50.104-3 Special procedures for unusually hazardous or nuclear risks
Source: FAR 50.104-3 on acquisition.gov
Contractors seeking indemnification for unusually hazardous or nuclear risks must submit detailed requests and promptly update insurance changes, with approval and contract incorporation following a rigorous review process.
Overview
FAR 50.104-3 outlines the special procedures for contractors seeking indemnification against unusually hazardous or nuclear risks. It details the information contractors must submit with their requests, the review and approval process by contracting officers, and the requirements for updating insurance information. The regulation ensures that contractors are adequately protected when performing work that exposes them to extraordinary risks, while also safeguarding government interests.
Key Rules
- Indemnification Requests
- Contractors must submit detailed requests to the contracting officer, including contract identification, risk definitions, insurance details, financial protection factors, and parent company relationships if applicable.
- Insurance Changes
- Contractors must promptly report any significant changes (10% or more) in insurance coverage after the initial request but before approval.
- Review and Approval Process
- The contracting officer, with legal and program office input, reviews the request, ensures all information is provided, and either denies or forwards the request for higher-level approval.
- Memorandum of Decision
- Approval to include the indemnification clause must be documented in a Memorandum of Decision by the designated official.
- Contract Incorporation
- Approved indemnification clauses and risk definitions must be incorporated into the contract.
- Subcontractor Indemnification
- Indemnification may be extended to subcontractors if justified and approved using the same procedures.
Responsibilities
- Contracting Officers: Review and process indemnification requests, ensure all required information is included, and document decisions.
- Contractors: Submit comprehensive indemnification requests, update insurance information as required, and comply with all safety and reporting requirements.
- Agencies: Provide oversight, legal review, and ensure national defense interests are considered.
Practical Implications
- This section exists to manage the risks associated with contracts involving unusually hazardous or nuclear activities, ensuring contractors are not unduly exposed to liabilities beyond available insurance. It impacts daily contracting by requiring thorough documentation, timely updates, and careful coordination between contractors and government officials. Common pitfalls include incomplete submissions, failure to update insurance changes, and lack of clarity in risk definitions.
(a) Indemnification requests.
(1) Contractor requests for the indemnification clause to cover unusually hazardous or nuclear risks should be submitted to the contracting officer and shall include the following information:
(i) Identification of the contract for which the indemnification clause is requested.
(ii) Identification and definition of the unusually hazardous or nuclear risks for which indemnification is requested, with a statement indicating how the contractor would be exposed to them.
(iii) A statement, executed by a corporate official with binding contractual authority, of all insurance coverage applicable to the risks to be defined in the contract as unusually hazardous or nuclear, including-
(A) Names of insurance companies, policy numbers, and expiration dates;
(B) A description of the types of insurance provided (including the extent to which the contractor is self-insured or intends to self-insure), with emphasis on identifying the risks insured against and the coverage extended to persons or property, or both;
(C) Dollar limits per occurrence and annually, and any other limitation, for relevant segments of the total insurance coverage;
(D) Deductibles, if any, applicable to losses under the policies;
(E) Any exclusions from coverage under such policies for unusually hazardous or nuclear risks; and
(F) Applicable workers’ compensation insurance coverage.
(iv) The controlling or limiting factors for determining the amount of financial protection the contractor is to provide and maintain, with information regarding the availability, cost, and terms of additional insurance or other forms of financial protection.
(v) Whether the contractor’s insurance program has been approved or accepted by any Government agency; and whether the contractor has an indemnification agreement covering similar risks under any other Government program, and, if so, a brief description of any limitations.
(vi) If the contractor is a division or subsidiary of a parent corporation-
(A) A statement of any insurance coverage of the parent corporation that bears on the risks for which the contractor seeks indemnification; and
(B) A description of the precise legal relationship between parent and subsidiary or division.
(2) If the dollar value of the contractor’s insurance coverage varies by 10 percent or more from that stated in an indemnification request submitted in accordance with paragraph (a)(1) of this subsection, or if other significant changes in insurance coverage occur after submission and before approval, the contractor shall immediately submit to the contracting officer a brief description of the changes.
(b) Action on indemnification requests.
(1) The contracting officer, with assistance from legal counsel and cognizant program office personnel, shall review the indemnification request and ascertain whether it contains all required information. If the contracting officer, after considering the facts and evidence, denies the request, the contracting officer shall notify the contractor promptly of the denial and of the reasons for it. If recommending approval, the contracting officer shall forward the request (as modified, if necessary, by negotiation) through channels to the appropriate official specified in 50.102-1(d). The contracting officer’s submission shall include all information submitted by the contractor and-
(i) All pertinent information regarding the proposed contract or program, including the period of performance, locations, and facilities involved;
(ii) A definition of the unusually hazardous or nuclear risks involved in the proposed contract or program, with a statement that the parties have agreed to it;
(iii) A statement by responsible authority that the indemnification action would facilitate the national defense;
(iv) A statement that the contract will involve unusually hazardous or nuclear risks that could impose liability upon the contractor in excess of financial protection reasonably available;
(v) A statement that the contractor is complying with applicable Government safety requirements;
(vi) A statement of whether the indemnification should be extended to subcontractors; and
(vii) A description of any significant changes in the contractor's insurance coverage (see 50.104-3(a)(2)) occurring since submission of the indemnification request.
(2) Approval of a request to include the indemnification clause in a contract shall be by a Memorandum of Decision executed by the appropriate official specified in 50.102-1(d).
(3) When use of the indemnification clause is approved under paragraph (b)(2) of this subsection, the definition of unusually hazardous or nuclear risks (see paragraph (b)(1)(ii) of this subsection) shall be incorporated into the contract, along with the clause.
(4) When approval is-
(i) Authorized in the Memorandum of Decision; and
(ii) Justified by the circumstances, the contracting officer may approve the contractor’s written request to provide for indemnification of subcontractors, using the same procedures as those required for contractors.