aircraft and has also been 
compensated by the Government, the Contractor shall equitably 
reimburse the Government. The Contractor shall do nothing to 
prejudice the Government's right to recover against third parties 
for damage, loss, or destruction. Upon the request of the 
Contracting Officer or authorized representative, the Contractor 
shall at Government expense furnish to the Government all reasonable 
assistance and cooperation (including the prosecution of suit and 
the execution of instruments of assignment or subrogation) in 
obtaining recovery.
    (j) Liability to third parties. Unless the flight and 
crewmembers have been approved in writing by the GFR, the Contractor 
shall not be reimbursed for liability to third parties for loss or 
damage to property or for death or bodily injury caused by covered 
aircraft during flight, even if the Government has accepted such 
liability under any other provisions of the contract.
    (k) Subcontracts. The Contractor shall incorporate the 
requirements of this clause, including this paragraph (k), in 
subcontracts to include subcontracts for commercial items, except--
    (1) The Contractor shall not include paragraph (f) in 
subcontracts for commercial items; and
    (2) The Contractor shall not incorporate the requirements of 
this clause in subcontracts with Federal Aviation Administration 
(FAA) Part 145 repair stations performing work pursuant to their FAA 
license.
    (End of clause)


252.228-7003   [Amended]

0
7. Amend section 252.228-7003 introductory text by removing 
``228.370(c)'' and adding ``228.371(d)'' in its place.


252.228-7005  [Amended]

0
8. Amend section 252.228-7005 introductory text by removing 
``228.370(d)'' and adding ``228.371(e)'' in its place.


252.228-7006  [Amended]

0
9. Amend section 252.228-7006 introductory text by removing 
``228.370(e)'' and adding ``228.371(f)'' in its place.
0
10. Add section 252.228-70XX to read as follows:


252.228-70XX   Public Aircraft and State Aircraft Operations--
Liability.

    As prescribed in 228.371(c), use the following clause:

Public Aircraft and State Aircraft Operations--Liability (Date)

    (a) Definitions. As used in this clause--
    Civil aircraft means an aircraft other than a public aircraft or 
state aircraft.
    Public aircraft means an aircraft that meets the definition in 
49 U.S.C. 40102(a)(41) and the qualifications in 49 U.S.C. 40125. 
Specifically, a public aircraft means any of the following:
    (1) An aircraft used only for the Government, except as provided 
in paragraphs (5) and (7) of this definition.
    (2) An aircraft owned by the Government and operated by any 
person for purposes related to crew training, equipment development, 
or demonstration, except as provided in paragraph (7) of this 
definition.
    (3) An aircraft owned and operated by the government of a State, 
the District of Columbia, or a territory or possession of the United 
States or a political subdivision of one of these governments, 
except as provided in paragraph (7) of this definition.
    (4) An aircraft exclusively leased for at least 90 continuous 
days by the government of a State, the District of Columbia, or a 
territory or possession of the United States or a political 
subdivision of one of these governments, except as provided in 
paragraph (7) of this definition.
    (5) An aircraft owned or operated by the armed forces or 
chartered to provide transportation or other commercial air service 
to the armed forces under the conditions specified by 49 U.S.C. 
40125(c). In the preceding sentence, the term ``other commercial air 
service'' means an aircraft operation that--

[[Page 67898]]

    (i) Is within the United States territorial airspace;
    (ii) The Administrator of the Federal Aviation Administration 
determines is available for compensation or hire to the public; and
    (iii) Must comply with all applicable civil aircraft rules under 
title 14, Code of Federal Regulations.
    (6) An unmanned aircraft that is owned and operated by, or 
exclusively leased for at least 90 continuous days by, an Indian 
Tribal government, as defined in section 102 of the Robert T. 
Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 
5122), except as provided in paragraph (7) of this definition.
    (7) As described in 49 U.S.C. 40125(b), an aircraft described in 
paragraphs (1), (2), (3), or (4) of this definition does not qualify 
as a public aircraft when the aircraft is used for commercial 
purposes or to carry an individual other than a crewmember or a 
qualified non-crewmember.
    Public aircraft operation means operation of an aircraft that 
meets the legal definition of public aircraft established in 49 
U.S.C. 40102(a)(41) and the legal qualifications for public aircraft 
status outlined in 49 U.S.C. 40125.
    State aircraft means an aircraft operated by the Government for 
sovereign, noncommercial purposes such as military, customs, and 
police services. Military aircraft are afforded status as state 
aircraft. In very rare circumstances, DoD-contracted aircraft may be 
designated, in writing, by a responsible Government official 
pursuant to DoD Directive 4500.54E, DoD Foreign Clearance Program, 
to be operated in state aircraft status, and such status cannot be 
deemed without a written designation by an authorized Government 
official.
    (b) Combined regulation/instruction. Upon award, for contract 
performance to be conducted as a public aircraft operation, the 
Contractor shall be bound by the operating procedures contained in 
the combined regulation/instruction entitled ``Contractor's Flight 
and Ground Operations'' (Air Force Instruction 10-220_IP, Army 
Regulation 95-20, NAVAIR Instruction 3710.1 (Series), Coast Guard 
Instruction M13020.3 (Series), and Defense Contract Management 
Agency Instruction 8210.1 (Series)) in effect on the date of 
contract award.
    (c) Contractor liability for operations for contract performance 
conducted as public aircraft operations or state aircraft 
operations.
    (1) The Contractor assumes responsibility for all damage or 
injury to persons or property, including the Contractor's employees 
and property and Government personnel and property, occasioned 
through the use, maintenance, and operation of the Contractor's 
aircraft or other equipment by, or the action of, the Contractor or 
the Contractor's employees and agents.
    (2) The Contractor, at the Contractor's expense, shall maintain 
adequate public liability and property damage insurance, including 
hull insurance for the Contractor's aircraft, during the duration of 
this contract, insuring the Contractor against all claims for injury 
or damage.
    (3) The Contractor shall maintain workers' compensation and 
other legally required insurance with respect to the Contractor's 
own employees and agents.
    (4) The Government will in no event be liable or responsible for 
damage or injury to any person or property occasioned through the 
use, maintenance, or operation of any aircraft or other equipment 
by, or the action of, the Contractor or the Contractor's employees 
and agents in performing under this contract, and the Government 
shall be indemnified and saved harmless against claims for damage or 
injury in such cases.

    (End of clause)

[FR Doc. 2021-25734 Filed 11-29-21; 8:45 am]
BILLING CODE 5001-06-P