Cost Questions: Is DBA Insurance an Allowable Cost?

Cost Questions: Is DBA Insurance an Allowable Cost?

Jan 22, 2021 | Defense Base Act, Workers' Comp

Defense Base Act Insurance (DBA) was enforced by the War Hazard Compensation Act and is crucial for all US government employees working overseas.

The law insists that workers’ compensation benefits are available for those individuals covered and that these are delivered correctly and promptly.

But is DBA Insurance an allowable cost? Read on to learn more…

DBA Insurance Explained

You are liable for DBA Insurance in the following categories.

  • If you work for a private employer at a US military base or on any lands used by the US for military purposes outside the US. This includes those in Territories and possessions owned by the US.
  • If you work for American employers providing services of welfare or similar outside the US, for the Armed Forces.
  • If you work on public employment contracts with any US government agency. This includes the likes of construction services, and national defense or war-related contracts out of the US.
  • If you work on contracts approved/funded by the US under the Foreign Assistance Act to facilitate the cash sale of military equipment, materials, and services to US allies, outside of the US.

The need for this insurance applies to you, whatever your nationality. You are therefore eligible for the benefits of DBA Insurance.

Is DBA Insurance an Allowable cost?

Contractors buy DBA insurance from commercial carriers. They will typically purchase it at market premiums.

Auditors are obligated to make sure the contractor searches for several competitive quotes so that the most reasonable rates are obtained for the DBA Insurance.

Some contractors can also offer additional insurance benefits on top of the mandatory DBA Insurance requirements. These must all be assessed in terms of how reasonable they are in accordance with FAR 31.205-6, Compensation for personal services.

An auditor must seek guidance from the contractor themselves on why any additional insurance benefits in excess of the mandatory DBA coverage is a comparable method of compensation, in relation to other companies in the same industry at the location in question.

It also must be ascertained that these extra benefits are offset by lower elements of compensation.

The Defense Contract Audit Agency (DCAA) is the government agency in charge of auditing Department of Defense (DoD) contracts.

DCAA has laid out term regarding the allowability of DBA insurance premiums by stating the following:

“A contractor is responsible for accounting for costs appropriately and for maintaining records, including supporting documentation, adequate to demonstrate that costs claimed have been incurred, are allocable to the contract, and comply with applicable cost principles in this subpart and agency supplements.

“The contracting officer may disallow all or part of a claimed cost that is inadequately supported.” 

Legal Assistance

Claiming compensation can often be a tricky and daunting process. And if it goes wrong, you’ll need to seek legal help.

In order to protect your rights when it comes to Defense Base Act legal issues, we can offer help at Barnes Law.

Now you’re clued up on allowable cost, check out our blog posts for more information or get in touch if you have any queries.