BONDS, INSURANCE, AND INDEMNIFICATION depositing United States bonds or notes in an amount equal at their par value to the penal sum of the bond, together with an agreement authorizing the collection or sale of such United States bonds or notes in the event of default on the penal bond. The contracting officer may turn these securities over to the disbursing officer or accounting and finance officer as provided in 10–202, or deposit them with a Federal Reserve Bank, or Branch, having the requisite facilities, or other depository duly designated for that purpose by the Secretary of the Treasury. 10-202.2 Certified or Cashier's Checks, Bank Drafts, Money Orders, or Currency. Any person required to furnish a bond has the option, in lieu of furnishing surety or sureties thereon, of furnishing a certified or cashier's check, a bank draft, a Post Office money order, or currency, in an amount equal to the penal sum of the bond, which the contracting officer will immediately deposit with the appropriate activity named in 10-202. Certified or cashier's checks, bank drafts, or Post Office money orders shall be drawn to the order of the office designated for contract administration. 10-202.2 ARMED SERVICES PROCUREMENT REGULATION BONDS, INSURANCE, AND INDEMNIFICATION Part 3-Insurance-General 10-300 Scope of Part. This Part sets forth the general principles and policy applicable to insurance under contracts of the Department for supplies or services. 10–301 General. Contractors shall be required to carry insurance when: (i) it is mandatory by law or this Regulation; (ii) it is considered necessary or desirable to utilize the facilities and services of the insurance industry; or (iii) when commingling of property, type of operations, circumstances of ownership, or conditions of the contract make insurance reasonably necessary for the protection of the Government. The minimum amounts of coverage required by this Regulation may be reduced when a contract is to be performed outside the United States, its possessions, and Puerto Rico. When more than one Department is involved, the Department responsible for review and approval of a contractor's insurance program shall coordinate with other interested Departments prior to taking action on significant insurance matters. 10-302 Notice of Cancellation or Change. When 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. 10-303 Insurance Against Loss of or Damage to Government Property. Generally, a contractor is relieved of liability for loss of or damage to Government property and insurance coverage is not required. This general rule is limited by certain of the contract clauses in Sections VII and XIII. When insurance is required or approved, it may be provided either by separate policies or by inclusion of appropriate coverage in the contractor's existing policies. In either event, the insurance policies shall disclose the Government's interest in the property. 10-304 Procedures To Be Followed in the Event of Loss of or Damage to Government 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 shall be as prescribed in subparagraphs (g)(4) of the clause in 7-104.24(c) and (g)(3) of the clauses in 7-203.21, 7-303.7, 7-402.25(a), and 7-901.5. 10-304 ARMED SERVICES PROCUREMENT REGULATION BONDS, INSURANCE, AND INDEMNIFICATION Part 4-Insurance Under Fixed-Price Contracts 10-400 Scope of Part. This Part sets forth the policy of the Departments with respect to insurance under fixed-price contracts for supplies or services. 10-401 Policy. Generally the Departments are concerned with the insurance program of a fixed price contractor only when special circumstances exist. Examples are: (i) the contractor is engaged principally in Government works; (ii) the contractor has a separate operation engaged principally in Government work; (iii) Government property of substantial value is involved; (iv) the work is performed within a Government installation; (v) the Government desires to assume risks for which the contractor ordinarily obtains commercial insurance; (vi) a substantial amount of work is being performed under a fixed-price incentive contract; and (vii) adequate coverage is not available in the commercial market at a reasonable cost. 10-402 Government Property. The contractors' responsibilities for loss of or damage to Government property under fixed price contracts are set forth in the clauses in 7-104.24. 10-403 Workmen's Compensation and War Hazard 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) to various classes of employees engaged in work outside the United States, including any employee engaged (i) in the performance of a public work contract or (ii) in the performance of any contract approved or financed pursuant to the Foreign Assistance Act of 1961 other than (A) contracts approved or financed by the Development Loan Fund, or (B) 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. When the Defense Base Act applies, the benefits of the Longshoremen's and Harbor Workers' Compensation Act are extended through operation of the War Hazards Compensation Act, as amended (42 U.S.C. 1701 et seq.), to afford protection to employees against the hazards of war risks (injury, death, capture, or detention). Under this plan, once a contract employer has provided the Workmen's Compensation coverage required by the Defense Base Act (by insurance policy or self-insurance program), his employees automatically receive War Hazard Risk protection. An employer need not insure against War Hazard Risk, however, since such war risk benefits are provided at no cost to the employer by the Bureau of Employee's Compensation, Department of Labor. The clause in 7-104.2(a) shall be included in all public work contracts to be performed outside the United States. 10-403 ARMED SERVICES PROCUREMENT REGULATION BONDS, INSURANCE, AND INDEMNIFICATION (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; (iii) 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 coverage; (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. 10-404 ARMED SERVICES PROCUREMENT REGULATION BONDS, INSURANCE, AND INDEMNIFICATION (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 10-405 ARMED SERVICES PROCUREMENT REGULATION |