[Federal Register Volume 60, Number 68 (Monday, April 10, 1995)]
[Rules and Regulations]
[Pages 18032-18034]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-8511]



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NATIONAL AERONAUTICS AND SPACE ADMINISTRATION

48 CFR Parts 1802, 1850, and 1852


Indemnification under Public Law 85-804

AGENCY: Office of Procurement, National Aeronautics and Space 
Administration (NASA).

ACTION: Final rule.

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SUMMARY: This rule amends the NASA policy and approval process on 
indemnifying contractors. This revision is part of NASA's efforts to 
simplify its regulations. The streamlined policy relies more on 
Federal-wide policies.

EFFECTIVE DATE: April 10, 1995.

FOR FURTHER INFORMATION CONTACT:
Harold Nelson, (202) 358-0436.

SUPPLEMENTARY INFORMATION:

Background

    NASA is reviewing and rewriting 48 CFR chapter 18, the NASA FAR 
Supplement, in its entirety in order to implement recommendations of 
the National Performance Review. During this review, NASA is 
eliminating reporting requirements and making other changes in order to 
reduce and simplify the regulation. This final rule 48 CFR parts 1802, 
1850, and 1852 for the following reasons. [[Page 18033]] 
    Section 1802.101 is revised in order to define the acronym ``FAR.''
    Section 1850.202 is revised in order to add a reference to 14 CFR 
subpart 1209.3 on the Contract Adjustment Board.
    Until now, requests for indemnification under Public Law 85-804 
have been processed using a two-step approach. Under the first step, 
the Administrator signed a ``Memorandum Decision Under Public Law 85-
804'' which recognized a class of contracts for which the statutory 
criteria for approving such requests could be met. Specifically, this 
document described the existence of the unusually hazardous risk, 
explained how approval of requests would facilitate the national 
defense, and set any other conditions for approval of requests to 
incorporate the indemnification clause in specific NASA prime 
contracts. Two Memorandum Decisions, one applicable to contracts under 
the Shuttle Program and the other applicable to contracts for launch 
services using expendable launch vehicles have been signed.
    The second step of the process involved the submission of an 
approval package for specific contracts, citing the pertinent 
Memorandum Decision. The Administrator signed a second document, an 
``Approval Under Public Law 85-804'', to grant approval to include the 
indemnification clause in designated contracts. 48 CFR 1850.402 also 
envisioned circumstances where a combined Memorandum Decision and 
Approval Under Public Law 85-804 could be signed by the Administrator 
in instances where requests were not covered by a current Memorandum 
Decision.
    The above described two-step approach is not required by 48 CFR 
(FAR) part 50, which prescribes a single document approach. Since one 
of the above mentioned Decision Memorandums expired in September 1994 
and the other is due to expire in July 1995, NASA Headquarters reviewed 
continuation of the two step approach. Based on this review, it has 
been decided to abandon the two step approach in favor of following the 
FAR procedure. Upon issuance of this notice, when NASA contractors 
request indemnification, the contracting officer will take the actions 
set forth in 48 CFR (FAR) 50.403. The contracting officer will also 
submit a ``Memorandum of Decision Under Public Law 85-804'' for each 
contract, or group of contracts, for which indemnification is being 
sought. This Memorandum of Decision will contain all the required 
information which has been previously distributed between the two 
documents, the Memorandum Decision Under Pub. L. 85-804 and the 
Approval Under Pub. L. 85-804.
    The need for separate NASA clauses covering indemnification--48 CFR 
1852.250-70, Indemnification Under Public Law 85-804, and 48 CFR 
1852.250-72, Space Activity--Unusually Hazardous Risks, was also 
reviewed. 48 CFR 1852.250-70 was extremely similar to the existing FAR 
clause (48 CFR 52.250-1, Indemnification Under Public Law 85-804). 
However, the NASA clause differed in ways that were not consistent with 
Executive Order 10789, as amended, which implements the statutory 
authority (50 U.S.C. 1431-1435) authorizing indemnification. Therefore, 
it was determined that the clause should be deleted and the FAR clause 
used. Also, practically from the time that 48 CFR 1852.250-72, Space 
Activity--Unusually Hazardous Risks, was adopted; it was recognized 
that the contractors could not merely cite the clause to substantiate 
their requests for the indemnification clause. Contractors are required 
to describe the nature of the unusually hazardous risk associated with 
performance of the specific contract in detail. Therefore, it has been 
determined that the standard clause be deleted and the definition and 
description of the unusually hazardous risks be addressed on a case by 
case basis.

Impact

    NASA certifies that this regulation will not have a significant 
economic impact on a substantial number of small entities under the 
Regulatory Flexibility Act (5 U.S.C. 601 et seq.). This rule does not 
impose any reporting or record keeping requirements subject to the 
Paperwork Reduction Act.

Lists of Subjects in 48 CFR Parts 1802, 1850 and 1852

    Government procurement.
Tom Luedtke,
Deputy Associate Administrator for Procurement.

    Accordingly, 48 CFR parts 1802, 1850 and 1852 are amended as 
follows.
    1. The authority citation for 48 CFR parts 1802, 1850 and 1852 
continues to read as follows:

    Authority: 42 U.S.C. 2473 (c)(1).

PART 1802--DEFINITIONS OF WORDS AND TERMS

    2. Section 1802.101 is amended by adding the following definition 
in alphabetical order in paragraph (b):


1802.101  Definitions.

* * * * *
    (b) * * *
    FAR means the Federal Acquisition Regulation as codified at 48 CFR 
chapter 1.
* * * * *

PART 1850--EXTRAORDINARY CONTRACTUAL ACTIONS

    3. Section 1850.202 is revised to read as follows:


1850.202  Contract adjustment boards.

    NMI 1152.5, 14 CFR part 1209, subpart 3, Contract Adjustment Board, 
establishes the Contract Adjustment Board as the approving authority to 
consider and dispose of requests from NASA contractors for 
extraordinary contractual actions.
    4. Section 1850.402 is removed.
    5. Section 1850.403-1 is revised to read as follows:


1850.403-1  Indemnification requests.

    In addition to the information required by 48 CFR (FAR) 50.403-
1(a), the contractor shall provide evidence, such as a certificate of 
insurance or other customary proof of insurance, that such insurance is 
either in force or is available and will be in force during the 
indemnified period.
    6. Section 1850.403-2 is revised to read as follows:


1850.403-2  Action on indemnification requests.

    (a) The Administrator will execute a Memorandum of Decision to 
approve a request to use the indemnification clause in a contract or 
group of contracts.
    (b) For contracts of five years duration or longer, in addition to 
information required to be submitted by the contracting officer under 
48 CFR (FAR) part 50, the submission should include discussion and 
determination on whether the indemnification approval and insurance 
coverage and premiums should be reviewed for adequacy and continued 
validity at points in time within the extended contract period.
    (c) If a contracting officer recommends that a request for 
indemnification be approved, the required information specified in 48 
CFR (FAR) 50.403-2(a) shall be forwarded to the Associate Administrator 
for Procurement (Code HS) for review and processing to the 
Administrator. The contracting officer shall also provide a recommended 
Memorandum of Decision. This document provides the specific approval to 
include an indemnification clause in a NASA contract, or group of 
[[Page 18034]] contracts. In addition to the applicable requirements of 
48 CFR (FAR) 50.306, the Memorandum of Decision shall contain the 
following:
    (1) The specific definition of the unusually hazardous risk to 
which the contractor is exposed in the performance of the contract(s).
    (2) A complete discussion of the contractor's financial protection 
program that the Administrator will review in order to approve the 
request for indemnification.
    (3) As appropriate, the extent to, and conditions under, which 
indemnification is being approved for subcontracts.
    (d) Before presentation to the Administrator, Code HS will obtain 
concurrences from the General Counsel, Comptroller, Associate 
Administrator for Procurement, Associate Deputy Administrator and 
Deputy Administrator, as appropriate.
    (e) Since indemnification coverage must flow through the prime 
contractor, subcontractors shall submit requests for indemnification to 
the prime contractor and through higher tier subcontractor(s), as 
applicable. If the prime contractor agrees indemnity should be flowed 
down to the subcontractor, the prime contractor shall forward its 
written request for subcontractor indemnification to the cognizant 
contracting officer for approval. The prime contractor's request shall 
provide information responsive to 1850.403-1, and 48 CFR (FAR) 50.403-1 
and 50.403-2(a) (1), (2), (4), (5) and (7). The agreed upon definition 
of the unusually hazardous risk to be incorporated into the subcontract 
shall be the same as that incorporated in the prime contract.
    (f) If the contracting officer approves indemnification of a 
subcontractor by the prime, the contracting officer shall document the 
file with a memorandum for record addressing the items set forth in 48 
CFR (FAR) 50.403-2(a). This memorandum shall address the items set 
forth in 48 CFR (FAR) 50.403-2(a) and contain an analysis of the 
subcontractor's financial protection program. In performing this 
analysis, the contracting officer shall take into consideration the 
availability, cost, terms and conditions of insurance in relation to 
the unusually hazardous risk. The contracting officer may rely on the 
analysis of the prime contractor's financial protection program in 
relation to the approval of indemnification of the prime contractor, to 
the extent this analysis is applicable.
    (g) Code HS will maintain records of each Memorandum of decision 
executed by the Administrator.
    7. Sections 1850.403-3, 1850.403-370, and 1850.403-70 are removed.


1850.403-3--[Removed]

1850.403-370--[Removed]

1850.403-70--[Removed]

PART 1852--SOLICITATION PROVISIONS AND CONTRACT CLAUSES

    8. Sections 1852.250-70 and 1852.250-72 are removed.


1852.250-72--[Removed]

1852.250-72--[Removed]

[FR Doc. 95-8511 Filed 4-7-95; 8:45 am]
BILLING CODE 7510-01-M