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of said corporation by authority of its governing body.

(Affix corporate seal)

(d) Name of principal. When a partnership is a principal on a bond, the names of all the members of the firm shall be listed in the bond following the name of the firm and the phrase "a partnership composed of". If a principal is a corporation, the state of incorporation must appear.

(e) Date of bond. A performance or payment bond other than an annual bond shall not antedate the contract to which it pertains.

(f) Continuation sheet. The Standard Form 25-B (Continuation Sheet) is prescribed for use when there are more than seven sureties on a bid, performance, or payment bond. It shall also be used when there are cosureties on an annual bid or performance bond.

[30 F.R. 12007, Sept. 21, 1965, as amended at 32 F.R. 10172, July 11, 1967]

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(a) Corporate sureties. In connection with contracts for supplies, services, or construction to be delivered or performed in the United States, its possessions (other than the Canal Zone), or Puerto Rico:

(1) Solicitations shall not require that only corporate sureties may be furnished or that a particular corporate surety be furnished, except as may be otherwise specifically provided (e.g., position schedule bonds may be obtained only from corporate sureties); and

(2) Any corporate surety offered for a bond furnished the Government, or furnished pursuant to a Government contractual requirement, where the contracting officer has authority to approve the sufficiency of the surety, must appear

on the Treasury Department List (TD Circular 570) and the amount of the bond must not be in excess of the underwriting limits stated in that list.

In connection with contracts to be performed in the Canal Zone, corporate Panamanian surety companies which are acceptable on bonds required by the Panama Canal Company may be accepted in addition to the corporate sureties appearing on the Treasury List. The acceptability of Panamanian sureties shall be subject to the conditions and restrictions (including any requirement for security deposits) similar to those imposed by the Panama Canal Company, and to a determination by the contracting officer that the amount of the bond is commensurate with the underwriting capacity of the surety. For contracts to be performed in a foreign country, sureties not appearing on Treasury Department Circular 570 are acceptable if it is determined by the contracting officer that it is impracticable for the contractor to use Treasury listed sureties.

(b) Corporate cosureties. More than one corporate surety may be accepted as cosurety upon any recognizance, stipulation, bond, or undertaking in connection with contracts for supplies, services, or construction. In no case, however, shall the liability of any such cosurety exceed the maximum penal sum which it is qualified to underwrite on any one obligation. It is not necessary that each corporate surety obligate itself for the full amount of the bond. Each corporate surety may limit its liability in the bond to a specified sum. The sureties must bind themselves jointly and separately for the purpose of allowing a joint action or actions against any or all of them. Where the bond is to be executed by two or more corporate sureties, Standard Form 25 shall be used in the case of a performance bond and Standard Form 25-A in the case of a payment bond. On bonds covering supply or service contracts where the amount of the bond exceeds the underwriting limitation of the corporate surety, the latter may reinsure with a corporation on the acceptable list of corporate sureties having the required reinsurance underwriting capacity. Reinsurance agreements are not acceptable in connection with construction contracts.

(c) Termination of authority to qualify as surety. The Treasury Department

issues supplements to the Treasury Department Circular 570, notifying all Federal agencies of the termination of the authority of a specified corporate surety company to qualify as a surety on Federal bonds. Procuring activities will be notified of these supplements in accordance with the procedures of their Departments. Upon receipt of notification of termination of a company's authority to qualify as surety on Federal bonds, each contracting officer concerned shall secure new bonds with acceptable sureties in lieu of any outstanding bonds with the named company.

[30 F.R. 12008, Sept. 21, 1965, as amended at 31 F.R. 1051, Jan. 27, 1966]

§ 10.201-2 Individual sureties.

(a) Acceptability. Individual sureties are acceptable for all types of bonds other than position schedule bonds. An individual surety shall be a citizen of the United States, except that if the contract and bond are executed in any foreign country, the Commonwealth of Puerto Rico, the Virgin Islands, the Canal Zone, Guam, or any other territory or possession of the United States, such surety need only be a permanent resident of the place of execution of the contract and bond.

(b) Number. If individual sureties are used, there shall be at least two responsible individuals on each bond.

(c) Extent of liability. The liability of each individual surety shall extend to the entire penal amount of the bond.

(d) Justification. The contracting officer, in evaluating bonds and consents of surety underwritten by individual sureties, must first ascertain that all documents, including the Affidavits of Individual Surety required by Instruction No. 4b on the reverse of Standard Form 24, "Bid Bond," and Instruction No. 3b on the reverse of Standard Form 25, "Performance Bond," and Standard Form 25-A, "Payment Bond," have been completely filled out and are properly executed. The contracting officer must next ascertain that each individual surety, underwriting a bond or consent of surety which increases the penal amount of a bond previously furnished, justifies his net worth "in a sum not less than the penalty of the bond" as required by Instruction No. 4 on the reverse of Standard Form 28, "Affidavit of Individual Surety." Since individual sureties

are jointly and severally liable in the event of default by the principal, each individual surety must list on Standard Form 28 a net worth at least equal to the total penal amount of the bond or consent of surety. Example: If performance and payment bonds on a construction contract have penal amounts of $4,000 and $2,000, respectively, each individual surety must show a net worth of at least $6,000 to have the contracting officer accept his underwriting of such bonds. Normally net worth will be the amount indicated by the individual surety on line g, block 7, of Standard Form 28. However, the contracting officer is expected to consider all relevant information furnished by the individual surety on Standard Form 28 and make an independent determination of the individual surety's net worth based on the contracting officer's own best judgment. Example: Normally the "fair value" of real estate is a more realistic figure than the "assessed value" for taxation purposes However, there may be situations where the reverse is true, for the purpose of determining net worth, in which case the contracting officer may determine net worth is a figure than that entered on line g, block 7 of Standard Form 28. The contracting officer also should scrutinize closely the information entered in block 10 on Standard Form 28 as the amount of outstanding bond obligation of an individual surety may have a substantial bearing on the financial position of such individual surety. The contracting officer may determine that the total amount entered in block 10 should be deducted from the net worth figure entered on line g, block 7, to arrive at a more realistic net worth or he may determine to deduct nothing, or only a portion of the amount entered in block 10 if upon inquiry he discovers that the contracts on which the bonds were written are completed in part and suppliers and materialmen paid in part. Affidavits should be scrutinized closely by a contracting officer in any case where an individual surety is underwriting a bond for a principal for whom that surety has underwritten other outstanding bonds. If the contracting officer cannot make a determination of net worth on the basis of information furnished on Standard Form 28, he should require the individual surety to furnish additional information. As a general rule, the contracting officer

should not require extrinsic evidence of an individual surety's net worth (other than Standard Form 28) unless Standard Form 28 is not filled out completely or properly, or unless the contracting officer has reason to believe that the individual surety's statements on Standard Form 28 do not reflect his true net worth.

(e) Stockholders as sureties. On any bond of which a corporation is the principal obligor, a stockholder of that corporation is acceptable as cosurety on the bond: Provided, That his net worth exclusive of his stock holdings or other interests, such as loans, in the corporation is equal to the amount for which he justified: And provided further, That such fact is expressly stated in his affidavit of justification.

[29 F.R. 6936, May 27, 1964, as amended at 32 F.R. 12099, Aug. 23, 1967; 33 F.R. 7400, May 18, 1968]

§ 10.201-3 Partnerships as sureties.

A partnership or other unincorporated association, as such, shall not be accepted as surety. The individual members of the partnership or association may, if they meet the requirements of § 10.201-2, qualify as sureties. Individual members of a partnership or association shall not be acceptable as sureties on bonds under which the partnership or association, or any copartner or member thereof, is the principal obligor. [29 F.R. 6937, May 27, 1964]

§ 10.201-4 Substitution or replacement of surety.

In case of financial embarrassment, failure, or other disqualifying cause on the part of a surety, substitution of a new surety is required. In other cases, substitute sureties may be accepted, when consistent with the Government's interest (see § 10.110).

[30 F.R. 12008, Sept. 21, 1965]

§ 10.202 Options in lieu of sureties.

Any one or more of the types of security listed below may be deposited by the contractor in lieu of furnishing corporate or individual sureties on bonds. Any such security accepted by the contracting officer shall be promptly turned over to the disbursing officer concerned for Army, Navy, and Defense Supply Agency contracts, and to the accounting and finance officer concerned for Air

Force contracts, except that when United States bonds or notes are involved, they shall be deposited as provided in § 10.202-1. Any such security or its equivalent shall be returned to the contractor when the obligation of the bond has by its terms ceased.

[29 F.R. 6937, May 27, 1964]

§ 10.202-1 United States bonds or notes.

In accordance with the provisions of the Act of 24 February 1919, as amended (6 U.S.C. 15) and Treasury Department Circular No. 154 (6 February 1935), any person required to furnish a bond has the option, in lieu of furnishing surety or sureties thereon, of 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 §§ 10.202-10.202-2, or deposit them with the Treasurer of the United States, a Federal Reserve Bank, branch Federal Reserve Bank having the requisite facilities, or other depositary duly designated for that purpose by the Secretary of the Treasury, under procedures prescribed by the Department 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.

[29 F.R. 6937, May 27, 1964] § 10.202-2

Certified or cashier's checks, bank drafts, money orders, or cur

rency.

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 Treasurer of the United States.

[30 F.R. 12008, Sept. 21, 1965]

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Contractors shall be required to carry insurance where:

(a) It is mandatory by law or this subchapter;

(b) It is considered necessary or desirable to utilize the facilities and services of the insurance industry; or

(c) Where 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 subchapter may be reduced when a contract is to be performed outside the United States, its possessions, and Puerto Rico. Where more than one Military Department is involved, the Department responsible for review and approval of a contractor's insurance program shall coordinate with other interested Military Departments prior to taking action on significant insurance matters.

§ 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.

§ 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 Parts 7 and 13 of this chapter. 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 of this chapter.

[36 F.R. 7948, Apr. 28, 1971]

Subpart D-Insurance Under

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Generally the Military Departments are concerned with the insurance program of a fixed price contractor only when special circumstances exist. Examples are:

(a) The contractor is engaged principally in Government works;

(b) The contractor has a separate operation engaged principally in Government work;

(c) Government property of substantial value is involved;

(d) The work is performed within a Government installation;

(e) The Government desires to assume risks for which the contractor ordinarily obtains commercial insurance;

(f) A substantial amount of work is being performed under a fixed-price incentive contract; and

(g) Adequate coverage is not available in the commercial market at a reasonable cost.

[30 F.R. 14898, Dec. 2, 1965]

§ 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 of this chapter.

[36 F.R. 7948, Apr. 28, 1971]

§ 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 (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 other than (i) contracts approved or financed by the Development Loan Fund, 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. 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 following clause shall be included in all public work contracts to be performed outside the United States.

WORKMEN'S COMPENSATION INSURANCE (DEFENSE BASE ACT) (JANUARY 1960)

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). 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 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 for the Army, to the Labor Advisor, Office of the Assistant Secretary of the Army (I&L), for the Navy, to the Chief of Naval Material (Attention: Contract Insurance Branch), for the Air Force, to the Directorate of Procurement Policy, Headquarters USAF, and for the Defense Supply Agency, to the Deputy Director, Contract Administration Services, Attention: DCAS-AF. The request for waiver shall include the following:

(1) Name of contractor;

(2) Business mailing address of contractor;

(3) Contract number;

(4) Date of award;

(5) Geographic location where contract will be performed;

(6) Name of insurance company providing the Defense Base Act coverage;

(7) Nationality of employees to whom waiver is to apply; and

(8) 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 paragraphs (b) and (c) of this section, 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 Part 15 of this chapter, 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

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