Fair Allocation of Government Fault Act

Fair Allocation of Government Fault Act - Directs a State court or a U.S. district court in any civil action brought by a Government employee (including a member of the U.S. armed forces or the National Guard) alleging liability of a Government contractor for harm concerning which the employee is entitled to receive Federal benefits: (1) at the request of any party, to make findings of fact as to the proportion of fault of the United States in causing such harm; and (2) to reduce any judgment of liability rendered against the contractor by the proportion of fault of the United States. Reduces the amount the United States is entitled to be reimbursed through right of subrogation for Federal benefits provided as a result of harm for which a contractor is liable by the proportion of fault of the United States.

Prohibits any reduction of a judgment against a contractor in a civil action unless the contractor notifies the U.S. Attorney General, within 90 days after such civil action is filed, that the contractor intends to seek an equitable reduction of liability. Allows the United States 90 days after receipt of such notice to intervene as a party in such action. Sets forth factors to be considered by the court in determining the proportion of fault of the United States.

Requires the United States to hold harmless and indemnify a contractor against any liability (for damages arising from personal injury, illness, or death or from damage to, or loss of use of, property) resulting from goods or services supplied pursuant to a Government contract to the extent such liability exceeds the amount of commercial insurance or qualified self-insurance protection the contractor is required to carry under the contract. Prohibits such indemnification of a contractor: (1) if the goods or services supplied under the contract are also sold by the contractor to nongovernmental purchasers for identical application or for nongovernmental use; (2) for liability caused by the gross negligence, willful misconduct, or lack of good faith of any of the directors, officers, or managing officials of the contractor; and (3) for liability resulting from any claim or action against the contractor unless the contractor notifies the contracting agency of such claim or action within a reasonable time. Permits the United States to control or assist in the settlement or defense of any such claim or action which can reasonably be expected to give rise to a claim for indemnification.

Requires a contractor seeking indemnification to present a claim to the contracting agency. Allows a contractor aggrieved by the agency's determination to appeal such determination under the Contract Disputes Act of 1978.

Permits the United States to discharge its indemnification obligation by making direct payments from specified funds to the contractor involved or the third persons to whom the contractor may be liable.

Provides that the provisions of the Act shall not apply with respect to any risks against which indemnification may be obtained under the Atomic Energy Act of 1954. Declares that nothing in this Act shall be construed to create any liability of the Government to any person other than to contractors for indemnification.