Is DBA Insurance, Defense Base Act insurance reimbursable on a government contract?
It is great news to be awarded a government contract. All the hard work that went into the proposal preparation and the on-time delivery has resulted in a “Big Win” for your company. But what about the insurance costs? Sure, you have insurance on your company, but does it anticipate the new exposure? The new contract?
Premium determination for the new contract can have varied results. If the insurance premium is low, no problem. If the premium is higher than expected, the impact on the contract profitability can be devastating.
Can the insurance premium be reimbursed by the US Government?
Each awarded government contract stands on its own for reimbursable costs. Two contract types include firm-fixed-price contracts and fixed-price contracts. The contracting officer and the proposal team must understand the insurance cost impact to the contract. Costs outside of the scope of the operations will straddle the company with additional costs, reducing profitability.
Cost reimbursement must be approved by the contracting officer, and submitted for repayment if permitted. On a fixed-price contract, there may be no relief. It is important to know in advance, the overall cost of insurance.
To determine premium, the rate, calculated per $100 in payroll, will provide an estimate of the cost. Your insurance broker/professional should assist with the rate determination. By contacting their office and asking for a rate associated with a certain occupation, you can determine the cost of insurance in advance so that profitability will not be marginalized.
If the insurance purchase was not considered during the proposal stage, it will impact the overall profitability of the contract award.