$9-10.000 Scope.

This part implements and supplements the requirements on bonds and insurance set forth in FPR Part 1-10. Coverage relating to operating contractors is to be found in Subpart 9-50.10.

Subpart 9-10.1 Bonds

$9-10.102 Definitions.

$9-10.102-50 Fidelity bonds.

A blanket fidelity bond is a bond under which the obligor agrees to indemnify as employer up to an amount stated on the bond for losses caused by dishonesty on the part of all employees except those expressly excluded by written endorsement on the bond. A blanket position fidelity bond affords the employer such protection with respect to all positions except those expressly excluded by written endorsement on the bond. An individual fidelity bond affords the employer such protection with respect to a named individual, and a schedule fidelity bond protects the employer against the dishonesty of any employee or employees included in a schedule of named individuals.

$9-10.103 Bid guarantees.

$9-10.103-1 Policy on use.

(a)

In addition to the restriction on use of bid guarantees in FPR 1-10.103-1(a), a bid guarantee may be required only for lump sum or unit price contracts entered into as a result of formal advertising, and may not be required for negotiated contracts.

Situations in addition to those listed in FPR 1-10.104-2(b) which may warrant requiring a performance bond are:

(a) Where doubt exists as to the financial or technical ability of all possible suppliers.

(b) Where the contractor's talent is overly concentrated in a few key personnel whose illness or departure could seriously impair the contractor's ability to perform the proposed work.

(c) Where other commitments of the contractor might delay performance.

(d) Where performance of the proposed work might disrupt other operations of the contractor and impair its overall efficiency.

(e) Where the item being manufactured is a component for another article and is required by a particular date in order to avoid delay in delivery of the end product.

$9-10.105 Payment bonds.

$9-10.105-2 Other than construction contracts.

Determinations that it is in the best interest of the Government to require payment bonds in connection with other than construction contracts may be made by the contracting officer on individual procurements, subject to the approval of the head of the procuring activity. In the case of either advertised or negotiated procurements, whenever the contracting officer has reason to believe that work under a proposed contract might be delayed because of the concern of subcontractors or suppliers over the credit standing of a potential prime contractor, the contracting officer should consider the advisability of requiring a payment bond.

$9-10.109 Execution and administration of bonds.

(a) Bid bonds. Prior to award of a contract, the contracting officer shall obtain review of the bid bond furnished with the successful bid as to legal form and sufficiency and as to acceptability of the surety. Prior to award of a subcontract, the contracting officer shall review the bid bond furnished with the successful bid as to legal form and sufficiency and as to acceptability of the surety and adequacy of the bond.

(b) Performance and payment bonds. Prior to award of a contract, the contracting officer shall obtain review of such bonds as to legal form and sufficiency and as to adequacy. Prior to award of a construction subcontract, the contracting officer shall obtain review of such bonds as to legal form and sufficiency and as to acceptability of the surety and adequacy of the bond.

$9-10.150 Fidelity bonds.

Fidelity bonds shall not be required in connection with fixedprice contracts. Under cost-reimbursement type contracts, as a general rule, fidelity bonds should not be recommended by contracting officers for approval even though under the terms of a particular

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.