FAR 28.307—Insurance under cost-reimbursement contracts.
Plain-English Summary
FAR 28.307 addresses insurance requirements for cost-reimbursement contracts and, when the prime contract flows down the requirement, for subcontracts as well. Its core purpose is to make sure the Government is protected against loss, damage, and liability risks that can arise while a contractor is performing reimbursable work, where the Government ultimately bears most allowable costs. This section points readers to FAR 28.307-2 for the specific types of insurance ordinarily required and the minimum liability amounts, and it also directs attention to FAR 28.308 for self-insurance as an alternative or supplement in appropriate cases. In practice, this means contracting officers must ensure the contract includes the right insurance coverage terms, contractors must maintain and document coverage that meets the contract’s requirements, and subcontractors may be bound when the prime contract’s insurance terms are extended down the chain. The section is important because insurance shortfalls can create performance risk, cost allowability issues, and exposure to uninsured claims during contract performance.
Key Rules
Insurance is ordinarily required
Cost-reimbursement contracts ordinarily require the insurance types listed in FAR 28.307-2. The rule is not optional by default; the contract should include the required coverage unless a justified exception or alternative arrangement applies.
Minimum liability amounts apply
The required insurance is not just about having coverage, but having coverage at least in the minimum liability amounts stated in FAR 28.307-2. Contractors should verify that policy limits, endorsements, and any deductibles or retentions satisfy the contract requirement.
Subcontracts may be covered
If the prime contract’s insurance terms are extended to a subcontract, the subcontractor must also comply with the required insurance provisions. This creates a flowdown obligation that the prime contractor must manage and enforce.
Self-insurance is addressed separately
FAR 28.307 points to FAR 28.308 for self-insurance. That means a contractor may rely on self-insurance only under the rules governing that approach, rather than treating it as an automatic substitute for commercial insurance.
Contract terms control application
The insurance requirement applies through the contract and any incorporated subcontract terms, so the exact obligations depend on how the contracting officer structures the award. Parties must read the contract clauses carefully to determine what coverage is required and whether any special approvals or deviations apply.
Responsibilities
Contracting Officer
Include the appropriate insurance requirements in cost-reimbursement contracts, ensure the required types and minimum amounts are identified, and decide whether the prime contract’s insurance terms must be flowed down to subcontracts. The contracting officer should also evaluate any proposed self-insurance arrangement under the applicable FAR provisions.
Contractor
Obtain and maintain the insurance coverage required by the contract, confirm that policy limits meet or exceed the minimum amounts, and ensure the coverage remains in force during performance. The contractor must also pass required insurance terms to covered subcontractors and monitor compliance.
Subcontractor
When the prime contract’s insurance requirements are extended to the subcontract, obtain and maintain the required coverage and comply with the stated minimum liability amounts. The subcontractor must provide evidence of coverage if required by the subcontract terms.
Agency
Establish and apply agency acquisition practices that support proper risk protection in cost-reimbursement contracting, including oversight of contract clauses and any approvals or guidance related to self-insurance. The agency also relies on contracting personnel to ensure the Government’s interests are protected.
Practical Implications
Contractors should check insurance early, before performance starts, because missing coverage can delay award, stop work, or create a compliance issue.
The minimum amounts matter as much as the type of insurance; a policy that exists but has too little coverage may still be noncompliant.
Prime contractors need to manage flowdown carefully, since subcontractor insurance gaps can create project risk even if the prime is properly insured.
Self-insurance is not a casual substitute; contractors should expect to justify it under FAR 28.308 and be prepared for contracting officer review.
Contracting officers should confirm that the contract language clearly states what insurance is required and whether subcontract flowdown is intended, to avoid disputes later.
Official Regulatory Text
Cost-reimbursement contracts (and subcontracts, if the terms of the prime contract are extended to the subcontract) ordinarily require the types of insurance listed in 28.307-2 , with the minimum amounts of liability indicated. (See 28.308 for self-insurance.)