Standards for use
Agency heads may require contractors to provide specific financial protections when granting indemnification under Public Law 85-804, and their determinations are final.
Overview
FAR 50.104-1 outlines the standards for using residual powers under Public Law 85-804, specifically regarding indemnification clauses in government contracts. It allows agency heads to authorize indemnification (using clause 52.250-1) when necessary, provided all relevant circumstances are considered and subject to limitations in FAR 50.102-3 and policies in 50.101-2. When indemnification is granted, the agency head may require the contractor to provide and maintain appropriate financial protection, such as insurance or self-insurance. The agency head must evaluate factors like the contractor’s existing insurance, financial responsibility, and the availability and cost of private insurance before making a final, binding determination on the type and amount of required financial protection.
Key Rules
- Use of Residual Powers
- Residual powers may be used when necessary and appropriate, considering all circumstances and subject to referenced limitations and policies.
- Indemnification Clause Authorization
- Agency heads may authorize the inclusion of the indemnification clause (52.250-1) and require contractors to maintain suitable financial protection.
- Evaluation of Financial Protection
- Agency heads must consider self-insurance, other financial responsibility, workers’ compensation, and private insurance options before determining requirements.
- Finality of Determination
- The agency head’s approval and determination regarding indemnification and financial protection are final.
Responsibilities
- Contracting Officers: Ensure compliance with referenced FAR sections and agency head determinations.
- Contractors: Provide and maintain required financial protection as determined by the agency head.
- Agencies: Evaluate and document all relevant factors before approving indemnification and set appropriate financial protection requirements.
Practical Implications
- This section ensures that indemnification under extraordinary contractual relief is carefully controlled and financially protected.
- Contractors must be prepared to demonstrate financial responsibility and secure insurance as required.
- Agency determinations are final, so contractors should proactively address financial protection requirements during negotiations.