Overview
This section addresses extraordinary contractual protections, primarily focusing on government indemnification for unusually hazardous or nuclear risks under Public Law 85-804 and liability limitations for anti-terrorism technologies under the SAFETY Act. It establishes the criteria, definitions, and procedures for shifting catastrophic risk from the contractor to the government or utilizing Department of Homeland Security (DHS) designations to mitigate liability.
Key Rules
- Indemnification (P.L. 85-804): The government indemnifies contractors against third-party claims (death, injury, or property damage) and loss of contractor property arising from risks defined as "unusually hazardous" or "nuclear" that are not covered by insurance.
- Exclusions for Misconduct: Indemnification is void if the loss or damage is caused by willful misconduct or lack of good faith by the contractor’s "principal officials" (directors, officers, or site managers).
- SAFETY Act Designations: Provides liability protections for "Qualified Anti-Terrorism Technologies" (QATT); DHS may issue "Block Designations" or "Pre-qualification notices" to streamline the application process for specific classes of technology.
- Contingency Prohibitions: Unless specific Alternates are used, the government will not consider proposals where pricing or acceptance is contingent upon receiving SAFETY Act designation or certification.
- Equitable Adjustment: Under clause 52.250-5, if a contractor establishes a price assuming they will receive SAFETY Act protection and DHS subsequently denies the application, the contractor can request a price adjustment or the government may terminate the contract for convenience.
- Notice and Cooperation: To maintain eligibility for indemnification or adjustments, contractors must promptly notify the Contracting Officer of claims, furnish all legal papers, and allow the government to direct or assist in the defense of claims.
Practical Implications
- Contractors performing high-risk work (such as nuclear cleanup or developing anti-terrorism sensors) can operate without the threat of company-ending liability, provided they adhere to strict notification and insurance requirements.
- The inclusion of these clauses requires contractors to engage in proactive coordination with both the Department of Homeland Security for technology certifications and the Contracting Officer for the approval of subcontractor indemnification flow-downs.