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6 Common Myths About DBA Insurance That Can Cost Government Contractors

Defense Base Act insurance is one of the most misunderstood coverages in government contracting.

I see it all the time. A contractor assumes DBA only applies to a narrow set of workers, or believes a waiver solves everything, or waits until after contract award to think about it. That is where problems begin.

If your company performs work overseas under a U.S. government contract, bad assumptions about DBA can create compliance issues, claims issues, and financial exposure.

Here are six of the most common myths I continue to see, and what government contractors should understand instead.

Myth 1: DBA insurance only applies to people working on military bases

That is not true.

The Defense Base Act reaches much further than military bases. According to the U.S. Department of Labor, DBA can apply to private employers working on U.S. military bases outside the United States, but it also applies to many public works contracts, service contracts connected to national defense or war activities, certain Foreign Assistance Act contracts, and some welfare or similar services performed for the benefit of the Armed Forces overseas.

That means a contractor does not need to be doing traditional base support work for DBA to matter. Construction, logistics, technical services, operations support, and other overseas contract performance can all trigger the requirement. The Department of Labor also defines “public work” broadly and makes clear it is not limited to construction. It includes service contracts and projects connected to national defense or war activities.

Practical takeaway:
If your work is overseas and tied to a U.S. government contract, do not assume DBA does not apply just because there is no military base involved.

Myth 2: DBA only covers U.S. citizens

Wrong.

The Department of Labor states that if the Act applies, all employees engaged in that employment are covered, regardless of nationality. That includes U.S. citizens and residents, host country nationals, and third country nationals.

This is one of the most expensive misunderstandings in the DBA world. Some contractors still assume local nationals or third country nationals fall outside the requirement. That can create a serious problem if payroll has been allocated incorrectly or coverage was never secured for the full workforce.

Practical takeaway:
When DBA applies, review the full labor mix carefully. Do not limit your thinking to U.S. employees only.

Myth 3: A waiver means DBA is no longer a concern

Not so fast.

Yes, waivers exist. But the Department of Labor makes clear that a waiver must be requested by the head of a U.S. government department or agency, and even when granted, it does not apply to U.S. citizens, U.S. legal residents, or employees hired in the United States. A waiver is also only valid if an alternative local workers’ compensation system applies. If no local workers’ compensation law exists, the waiver has no real effect.

That means waivers are not a simple escape hatch. They are limited, technical, and often misunderstood.

Practical takeaway:
Never build your DBA strategy around assumptions about a waiver. Review the actual waiver terms, the employee classifications, and the local law behind it.

Myth 4: DBA only responds to injuries that happen during work hours

This one catches many people off guard.

The Department of Labor explains that DBA provides disability, medical, and death benefits to covered employees injured or killed in the course of employment, whether or not the injury or death occurred during work hours.

That does not mean every off duty event is covered, but it does mean DBA is not as narrow as many contractors assume. Overseas work environments can create a wider exposure profile than domestic workers compensation, which is one reason DBA needs to be reviewed carefully before people deploy.

Practical takeaway:
Do not treat DBA like ordinary domestic workers compensation and assume the exposure begins and ends with the shift.

Myth 5: The government handles the DBA problem for the contractor

It does not.

FAR 52.228-3 requires the contractor to secure the required benefits before contract performance begins and maintain them until contract performance is complete. It also requires prompt reporting of employee injury or death to the Department of Labor.

The Department of Labor also states that every covered contract must require the contractor and subcontractor to secure payment of compensation and maintain that security during the contract term. If a subcontractor fails to secure compensation, the contractor can be held liable.

This is where prime contractors can get into trouble. Too many assume the subcontractor has it handled, only to discover later that the requirement was missed or misunderstood.

Practical takeaway:
DBA responsibility cannot be delegated casually. Prime contractors need to verify, not assume.

Myth 6: Failing to secure DBA coverage is just an administrative issue

It is much more serious than that.

The Department of Labor states that employers who fail to secure required compensation may face criminal prosecution, fines, imprisonment, and potential personal liability for certain corporate officers. An injured employee may also be able to sue for damages if the employer failed to secure the required compensation.

That is not a paperwork problem. That is a real business risk.

Practical takeaway:
Ignoring DBA can expose the company and leadership personally. This is a compliance issue worth getting right before work begins.

Why this matters to government contractors

DBA is not a side issue. It is part of contract compliance, employee protection, and risk management.

When contractors misunderstand DBA, the results usually show up in one of three places:

First, the company may go into performance with a compliance gap.

Second, payroll and worker classifications may be mishandled, leading to inaccurate pricing or audit trouble.

Third, a claim happens and the business finds out too late that its assumptions were wrong.

None of those outcomes are good.

Final thought

DBA insurance does not have to be confusing, but it does need to be taken seriously.

If your company works outside the United States under a U.S. government contract, this is not the place for guesswork. The contract terms matter. The labor mix matters. The location matters. The waiver question matters. And getting it wrong can become expensive very quickly.

If you want a second opinion on whether your contract triggers DBA, or you need help reviewing payroll allocation, waivers, subcontractor responsibilities, or the quote process, that conversation should happen before the problem shows up.