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(b) Upon the recommendation of the Secretary 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.

(c) Requests for waivers shall be submitted through channels (i) for the Army, to the Labor Advisor, Office of the Assistant Secretary of the Army (I&L); (ii) for the Navy, to the Chief of Naval Material; (ii) for the Air Force, to the Directorate of Procurement Policy, Headquarters USAF; (iv) for the Defense Supply Agency, to the Deputy Director, Contract Administration Services, Attn: DCAS-AF; (v) for the Defense Communications Agency, to the Chief, Contract Management Division; (vi) for the Defense Nuclear Agency, to the Chief, Office of Procurement; and (vii) for the Defense Mapping Agency, to the Staff Director of Logistics. The request for waiver shall include the following:

(i) name of contractor;
(ii) business mailing address of contractor;
(iii) contract number;
(iv) date of award;
(v) geographic location where contract will be performed;
(vi) name of insurance company providing the Defense Base Act

(vii) nationality of employees to whom waiver is to apply; and
(viii) reason for waiver.

(d) (1) If the Defense Base Act has been waived with respect to some or all of the contractor's employees in accordance with procedures set forth in (b) and (c) above, the benefits of the War Hazards Compensation Act will also have been waived as to such employees. In case of such waivers, the contractor shall provide protection against the risk of work injury or death (workmen's compensation type coverage) for the benefit of such waived employees. Insurance for this purpose as in any other case should be obtained at competitive rates in line with the policies of Section XV, particularly if there has been a waiver and the insurance has been or is to be obtained to comply with workmen's compensation or equivalent statutes of a foreign country.

(2) The contractor shall also assume liability to such waived employees and their beneficiaries for war hazard injury, death, capture or detention. At the option of the Chief of the Purchasing Office, either the costs of this liability or the reasonable cost of insurance against this liability shall be allowed as a cost under the contract. If it is decided that the contractor shall not purchase insurance against this liability, the clause in 10-502(b) shall be included in the contract.

(e) If a contract would otherwise be subject to (a) above, but (d) applies to some or all of the contractor's employees by reason of waiver by the Secretary of Labor, the provisions of 10-502(b) and (c) apply, and the clause in 7-104.2(b) shall be included in the contract.

10-404 Aircraft-Ground and Flight Risk.

(a) Negotiated fixed-price type contracts for the production, modification, maintenance, or overhaul of aircraft shall, except as provided in (b) below, include the clause in 7-104.10.




(b) (1) In paragraph (b) of the clause in 7-104.10, certain of the defined terms may be modified by insertion of appropriate additional definitions in the contract in accordance with the following. The purpose of the clause is to have the Government assume risks which generally entail unusually high insurance premiums and which are not covered by the contractor's “contents," "work-inprocess," or other similar insurance. It is recognized that all of the definitions prescribed in the clause may not cover all situations which should be covered if the above purpose is to be accomplished. Therefore, changes may be effected in the contract as set forth below.

(i) Since the standard definition of “aircraft" contemplates conventional

types of winged aircraft, a modified definition is necessary if the contract covers helicopters, vertical take-off aircraft, lighter-than-air airships or other nonconventional types of aircraft. The modified definition should take into consideration that the aircraft has reached a point of manufacture comparable to that required in the standard

definition; (ii) The definition of “in the open" may be modified to include "hush

houses," test hangers, and comparable structures, and other

designated areas; (iii) “Contractor's premises" shall be expressly defined and shall be

limited to those locations where aircraft, as defined in the clause, may be located during and for the performance of the contract. Contractor's premises" may include, but are not limited to, premises owned or leased by the contractor or premises as to which the contractor has a permit, license, or other right of use either exclusively

or jointly with others, including Government airfields. (2) The Government need not assume the risk of damage to, or loss or destruction of, aircraft, as provided by the clause, if the best estimate of premium costs which would be included in the contract price for insurance coverage for such damage, loss, or destruction at any plant or facility is less than $500. The Government shall not assume such risks if the aircraft is being acquired in connection with a Foreign Military Sale and the foreign government involved has not agreed to assume such risks. If it is determined not to assume such risks, the clause shall not be made a part of the contract, and the cost of necessary insurance to be obtained by the contractor to cover such risks shall be considered in establishing the contract price. In such cases, however, if performance of the contract is expected to involve the flight of Government-furnished aircraft, the substance of the Flight Risks clause in 7-204.21, suitably adapted for use in a fixed-price type contract, shall be used.

(3) Subparagraph (d) (iii) of the clause in 7-104.10 may be varied to provide for Government assumption of risk of transportation by conveyance on streets or highways where the contracting officer determines that such transportation is limited to the vicinity of the contractor's premises and is merely an incident to work being performed under the contract.

10-405 Work on a Government Installation.

(a) Insert the clause in 7-603.10 in all construction and architect-engineer contracts requiring work on a Government installation, and the clause in





7-104.65 in all other contracts requiring work on a Government installation. Neither clause is required, however, for contracts (i) of $10,000 or less, (ii) when only a small amount of work is required on a Government installation (e.8., a few brief visits per month), and (iii) when all work on a Government installation is to be performed outside the United States, its possessions, and Puerto Rico. The coverage specified in 10-501 is the minimum insurance required and shall be included in the clause in 7-603.10 or in the contract schedule. Additional coverage and higher limits may be required by the contracting officer.

(b) The clause in 7-104.65 or the clause in 7-603.10 may also be included in contracts described in (a) (i), (ii), and (iii) above when the contracting officer considers this to be in the interest of the Government. In such contracts, if appropriate, any of the kinds of insurance listed in 10-501 may be omitted or the limits may be lowered.

10-406 Capture and Detention of Contractor Employees. The clause in 7-104.94 is authorized for use when the employees of a contractor are subject to capture and detention under circumstances which may be outside the scope of the War Hazards Compensation Act (42 U.S.C. 1701 et seq.).




Part 5-Insurance Under Cost-Reimbursement Type Contracts 10-500 Scope of Part. This Part sets forth the policy of the Departments with respect to insurance under cost-reimbursement type contracts for supplies or services.

10-501 Policy. The types of insurance listed below, with the minimum amounts of liability indicated, ordinarily shall be required in cost-reimbursement contracts and subcontracts thereunder when the provisions of the prime contract are extended to the subcontract. (Insurance written on a single limit basis must be equal to or greater than the combined required minimums indicated.) An approved program of self-insurance, as provided in 10-502, may be substituted for any of the types of insurance ordinarily required.

10–501.1 Workmen's Compensation and Employers' Liability Insurance. Compliance with applicable workmen's compensation and occupational disease statutes shall be required. In jurisdictions where all occupational diseases are not compensable under applicable law, insurance for occupational disease shall be required under the employers' liability section of the insurance policy; however, such additional insurance shall not be required where contract operations are commingled with the contractor's commercial operations so that it would be impracticable to require such coverage. Employers' liability coverage in the minimum amount of $100,000 shall be required except in states with exclusive or monopolistic funds which do not permit the writing of workmen's compensation by private carriers (Nevada, North Dakota, Ohio, Washington, West Virginia, and Wyoming). The clause in 7-104.2(a) shall be included in all public work contracts as described therein to be performed outside the United States.

10–501.2 General Liability Insurance. Bodily injury liability insurance, in the minimum limits of $300,000 per occurrence shall be required on the comprehensive form of policy; however, property damage liability insurance ordinarily shall not be required.

10–501.3 Automobile Liability Insurance. This insurance shall be required on the comprehensive form of policy and shall provide bodily injury liability and property damage liability covering the operation of all automobiles used in connection with the performance of the contract. At least the minimum limits of $100,000 per person and $300,000 per occurrence for bodily injury and $10,000 per occurrence for property damage shall be required.

10–501.4 Aircraft Public and Passenger Liability Insurance. When aircraft are used in connection with the performance of the contract, such insurance ordinarily will be considered required coverage. The minimum limits of $100,000 per person and $300,000 per occurrence for bodily injury, other than passenger liability, and a limit of $100,000 per occurrence for property damage shall be required. Passenger liability bodily injury limits of $100,000 per passenger with an aggregate equal to the total number of seats or number of passengers whichever is greater, shall be required.

10–501.5 Vessel Collision Liability and Protection and Indemnity Liability Insurance. Where vessels are used in connection with the performance of the contract, such insurance shall be required whenever deemed necessary by the Department concerned.




10-502 Self-Insurance.

(a) 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, a program of self-insurance for workmen's compensation in any jurisdiction where workmen's compensation does not completely cover employers' liability to employees may be approved only if:

(i) the contractor also maintains an approved program of self-insurance

for any employers' liability which is not so covered; or (ü) the contractor shows that the combined cost to the Government of

self-insurance for workmen's compensation and commercial insurance for employers' liability will not exceed the costs of covering

both kinds of risks by commercial insurance. (b) When the clause in 7-104.2(b) is required, and the Chief of the Purchasing Office determines that the contractor shall not purchase insurance against the liability described in 10-403(d)(2), the clause in 7-104.2(c) shall be inserted in the contract.

(c) Each contract containing the clause in 7-104.2(c) shall contain (i) the estimated cost for war hazard losses, (ii) the clause at 7–203.4(a) appropriately limited to cover allowable war hazard cost, (ii) the Examination of Records clause (7-104.15), and (iv) an entry similar to the following.

The portion of this contract providing for the Contractor to afford protection to his employees and subcontractors to their employees against war hazard risks (see the clauses entitled Reimbursement for War Hazard Losses and Workmen's Compensation and War Hazard Insurance Overseas) is on a cost-reimbursement, no fee basis, notwithstanding the basis of the remainder of the contract.

(d) The estimated cost for war hazard losses will be based upon estimates arrived at in the light of experience, taking into account the number of the contractor's employees subject to protection for war hazard risks, the level of benefits applicable to such employees, location, nature of the risks to which the contractor's employees are exposed. The amount allotted to the contract will initially be kept as small as reasonably feasible. As reports are received indicating the need to increase the allotment to a particular contract, these will be evaluated and the allotment increased as necessary. When negotiating for the inclusion in a contract of provisions applicable to war hazard risks, the contracting officer may include provisions concerning the types of foreign nationals employed by the contractor, the level of benefits applicable to them, and other pertinent provisions relating to the manner in which the program will function to the benefit of all concerned, Advance agreements pursuant to 15-107 may also be advantageous with respect to the levels of proof considered acceptable to justify the contractor commencing payments and being reimbursed therefor prior to the time he is able to work out, in a proper case, lump sum settlement of his obligation.

10-503 Government Property. The contractor's responsibilities for loss of or damage to Government property under cost-reimbursement-type contracts are set forth in the clause in 7–203.21.



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