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bond is required pursuant to paragraph ditions in which NASA uses a patent in(a) of this section if:

(1) The modification is for new or additional work which is beyond the scope of the existing contract; or

(2) The modification is pursuant to an existing provision of the contract and is expected to increase the contract price by $50,000 or 25 percent of the basic contract price, whichever is less.

The penal amount of the additional bond protection should generally be such that the total payment bond protection is 50 percent of the contract price as revised by (i) the modification requiring such additional protection, and (ii) the aggregate of any previous modifications: Provided, That when the contract price as so revised is more than $1,000,000 but not more than $5,000,000, the total payment bond protection shall be in a penal amount of 40 percent of the revised contract price: Provided further, That when the contract price as so revised is more than $5,000,000, the total payment bond protection shall be in the penal amount of $2,500,000. The additional protection may be secured either by increasing the bond protection provided by the existing surety or sureties or by obtaining an additional payment bond from a new surety. See § 18-10.203 with respect to requiring consent of surety.

(c) The contracting officer may waive the requirement for a payment bond for

that work under the contract which is to be performed in a foreign country provided he finds it impracticable for the contractor to furnish such bond. However, the authority available to the Military Departments to waive payment bonds under the Miller Act in cost-type contracts is not available at the present

time to NASA.

§ 18-10.105

Advance payment bonds.

Generally, the security provisions of an advance payment agreement should make it unnecessary to require a bond to protect the interests of the Government. Advance payment bonds shall not be used without the approval of the Deputy Associate Administrator for Administration, who shall prescribe the penal sum thereof.

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demnity, as set forth in § 18-9.104, and then only if a performance bond has not been executed and if the financial responsibility of the contractor is unknown or doubtful. Such bonds shall be in a penal sum deemed adequate by the contracting officer for the protection of the Government.

§ 18-10.107 Other types of bonds.

Other types of bonds may be used only when, in the opinion of the Director of Procurement, such bonds are necessary or desirable in connection with the procurement of particular supplies and services.

§ 18-10.108 Execution and administration of bonds.

§ 18-10.108–1 Execution.

All bonds shall be executed in duplicate.

§ 18-10.108-2 Administration of bonds.

The Treasury Department list of corporate sureties certified by the Secretary of the Treasury as being acceptable as sureties on Federal bonds, and provision for the distribution of up-to-date copies of the list, are discussed in § 18– 10.201-1. As stated therein, listing of a surety by the Treasury Department will be accepted as establishing the qualification of the surety within the limits specified. Upon receipt of the bonds required in connection with a NASA contract, the contracting officer shall determine whether the corporate surety which executed the bonds appears on the latest Treasury Department list of acIf the name of the ceptable sureties. surety does not appear on the list, the bonds shall be forwarded by letter to the Office of Procurement to determine from the Surety Bond Section, Treasury Department, whether the corporate surety has been approved subsequent to the issuance of the latest list. When the surety on a bond is not acceptable, the contracting officer shall return the bond to the bidder by letter, advising that the surety on the bond is not acceptable because of lack of Treasury Department approval. When time permits and when it would be to the best interest of the Government, the bidder may be permitted a specific period of time in which to submit an acceptable bond.

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than the penal sum of the bond. When individual sureties are used, there shall be at least two responsible individuals on each bond and the liability of each individual surety shall extend to the entire penal amount of the bond. In connection with any bond of which a cor

Bond forms applicable to NASA pro- poration is the principal obligor, a stockcurements are listed in § 18-16.805.

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In order to be acceptable, the corporate surety must have obtained from the Secretary of the Treasury authority to do business under the Act of August 13, 1894 (28 Stat. 279), as amended by the Acts of March 23, 1910 (36 Stat. 241), July 30, 1947 (61 Stat. 646), and the Act of August 9, 1955 (69 Stat. 620) (6 U.S.C. 6-13). A list of the corporations approved by the Secretary of the Treasury is published annually by the Treasury Department (T.D. Circular 570). This list indicates the maximum penal sum in which any corporate surety may underwrite any one obligation. Any corporation whose name is on this list is acceptable within the limits specified. The Director of Procurement will secure and distribute up-to-date copies of this list. When the bond is to be executed by two or more corporate sureties, Standard Form 27 should be used in the case of a performance bond, and Standard Form 27A in the case of a payment bond. Each corporate surety may limit its liability in the bond to a specified sum. The sureties must bind themselves "jointly and severally" for the purpose of allowing a joint action or actions against any or all of them.

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holder of that corporation is acceptable as a co-surety on the bond, provided that his net worth exclusive of his stockholdings in the corporation is equal to the amount for which he justified and that such fact is expressly stated in his affidavit of justification. Standard Form 28 should be used in connection with the justification of an individual surety. § 18–10.201–3 Partnerships as sureties. A partnership or other unincorporated association as such, shall not be accepted as a surety. The individual members of the partnership or association may, if they meet the requirements of § 18-10.201-2, qualify as sureties. Individual members of a partnership or association shall not, however, be acceptable as sureties on bonds under which the partnership or association, or any co-partner or member thereof, is the principal obligor.

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18-10.201-4 Substitution or replacement of a surety.

In case of financial embarrassment, failure, or other disqualifying cause on the part of a surety under a bond, the contracting officer shall require the substitution of a new surety which is satisfactory to him.

§ 18-10.202 Options in lieu of sureties.

Any one or more of the sureties listed in § 18-10.202 may be deposited by the contractor in lieu of furnishing corporate or individual sureties on bonds. Any such surety accepted by the contracting officer shall be promptly turned over to the fiscal officer concerned, and such security or its equivalent shall be returned to the contractor when the obligation of the bond has by its terms ceased.

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Circular No. 154 (February 6, 1935), any person required to furnish a bond has the option, in lieu of furnishing surety or sureties thereon, of depositing United

States bonds or notes in an amount equal

at their par value to the penal sum of the bond together with an agreement authorizing the collection or sale of such United States bonds or notes in the event of default on the penal bond.

§ 18-10.202-2 Certified or cashier's checks, bank drafts, money orders, or currency.

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, or currency in an amount equal to the penal sum of the bond: Provided, That the penal sum of the bond is not in excess of $50,000. Certified or cashier's checks, bank drafts, or Post Office money orders

shall be drawn to the order of the National Aeronautics and Space Administration.

§ 18-10.203 Consent of surety.

In connection with any amendment, modification, or supplemental agreement which would otherwise effect the release of a surety, 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 support-
ed by a new surety): Provided, That no
such consent need be obtained if there
is an increased or additional bond sup-
ported by the same surety or sureties.
§ 18-10.203-1 Forms.

The following forms of consent of surety are authorized for use.

(a) Consent of surety to a modification providing for an increase in the penal sums of bonds previously given. SURETIES ON BONDS CONSENT OF SURETY

Date

Contract No.

Supplemental Agreement No.
Change Order No.

Consent of surety is hereby given to the foregoing contract modification, and the surety agrees that its bond or bonds shall apply and extend to the contract as modified or amended thereby. The principal and surety further agree that on and after the execution of this consent the penalty of the aforementioned performance bond or bonds is hereby increased by .* dollars, and the penalty of the aforementioned payment bond or bonds is hereby increased by

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*The amount of increase entered will be at least in the same proportion that the penalty on the original bond bears to the contract price on the original contract. The penalty of the payment bond shall not be increased beyond $2,500,000.

** This consent shall be executed concurrently with the execution of the contract modification by the same person who executed the modification.

(b) Consent of Surety where the penal sums of bonds previously given are not increased.

Date

Contract No.

Supplemental Agreement No.

Change Order No.

CONSENT OF SURETY

Consent of Surety is hereby given to the foregoing contract modification, and the surety agrees that its bond or bonds shall apply and extend to the contract as modified or amended thereby.

Attest:

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This Subpart 18-10.3 sets forth the general principles and policy applicable to insurance under NASA contracts.

§ 18-10.301 General.

Insurance will be required where (a) it is mandatory by law, (b) it is considered desirable to utilize the facilities and services of the insurance industry, or (c), in special instances, it is considered necessary or desirable in connection with the performance of a contract. The Director of Procurement may authorize or require the purchase of insurance where commingling of property, circumstances of ownership, or degree of responsibility imposed by the contract makes the purchase of insurance reasonably necessary for the protection of the several interests concerned.

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The term "insurance" includes but is not limited to the following forms of coverage, whether provided under an insurance policy issued by privately operated insurance companies or underwriters, or under a State-operated insurance fund, or under an approved self-insurance plan.

(a) Workmen's Compensation Employers' Liability;

(b) General Liability;

(c) Automobile Liability;

(d) Aircraft Liability;

(e) Physical Damage (Property);

(Affix corporate seal)

(f) Employees' Group Insurance (Life, Hospitalization, Accident and Health, Surgical, etc.); and

(g) Extrahazardous Accident. § 18–10.302

change.

Notice of cancellation or

Where insurance is required by the contract, or required or approved under a contract by the Director of Procurement or his designee, the policies evidencing such insurance shall contain an endorsement to the effect that cancellation of, or any material change in, the policies which adversely affect the interests of the Government in such insurance shall not be effective unless a 30-day written notice of cancellation or change is given to the Director of Procurement. § 18-10.303 Responsibility for loss of

or damage to Government property. NASA's policy with respect to Government assumption of risk for loss of or damage to Government property in the possession of contractors is set forth in §§ 18-13.104-1 and 18-13.411. This policy is implemented by the Government property clauses set forth in Subpart 18-13.5, and the facilities contract clauses set forth in Subpart 18-7.7. Except for advertised fixed-price contracts, and except in accordance with § 1813.502-1 for fixed-price contracts under $25,000 where contractor responsibility and for risk of loss or damage would not result in the inclusion of contingency charges in the contract, it is NASA policy to assume the risk of loss or damage. This policy is based on the principle that it is less costly for the Government to

act as a self-insurer than to permit the contractor to take out property damage insurance. However, when, due to the commingling of the Government's and the contractor's property, or for other reasons, relief of the contractor from liability will not result in a reduction of the contract price or contract cost to the Government, this policy may be waived and the contractor held fully responsible. Such a waiver, unless otherwise authorized by §§ 18-13.104 and 18-13.411, constitutes a deviation to be processed in accordance with § 18-1.109-3.

§ 18-10.304 Insurance against loss of or damage to Government property. When insurance is required or approved to cover loss of or damage to Gov

NASA, there are few instances where
providing such coverage is really of bene-
fit to a contractor. No indemnification
clause may be used in NASA contracts
without the authorization of the Director
of Procurement.

(b) An exception to the foregoing
exists in connection with contracts em-
ploying nuclear material where, pursuant
to a license obtained from the Atomic
Energy Commission, indemnification
authorized under the Atomic Energy Act
of 1954 (42 U.S.C. 2011 et seq.,
amended) may be extended to contrac-
tors engaged in work under the license.
Subpart 18-10.4-Insurance Under

Fixed-Price Contracts

ernment property, such insurance may be § 18-10.400 Scope of subpart.

provided either by specific insurance policies or by inclusion of such risks in the contractor's existing insurance policies. In either event, the insurance policies

shall make formal disclosure of the Government's interest in the property.

§ 18-10.305 Procedures to be followed in the event of loss of or damage to Government property.

Upon the happening of loss of or damage to any Government property for which the contractor is relieved of responsibility by contract provision, the procedures set forth in the applicable "Government-Furnished Property" clause of the contract involved shall be followed.

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(a) The indemnification authority available to the Military Departments under 10 U.S.C. 2354, which applies to contracts for research or development, is not applicable to contracts of NASA. Furthermore, the exercise of the broad authority contained in Public Law 85-804 (50 U.S.C. 1431-1435) is by Executive Order 10789 (November 14, 1958) made subject to the availability of funds, and, accordingly, provides no broad indemnification authority. Although limited indemnification arrangements may be legally possible, provided they are made subject to the availability of appropriations, it is NASA policy to avoid indemnification provisions. Moreover, in view of the narrow indemnification coverage which may legally be made available by

as

This Subpart 18-10.4 sets forth the
policy of NASA with respect to insurance
under fixed-price contracts of NASA.
§ 18-10.401 Policy.

Ordinarily, NASA is not concerned
with the insurance programs of fixed-
price contractors. However, NASA may
be concerned with a contractor's insur-
ance program where special circum-
stances exist. Examples of special cir-
cumstances are:

(a) Where the contractor is engaged principally in Government work;

(b) Where the contractor has a segregated operation which is engaged principally in Government work;

(c) Where Government-furnished property is involved;

(d) Where the work is performed within a Government establishment; and

(e) Where the Government may desire to assume risks for which the contractor ordinarily obtains commercial insurance. § 18–10.402 Government-f u r n is hed

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