FAR 52.246-24—Limitation of Liability-High-Value Items.
Plain-English Summary
FAR 52.246-24, Limitation of Liability-High-Value Items, allocates post-acceptance risk for certain high-value supplies and limits when the contractor is financially responsible for loss of or damage to Government property caused by defects or deficiencies in those supplies. The clause addresses the basic liability rule after Government acceptance, the exception for willful misconduct or lack of good faith by the contractor’s managerial personnel, the effect of contractor insurance or self-insurance reserves, the contractor’s continuing obligations for correction, repair, replacement, or other relief, the Government’s right to recover the cost of correction when repair or replacement is not feasible or desired, and the clause’s relationship to other contract clauses such as warranty of technical data, ground/flight risks, and Government property. It also includes Alternate I, which is used when the contract contains both high-value items and other end items and requires the contracting officer to identify the covered items by line item. In practice, this clause narrows the contractor’s exposure after acceptance, but it does not eliminate all liability, especially where managerial misconduct, insurance coverage, or separate contractual remedies apply. It is designed to balance the Government’s need for protection on expensive items with a predictable liability framework for contractors.
Key Rules
Post-acceptance liability is limited
After Government acceptance, the contractor is generally not liable for loss of or damage to Government property, including the delivered supplies, if the loss results from defects or deficiencies in the supplies. This is the core protection provided by the clause.
Misconduct exception applies
The limitation does not apply if the defect, deficiency, or Government acceptance resulted from willful misconduct or lack of good faith by the contractor’s managerial personnel. The clause defines managerial personnel broadly to include directors, officers, and certain managers or equivalent representatives with substantial supervisory authority.
Insurance or reserves create liability
If the contractor has insurance or a self-insurance reserve covering the relevant risk, the contractor is liable to the Government up to the amount of that insurance or reserve for post-acceptance loss or damage caused by defects or deficiencies. The clause ties liability to the coverage the contractor has already established.
Other contract remedies remain
The clause does not reduce the contractor’s separate obligations to correct, repair, replace, or otherwise provide relief for defective supplies under other contract terms. Those remedies can still be enforced even when the liability limitation applies.
Government may recover equivalent cost
For non-cost-reimbursement contracts, if loss or damage occurs and correction, repair, or replacement is not feasible or not desired by the Government, the contracting officer may require the contractor to pay the amount it would have cost to make the correction before the loss occurred, or may provide other equitable relief.
Other clauses are preserved
This clause does not limit Government rights under included clauses covering warranty of technical data, ground and flight risks or aircraft flight risks, or Government property. Those clauses operate independently and may provide additional remedies or risk allocation.
Alternate I narrows application
When the contract includes both high-value items and other end items, Alternate I requires the contracting officer to identify the high-value items by line item and state that the clause applies only to those identified items. This prevents the clause from being applied too broadly.
Responsibilities
Contracting Officer
Insert the clause when prescribed by FAR 46.805, identify covered high-value items by line item when Alternate I applies, and determine whether the Government will seek payment, other equitable relief, or another remedy when correction, repair, or replacement is not feasible or desired. The contracting officer also must ensure the clause is coordinated with any applicable warranty, Government property, or risk-of-loss provisions.
Contractor
Deliver supplies that are free from defects and deficiencies, remain responsible for correction, repair, replacement, or other relief required elsewhere in the contract, and understand that post-acceptance liability may still arise if managerial personnel engage in willful misconduct or lack good faith. The contractor must also account for any insurance or self-insurance reserve that can create liability up to the covered amount.
Government
Accept supplies in accordance with contract requirements, identify and assert claims when post-acceptance loss or damage is linked to defects or deficiencies, and determine whether correction, repair, replacement, or monetary/equitable relief is the appropriate remedy. The Government must also preserve and apply any rights under other relevant clauses.
Contractor’s managerial personnel
Exercise proper supervision and good-faith decision-making because their willful misconduct or lack of good faith can remove the liability limitation. Their conduct can be imputed to the contractor for purposes of this clause.
Practical Implications
Acceptance matters a great deal: once the Government accepts the supplies, the contractor’s exposure is generally narrowed, so parties should pay close attention to inspection, acceptance, and documentation before acceptance occurs.
This clause is not a blanket shield. Contractors can still face liability through insurance coverage, self-insurance reserves, separate warranty obligations, or other clauses that preserve Government rights.
The definition of managerial personnel is broad enough to capture senior decision-makers and plant-level leadership, so compliance and ethics failures at the management level can defeat the limitation.
For non-cost-reimbursement contracts, the Government may seek the cost of correction even if it does not want the item repaired or replaced, so contractors should be prepared for monetary claims rather than only physical rework.
When mixed contracts include both high-value and other items, failure to identify the covered line items clearly can create disputes over clause applicability and risk allocation.
Official Regulatory Text
As prescribed in 46.805 , insert the following clause: Limitation of Liability-High-Value Items (Feb 1997) (a) Except as provided in paragraphs (b) through (e) of this clause, and notwithstanding any other provision of this contract, the Contractor shall not be liable for loss of or damage to property of the Government (including the supplies delivered under this contract) that- (1) Occurs after Government acceptance of the supplies delivered under this contract; and (2) Results from any defects or deficiencies in the sup-plies. (b) The limitation of liability under paragraph (a) of this clause shall not apply when a defect or deficiency in, or the Government’s acceptance of, the supplies results from willful misconduct or lack of good faith on the part of any of the Contractor’s managerial personnel. The term "Contractor’s managerial personnel," as used in this clause, means the Contractor’s directors, officers, and any of the Contractor’s 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 operations at any one plant, laboratory, or separate location at which the contract is being performed; or (3) A separate and complete major industrial operation connected with the performance of this contract. (c) If the Contractor carries insurance, or has established a reserve for self-insurance, covering liability for loss or damage suffered by the Government through purchase or use of the supplies required to be delivered under this contract, the Contractor shall be liable to the Government, to the extent of such insurance or reserve, for loss of or damage to property of the Government occurring after Government acceptance of, and resulting from any defects or deficiencies in, the supplies delivered under this contract. (d) (1) This clause does not diminish the Contractor’s obligations, to the extent that they arise otherwise under this contract, relating to correction, repair, replacement, or other relief for any defect or deficiency in supplies delivered under this contract. (2) Unless this is a cost-reimbursement contract, if loss or damage occurs and correction, repair, or replacement is not feasible or desired by the Government, the Contractor shall, as determined by the Contracting Officer- (i) Pay the Government the amount it would have cost the Contractor to make correction, repair, or replacement before the loss or damage occurred; (ii) Provide other equitable relief. (e) This clause shall not limit or otherwise affect the Government’s rights under clauses, if included in this contract, that cover- (1) Warranty of technical data; (2) Ground and flight risks or aircraft flight risks; or (3) Government property. (End of clause) Alternate I (Apr 1984) . If the contract is for both high-value items and other end items, the contracting officer shall identify the high-value items by line item and insert the following preamble before paragraph (a): (This clause shall apply only to those items identified in this contract as being subject to this clause.)