contract or subcontract losses normally covered by such bonds might fall upon the Government.

Subpart 9-10.2 Sureties on Bonds.

$9-10.250 Corporate co-sureties.

More than one corporate surety may be accepted as surety upon any recognizance, stipulation, bond or undertaking in connection with either construction contracts or contracts other than construction contracts, provided that in no case will the liability of any such co-surety exceed the maximum penal sum in which the corporate surety is qualified to underwrite any one obligation. On bonds covering contracts other than construction contracts, where the amount of the bond is greater than the underwriting limitation of the corporate surety, the latter may reinsure with a corporation on the acceptable list of corporate sureties having the required underwriting capacity. Reinsurance agreements are not acceptable in connection with construction contracts. Corporate co-sureties need not obligate themselves for the full amount of the bond. Each corporate surety may, by setting forth the limit of its liability in the bond as a definite and specified sum, limit such liability. The co-sureties must, however, bind themselves "jointly and severally" for the purpose of allowing a joint action or actions against any or all of them.

$9-10.251 Partnerships as sureties.

A partnership or other unincorporated association, as such, shall not be accepted as a surety. The individual members of the partnership or association may, of course, qualify as sureties, provided they meet the requirements set forth in FPR 1-10.203. Individual members of a partnership or association shall not, however, be acceptable as sureties on bonds under which the partnership or association, or any co-partner or member thereof, is the principal obliger.

$9-10.252 Substitution or replacement of a surety.

In case of financial inadequacy, failure or other disqualifying cause on the part of a surety under a bond, the contracting officer shall require the substitution of a new surety.

The contract article pertaining to insurance is set forth in $9-50.704-30.

Subpart 9-10.50

$9-10.5000 Scope.

Indemnification of ERDA Contractors

This subpart describes the established policies concerning (a) indemnification of ERDA contractors against public liability for a nuclear incident arising out of or in connection with the contract activity and (b) indemnification of ERDA contractors against liability for nonnuclear risks arising out of or in connection with the contract activity.

$9-10.5001 Applicability.

(a) With respect to indemnification against public liability for a nuclear incident, the pertinent policies and procedures set forth in this subpart shall be applicable in entering into indemnity agreements with:

(1) ERDA contractors engaged in the operation of production

or utilization facilities.

(2) ERDA contractors whose work entails the risk of public liability for a substantial nuclear incident.

(b) With respect to indemnification against liability for nonnuclear risks, the pertinent policies and procedures set forth in this subpart shall not be applicable in entering into indemnity agreements with any ERDA contractors.

§9-10.5002 Definitions.

(a) The term "ERDA contractor" means any ERDA prime contractor, including any agency of the Federal Government with which ERDA has entered into an interagency agreement.

(b) The term "construction contractor" means a ERDA contactor who is constructing an installation for ERDA which, when completed, will be a production or utilization facility.

(c) The term "nuclear incident" means (1) any occurrence within the United States causing, within or outside the United States, bodily injury, sickness, disease, or death, or loss of or damage to property, or loss of use of property, arising out of or resulting from the radioactive, toxic, explosive, or other hazardous properties of source, special nuclear, or by-product material, and (2) any such occurrence outside the United States if such occurrence involves a facility or device owned by, and used by or under contract with, the United States.

(d) The term "person indemnified" means (1) with respect to a nuclear incident occurring within the United States, the person with whom an indemnity agreement is executed and any other person who may be liable for public liability; or (2) with respect to any nuclear incident occurring outside the United States, the person with whom an indemnity agreement is executed and any other person who may be liable for public liability by reason of his activities under any contract with ERDA or any project to which indemnification under the provisions of section 170d of the Atomic Energy Act of 1954, as amended, has been extended or under any subcontract, purchase order or other agreement, of any tier, under any such contract or project.

(e) The term "production facility" means:

(1) Any nuclear reactor designed or used primarily for the formation of plutonium or uranium 233; or

(2) Any facility designed or used for the separation of the isotopes of plutonium, except laboratory scale facilities designed or used for experimental or analytical purposes only; or

(3) Any facility designed or used for the processing of irradiated materials containing special nuclear material, except laboratory scale facilities designed or used for experimental or analytical purposes only.

(f) The term "public liability" means any legal liability (including liablity for loss of, or damage to, or loss of use of property which is located at the site of and used in connection with the contract activity) arising out of or resulting from a nuclear incident, except: (1) Claims under State or Federal workmen's compensation acts of employees of persons indemnified who are employed at the site of and in connection with the activity where the nuclear incident occurs and (2) claims arising out of an act of war. "Public liability" also includes damage to property of persons indemnified: Provided, that such property is covered under the terms of any financial protection that may be required, except property which is located at the site of and used in connection with the activity where the nuclear incident occurs.

(g) The term "substantial nuclear incident". See $9-10.5005.

(h) The term "utilization facility" means any nuclear reactor other than one designed or used primarily for the formation of plutonium or U 233.

(i) The term "nuclear reactor" means an apparatus, other than an atomic weapon, designed or used to sustain nuclear fission in a selfsupporting chain reaction.

$9-10.5003 Statutory indemnity - section 170d

of the Atomic Energy Act of 1954, as amended.

Section 170(d) of the Atomic Energy Act of 1954, as amended, authorizes ERDA "to enter into agreements of indemnification with its contractors for the construction or operation of production or utilization facilities or other activities under contracts for the benefit of the United States involving activities under the risk of public liability for a substantial nuclear incident." Contractors identified in §9-10.5001(a) are eligible for such statutory indemnity. $9-10.5004 Authority of heads of procuring activities

to negotiate statutory indemnity agreements.

(a) Heads of procuring activities are authorized to negotiate statutory indemnity agreements with contractors identified in $9-10.5001(a) (1).

(b) Pursuant to §9-10.5005, heads of procuring activities are authorized to enter into a statutory indemnity agreement whenever it has been determined that a contractor in sub-paragraph (2) of $9-10.5001 (a) is engaged in activities involving the risk of public liability for a substantial nuclear incident. Such a determination may be based upon either the risk of liability for the occurrence of a substantial nuclear incident in the course of performance of the contract work or the risk of liability for a substantial nuclear incident caused by a product delivered to or for ERDA under the contract where such product is expected to be used in connection with a facility or device not covered by a statutory indemnity agreement. If, pursuant to $9-10.5005, a head of a procuring activity determines that the maximum conceivable damage which could result from a nuclear incident arising in the course of a contractor's activities falls between $1 million and $60 million, he shall submit the proposed indemnification with a recommendation, and all supporting data, to the head of the agency or designee for appropriate action.

$9-10.5005 Substantial nuclear incident.

With respect to subparagraph (2) of §9-10.5001(a), and pursuant to the provisions of §9-10.5004, a head of a procuring activity may be required to determine whether a contractor's activities involve the risk of public liability for a substantial nuclear incident and thus make the contractor eligible to obtain a statutory indemnity agreement from ERDA. The determination by a head of a procuring activity shall be based on the following criteria:

If, after a study of the maximum conceivable damage which can result from an incident arising out of or in connection with the

contractor's activities, the head of a procuring activity concludes that the maximum conceivable damage per incident to property and persons is $60 million or more, then the contractor may be found to be under a risk of public liability for a substantial nuclear incident and the head of the procuring activity is authorized to execute a statutory indemnity agreement under such a contract. If such a study of the maximum conceivable damage indicates a figure of $1 million or less, the contractor should not be considered to have a risk of public liability for a substantial nuclear incident and, therefore, should not be made a party to a statutory indemnity agreement. If the study indicates that the maximum conceivable damage falls between $1 million and $60 million, the head of a procuring activity will submit the proposed indemnification of such contractor to the head of the agency or designee with a recommendation and all supporting data.

The head of the agency or designee on such a recommendation, may take one of the following actions:

(a) Determine that the contractor is under risk of public liability for a substantial nuclear incident and that the contractor should be extended a statutory indemnity agreement.

(b) Determine that the contractor should not be extended a statutory indemnity. In this case the head of the agency or designee may authorize the head of a procuring activity to authorize the contractor to purchase nuclear liability insurance or to offer the contractor a general authority indemnity agreement.

$9-10.5006 Statutory indemnity contract article.

The contract article contained in $9-50.704-6 shall be incorporated in all contracts in which a statutory indemnity agreemment is to be included upon a determination that the contractor is under risk of public liability for the occurrence of a substantial nuclear incident in the course of performance of the contract work. The contract article contained in 9-50.704-7 shall be incorporated in all contracts in which a statutory indemnity agreement is to be included upon a determination that the contractor is under risk of public liability only for a substantial nuclear incident caused by a product delivered to or for ERDA under the contract where such product is expected to be used in connection with a facility or device not covered by a statutory indemnity agreement.

Heads of procuring activities are authorized to include in all contracts for: