In accordance with the provisions of the Act of February 24, 1919, as amended (6 U.S.C. 15) and Treasury Department Circular No. 154 dated February 6, 1935 (31 CFR Part 225), any person required to furnish a bond to the Government has the option, in lieu of furnishing a surety or sureties thereon, of depositing certain United States bonds or notes in an amount equal at their par value to the penal sum of the bond, together with a duly executed power of attorney and agreement authorizing the collection or sale of such United States bonds or notes in the event of default of the principal on the bond. The contracting officer may turn these securities over to the finance or other officer as provided in agency procedures, or deposit them with the Treasurer of the United States, a Federal Reserve Bank, branch Federal Reserve Bank having the requisite facilities, or other depository duly designated for the purpose by the Secretary of the Treasury, under procedures prescribed by the agency concerned and Treasury Department Circular No. 154. However, the contracting officer shall deposit with the Treasurer of the United States all such bonds and notes received by him in the District of Columbia. § 1-10.204-2 Certified or cashier's checks, bank drafts, money orders, currency, or irrevocable letters of credit.

Any person required to furnish a bond has the option, in lieu of furnishing surety or sureties thereon, of depositing a certified or cashier's check, a bank draft, a Post Office money order, currency, or an irrevocable letter of credit, in an amount equal to the penal sum of the bond. Certified or cashier's checks, bank drafts, or Post Office money orders shall be drawn to the order of the appropriate Federal agency.

§ 1-10.205 Consent of surety.

In connection with any amendment, modification, or supplemental agreement with respect to which the waiver of notice to the surety contained in the bond form is inapplicable and which would otherwise effect the release of a surety, or in any other situation as prescribed by each agency, the contracting officer shall obtain the written consent thereto of the surety or sureties on the existing bond or bonds (notwithstanding

Ordinarily, it is the policy of the Government not to insure its own risks. In the absence of specific statutory authority for the payment of insurance premiums, appropriated moneys of the United States generally are not regarded as available for that purpose. There are, however, exceptions to these two statements. Insurance will be required where it is mandatory by law, and may be required in the absence of any statutory prohibition when in the best interest of the Government. Examples of situations which may warrant obtaining insurance are (a) where it is considered desirable to utilize the facilities and services of the insurance industry (e.g., safety protection and claim services), (b) where, in special instances, it is deemed necessary or desirable in connection with the performance of a contract (e.g., transportation of particularly valuable items), or (c) where commingling of property or the conditions of the contract make the carrying of insurance reasonably necessary for the protection of the several interests concerned.

§ 1-10.302 Notice of cancellation or change.

Where insurance is required by contract provision or in writing by the approving authority, the policies evidencing such insurance shall contain an endorsement to the effect that cancellation

or material change in the policies, adversely affecting the interest of the Government in such insurance, shall not be effective unless the written notice as required by the approving authority is given.

§ 1-10.303 Responsibility for loss of or damage to Government property. Where Government property may be in the possession of or under the control of the contractor, or in the custody of a transportation company, the contract shall set forth the responsibility of the contractor for loss of or damage to such Government property.

§ 1-10.304 Insurance against loss of or damage to Government property.

In instances where insurance is required or approved to cover loss of or damage to Government property, such insurance may be provided either by specific insurance policies, or by inclusion of such risks in the contractor's existing insurance policies. When appropriate the insurance policies shall make formal disclosure of the Government's interest in the property.

§ 1-10.305 Procedures to be followed in the event of loss or damage to Gov. ernment property.

Upon the happening of loss of or damage to any Government property, concerning which the contractor is relieved of responsibility by contract provision, the procedure to be followed shall be as prescribed by the agency. Subpart 1-10.4-Insurance Under

Fixed-Price Contracts

§ 1-10.400 Scope of subpart.

This subpart sets forth general policies with respect to insurance under fixedprice contracts for supplies and services (including construction).

99-187-69-20

(d) The work required by the contract is performed within a Government establishment.

(e) The Government may desire to assume risks for which the contractor ordinarily obtains commercial insurance. § 1-10.402 Workmen's compensation insurance overseas.

(a) The Defense Base Act, as amended (42 U.S.C. 1651 et seq.), extends the application of the Longshoremen's and Harbor Workers' Compensation Act (33 U.S.C. 901 et seq.) to various classes of employees engaged in work outside the United States, including any employee engaged (1) in the performance of a public work contract or (2) in the performance of any contract approved or financed pursuant to the Foreign Assistance Act of 1961 (P.L. 87-195) other than (i) contracts approved or financed by the Development Loan Fund except where the Secretary of Labor, acting upon the recommendation of any department or agency of the United States, determines that such contracts should be covered, or (ii) contracts exclusively for the furnishing of materials or supplies. As used in this paragraph, a "public work" contract includes any contract for a fixed improvement or any project, whether or not fixed, involving construction, alteration, removal, or repair for the public use of the United States or its allies, including projects or operations under service contracts and projects in connection with the national defense or with war activities, dredging, harbor improvements, dams, roadways, and housing, as well as preparatory and ancillary work in connection therewith at the site or on the project. The following clause shall be included in all contracts subject to the Defense Base Act unless applicability of that Act has been waived by the Secretary of Labor as provided in paragraph (b) of this § 1-10.402:

WORKMEN'S COMPENSATION INSURANCE

(DEFENSE BASE ACT)

The Contractor before commencing performance under this contract shall provide and thereafter maintain such Workmen's Compensation Insurance or security as is required by the Defense Base Act, as amended (42 U.S.C. 1651 et seq.). The Contractor further agrees to insert in all subcontracts hereunder to which the Defense Base Act is applicable, a clause similar to this clause, including this sentence, imposing on

all such subcontractors a like requirement to comply with the Defense Base Act.

(b) Upon the recommendation of the head of the agency concerned, the Secretary of Labor may waive the applicability of the Defense Base Act with respect to any contract, subcontract, or subordinate contract, work location, or classification of employees. Subpart 1-10.5 Insurance Under Cost-Reimbursement Type Contracts § 1-10.500 Scope of subpart.

This subpart sets forth general policies with respect to insurance under costreimbursement type contracts for supplies and services (including construction).

§ 1-10.502-1 Workmen's compensation and employers' liability insurance. Compliance with applicable workmen's compensation and occupational disease statutes will be required, and employers' liability coverage will be obtained where available. In jurisdictions where all occupational diseases are not compensable under applicable law, insurance for occupational diseases will be required under the employers' liability section of the insurance policy; however, such additional insurance will not be required where contract operations are commingled with the contractor's commercial operations so that it would be impracticable to require such coverage. The clause set forth in § 1-10.402 shall be included in all contracts subject to the Defense Base Act unless applicability of that Act has been waived by the Secretary of Labor as provided in § 1-10.402 (b). § 1-10.502-2

ance.

General liability insur

(a) Bodily injury liability insurance will be required on the comprehensive form of policy.

(b) Property damage liability insurance will be required only in special circumstances as determined by the agency concerned. Property damage liability insurance may be approved when the nature of the contract operations warrant its purchase or where such operations are not separable from the contractor's commercial operations.

§ 1-10.502-3 Automobile liability insur

ance.

Automobile liability insurance will be required on the comprehensive form of policy and will provide for bodily injury and property damage liability covering the operation of all automobiles used in connection with the performance of the contract.

Qualified programs of self-insurance covering any kind of risk may be approved where an examination of the program indicates that its application to the cost-reimbursement type contract is in the best interest of the Government. However, in any jurisdiction where workmen's compensation does not completely cover employers' liability to employees, a program of self-insurance for workmen's compensation may be approved only if—

(a) The contractor also maintains an approved program of self-insurance for any employers' liability which is not so covered; or

(b) The contractor shows that the combined cost to the Government of selfinsurance for workmen's compensation and commercial insurance for employers' liability will not exceed the costs of covering both kinds of risks by commercial insurance.

§ 1-10.504 Government property [Reserved].

upon certain supplies and services procured by executive agencies; exemptions from such Federal taxes; policy for obtaining exemption from State and local taxes; and contract clauses required or authorized for insertion in contracts.

(b) The problems presented in connection with the administration of the tax aspect of a contract or transaction are widely varied. The right to immunity, exemption, refund, credit, or drawback depends upon the nature of the tax, the particular tax law, the party sought to be taxed, the items being procured, and the provisions of the contract. These problems are essentially legal; therefore, when questions arise, contracting officers should request the assistance of legal counsel.

Subpart 1-11.1-Federal Excise Taxes

SOURCE: The provisions of this Subpart 1-11.1 appear at 31 F.R. 6370, Apr. 27, 1966, unless otherwise noted.

§ 1-11.100 Scope of subpart.

This subpart deals with Federal excise taxes involved in the procurement of certain supplies and services. It is for the general information of Government personnel and does not purport to present the full scope of the applicable provisions of law and implementing regulations as they may be amended from time to time.

§ 1-11.101 Retailers excise taxes. § 1-11.101-1 Special fuels.

(a) Diesel fuel. A tax at the indicated rates is imposed upon any liquid, other than that taxable as gasoline under section 4081 of the Internal Revenue Code (see § 1-11.102-3), which is (i) sold by any person to an owner, lessee, or other operator of a diesel-powered highway vehicle, for use as a fuel in such vehicle, or (ii) used by any person as a fuel in a diesel-powered highway vehicle unless there was a taxable sale of such liquid pursuant to (i) above, as follows:

(1) At 4 cents per gallon, if sold for use or if used as fuel in a diesel-powered highway vehicle

(i) Which, at the time of such sale or use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or

(ii) Which, if owned by the United States, is used on the highway; or (2) At 2 cents per gallon, if sold for

use or if used as fuel in a diesel-powered highway vehicle

(i) Which, at the time of such sale or use, is not registered, and is not required to be registered, for highway use under the laws of any State or foreign country;

or

(ii) Which, if owned by the United States, is not used on the highway; and

(3) At an additional 2 cents per gallon, if fuel on which a tax of 2 cents was paid pursuant to subparagraph (2) of this paragraph is used as fuel in a dieselpowered highway vehicle

(i) Which, at the time of such use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or

(ii) Which, if owned by the United States, is used on the highway.

No tax is imposed on diesel fuel sold for use or used as fuel in a nonhighway vehicle, such as certain military vehicles, construction equipment, and equipment designed for use at mines, factories, railroad stations, and farms.

(b) Special motor fuels. A tax at the rates indicated in subparagraphs (1) through (3) of this paragraph is imposed upon benzol, benzene, naphtha, liquefied petroleum gas, casing-head and natural gasolines, or any other liquid (other than kerosene, gas oil, fuel oil, or a product taxable as diesel fuel under paragraph (a) of this section or as gasoline under section 4081 of the Internal Revenue Code (see § 1-11.102-3), which is (i) sold by any person to an owner, lessee, or other operator of a motor vehicle, motorboat, or airplane for use as a fuel for the propulsion thereof, or (ii) used by any person as a fuel for the propulsion of a motor vehicle, motorboat, or airplane, unless there was a taxable sale of such liquid pursuant to (i) above, as follows:

(1) At 4 cents per gallon, if such liquid is sold for use or is used as a fuel for a highway vehicle

(i) Which, at the time of such sale or use, is registered, or is required to be registered, for highway use under the laws of any State or foreign country; or

(ii) Which, if owned by the United States, is used on the highway; or

(2) At 2 cents per gallon, if such liquid is sold for use or is used as a fuel for the propulsion of a motorboat or airplane, or a motor vehicle

(i) Which, at the time of such sale or use, is not registered, and is not required

to be registered, for highway use under the laws of any State or foreign country;

or

(ii) Which, if owned by the United States, is not used on the highway; and

(3) At an additional 2 cents per gallon, if a liquid on which a tax of 2 cents was paid pursuant to subparagraph (2) of this paragraph is used as fuel in a highway vehicle

(i) Which, at the time of such use, is registered, or required to be registered, for highway use under the laws of any State or foreign country; or

(ii) Which, if owned by the United States is used on the highway.

(c) Procedures. (1) The sale of diesel fuel to an owner, lessee, or other operator of a diesel-powered highway vehicle, or of special motor fuel to an owner, lessee, or other operator of a motor vehicle, motorboat, or airplane is considered as a taxable sale by the Internal Revenue Service only (i) if the liquid is delivered by the seller into the fuel supply tank of the vehicle, motorboat, or airplane, or (ii) where not so delivered, the purchaser indicates in writing to the seller prior to or at the time of the sale that the entire quantity of the liquid covered by the sale is for use by him for a taxable purpose as a fuel in such a vehicle, motorboat. or airplane. If such a written statement is not furnished by the purchaser, he is liable for the tax at the applicable rate on that quantity of the liquid which is used by him as fuel in such a vehicle, motorboat, or airplane, or which is sold by him in a taxable transaction.

(2) If it is known in advance of procurement that the entire quantity of any bulk purchase of diesel or special motor fuel is to be used for taxable purposes (as indicated elsewhere in this section), bids may be solicited on a tax inclusive basis and the written statement referred to in subparagraph (1) of this paragraph should be furnished to the contractor.

(3) All other bulk purchases of diesel and special motor fuels will be on a tax exclusive basis and the agencies will be responsible for making payment of the tax at the applicable rate, directly to Internal Revenue Service. Such payment shall be made quarterly on TD Form 720, "Quarterly Federal Excise Tax Return.' A certificate of Export is not required to support a tax-free sale of diesel fuel exported to a foreign country or shipped to a possession of the United States or to Puerto Rico.