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FAR and DFARS › FAR Part 32: Contract Financing › Subpart 32.5

FAR 32.503-16 Risk of loss.

The codified text (eCFR, as of 2026-10-02). Under the Revolutionary FAR Overhaul ↗, agencies follow class deviations with new text for many parts while the formal rules go through the Federal Register: check the solicitation and your contract's clauses, which rule.

In plain English

This section explains that under the Progress Payments clause, the contractor generally bears the risk of loss for Government property, even though the Government holds title, unless the Government expressly assumes that risk. If a loss occurs on property for which the contractor bears the risk, the contractor must repay unliquidated progress payments based on allocable costs. The contractor does not pay for losses when the Government has assumed the risk, but a serious loss may still affect contract performance and require contracting officer action.

Applies to: Contractors operating under the Progress Payments clause with Government property

What it requires

  • Bear the risk of loss for Government property unless the Government expressly assumes it
  • Repay unliquidated progress payments based on costs allocable to the property if a loss occurs and the contractor bears the risk

Key terms: Progress Payments clause · risk of loss · Government property · unliquidated progress payments · normal spoilage

Written by AI from this section's text. A guide, not legal advice: the text below rules.

The text

(a) Under the Progress Payments clause, and except for normal spoilage, the contractor bears the risk of loss for Government property under the clause, even though title is vested in the Government, unless the Government has expressly assumed this risk. The clauses prescribed in this regulation related to progress payments, default, and terminations do not constitute a Government assumption of this risk.

(b) If a loss occurs in connection with property for which the contractor bears the risk, the contractor is obligated to repay to the Government the amount of unliquidated progress payments based on costs allocable to the property.

(c) The contractor is not obligated to pay for the loss of property for which the Government has assumed the risk of loss. However, a serious loss may impede the satisfactory progress of contract performance, so that the contracting officer may need to act under paragraph (c)(5) of the Progress Payments clause.

← 32.503-15 Application of Government title terms. · 32.504 Subcontracts under prime contracts providing progress payments. →

Rule changes for FAR Part 32

Source: eCFR, 48 CFR chapters 1 and 2 (GPO GovInfo bulk data) ↗. Plain words for the terms: glossary.

FAR 32.503-16 Risk of loss · SpendQuery