FAR 50.104-3—Special procedures for unusually hazardous or nuclear risks.
Plain-English Summary
FAR 50.104-3 explains the special procedures for requesting, reviewing, and approving indemnification for unusually hazardous or nuclear risks. It covers what information a contractor must submit, including the contract identification, the specific risks involved, how the contractor is exposed, detailed insurance and self-insurance information, financial protection limits, prior Government approvals or indemnities, and any parent-company coverage or relationship details. It also covers what the contracting officer must do with the request, including review with legal and program support, denial or forwarding for higher-level approval, and the additional statements that must accompany a recommendation for approval. Finally, it addresses the formal approval mechanism, incorporation of the risk definition into the contract, and the limited circumstances under which subcontractors may also be indemnified. In practice, this section is the gatekeeping process for extraordinary risk protection: it ensures the Government only agrees to indemnify when the risks are clearly defined, the contractor’s exposure and insurance position are documented, and the action is properly justified and approved at the required level.
Key Rules
Contractor submits detailed request
A contractor seeking indemnification for unusually hazardous or nuclear risks must submit a written request to the contracting officer with specific supporting information. The request must identify the contract, define the risks, explain the contractor’s exposure, and provide a sworn corporate statement describing all applicable insurance and self-insurance coverage.
Insurance and financial protection data required
The request must include names of insurers, policy numbers, expiration dates, coverage types, limits, deductibles, exclusions, workers’ compensation coverage, and the factors used to determine required financial protection. The contractor must also explain the availability, cost, and terms of additional insurance or other financial protection.
Prior approvals and related coverage disclosed
The contractor must state whether its insurance program has been approved or accepted by any Government agency and whether it already has an indemnification agreement for similar risks under another Government program. If the contractor is a division or subsidiary, it must also disclose relevant parent-company insurance and the legal relationship to the parent.
Material insurance changes must be reported
If the contractor’s insurance coverage changes by 10 percent or more from what was stated in the request, or if other significant changes occur before approval, the contractor must immediately notify the contracting officer with a brief description of the changes.
Contracting officer reviews and forwards
The contracting officer, with legal counsel and cognizant program office support, must determine whether the request is complete. If the request is denied, the contractor must be promptly told the reasons; if approval is recommended, the request is forwarded through channels to the appropriate approving official with all required supporting statements.
Additional approval package statements
The submission to the approving official must include program facts, a definition of the risks agreed to by the parties, a statement that indemnification would facilitate national defense, a statement that the risks could exceed reasonably available financial protection, confirmation of compliance with Government safety requirements, a statement on subcontractor coverage, and any significant insurance changes since submission.
Formal approval and contract incorporation
Approval to include the indemnification clause must be made by a Memorandum of Decision executed by the designated official. If approved, the agreed definition of unusually hazardous or nuclear risks must be incorporated into the contract along with the clause.
Subcontractor indemnification is limited
The contracting officer may extend indemnification to subcontractors only when the Memorandum of Decision authorizes it and the circumstances justify it. The same procedural requirements used for the contractor must be followed for subcontractor indemnification.
Responsibilities
Contractor
Prepare and submit a complete indemnification request with all required contract, risk, insurance, financial protection, prior approval, and parent-company information. Promptly report material insurance changes before approval and, if seeking coverage for subcontractors, provide a written request supporting that extension.
Corporate official with binding authority
Execute the insurance coverage statement included in the request, certifying the accuracy of the insurance and self-insurance information on behalf of the contractor.
Contracting Officer
Review the request for completeness with legal counsel and program office support, deny incomplete or unsupported requests when appropriate, notify the contractor of denials and reasons, and forward recommended approvals through the proper channels with all required supporting information.
Legal Counsel
Assist the contracting officer in evaluating the request, especially the legal sufficiency of the indemnification request and the supporting documentation.
Cognizant Program Office Personnel
Assist the contracting officer by providing program facts, risk details, operational context, and support for the national defense and safety-related statements needed for approval.
Appropriate Approving Official under 50.102-1(d)
Review the forwarded package and, if warranted, execute the Memorandum of Decision approving inclusion of the indemnification clause.
Contracting Officer for Subcontractors
When authorized by the Memorandum of Decision and justified by the circumstances, process a subcontractor indemnification request using the same procedures required for the prime contractor.
Practical Implications
This section is documentation-heavy, so incomplete insurance data or vague risk descriptions are common reasons for delay or denial.
Contractors should monitor insurance changes closely during the approval process; a 10 percent coverage change can trigger an immediate update obligation.
The Government is not just looking at the hazard itself, but at whether the contractor’s exposure exceeds reasonably available financial protection and whether safety requirements are being followed.
Approval is not automatic at the contracting officer level; the request must be elevated and approved by the designated higher official through a formal Memorandum of Decision.
If subcontractor indemnification is being considered, it must be expressly authorized and separately justified; it is not implied by approval of the prime contractor’s request.
Official Regulatory Text
(a) Indemnification requests. (1) Contractor requests for the indemnification clause to cover unusually hazardous or nuclear risks should be submitted to the contracting officer and shall include the following information: (i) Identification of the contract for which the indemnification clause is requested. (ii) Identification and definition of the unusually hazardous or nuclear risks for which indemnification is requested, with a statement indicating how the contractor would be exposed to them. (iii) A statement, executed by a corporate official with binding contractual authority, of all insurance coverage applicable to the risks to be defined in the contract as unusually hazardous or nuclear, including- (A) Names of insurance companies, policy numbers, and expiration dates; (B) A description of the types of insurance provided (including the extent to which the contractor is self-insured or intends to self-insure), with emphasis on identifying the risks insured against and the coverage extended to persons or property, or both; (C) Dollar limits per occurrence and annually, and any other limitation, for relevant segments of the total insurance coverage; (D) Deductibles, if any, applicable to losses under the policies; (E) Any exclusions from coverage under such policies for unusually hazardous or nuclear risks; and (F) Applicable workers’ compensation insurance coverage. (iv) The controlling or limiting factors for determining the amount of financial protection the contractor is to provide and maintain, with information regarding the availability, cost, and terms of additional insurance or other forms of financial protection. (v) Whether the contractor’s insurance program has been approved or accepted by any Government agency; and whether the contractor has an indemnification agreement covering similar risks under any other Government program, and, if so, a brief description of any limitations. (vi) If the contractor is a division or subsidiary of a parent corporation- (A) A statement of any insurance coverage of the parent corporation that bears on the risks for which the contractor seeks indemnification; and (B) A description of the precise legal relationship between parent and subsidiary or division. (2) If the dollar value of the contractor’s insurance coverage varies by 10 percent or more from that stated in an indemnification request submitted in accordance with paragraph (a)(1) of this subsection, or if other significant changes in insurance coverage occur after submission and before approval, the contractor shall immediately submit to the contracting officer a brief description of the changes. (b) Action on indemnification requests. (1) The contracting officer, with assistance from legal counsel and cognizant program office personnel, shall review the indemnification request and ascertain whether it contains all required information. If the contracting officer, after considering the facts and evidence, denies the request, the contracting officer shall notify the contractor promptly of the denial and of the reasons for it. If recommending approval, the contracting officer shall forward the request (as modified, if necessary, by negotiation) through channels to the appropriate official specified in 50.102-1 (d). The contracting officer’s submission shall include all information submitted by the contractor and- (i) All pertinent information regarding the proposed contract or program, including the period of performance, locations, and facilities involved; (ii) A definition of the unusually hazardous or nuclear risks involved in the proposed contract or program, with a statement that the parties have agreed to it; (iii) A statement by responsible authority that the indemnification action would facilitate the national defense; (iv) A statement that the contract will involve unusually hazardous or nuclear risks that could impose liability upon the contractor in excess of financial protection reasonably available; (v) A statement that the contractor is complying with applicable Government safety requirements; (vi) A statement of whether the indemnification should be extended to subcontractors; and (vii) A description of any significant changes in the contractor's insurance coverage (see 50.104-3 (a)(2)) occurring since submission of the indemnification request. (2) Approval of a request to include the indemnification clause in a contract shall be by a Memorandum of Decision executed by the appropriate official specified in 50.102-1 (d). (3) When use of the indemnification clause is approved under paragraph (b)(2) of this subsection, the definition of unusually hazardous or nuclear risks (see paragraph (b)(1)(ii) of this subsection) shall be incorporated into the contract, along with the clause. (4) When approval is- (i) Authorized in the Memorandum of Decision; and (ii) Justified by the circumstances, the contracting officer may approve the contractor’s written request to provide for indemnification of subcontractors, using the same procedures as those required for contractors.