period specified by the terms of the contract, the contract may be terminated for default when deemed to be in the public interest (see §§ 1-10.1033(a)(2) and 1-18.803-5).

(e) Whenever a contract is modified in a manner not provided for in any provision thereof, consent of surety shall be obtained (see § 1-10.205).

(f) In any case where a contract is modified, whether or not pursuant to a contractual provision, so as to increase the contract amount to such an extent that the penal sum of the existing bond becomes inadequate to protect the interests of persons furnishing labor and material, in the opinion of the contracting officer, additional payment bond protection shall be secured, either by increasing the penal sum of the existing bond or by obtaining an additional bond from a new surety.

[29 FR 10247, July 24, 1964, as amended at 42 FR 56116, Oct. 21, 1977; 44 FR 34499, Jan. 11, 1979]

§ 1-10.105-2 Other than construction contracts.

(a) Payment bonds generally shall not be required in connection with other than construction contracts and may be required only where the head of the procuring activity determines that such requirements is in the best interest of the Government. If a performance bond is required in connection with a contract, a payment bond can generally be obtained without the payment of an additional premium.

(b) Subject to paragraph (a) of this § 1-10.105-2, a payment bond shall not be required unless the invitation for bids requires such a bond.

(c) Whenever a payment bond is required, the penal sum thereof shall be in an amount deemed adequate by the contracting officer.

§ 1-10.105-3 Furnishing information to subcontractors and suppliers.

Where a payment bond has been provided, the contracting officer may furnish the name and address of the surety or sureties thereon to persons who have furnished, or have been requested to furnish, labor and/or material for use in the prosecution of the work required by the contract in ques

tion. In addition, the contracting officer may furnish to persons who satisfy him that they have provided labor and/or material, and have not received payment, additional general information on such matters as the progress of the work, payments, and the estimated percentage of completion.

§ 1-10.106 Advance payment bonds.

An advance payment bond may be required only in connection with a contract containing an advance payments provision, and then only if a performance bond has not been furnished. Whenever an advance payment bond is required, the contracting officer shall determine the amount necessary adequately to protect the Government.

§ 1-10.107 Patent infringement bonds.

Patent infringement bonds may be required only in connection with contracts containing provisions for patent indemnity, and then only if a performance bond has not been furnished and if the financial responsibility of the contractor is unknown or doubtful. Whenever a patent infringement bond is required, the contracting officer shall determine the amount necessary adequately to protect the Government.

§ 1-10.108 Other types of bonds.

Other types of bonds may be used only when, in the opinion of the head of the procuring activity concerned, such bonds are necessary or desirable in connection with the procurement of particular supplies or services (including construction).

§ 1-10.109 Execution and administration of bonds.

The forms and provisions of bonds, and their preparation, execution and administration, shall be in accordance with the provisions of the Federal Procurement Regulations and with agency procedures (see §§ 1-16.801 and 1-16.901 for bonds forms).

Every bond furnished in connection with the procurement of supplies or services (including construction) shall be supported by corporate or individual sureties or any of the types of security authorized to be deposited in lieu of surety by § 1-10.204. Invitations for bids or requests for proposals may not preclude bidders from offering any of the types of surety or security authorized to be furnished by this Subpart 110.2, unless otherwise authorized by law or regulation.

§ 1-10.202 Corporate sureties.

(a) In connection with contracts for supplies or services (including construction) to be delivered or performed in the United States, the Commonwealth of Puerto Rico, and the Virgin Islands, any corporate surety offered for a bond furnished the Government must appear on the list contained in Treasury Department Circular 570, entitled "Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies." If the penal amount of a bond exceeds a surety's underwriting limit specified in the Department of the Treasury Circular, the bond will be acceptable only if the excess over the specified limit is coinsured or reinsured and the amount of such coinsurance or reinsurance does not exceed the underwriting limit of each coinsurer or reinsurer. Coinsurance or reinsurance agreements shall conform to the Department of the Treasury Regulations as set forth in 31 CFR 223.10 and 223.11. Where reinsurance is contemplated, the procuring activity generally will require reinsurance agreements to be executed and submitted with the bonds before making a final determination on the bonds. When specified on the bid form (Standard Form 21 Bid Form (Construction Contract)), the procuring activity may accept a bond from the direct writing company in satisfaction of the total bond requirement of the contract, even though it may exceed the insurer's underwriting limitation, until necessary reinsurance agreements have been executed. However,

necessary

reinsurance agreements must be executed and submitted to the procuring activity within the time specified on the bid form (not to exceed 45 calendar days after the execution of the bond). Standard Form 273, Reinsurance Agreement for a Miller Act Performance Bond, and Standard Form 274, Reinsurance Agreement for a Miller Act Payment Bond, shall be used when reinsurance is furnished in connection with Miller Act bonds. Standard Form 275, Reinsurance Agreement in Favor of the United States, shall be used when reinis furnished in connection with bonds for other purposes.

surance

(b) 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 on sureties appearing the Treasury List. The acceptability of Panamanian sureties shall be subject to the conditions and restrictions (including any requirement for security deposits) imposed by the Panama Canal Company.

(c) For contracts to be performed outside the United States, Puerto Rico, the Virgin Islands, and the Canal Zone, sureties not appearing on Treasury Department Circular 570 may be accepted if determined by the contracting officer to be in the best interest of the Government.

(d) The Department of the Treasury Circular 570 may be obtained from the U.S. Treasury Department, Bureau of Government Financial Operation, Audit Staff, Washington, D.C. 20226. [29 FR 10247, July 24, 1964, as amended at 42 FR 56116, Oct. 21, 1977]

§ 1-10.203 Individual sureties.

(a) It is the responsibility of the contracting officer to determine the acceptability of individuals proposed as sureties on bonds. At least two individual sureties must execute the bond and the net worth of each individual must be not less than the penal amount of the bond. The number and amounts of other bonds upon which a proposed individual surety is bound, and the status of the contracts in con

nection with which such bonds were furnished, must be considered in determining the acceptability of the individual surety. (See also the instructions on the reverse of Standard Form 28, Affidavit of Individual Surety, FPR 1-16.901-28.)

(b) Each individual surety must execute an Affidavit of Individual Surety, Standard Form 28. The information thus provided is helpful in determining the net worth of proposed individual sureties.

(c) In order to ascertain the continuing acceptability of individual sureties, the official executing the Certificate of Sufficiency on the reverse of Standard Form 28 may be required to execute further certificates, as contemplated by Instruction 5 on that form, with such frequency as the agency may deem necessary and appropriate. Further certificates indicating additional assets, or a new surety, may be required to assure protection of the Government's interest.

[29 FR 10247, July 24, 1964, as amended at 31 FR 15093, Dec. 1, 1966]

§ 1-10.204 Options in lieu of sureties.

Any one or more of the types of security listed in this § 1-10.204 may be deposited by the contractor in lieu of furnishing corporate or individual sureties on bonds. Where any such type of security is deposited, a statement shall be incorporated in the bond form pledging such security, and the bond form shall be executed by the contractor as principal. Agencies shall establish such safeguards as may be necessary to protect against loss of the security and shall return such security or its equivalent when, by its terms, the obligation of the bond has ceased.

sum of the bond, together with a duly executed power of attorney and agreement authorizing the collection or sale of such United States bonds or notes in the event of default of the principal on the bond. The contracting officer may turn these securities over to the finance or other officer as provided in agency procedures, or deposit them with the Treasurer of the United States, a Federal Reserve Bank, branch Federal Reserve Bank having the requisite facilities, or other depository duly designated for the purpose by the Secretary of the Treasury, under procedures prescribed by the agency 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.

§ 1-10.204-2 Certified or cashier's checks, bank drafts, money orders, currency, or irrevocable letters of credit. Any person required to furnish a bond has the option, in lieu of furnishing surety or sureties thereon, of depositing a certified or cashier's check, a bank draft, a Post Office money order, currency, or an irrevocable letter of credit, in an amount equal to the penal sum of the bond. Certified or cashier's checks, bank drafts, or Post Office money orders shall be drawn to the order of the appropriate Federal agency.

§ 1-10.205 Consent of surety.

In connection with any amendment, modification, or supplemental agreement with respect to which the waiver of notice to the surety contained in the bond form is inapplicable and which would otherwise effect the release of a surety, or in any other situation as prescribed by each agency, the contracting officer shall obtain the written consent thereto of the surety or sureties on the existing bond or bonds (notwithstanding the fact that there may be an additional bond supported by a new surety); provided, that no such consent need be obtained if there is an increased or additional

Ordinarily, it is the policy of the Government not to insure its own risks. In the absence of specific statutory authority for the payment of insurance premiums, appropriated moneys of the United States generally are not regarded as available for that purpose. There are, however, exceptions to these two statements. Insurance will be required where it is mandatory by law, and may be required in the absence of any statutory prohibition when in the best interest of the Government. Examples of situations which may warrant obtaining insurance are: (a) Where it is considered desirable to utilize the facilities and services of the insurance industry (e.g., safety protection and claim services); (b) where, in special instances, it is deemed necessary or desirable in connection with the performance of a contract (e.g., transportation of particularly valuable items), or (c) where commingling of property or the conditions of the contract make the carrying of insurance reasonably necessary for the protection of the several interests concerned.

§ 1-10.302 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

cial circumstances include the following:

(a) The contractor is engaged principally in Government work.

(b) The contractor has a segregated operation which is engaged principally in Government work.

(c) Government-furnished property is involved.

(d) The work required by the contract is performed within a Government establishment.

(e) The Government may desire to assume risks for which the contractor ordinarily obtains commercial insur

ance.

§ 1-10.402 Workmen's compensation in

surance 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 et seq.) 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 (P.L. 87-195) other than: (i) Contracts approved or financed by the Development Loan Fund except where the Secretary of Labor, acting upon the recommendation of any department or agency of the United States, determines that such contracts should be covered, 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. The following clause shall be included in all contracts subject to the Defense Base Act unless applicability of that Act has been waived by the Secretary of

Labor as provided in paragraph (b) of this § 1-10.402:

WORKMEN'S COMPENSATION INSURANCE
(DEFENSE BASE ACT)

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 et seq.). 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 head of the agency 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.