FAR 28.306—Insurance under fixed-price contracts.
Plain-English Summary
FAR 28.306 explains when and how insurance requirements may be imposed in fixed-price contracts, even though the Government normally does not concern itself with a contractor’s insurance on fixed-price work. It identifies the special circumstances that can justify agency-specified insurance requirements: when the contractor is principally engaged in Government work, when Government property is involved, when the work will be performed on a Government installation, or when the Government chooses to assume risks the contractor would ordinarily insure commercially. The section also addresses the specific case of work on a Government installation and ties those contracts to the clause at 52.228-5, Insurance—Work on a Government Installation. It explains that, when that clause is required by FAR 28.310, the insurance coverage in 28.307 is the minimum required and must be stated in the contract, while the contracting officer may require more coverage or higher limits. If the clause is included voluntarily because the contracting officer believes it benefits the Government, the contracting officer has flexibility to omit some types of coverage or reduce limits as appropriate. In practice, this section helps contracting officers decide when insurance terms belong in a fixed-price contract and helps contractors understand when they may face specific insurance obligations beyond their normal commercial coverage.
Key Rules
Default rule: limited Government concern
For fixed-price contracts, the Government ordinarily does not worry about the contractor’s insurance coverage. Insurance requirements are the exception, not the rule, and should be imposed only in special circumstances.
Special circumstances justify requirements
Agencies may specify insurance requirements when the contractor is mainly doing Government work, Government property is involved, the work occurs on a Government installation, or the Government elects to assume risks the contractor would normally insure commercially.
Mandatory clause on installations
When 52.228-5 is required by FAR 28.310 for work on a Government installation, the insurance coverage listed in FAR 28.307 is the minimum required. Those minimum coverages must be included in the contract schedule or elsewhere in the contract.
Higher limits may be required
Even when the minimum coverages apply, the contracting officer may require additional types of coverage or higher policy limits if the circumstances warrant it.
Discretion when clause is optional
If 52.228-5 is included even though FAR 28.310 does not require it, the contracting officer may tailor the insurance terms. Any of the insurance types in FAR 28.307 may be omitted, and the limits may be lowered if appropriate.
Contract text must reflect requirements
When insurance is required, the contract must clearly state the applicable coverage and limits. This avoids ambiguity and ensures the contractor knows exactly what insurance obligations apply.
Responsibilities
Contracting Officer
Determine whether special circumstances justify insurance requirements in a fixed-price contract. If 52.228-5 is required, ensure the minimum coverage from FAR 28.307 is included in the contract and decide whether additional coverage or higher limits are needed. If the clause is included voluntarily, tailor the coverage and limits as appropriate to the Government’s interest.
Agency
Apply insurance requirements only in the special circumstances identified in this section and ensure contracting personnel follow the related FAR provisions, including the requirement in 28.310 for when 52.228-5 must be used.
Contractor
Review the contract for any specified insurance obligations, obtain and maintain the required coverage and limits, and understand that fixed-price status does not prevent the Government from imposing insurance terms in the circumstances described here.
Practical Implications
Contractors should not assume fixed-price contracts mean no insurance clauses; work on a Government installation often triggers specific coverage requirements.
The contract must be checked carefully for the exact insurance types and limits, because the minimums may be increased or, in some cases, reduced if the clause is optional.
A common pitfall is failing to include the required insurance terms in the schedule or elsewhere in the contract when 52.228-5 is mandatory.
Contracting officers should document why insurance requirements are being imposed, especially when the contract is fixed-price and the Government is departing from the general rule of limited concern.
When the clause is included voluntarily, both sides should confirm whether any coverage was intentionally omitted or reduced so there is no later dispute about what was required.
Official Regulatory Text
(a) General . Although the Government is not ordinarily concerned with the contractor’s insurance coverage if the contract is a fixed-price contract, in special circumstances agencies may specify insurance requirements under fixed-price contracts. Examples of such circumstances include the following: (1) The contractor is, or has a separate operation, engaged principally in Government work. (2) Government property is involved. (3) The work is to be performed on a Government installation. (4) The Government elects to assume risks for which the contractor ordinarily obtains commercial insurance. (b) Work on a Government installation. (1) When the clause at 52.228-5 , Insurance-Work on a Government Installation, is required to be included in a fixed-price contract by 28.310 , the coverage specified in 28.307 is the minimum insurance required and shall be included in the contract Schedule or elsewhere in the contract. The contracting officer may require additional coverage and higher limits. (2) When the clause at 52.228-5 , Insurance-Work on a Government Installation, is not required by 28.310 but is included because the contracting officer considers it to be in the Government’s interest to do so, any of the types of insurance specified in 28.307 may be omitted or the limits may be lowered, if appropriate.