52.250-5 SAFETY ActEquitable Adjustment
Source: FAR 52.250-5 on acquisition.gov
If your contract price assumed DHS SAFETY Act approval, you must diligently pursue that approval and required insurance, then request any equitable adjustment within 30 days of a denial—or risk losing relief while still having to keep performing.
Overview
- FAR 52.250-5, SAFETY Act—Equitable Adjustment, addresses what happens when contract pricing was based on the expectation that the contractor would obtain a Department of Homeland Security (DHS) SAFETY Act designation or certification for covered items, but DHS later denies that application.
- The clause allocates risk by allowing a potential contract adjustment or, at the Government’s option, a convenience termination.
Key Rules
- Definitions and covered approvals
- The clause defines key terms including act of terrorism, Qualified Anti-Terrorism Technology (QATT), SAFETY Act designation, SAFETY Act certification, and related block designation/block certification concepts.
- Pricing assumption
- Contract prices for covered items are established on the assumption that DHS will issue the expected SAFETY Act designation or certification.
- Contractor prerequisites for relief
- To qualify for an equitable adjustment, the contractor must in good faith pursue both the required SAFETY Act approval and the level of insurance DHS requires for that approval.
- Adjustment process after denial
- If DHS denies the application, the contractor may request an equitable adjustment within 30 days of the denial notice. The Contracting Officer may adjust price and/or other terms based on proven cost impacts, or the Government may instead terminate for convenience.
Responsibilities
- Contracting Officers: Evaluate evidence of cost impacts, decide whether to grant an equitable adjustment, and may elect convenience termination.
- Contractors: Diligently pursue DHS approval and required insurance, submit any adjustment request on time, and continue performance unless terminated.
- Agencies: Administer disputes under the contract’s Disputes clause if the parties cannot agree.
Practical Implications
- This clause protects both parties when SAFETY Act approval assumptions built into pricing do not materialize.
- Contractors should maintain documentation showing good-faith pursuit, insurance efforts, denial notices, and resulting cost changes.
- A common pitfall is missing the 30-day deadline or failing to prove that increased costs resulted from the denial.
As prescribed in 50.206(d), insert the following clause:
SAFETY Act-Equitable Adjustment (Feb 2009)
(a) Definitions. As used in this clause-
Act of terrorism means any act determined to have met the following requirements or such other requirements as defined and specified by the Secretary of Homeland Security:
(1) Is unlawful.
(2) Causes harm, including financial harm, to a person, property, or entity, in the United States, or in the case of a domestic United States air carrier or a United States-flag vessel (or a vessel based principally in the United States on which United States income tax is paid and whose insurance coverage is subject to regulation in the United States), in or outside the United States.
(3) Uses or attempts to use instrumentalities, weapons or other methods designed or intended to cause mass destruction, injury or other loss to citizens or institutions of the United States.
Block certification means SAFETY Act certification of a technology class that the Department of Homeland Security (DHS) has determined to be an approved class of approved products for homeland security.
Block designation means SAFETY Act designation of a technology class that the DHS has determined to be a Qualified Anti-Terrorism Technology (QATT).
Qualified Anti-Terrorism Technology (QATT) means any technology designed, developed, modified, procured, or sold for the purpose of preventing, detecting, identifying, or deterring acts of terrorism or limiting the harm such acts might otherwise cause, for which a SAFETY Act designation has been issued. For purposes of defining a QATT, technology means any product, equipment, service (including support services), device, or technology (including information technology) or any combination of the foregoing. Design services, consulting services, engineering services, software development services, software integration services, threat assessments, vulnerability studies, and other analyses relevant to homeland security may be deemed a technology.
SAFETY Act certification means a determination by DHS pursuant to http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title6-section442(d)&num=0&edition=prelim" target="_blank">6 U.S.C. 442(d), as further delineated in 6 CFR 25.9, that a QATT for which a SAFETY Act designation has been issued is an approved product for homeland security, i.e., it will perform as intended, conforms to the seller's specifications, and is safe for use as intended.
SAFETY Act designation means a determination by DHS pursuant to http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title6-section441(b)&num=0&edition=prelim" target="_blank">6 U.S.C. 441(b) and http://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title6-section443(a)&num=0&edition=prelim" target="_blank">6 U.S.C. 443(a), as further delineated in 6 CFR 25.4, that a particular Anti-Terrorism Technology constitutes a QATT under the SAFETY Act.
(b) Prices for the items covered by the pre-qualification designation notice, block designation, or block certification in the contract were established presuming DHS will issue a SAFETY Act designation (or SAFETY Act certification) for those items.
(c) In order to qualify for an equitable adjustment in accordance with paragraph (d) of this clause the Contractor shall in good faith pursue obtaining-
(1) SAFETY Act designation (or SAFETY Act certification); and
(2) The amount of insurance DHS requires for issuing any SAFETY Act designation (or SAFETY Act certification).
(d)
(1) If DHS denies the Contractor’s SAFETY Act designation (or certification) application, the Contractor may submit a request for an equitable adjustment within 30 days of DHS’s notification of denial.
(2) The Contracting Officer shall either-
(i) Make an equitable adjustment to the contract price based on evidence of the resulting increase or decrease in the Contractor’s costs and/or an equitable adjustment to other terms and conditions based on lack of SAFETY Act designation (or certification); or
(ii) At the sole option of the Government, terminate this contract for the convenience of the Government in place of an equitable adjustment.
(3) A failure of the parties to agree on the equitable adjustment will be considered to be a dispute in accordance with the "Disputes" clause of this contract.
(4) Unless first terminated, the Contractor shall continue contract performance during establishment of any equitable adjustment.
(End of clause)