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period specified by the terms of the tion. In addition, the contracting officontract, the contract may be termi- cer may furnish to persons who satisfy nated for default when deemed to be him that they have provided labor in the public interest (see $$ 1-10.103- and/or material, and have not received 3(a)(2) and 1-18.803-5).

payment, additional general informa(e) Whenever a contract is modified

tion on such matters as the progress of in a manner not provided for in any

the work, payments, and the estimated provision thereof, consent of surety

percentage of completion. shall be obtained (see $ 1-10.205). (f) In any case where a contract is

$ 1-10.106 Advance payment bonds. modified, whether or not pursuant to

An advance payment bond may be a contractual provision, so as to increase the contract amount to such an

required only in connection with a extent that the penal sum of the exist contract containing an advance pay. ing bond becomes inadequate to pro- ments provision, and then only if a tect the interests of persons furnish performance bond has not been furing labor and material, in the opinion nished. Whenever an advance pay. of the contracting officer, additional ment bond is required, the contracting payment bond protection shall be se officer shall determine the amount cured, either by increasing the penal necessary adequately to protect the sum of the existing bond or by obtain Government. ing an additional bond from a new surety.

§ 1-10.107 Patent infringement bonds. (29 FR 10247, July 24, 1964, as amended at Patent infringement bonds may be 42 FR 56116, Oct. 21, 1977; 44 FR 34499,

required only in connection with conJan. 11, 1979)

tracts containing provisions for patent § 1-10.105-2 Other than construction con

indemnity, and then only if a perform

ance bond has not been furnished and tracts.

if the financial responsibility of the (a) Payment bonds generally shall

contractor is unknown or doubtful. not be required in connection with

Whenever a patent infringement bond other than construction contracts and may be required only where the head

is required, the contracting officer of the procuring activity determines

shall determine the amount necessary that such requirements is in the best

adequately to protect the Governinterest of the Government. If a per

ment. formance bond is required in connection with a contract, a payment bond

§ 1-10.108 Other types of bonds. can generally be obtained without the Other types of bonds may be used payment of an additional premium. only when, in the opinion of the head

(b) Subject to paragraph (a) of this of the procuring activity concerned, § 1-10.105-2, a payment bond shall not

such bonds are necessary or desirable be required unless the invitation for in connection with the procurement of bids requires such a bond.

particular supplies or services (includ(c) Whenever a payment bond is re

ing construction). quired, the penal sum thereof shall be in an amount deemed adequate by the 81-10.109 Execution and administration contracting officer.

of bonds. 8 1-10.105-3 Furnishing information to The forms and provisions of bonds, subcontractors and suppliers.

and their preparation, execution and Where a payment bond has been

administration, shall be in accordance provided, the contracting officer may

with the provisions of the Federal Profurnish the name and address of the curement Regulations and with surety or sureties thereon to persons agency procedures (see $ $ 1-16.801 and who have furnished, or have been re 1-16.901 for bonds forms). quested to furnish, labor and/or material for use in the prosecution of the work required by the contract in ques

Subpart 1-10.2—Sureties on Bonds

necessary reinsurance agreements

must be executed and submitted to $ 1-10.201 General.

the procuring activity within the time

specified on the bid form (not to Every bond furnished in connection

exceed 45 calendar days after the exwith the procurement of supplies or services (including construction) shall

ecution of the bond). Standard Form

273, Reinsurance Agreement for a be supported by corporate or individual sureties or any of the types of secu

Miller Act Performance Bond, and

Standard Form 274, Reinsurance rity authorized to be deposited in lieu of surety by § 1-10.204. Invitations for

Agreement for a Miller Act Payment bids or requests for proposals may not

Bond, shall be used when reinsurance preclude bidders from offering any of

is furnished in connection with Miller the types of surety or security author

Act bonds. Standard Form 275, Reinized to be furnished by this Subpart 1

surance Agreement in Favor of the 10.2, unless otherwise authorized by

United States, shall be used when reinlaw or regulation.

surance is furnished in connection

with bonds for other purposes. § 1-10.202 Corporate sureties.

(b) In connection with contracts to (a) In connection with contracts for

be performed in the Canal Zone, corsupplies or services (including con

porate Panamanian surety companies struction) to be delivered or performed

which are acceptable on bonds rein the United States, the Common

quired by the Panama Canal Company wealth of Puerto Rico, and the Virgin

may be accepted in addition to the corIslands, any corporate surety offered

porate Sureties appearing on the for a bond furnished the Government

Treasury List. The acceptability of must appear on the list contained in Panamanian sureties shall be subject Treasury Department Circular 570, en to the conditions and restrictions (intitled “Companies Holding Certificates

cluding any requirement for security of Authority as Acceptable Sureties on

deposits) imposed by the Panama Federal Bonds and as Acceptable Re- Canal Company. insuring Companies.” If the penal (c) For contracts to be performed amount of a bond exceeds a surety's outside the United States, Puerto underwriting limit specified in the De Rico, the Virgin Islands, and the partment of the Treasury Circular, Canal Zone, sureties not appearing on the bond will be acceptable only if the Treasury Department Circular 570 excess over the specified limit is coin may be accepted if determined by the sured or reinsured and the amount of contracting officer to be in the best insuch coinsurance or reinsurance does terest of the Government. not exceed the underwriting limit of (d) The Department of the Treasury each coinsurer or reinsurer. Coinsur- Circular 570 may be obtained from the ance or reinsurance agreements shall U.S. Treasury Department, Bureau of conform to the Department of the Government Financial Operation, Treasury Regulations as set forth in Audit Staff, Washington, D.C. 20226. 31 CFR 223.10 and 223.11. Where reinsurance is contemplated, the procur

[29 FR 10247, July 24, 1964, as amended at

42 FR 56116, Oct. 21, 1977) ing activity generally will require reinsurance agreements to be executed

§ 1-10.203 Individual sureties. and submitted with the bonds before making a final determination on the (a) It is the responsibility of the conbonds. When specified on the bid form tracting officer to determine the ac(Standard Form 21 Bid Form (Con ceptability of individuals proposed as struction Contract)), the procuring ac sureties on bonds. At least two individtivity may accept a bond from the ual sureties must execute the bond direct writing company in satisfaction and the net worth of each individual of the total bond requirement of the must be not less than the penal contract, even though it may exceed amount of the bond. The number and the insurer's underwriting limitation, amounts of other bonds upon which a until necessary reinsurance agree- proposed individual surety is bound, ments have been executed. However, and the status of the contracts in con

nection with which such bonds were sum of the bond, together with a duly furnished, must be considered in de- executed power of attorney and agreetermining the acceptability of the in- ment authorizing the collection or sale dividual surety. (See also the instruc of such United States bonds or notes tions on the reverse of Standard Form in the event of default of the principal 28, Affidavit of Individual Surety, on the bond. The contracting officer FPR 1-16.901-28.)

may turn these securities over to the (b) Each individual surety must ex

finance or other officer as provided in ecute an Affidavit of Individual

agency procedures, or deposit them Surety, Standard Form 28. The infor

with the Treasurer of the United mation thus provided is helpful in de

States, a Federal Reserve Bank, termining the net worth of proposed individual sureties.

branch Federal Reserve Bank having (c) In order to ascertain the continu

the requisite facilities, or other deposiing acceptability of individual sureties,

tory duly designated for the purpose the official executing the Certificate

by the Secretary of the Treasury, of Sufficiency on the reverse of Stand

under procedures prescribed by the ard Form 28 may be required to ex

agency concerned and Treasury Deecute further certificates, as contem

partment Circular No. 154. However, plated by Instruction 5 on that form, the contracting officer shall deposit with such frequency as the agency with the Treasurer of the United may deem necessary and appropriate. States all such bonds and notes reFurther certificates indicating addi- ceived by him in the District of Cotional assets, or a new surety, may be lumbia. required to assure protection of the Government's interest.

§ 1-10.204-2 Certified or cashier's checks, (29 FR 10247, July 24, 1964, as amended at

bank drafts, money orders, currency, 31 FR 15093, Dec. 1, 1966)

or irrevocable letters of credit.

Any person required to furnish a § 1-10.204 Options in lieu of sureties.

bond has the option, in lieu of furnishAny one or more of the types of se- ing surety or sureties thereon, of decurity listed in this § 1-10.204 may be positing a certified or cashier's check, deposited by the contractor in lieu of a bank draft, a Post Office money furnishing corporate or individual

order, currency, or an irrevocable sureties on bonds. Where any such

letter of credit, in an amount equal to type of security is deposited, a state

the penal sum of the bond. Certified ment shall be incorporated in the

or cashier's checks, bank drafts, or bond form pledging such security, and

Post Office money orders shall be the bond form shall be executed by

drawn to the order of the appropriate the contractor as principal. Agencies

Federal agency. shall establish such safeguards as may be necessary to protect against loss of

8 1-10.205 Consent of surety. the security and shall return such security or its equivalent when, by its

In connection with any amendment, terms, the obligation of the bond has

modification, or supplemental agreeceased.

ment with respect to which the waiver

of notice to the surety contained in § 1-10.204-1 United States bonds or notes. the bond form is inapplicable and

In accordance with the provisions of which would otherwise effect the rethe Act of February 24, 1919, as lease of a surety, or in any other situaamended (6 U.S.C. 15) and Treasury tion as prescribed by each agency, the Department Circular No. 154 dated contracting officer shall obtain the February 6, 1935 (31 CFR Part 225), written consent thereto of the surety any person required to furnish a bond or sureties on the existing bond or to the Government has the option, in bonds (notwithstanding the fact that lieu of furnishing a surety or sureties there may be an additional bond supthereon, of depositing certain United ported by a new surety); provided, States bonds or notes in an amount that no such consent need be obtained equal at their par value to the penal if there is an increased or additional bond supported by the same surety or an endorsement to the effect that cansureties.

cellation or material change in the

policies, adversely affecting the inter§ 1-10.206 Furnishing information to

est of the Government in such insursureties.

ance, shall not be effective unless the The surety on any bond executed in written notice as required by the apconnection with a Government con- proving authority is given. tract, upon its written request, shall be furnished with information as to the

§ 1-10.303 Responsibility for loss of or progress of the work, payments, and

damage to Government property. the estimated percentage of comple Where Government property may be tion.

in the possession of or under the con

trol of the contractor, or in the custoSubpart 1-10.3—Insurance General dy of a transportation company, the

contract shall set forth the responsi8 1-10.300 Scope of subpart.

bility of the contractor for loss of or This subpart sets forth principles

damage to such Government property. and policies applicable to insurance

§ 1-10.304 Insurance against loss of or under contracts for supplies and serv

damage to Government property. ices (including construction).

In instances where insurance is re§ 1-10.301 General.

quired or approved to cover loss of or Ordinarily, it is the policy of the

damage to Government property, such Government not to insure its own

insurance may be provided either by risks. In the absence of specific statu

specific insurance policies, or by inclutory authority for the payment of in

sion of such risks in the contractor's surance premiums, appropriated

existing insurance policies. When apmoneys of the United States generally

propriate the insurance policies shall are not regarded as available for that

make formal disclosure of the Governpurpose. There are, however, excep

ment's interest in the property. tions to these two statements. Insurance will be required where it is man

§ 1-10.305 Procedures to be followed in datory by law, and may be required in

the event of loss or damage to Governthe absence of any statutory prohibi

ment property. tion when in the best interest of the Upon the happening of loss of or Government. Examples of situations damage to any Government property, which may warrant obtaining insur- concerning which the contractor is reance are: (a) Where it is considered de- lieved of responsibility by contract sirable to utilize the facilities and serv. provision, the procedure to be followed ices of the insurance industry (e.g., shall be as prescribed by the agency. safety protection and claim services); (b) where, in special instances, it is

Subpart 1-10.4-Insurance Under deemed necessary or desirable in con

Fixed-Price Contracts nection with the performance of a contract (e.g., transportation of par

§ 1-10.400 Scope of subpart. ticularly valuable items), or (c) where commingling of property or the condi This subpart sets forth general politions of the contract make the carry cies with respect to insurance under ing of insurance reasonably necessary fixed-price contracts for supplies and for the protection of the several inter services (including construction). ests concerned.

§ 1-10.401 Policy. § 1-10.302 Notice of cancellation or

Ordinarily Government agencies are change.

not concerned with the insurance proWhere insurance is required by con- grams of fixed-price contractors. Howtract provision or in writing by the ap- ever, agencies may be concerned with proving authority, the policies evi such insurance programs when special dencing such insurance shall contain circumstances exist. Examples of spe

cial circumstances include the follow- Labor as provided in paragraph (b) of ing:

this § 1-10.402: (a) The contractor is engaged principally in Government work.


(DEFENSE BASE ACT) (b) The contractor has a segregated operation which is engaged principally The Contractor before commencing perin Government work.

formance under this contract shall provide (c) Government-furnished property

and thereafter maintain such Workmen's is involved.

Compensation Insurance or security as is re

quired by the Defense Base Act, as amended (d) The work required by the con

(42 U.S.C. 1651 et seq.). The Contractor furtract is performed within a Govern

ther agrees to insert in all subcontracts ment establishment.

hereunder to which the Defense Base Act is (e) The Government may desire to applicable, a clause similar to this clause, inassume risks for which the contractor cluding this sentence, imposing on all such ordinarily obtains commercial insur subcontractors a like requirement to comply ance.

with the Defense Base Act.

(b) Upon the recommendation of the § 1-10.402 Workmen's compensation in

head of the agency concerned, the surance overseas.

Secretary of Labor may waive the ap(a) The Defense Base Act, as amend plicability of the Defense Base Act ed (42 U.S.C. 1651 et seq.), extends the with respect to any contract, subconapplication of the Longshoremen's tract, or subordinate contract, work loand Harbor Workers' Compensation cation, or classification of employees. Act (33 U.S.C. 901 et seq.) to various classes of employees engaged in work

Subpart 1-10.5-Insurance Under outside the United States, including

Cost-Reimbursement Type Conany employee engaged: (1) In the performance of a public work contract or;

tracts (2) in the performance of any contract

§ 1-10.500 Scope of subpart. approved or financed pursuant to the Foreign Assistance Act of 1961 (P.L.

This subpart sets forth general poli87-195) other than: (i) Contracts ap cies with respect to insurance under proved or financed by the Develop cost-reimbursement type contracts for ment Loan Fund except where the supplies and services (including conSecretary of Labor, acting upon the struction). recommendation of any department or agency of the United States, deter

§ 1-10.501 Policy. mines that such contracts should be The kinds of insurance referred to in covered, or (ii) contracts exclusively this $ 1-10.501, with limits of liability for the furnishing of materials or sup- as prescribed by the agency, ordinarily plies. As used in this paragraph, a shall be required under cost-reim“public work” contract includes any bursement type prime contracts and contract for a fixed improvement or cost-reimbursement type subcontracts any project, whether or not fixed, in- under cost-reimbursement type prime volving construction, alteration, re- contracts. However, a program of selfmoval, or repair for the public use of insurance approved by the agency conthe United States or its allies, includ cerned, as provided in § 1-10.503, may ing projects or operations under serv- be substituted for any of the kinds of ice contracts and projects in connec- required insurance. tion with the national defense or with war activities, dredging, harbor im- & 1-10.502 Types of insurance. provements, dams, roadways, and

8 1-10.502-1 Workmen's housing, as well as preparatory and

compensation ancillary work in connection therewith

and employers' liability insurance. at the site or on the project. The fol Compliance with applicable worklowing clause shall be included in all men's compensation and occupational contracts subject to the Defense Base disease statutes will be required, and Act unless applicability of that Act employers' liability coverage will be has been waived by the Secretary of obtained where available. In jurisdic

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