FAR 37.401—Policy.
Plain-English Summary
FAR 37.401 sets the policy for nonpersonal health care services contracts with physicians, dentists, and other health care providers. It explains when agencies may use these contracts and what mandatory contract terms must be included to preserve the independent-contractor relationship and avoid creating a personal services arrangement. The section also addresses the Government’s limited role in evaluating performance, making clear that the Government may review the quality of professional and administrative services but may not control medical judgment, diagnosis, or other professional aspects of care. In addition, it requires contractor indemnification for liability-producing acts or omissions, medical liability insurance at an acceptable and locally prevailing level, and flowdown of the health care services requirements to subcontractors. In practice, this section is designed to protect the Government from liability, maintain proper legal boundaries in clinical services, and ensure that health care providers and their subcontractors carry appropriate insurance and contractual protections.
Key Rules
Authorized contract type
Agencies may use nonpersonal health care services contracts under the cited statutory authorities. The contract must be structured as a nonpersonal services arrangement, not a personal services relationship.
Independent contractor status
The contract must state that it is a nonpersonal health care services contract under FAR 37.101 and that the contractor is an independent contractor. This language helps distinguish the arrangement from federal employment or personal services.
Limited Government oversight
The Government may evaluate the quality of professional and administrative services, but it cannot control the medical or professional aspects of care. That means the Government may monitor performance, but not direct clinical judgment, diagnosis, or treatment decisions.
Indemnification required
The contractor must indemnify the Government for liability-producing acts or omissions by the contractor, its employees, and its agents during performance. This shifts responsibility for contractor-caused liability to the contractor.
Medical liability insurance
The contractor must maintain medical liability insurance in an amount acceptable to the contracting officer, and the coverage must be at least the amount normally prevailing in the local community for the specialty involved. The contracting officer must assess adequacy based on local market conditions.
Subcontract flowdown
The contract must require the contractor to ensure that health care services subcontracts include the requirements of the clause at 52.237-7, including medical liability insurance. This extends key protections and insurance obligations to lower-tier providers.
Responsibilities
Contracting Officer
Ensure the contract is properly structured as a nonpersonal health care services contract and includes all required statements and clauses. Determine whether the contractor’s medical liability insurance coverage is acceptable and consistent with local prevailing levels, and verify that subcontract flowdown requirements are included.
Agency
Use this authority only for appropriate nonpersonal health care services arrangements and maintain the policy distinction between contractor services and federal personnel services. Support contract administration practices that respect the contractor’s independent professional judgment.
Contractor
Perform as an independent contractor, not as Government personnel, and comply with all required contract terms. Indemnify the Government for liability-producing acts or omissions, maintain required medical liability insurance, and ensure subcontractors providing health care services accept the required flowdown terms.
Subcontractors providing health care services
Comply with the flowed-down requirements from clause 52.237-7, including maintaining medical liability insurance and any other applicable contract protections.
Government evaluators or program staff
Assess the quality of professional and administrative services without directing medical judgment, diagnosis, or treatment decisions. Monitor performance within the limits of the contract, but avoid actions that would create a personal services relationship.
Practical Implications
This section is critical for avoiding an improper personal services arrangement. If Government personnel start directing clinical decisions or treating provider staff like employees, the contract can drift outside the permitted framework.
Insurance review is not a formality. The contracting officer should confirm both the amount and the local-market adequacy of medical liability coverage, especially for higher-risk specialties.
Indemnification language matters because it allocates risk for contractor-caused liability. Contractors should review the clause carefully and confirm their insurance and risk management practices can support it.
Flowdown to subcontractors is easy to overlook. Prime contractors need a process to ensure every health care services subcontract includes the required clause and insurance obligations.
Performance oversight should focus on outcomes, quality, and administrative compliance, not clinical control. Agencies should train program staff to avoid giving instructions that could be interpreted as controlling professional medical judgment.
Official Regulatory Text
Agencies may enter into nonpersonal health care services contracts with physicians, dentists and other health care providers under authority of 10 U.S.C. chapter 221 and 41 U.S.C. chapter 33 , Planning and Solicitation. Each contract shall- (a) State that the contract is a nonpersonal health care services contract, as defined in 37.101 , under which the contractor is an independent contractor; (b) State that the Government may evaluate the quality of professional and administrative services provided, but retains no control over the medical, professional aspects of services rendered ( e.g., professional judgments, diagnosis for specific medical treatment); (c) Require that the contractor indemnify the Government for any liability producing act or omission by the contractor, its employees and agents occurring during contract performance; (d) Require that the contractor maintain medical liability insurance, in a coverage amount acceptable to the contracting officer, which is not less than the amount normally prevailing within the local community for the medical specialty concerned; and (e) State that the contractor is required to ensure that its subcontracts for provisions of health care services, contain the requirements of the clause at 52.237-7 , including the maintenance of medical liability insurance.